<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 17, 1998
-------------------------------
First Chicago NBD Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-7127 38-1984850
- --------------------------- ------------ -------------------
(Name or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One First National Plaza, Chicago, IL 60670
- --------------------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code 312-732-4000
-----------------------------
<PAGE>
Item 7. Financial Statements and Exhibits
- ------
c) Exhibits
--------
Attached hereto or incorporated herein are the following Exhibits relating to
the previously announced merger of First Chicago NBD Corporation, a Delaware
corporation (the "Corporation"), and BANC ONE CORPORATION, an Ohio corporation
("ONE"):
Exhibit Description of
Number Exhibit
- --------- --------------
99(a) Pro forma financial information.
99(b) Certain ONE historical financial information for the second
quarter and six months ended June 30, 1998 and 1997.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
First Chicago NBD Corporation
----------------------------------------
(Registrant)
Date: August 17, 1998 By: William J. Roberts
----------------------------------------
Title: Senior Vice President and Comptroller
<PAGE>
Exhibit 99(a)
BANK ONE CORPORATION
PRO FORMA FINANCIAL INFORMATION
On April 10, 1998, First Chicago NBD Corporation (the "Corporation" or "FCNBD")
and BANC ONE CORPORATION ("ONE") entered into an Agreement and Plan of
Reorganization as subsequently amended (the "Agreement"), pursuant to which,
subject to the conditions and upon the terms stated therein, the Corporation and
ONE will each merge into a new company, BANK ONE CORPORATION ("BANK ONE"), which
was organized to effect the merger (such mergers, collectively, the "Merger").
In accordance with the Agreement, each share of the common stock, of ONE ("ONE
Common Stock") outstanding immediately prior to the effective time of the Merger
(the "Effective Time") will at the Effective Time be converted into one share of
the common stock of BANK ONE ("BANK ONE Common Stock"), and each share of the
common stock of the Corporation ("FCN Common Stock") outstanding immediately
prior to the Effective Time will at the Effective Time be converted into the
right to receive 1.62 shares of BANK ONE Common Stock. In addition, each share
of the Corporation's Preferred Stock with Cumulative and Adjustable Dividends,
Series B, and Preferred Stock with Cumulative and Adjustable Dividends, Series
C, in each case outstanding immediately prior to the Effective Time, will be
converted into the right to receive one share of a series of corresponding
preferred stock of BANK ONE with substantially the same terms.
Consummation of the transactions contemplated by the Agreement is subject to the
terms and conditions contained in the Agreement, including among other things,
the receipt of approval of the Merger by the respective shareholders of the
Corporation and ONE at meetings of the shareholders of the Corporation and ONE
that are scheduled to take place on September 15, 1998.
-1-
<PAGE>
It is anticipated that the Merger will be accounted for as a pooling-of-
interests. The Corporation's stock repurchase program has been rescinded. The
following pro forma financial information giving effect to the Merger, accounted
for as a pooling-of-interests, includes: (i) the unaudited pro forma condensed
combined balance sheet as of June 30, 1998, and (ii) the unaudited pro forma
condensed combined statements of income for the six months ended June 30, 1998
and 1997. The pro forma condensed combined financial statements should be read
in conjunction with the historical consolidated financial statements and notes
thereto of the Corporation and ONE.
The pro forma financial information noted above gives effect to ONE's
acquisition of First Commerce Corporation which was consummated on June 12,
1998. Previously presented unaudited pro forma financial information for the
years ended December 31, 1997, 1996 and 1995 have not been restated to give
effect to ONE's acquisition of First Commerce Corporation as the acquisition is
not material to ONE.
The pro forma financial statements and the notes thereto included in this
Current Report on Form 8-K, and the exhibits hereto, contain certain estimates
and projections regarding the Corporation, ONE and the combined company
following the Merger, including without limitation estimates and projections
relating to the pro forma business and assets of the combined company, the cost
savings, revenue increases, and restructuring charges expected as a result of
the Merger and the expected impact of the transaction on earnings per share of
the constituent corporations. These estimates and projections constitute
forward-looking statements (within the meaning of the Private Securities
Litigation Reform Act of 1995). Forward-looking statements involve risks and
uncertainties which may cause actual results to differ materially from those in
such statements.
Factors that could cause actual results to differ from those discussed in the
forward-looking statements include, but are not limited to, risks and
uncertainties related to the consummation and execution of the contemplated
transaction (including integration
-2-
<PAGE>
activities), as well as: (i) the strength of the U.S. economy in general and the
strength of the local economies in which operations are conducted; (ii) the
effects of and changes in trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal
Reserve System; (iii) inflation, interest rate, market and monetary
fluctuations; (iv) the timely development of and acceptance of new products and
services and perceived overall value of these products and services by users;
(v) changes in consumer spending, borrowing and saving habits; (vi)
technological changes (including "Year 2000" data systems compliance issues);
(vii) acquisitions and integration of acquired businesses; (viii) the ability to
increase market share and control expenses; (ix) the effect of changes in laws
and regulations (including laws and regulations concerning taxes, banking,
securities and insurance) with which the Corporation, ONE and the combined
company after the Merger, and their respective subsidiaries and competitors,
must comply; (x) the effect of changes in accounting policies and practices, as
may be adopted by the regulatory agencies as well as the Financial Accounting
Standards Board; (xi) changes in the organization, compensation and benefit
plans of the Corporation, ONE and the combined company after the Merger, and
their respective subsidiaries; (xii) the costs and effects of litigation and of
unexpected or adverse outcomes in such litigation; and (xiii) the success of the
Corporation, ONE and the combined company after the Merger at managing the risks
involved in the foregoing.
Such forward-looking statements speak only as of the date on which such
statements are made, and the Corporation undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.
-3-
<PAGE>
BANK ONE CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1998
(UNAUDITED)
The following pro forma condensed combined balance sheet as of June 30, 1998, is
presented to show the impact on the Corporation's historical financial condition
of the merger with ONE. The Merger has been reflected under the pooling-of-
interests method of accounting.
<TABLE>
<CAPTION>
BANK ONE CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1998
(in millions) Corporation ONE Pro forma Pro forma
(as reported) (as reported) adjustments BANK ONE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and due from banks-noninterest bearing............. $ 8,049 $ 8,174 $ 16,223
Short-term investments.................................. 13,570 765 14,335
Trading account assets.................................. 4,128 1,214 5,342
Investment securities:
Securities held to maturity........................ - 691 691
Securities available for sale...................... 12,604 18,357 30,961
- ---------------------------------------------------------------------------------------------------------------
Total securities........................................ 12,604 19,048 31,652
Loans, net of allowance for credit losses............... 70,191 82,683 152,874
Other assets/*/......................................... 11,239 12,135 23,374
- ---------------------------------------------------------------------------------------------------------------
Total assets............................................ $119,781 $124,019 $243,800
- ---------------------------------------------------------------------------------------------------------------
Liabilities
Deposits:
Noninterest bearing................................ 19,800 21,482 41,282
Interest bearing................................... 49,728 63,472 113,200
- ---------------------------------------------------------------------------------------------------------------
Total deposits.......................................... 69,528 84,954 154,482
Short term borrowings................................... 22,541 11,807 34,348
Long term debt.......................................... 10,591 11,656 22,247
Other liabilities....................................... 8,807 4,028 837 13,672
- ---------------------------------------------------------------------------------------------------------------
Total liabilities....................................... 111,467 112,445 837 224,749
Stockholders' Equity
Preferred stock......................................... 190 - 190
Common stock............................................ 320 3,521 (320) 5,852
2,331
Surplus................................................. 1,948 6,772 (1,948) 4,634
(2,138)
Retained earnings....................................... 7,977 1,170 (837) 8,310
Other................................................... (46) 111 - 65
Less: Treasury stock.................................... (2,075) - 2,075 -
- ---------------------------------------------------------------------------------------------------------------
Stockholders' equity............................... 8,314 11,574 (837) 19,051
- ---------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity......... $119,781 $124,019 $ - $243,800
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
/*/Includes loans held for sale.
See accompanying notes to pro forma financial information.
-4-
<PAGE>
BANK ONE CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
The following unaudited pro forma condensed combined statements of income are
presented to show the impact on the Corporation's historical results of
operations of the proposed merger with ONE. Such statements assume that the
companies had been combined for each period presented.
<TABLE>
<CAPTION>
BANK ONE CORPORATION
Pro Forma Condensed Combined Statement of Income
For the Six Months Ended June 30, 1998
(in millions, except per share data)
UNAUDITED Corporation ONE Pro Forma
(as reported) (as reported) BANK ONE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Loans (including fees)........................ $2,961 $4,273 $ 7,234
Securities, including trading................. 440 664 1,104
Other......................................... 374 29 403
---------------- ---------------- ----------------
Total......................................... 3,775 4,966 8,741
Interest Expense
Deposits...................................... 1,120 1,393 2,513
Borrowings.................................... 910 726 1,636
---------------- ---------------- ----------------
Total......................................... 2,030 2,119 4,149
Net Interest Income........................... 1,745 2,847 4,592
Provision for credit losses................... 385 406 791
---------------- ---------------- ----------------
Net Interest Income After
Provision for Credit Losses.................. 1,360 2,441 3,801
Noninterest Income
Credit card fee revenue....................... 468 948 1,416
Deposit fees.................................. 231 394 625
Other......................................... 882 1,121 2,003
---------------- ---------------- ----------------
Total......................................... 1,581 2,463 4,044
Noninterest Expense
Salaries and employee benefits................ 917 1,346 2,263
Other operating expense....................... 842 2,043 2,885
---------------- ---------------- ----------------
Total......................................... 1,759 3,389 5,148
Income Before Income Taxes.................... 1,182 1,515 2,697
Applicable income taxes....................... 391 479 870
---------------- ---------------- ----------------
Net Income.................................... $ 791 $1,036 $ 1,827
---------------- ---------------- ----------------
Common Share Data
Net income
Basic......................................... $ 2.73 $ 1.47 $ 1.56
Diluted....................................... $ 2.68 $ 1.45 $ 1.53
Weighted Average Shares
Basic......................................... 287.8 701.1 1,167.3
Diluted....................................... 292.8 716.0 1,190.4
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to pro forma financial information.
-5-
<PAGE>
<TABLE>
<CAPTION>
BANK ONE CORPORATION
Pro Forma Condensed Combined Statement of Income
For the Six Months Ended June 30, 1997
(in millions, except per share data)
UNAUDITED Corporation ONE Pro Forma
(as reported) (as reported) BANK ONE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Loans (including fees)........................ $2,885 $4,363 $ 7,248
Securities, including trading................. 357 654 1,011
Other......................................... 352 23 375
--------------------- --------------------- ---------------------
Total......................................... 3,594 5,040 8,634
Interest Expense
Deposits...................................... 1,043 1,387 2,430
Borrowings.................................... 750 741 1,491
--------------------- --------------------- ---------------------
Total......................................... 1,793 2,128 3,921
Net Interest Income........................... 1,801 2,912 4,713
Provision for credit losses................... 367 696 1,063
--------------------- --------------------- ---------------------
Net Interest Income After
Provision for Credit Losses.............. 1,434 2,216 3,650
Noninterest Income
Credit card fee revenue....................... 441 655 1,096
Deposit fees.................................. 221 369 590
Other......................................... 661 697 1,358
--------------------- --------------------- ---------------------
Total......................................... 1,323 1,721 3,044
Noninterest Expense
Salaries and employee benefits................ 851 1,219 2,070
Other operating expense....................... 774 1,978 2,752
--------------------- --------------------- ---------------------
Total......................................... 1,625 3,197 4,822
Income Before Income Taxes.................... 1,132 740 1,872
Applicable income taxes....................... 374 280 654
--------------------- --------------------- ---------------------
Net Income.................................... $ 758 $ 460 $ 1,218
--------------------- --------------------- ---------------------
Common Share Data
Net income
Basic......................................... $ 2.41 $ 0.66 $ 1.01
Diluted....................................... $ 2.37 $ 0.65 $ 0.99
Weighted Average Shares
Basic......................................... 309.4 676.2 1,177.5
Diluted....................................... 315.9 712.4 1,224.1
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to pro forma financial information.
-6-
<PAGE>
BANK ONE CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The pro forma information presented is not necessarily indicative of the results
of operations or the combined financial position that would have resulted had
the Merger been consummated at the beginning of the periods indicated, nor is it
necessarily indicative of the results of operations in future periods or the
future financial position of the combined entities. It is anticipated that the
Merger will be consummated in the fourth quarter of 1998. Certain
reclassifications have been included in the unaudited pro forma condensed
combined balance sheet and statements of income to conform statement
presentations.
Note 2. Accounting Policies
The Corporation is still in the process of reviewing its accounting policies in
light of those employed by ONE. As a result of this review, certain conforming
accounting adjustments may be necessary. The nature and extent of such
adjustments have not been determined but are not expected to be significant.
Note 3. Merger-Related Effects
In connection with the Merger, the managements of the Corporation and ONE
estimate that a one-time restructuring charge of approximately $1.25 billion
($837 million after-tax) will be incurred at the time of the consummation of the
Merger. The estimated details of this overall charge have been summarized into
the following components: $800 million in personnel-related items, $350 million
related to facilities and equipment costs, and $100 million of other merger-
related transaction costs. Actions incorporated in the business combination and
restructuring plan are principally targeted for implementation over a 12-18
month period following the effective date of the Merger, currently contemplated
for the
-7-
<PAGE>
fourth quarter of 1998. There can be no assurance that the actual restructuring
charge and the details thereof will not differ materially from the foregoing
estimates.
Personnel-related items consist primarily of severance and benefits cost for
separated employees and costs associated with change in control provisions of
the Corporation's stock plans (currently estimated at $200 million). The benefit
package to be made available to certain affected employees has been approved by
management and communicated on a corporate-wide basis. Facilities and equipment
costs include the net cost associated with the closing and divestiture of
identified banking facilities, and from the consolidation of headquarters and
operational facilities. Other merger-related transaction costs include
investment banking fees, registration and listing fees, and various accounting,
legal and other related costs.
These amounts, including the related tax effects, have been reflected in the
Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 1998 and are
not reflected in the Unaudited Pro Forma Condensed Combined Statements of Income
due to their nonrecurring nature.
Note 4. Pro Forma Adjustments
Pro forma adjustments to common shares and surplus at June 30, 1998, reflect the
Merger accounted for as a pooling-of-interests, through the exchange of 466.1
million shares of BANC ONE common stock (using the common exchange ratio of
1.62) for the 287.7 million outstanding common shares of the Corporation.
-8-
<PAGE>
The pro forma entry is displayed below (in millions):
<TABLE>
<S> <C> <C>
Dr. Common Stock (FCNBD) $ 320
Dr. Surplus (FCNBD) 1,948
Cr. Treasury Stock (FCNBD) $2,075
Cr. Common Stock (ONE) 2,331
Dr. Surplus (ONE) 2,138
</TABLE>
Based on management's current estimate of merger- and restructure-related
charges, the following adjustment was made to the pro forma condensed combined
balance sheet as of June 30, 1998.
<TABLE>
<S> <C> <C>
Dr. Retained Earnings $ 837
Dr. Other Liabilities-Taxes Payable 413
Cr. Other Liabilities-Merger Reserve $1,250
</TABLE>
-9-
<PAGE>
EXHIBIT 99(b)
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
$(MILLIONS, EXCEPT SHARE AMOUNTS) (UNAUDITED) 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks.............................................. $ 8,174.3 $ 8,162.3
Short-term investments............................................... 765.4 938.6
Loans held for sale.................................................. 3,436.2 2,362.0
Securities:
Securities held to maturity......................................... 691.0 785.3
Securities available for sale....................................... 19,570.8 16,711.3
---------- ----------
Total securities (fair value approximates $20,273.9 and
$17,511.4 at June 30, 1998, and December 31, 1997,
respectively)...................................................... 20,261.8 17,496.6
Loans and leases (net of unearned income of $2,248.4 and
$2,017.0 and allowance for credit losses of $1,343.3 and
$1,409.1 at June 30, 1998, and December 31, 1997,
respectively)....................................................... 82,682.7 87,083.8
Other assets:
Bank premises and equipment, net.................................... 2,055.5 2,045.3
Interest earned, not collected...................................... 923.6 925.8
Other real estate owned............................................. 86.7 70.1
Excess of cost over net assets of affiliates purchased.............. 716.2 755.2
Other............................................................... 4,916.5 5,557.7
---------- ----------
Total other assets............................................... 8,698.5 9,354.1
---------- ----------
TOTAL ASSETS..................................................... $124,018.9 $125,397.4
========== ==========
LIABILITIES:
Deposits:
Noninterest-bearing................................................. $ 21,481.9 $ 19,862.3
Interest-bearing.................................................... 63,472.0 65,357.6
---------- ----------
Total deposits..................................................... 84,953.9 85,219.9
Federal funds purchased and repurchase agreements.................... 8,707.4 11,075.0
Other short-term borrowings.......................................... 3,099.5 3,095.8
Long-term debt....................................................... 11,656.0 11,457.2
Accrued interest payable............................................. 516.9 544.7
Other liabilities.................................................... 3,510.9 2,801.5
---------- ----------
TOTAL LIABILITIES................................................ 112,444.6 114,194.1
---------- ----------
STOCKHOLDERS' EQUITY:
Series C convertible preferred stock, 35,000,000 shares
authorized, no par value, 2,707,917 shares issued and
outstanding at December 31, 1997.................................... 135.4
Common stock, no par value, $5 stated value, 950,000,000
shares authorized; 704,322,047 and 701,207,558 shares
issued at June 30, 1998, and December 31, 1997,
respectively........................................................ 3,521.6 3,506.0
Capital in excess of aggregate stated value of common
stock............................................................... 6,771.6 6,803.9
Retained earnings.................................................... 1,170.3 672.0
Accumulated change related to other nonowner transactions............ 110.8 154.7
Treasury stock (1,421,331 shares at December 31, 1997), at
cost................................................................ (68.7)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY....................................... 11,574.3 11,203.3
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................... $124,018.9 $125,397.4
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------- --------------------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans and leases........................................ $2,026.7 $2,130.8 $4,113.1 $4,240.5
Securities:
Taxable................................................ 349.3 297.7 627.8 608.7
Tax-exempt............................................. 17.2 22.1 35.9 45.4
Loans held for sale..................................... 76.5 78.3 159.9 122.5
Other................................................... 16.5 11.5 29.0 22.9
-------- -------- -------- --------
TOTAL INTEREST INCOME................................. 2,486.2 2,540.4 4,965.7 5,040.0
INTEREST EXPENSE:
Deposits:
Demand, savings and money market deposits.............. 341.2 293.3 672.0 570.1
Time deposits.......................................... 352.2 408.2 720.5 817.0
Borrowings.............................................. 363.9 384.6 726.0 740.6
-------- -------- -------- --------
TOTAL INTEREST EXPENSE................................ 1,057.3 1,086.1 2,118.5 2,127.7
-------- -------- -------- --------
NET INTEREST INCOME................................... 1,428.9 1,454.3 2,847.2 2,912.3
Provision for credit losses.............................. 193.8 410.5 406.1 695.7
-------- -------- -------- --------
Net interest income after provision for
credit losses........................................ 1,235.1 1,043.8 2,441.1 2,216.6
NONINTEREST INCOME:
Investment management and advisory activities........... 95.1 82.0 187.0 161.7
Service charges on deposit accounts..................... 197.4 189.1 394.3 369.1
Loan servicing income................................... 477.6 385.8 1,018.1 709.4
Securities gains, net................................... 42.4 17.9 65.4 33.1
Other................................................... 468.3 200.0 798.2 447.2
-------- -------- -------- --------
TOTAL NONINTEREST INCOME.............................. 1,280.8 874.8 2,463.0 1,720.5
NONINTEREST EXPENSE:
Salary and related costs................................ 663.9 607.2 1,345.5 1,219.2
Net occupancy and equipment............................. 111.3 83.0 216.0 169.4
Depreciation and amortization........................... 116.1 118.3 233.7 233.9
Outside services and processing......................... 270.0 201.6 491.6 400.7
Marketing and development............................... 192.0 204.1 374.6 337.9
Communication and transportation........................ 124.5 110.3 242.6 210.3
Restructuring charges................................... 126.9 337.3 126.9 337.3
Other................................................... 203.7 144.7 357.9 288.9
-------- -------- -------- --------
TOTAL NONINTEREST EXPENSE............................. 1,808.4 1,806.5 3,388.8 3,197.6
-------- -------- -------- --------
Income before income taxes............................... 707.5 112.1 1,515.3 739.5
Provision for income taxes............................... 220.2 63.4 479.6 279.9
-------- -------- -------- --------
NET INCOME............................................... $ 487.3 $ 48.7 $1,035.7 $ 459.6
======== ======== ======== ========
NET INCOME PER COMMON SHARE:
NET INCOME PER COMMON SHARE, BASIC..................... $ .69 $ .06 $ 1.47 $ .66
======== ======== ======== ========
NET INCOME PER COMMON SHARE, DILUTED................... $ .68 $ .06 $ 1.45 $ .65
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------
$(MILLIONS) (UNAUDITED) 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income...................................................... $ 1,035.7 $ 459.6
Depreciation expense............................................ 183.7 171.4
Amortization of other intangibles............................... 50.0 62.5
Other cash provided by operating activities..................... 389.7 527.0
--------- ---------
Net cash provided by operating activities..................... 1,659.1 1,220.5
--------- ---------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Securities available for sale activity:
Purchases...................................................... (5,788.7) (3,471.5)
Maturities..................................................... 1,653.1 2,035.6
Sales.......................................................... 5,055.8 3,809.8
Securities held to maturity activity:
Purchases...................................................... (493.9)
Maturities..................................................... 72.8 607.1
Loan activity:
Net increase, excluding sales and purchases.................... (3,668.8) (3,176.1)
Sales.......................................................... 5,536.9 736.7
Purchases and related premiums................................. (889.3) (447.5)
Net (increase) decrease in short-term investments............... 173.2 (97.3)
Additions to bank premises and equipment........................ (288.5) (188.4)
Sale of banks and branch offices................................ (1,880.2) (22.3)
Net increase in credit card securitization activity............. (632.4) (1,017.9)
Net cash acquired in acquisitions............................... 240.7
All other investing activities, net............................. 55.6 93.9
--------- ---------
Net cash used in investing activities......................... (600.5) (1,391.1)
--------- ---------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Net increase in demand savings and money market
deposits....................................................... 3,697.3 1,540.0
Net decrease in time deposits................................... (1,629.1) (725.2)
Net decrease in short-term borrowings........................... (2,363.9) (3,230.4)
Issuance of long-term borrowings, net........................... 1,587.3 4,048.0
Repayment of long-term borrowings............................... (1,717.4) (630.6)
Cash dividends paid............................................. (529.9) (381.9)
Purchase of treasury stock...................................... (146.3) (710.3)
All other financing activities, net............................. 55.4 93.1
--------- ---------
Net cash (used in) provided by financing
activities................................................... (1,046.6) 2.7
--------- ---------
Increase (decrease) in cash and cash equivalents................. 12.0 (167.9)
Cash and cash equivalents at January 1........................... 8,162.3 6,967.8
--------- ---------
Cash and cash equivalents at June 30............................. $ 8,174.3 $ 6,799.9
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
BANC ONE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD.................................. $11,203.3 $10,608.0
Net income.................................................... 1,035.7 459.6
Changes related to other nonowner transactions:
Change in unrealized holding gains (losses) on securities
available for sale, net of tax.............................. (43.9) 9.3
--------- ---------
Total net income and changes related to other
nonowner transactions...................................... 991.8 468.9
--------- ---------
Exercise of stock options, net of shares purchased............ (15.8) 14.5
Shares issued in acquisitions................................. 1.4 538.4
Stock transactions related to employee benefit plans and
other........................................................ 69.8 78.0
Cash dividends:
Common ($.76 and $.69 per share for the six months ended
June 30, 1998 and 1997, respectively)....................... (527.8) (323.5)
Series C Preferred ($.88 and $1.75 per share for the six
months ended June 30, 1998 and 1997, respectively).......... (2.1) (6.6)
Preferred stock of pooled affiliate.......................... (51.8)
Purchase of treasury stock.................................... (146.3) (707.3)
--------- ---------
BALANCE, END OF PERIOD........................................ $11,574.3 $10,618.6
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements are unaudited. However,
in the opinion of management, they contain the adjustments, all of which are
normal and recurring in nature, necessary to present fairly the consolidated
financial position, results of operations and changes in cash flow. The
consolidated financial statements and notes to the consolidated financial
statements contained in the Annual Report on Form 10-K for the year ended
December 31, 1997, and the Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, should be read in conjunction with these consolidated financial
statements. The "Corporation" is defined as the parent company only. "BANC ONE"
refers to the Corporation and all significant majority-owned subsidiaries.
Certain prior period amounts have been reclassified to be consistent with
current presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. ACQUISITION
On June 12, 1998, the Corporation completed its acquisition of First
Commerce Corporation ("First Commerce") located in New Orleans, Louisiana,
resulting in the issuance of approximately 56 million shares of the
Corporation's common stock valued at $3.5 billion for all the outstanding shares
of First Commerce common stock, in a tax-free exchange. First Commerce was a
multi-bank holding company with total assets of approximately $9.3 billion and
stockholders' equity of approximately $804.6 million at June 12, 1998. The
acquisition was accounted for as a pooling of interests and, therefore, these
consolidated financial statements have been restated for all periods presented
to include the results of operations, financial position and changes in cash
flows of First Commerce. For further information, see BANC ONE's current report
on Form 8-K dated July 24, 1998.
In connection with the First Commerce merger, BANC ONE identified
restructuring and merger integration charges of $182.0 million ($127.3 million
after tax), of which $126.9 million was recorded as a restructuring charge,
$43.6 million represented integration costs, and $11.5 million was associated
with Year 2000 compliance. The restructuring charge of $126.9 million associated
with the First Commerce merger consisted of employee benefits, severance and
retention costs, and other merger-related costs.
The separate results of operations for BANC ONE and First Commerce were as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- ------------------------
$(MILLIONS) 1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUE:
BANC ONE......................... $3,506.6 $3,190.3 $6,944.7 $6,321.6
First Commerce................... 260.4 224.9 484.0 438.9
-------- -------- -------- --------
$3,767.0 $3,415.2 $7,428.7 $6,760.5
======== ======== ======== ========
NET INCOME:
BANC ONE......................... $ 536.6 $ 15.8 $1,054.2 $ 397.7
First Commerce................... (49.3)(a) 32.9 (18.5)(a) 61.9
-------- -------- -------- --------
$ 487.3 $ 48.7 $1,035.7 $ 459.6
======== ======== ======== ========
</TABLE>
- -------------
(a) Includes accounting conformity and acquisition-related charges.
3. PENDING MERGER
On April 10, 1998, the Corporation entered into an agreement to merge with
First Chicago NBD Corporation ("First Chicago"), a multi-bank holding company
headquartered in Chicago with approximately
5
<PAGE>
$119.8 billion in assets at June 30, 1998. The new company will be named BANK
ONE CORPORATION. Terms of the agreement call for First Chicago shareholders to
receive 1.62 shares of the new company in exchange for each share of First
Chicago stock. In the transaction, each share of BANC ONE common stock will
continue to represent one share of BANK ONE CORPORATION common stock after the
merger. The transaction, subject to regulatory and shareholder approval, is
expected to be completed during the second half of 1998, and will be accounted
for as a pooling of interests. In conjunction with the merger, BANC ONE and
First Chicago expect that the new company will incur a pre-tax restructuring
charge of approximately $1.25 billion. For further information, see BANC ONE's
Current Report on Form 8-K dated April 10, 1998 (as amended by Form 8-K/A filed
April 21, 1998 and Form 8-K/A filed May 19, 1998), which is incorporated herein
by reference.
4. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Supplemental disclosures for the consolidated condensed statement of cash
flows are as follows: common stock issued and treasury stock reissued in
purchase acquisitions was $1.4 million and $538.4 million for the six months
ended June 30, 1998 and 1997, respectively, and securities trades not settled
decreased $156.2 million and $2.3 billion for the six months ended June 30, 1998
and 1997, respectively. Finally, in connection with the First USA merger, $3.6
billion of mortgage-backed securities were reclassified from held to maturity to
available for sale during the 1997 second quarter.
In addition, noncash investing activities for the six months ended June 30,
1998, included the following transfers of securitization-related assets: (1) an
interest-only strip of $469.4 million was transferred from other assets to
securities available for sale and (2) certificated retained interests in credit
card securitizations of $2.4 billion were transferred from loans to securities
available for sale.
5. EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------ ----------
$(MILLIONS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BASIC:
EARNINGS:
Net income.................................................... $487.3 $ 48.7 $1,035.7 $459.6
Deduct: Dividends on preferred shares......................... 6.1 2.1 12.4
------ -------- -------- ------
$487.3 $ 42.6 $1,033.6 $447.2
====== ======== ======== ======
SHARES:
Weighted average common shares outstanding.................... 703.5 675.2 701.1 676.2
====== ======== ======== ======
NET INCOME PER COMMON SHARE, BASIC.............................. $ .69 $ .06 $ 1.47 $ .66
====== ======== ======== ======
DILUTED:
EARNINGS:
Net income.................................................... $487.3 $ 48.7 $1,035.7 $459.6
Interest expense on convertible debentures, net of
tax.......................................................... 1.5 1.6 3.2 3.3
Anti-dilutive effect of preferred dividends (1)............... (6.1)
------ -------- -------- ------
$488.8 $ 44.2 $1,038.9 $462.9
====== ======== ======== ======
SHARES:
Weighted average common shares outstanding.................... 703.5 675.2 701.1 676.2
Add: Dilutive effect of outstanding options................... 7.6 12.9 8.0 12.9
Add: Conversion of preferred stock (1)........................ .2 2.8 18.8
Add: Other dilutive contingent share issuances................ 4.0 4.5 4.1 4.5
------ -------- -------- ------
Weighted average common shares outstanding.................... 715.3 692.6 716.0 712.4
====== ======== ======== ======
NET INCOME PER COMMON SHARE, DILUTED............................ $ .68 $ .06 $ 1.45 $ .65
====== ======== ======== ======
</TABLE>
- -----------------
(1) The calculation for the three months ended June 1997 excludes the impact of
conversion of preferred stock because of its antidilutive effect on earnings
per share.
6
<PAGE>
6. CHANGES IN STOCKHOLDERS' EQUITY
In addition to net income, BANC ONE has identified changes related to other
nonowner transactions in the Consolidated Statement of Changes in Stockholders'
Equity. For BANC ONE, changes in other nonowner transactions consist entirely of
changes in unrealized holding gains and losses on securities available for sale.
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
---------------------------------- ---------------------------------------
TAX TAX
BEFORE-TAX (EXPENSE) AFTER-TAX BEFORE-TAX (EXPENSE) AFTER-TAX
$(MILLIONS) AMOUNT OR BENEFIT AMOUNT AMOUNT OR BENEFIT AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UNREALIZED GAINS ON SECURITIES:
Unrealized holding gains arising during
period......................................... $ 7.3 $(2.3) $ 5.0 $ 51.1 $(19.3) $ 31.8
Less: reclassification adjustment for
gain realized in net income.................... (71.6) 22.7 (48.9) (36.1) 13.6 (22.5)
------ ----- ------ ------ ------ ------
Change related to other nonowner
transactions.................................... $(64.3) $20.4 $(43.9) $ 15.0 $ (5.7) $ 9.3
====== ===== ====== ====== ====== ======
</TABLE>
On January 20, 1998, the Corporation announced the election to redeem all
of the shares of BANC ONE's Series C Convertible Preferred Stock ("preferred
stock") on April 16, 1998, at the redemption price of $51.05 per share plus the
amount of any dividends accrued and unpaid.
In addition, of the approximately 56 million shares of BANC ONE stock
issued in the acquisition of First Commerce, approximately four million shares
were shares of treasury stock.
7. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
This Statement establishes standards for reporting operating segments and
requires certain other disclosures about products and services, geographic areas
and major customers. The disclosure requirements are effective for the year
ended December 31, 1998. The Statement requires selected information about
operating segments in interim financial reports beginning in 1999. BANC ONE
expects to report the following lines of business in its segment disclosures for
the year ended December 31, 1998: the Banc One Commercial Banking Group, the
Banc One Retail Banking Group, First USA, the Finance One Group and the Banc One
Capital Holdings Group. These segments may change as a result of the merger with
First Chicago.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 provides guidance on
accounting for the costs of computer software developed or obtained for internal
use. BANC ONE adopted SOP 98-1 effective for the first quarter of 1998. These
costs will be amortized on a straight-line basis over the period of benefit, not
to exceed five years, and will be periodically reviewed for possible impairment.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999, and may be
implemented as of the beginning of any fiscal quarter after issuance. SFAS No.
133 may not be applied retroactively. Management has not yet quantified the
impact of adopting SFAS No. 133 on BANC ONE's financial statements and has not
yet determined the timing or method of adoption of SFAS No. 133.
7
