SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
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 5, 1998
NORWEST CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-2979 41-0449260
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 612-667-1234
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Form 8-K
NORWEST CORPORATION
ITEM 5. Other Events
On June 8, 1998, Norwest Corporation ("Norwest") announced it had entered into
a definitive agreement for a merger of equals ("Merger") with Wells Fargo &
Company ("Wells Fargo"). In accordance with the agreement, common stockholders
of Wells Fargo will receive ten shares of Norwest common stock in exchange for
each share of Wells Fargo common stock. The transaction is subject to
customary stockholder and regulatory approval and is expected to close in the
fourth quarter of 1998. The pending Merger is significant to the financial
statements of Norwest, as specified in Rules 1-02(w) and 3-05 of Regulation S-
X. Consequently, pro forma financial statements are presented herein under
Item 7 below.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
Pro forma Financial Information
The following unaudited pro forma condensed combined financial information and
explanatory notes are presented to show the impact on the historical financial
positions and results of operations of Norwest and Wells Fargo of the Merger
under the "pooling of interests" method of accounting. The unaudited pro forma
condensed combined financial information combines the historical financial
information of Norwest and Wells Fargo as of March 31, 1998 and for the three
months ended March 31, 1998 and 1997 and for the twelve-month periods ended
December 31, 1997, 1996, and 1995, respectively. The unaudited pro forma
condensed combined statements of income give effect to the Merger as if the
Merger had been consummated at the beginning of the earliest period presented.
The pro forma condensed combined balance sheet assumes the Merger was
consummated on March 31, 1998. The Merger, which is expected to be completed
in the fourth quarter of 1998, provides for the exchange of ten shares of
Norwest Common Stock for each outstanding share of Wells Fargo Common Stock.
The pro forma condensed combined financial information as of March 31, 1998 and
for the three months ended March 31, 1998 and 1997 and each of the years in the
three-year period ended December 31, 1997 is based on and derived from, and
should be read in conjunction with the historical consolidated financial
statements and the related notes thereto of Norwest and Wells Fargo. The pro
forma condensed combined financial statements do not give effect to
anticipated cost savings or potential revenue enhancements in connection with
the Merger.
The pro forma data are presented for comparative purposes only and are not
necessarily indicative of the future financial position or results of
operations of the combined company or of the combined financial position or the
results of operations that would have been realized had the Merger been
consummated during the periods or as of the dates for which the pro forma data
are presented.
Exhibits
23. Consent of KPMG Peat Marwick LLP.
99(a). Wells Fargo & Company audited consolidated financial statements as of
December 31, 1997 and 1996 and for the three-year period ended
December 31, 1997 (incorporated by reference to Item 8 of the Wells
Fargo & Company Annual Report on Form 10-K for the year ended
December 31, 1997).
99(b). Wells Fargo & Company unaudited consolidated financial statements as of
March 31, 1998 and for the three months ended March 31, 1998 and
1997 (incorporated by reference to Item 1 of the Wells Fargo &
Company Quarterly Report on Form 10-Q for the quarter ended March 31,
1998).
2
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NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AT MARCH 31, 1998
(in millions)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
ASSETS
Cash and due from banks ........... $ 4,674 8,303 - 12,977
Interest-bearing deposits ......... 82 23 - 105
Federal funds sold and
resale agreements ............... 373 111 - 484
Total cash and cash equivalents.... 5,129 8,437 - 13,566
Trading account securities......... 1,412 721 - 2,133
Investment securities
available for sale .............. 22,473 8,676 - 31,149
Investment securities ............. 746 405 - 1,151
Total investment securities ....... 23,219 9,081 - 32,300
Loans held for sale ............... 3,436 1,141 - 4,577
Mortgages held for sale ........... 12,031 378 - 12,409
Loans and leases, net of
unearned discount ............... 42,162 62,985 - 105,147
Allowance for credit losses ....... (1,236) (1,830) - (3,066)
Net loans and leases .............. 40,926 61,155 - 102,081
Premises and equipment, net ....... 1,341 2,081 (105) 3,317
Mortgage servicing rights, net .... 2,811 303 - 3,114
Goodwill and intangible assets .... 1,094 8,771 - 9,865
Interest receivable
and other assets ................ 4,695 2,752 - 7,447
Total assets ................. $96,094 94,820 (105) 190,809
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing ............. $18,606 24,421 - 43,027
Interest-bearing ................ 39,227 47,895 - 87,122
Total deposits .................. 57,833 72,316 - 130,149
Short-term borrowings ............. 14,234 1,392 - 15,626
Accrued expenses and
other liabilities ............... 4,435 2,750 662 7,847
Long-term debt .................... 12,487 4,260 - 16,747
Guaranteed preferred
beneficial interest in Wells
Fargo subordinated debentures ... - 1,299 - 1,299
Preferred stock ................... 186 275 - 461
Common stock ...................... 1,282 426 995 2,703
Surplus ........................... 457 8,431 (995) 7,893
Retained earnings ................. 5,190 3,615 (767) 8,038
Accumulated other
comprehensive income ............ 347 56 - 403
Notes receivable from ESOP ........ (8) - - (8)
Treasury stock .................... (349) - - (349)
Total stockholders' equity ... 7,105 12,803 (767) 19,141
Total liabilities and
Stockholders'equity ........ $96,094 94,820 (105) 190,809
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
3
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NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
(in millions, except per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
INTEREST INCOME ON
Loans and leases ................... $1,185 1,476 - 2,661
Investment securities
available for sale ............... 314 145 - 459
Investment securities .............. 7 6 - 13
Loans held for sale ................ 70 21 - 91
Mortgages held for sale ........... 156 15 - 171
Money market investments .......... 12 6 - 18
Trading account securities ........ 11 15 - 26
Total interest income ........ 1,755 1,684 - 3,439
INTEREST EXPENSE ON
Deposits .......................... 367 410 - 777
Short-term borrowings ............. 124 47 - 171
Long-term debt .................... 197 75 - 272
Guaranteed preferred beneficial
interest in Wells Fargo
subordinated debentures ......... - 25 - 25
Total interest expense ....... 688 557 - 1,245
Net interest income ........ 1,067 1,127 - 2,194
Provision for credit losses ....... 125 180 - 305
Net interest income after
provision for credit losses. 942 947 - 1,889
NON-INTEREST INCOME
Mortgage banking .................. 253 24 - 277
Trust and investment fees
and commissions ................. 124 135 - 259
Service charges and fees .......... 148 293 - 441
Credit card fee revenue ........... 33 87 - 120
Insurance ......................... 95 - - 95
Data processing ................... 17 - - 17
Net investment securities
available for sale gains ........ 8 5 - 13
Net venture capital gains ......... 59 - - 59
Trading ........................... 24 20 - 44
Other ............................. 49 150 - 199
Total non-interest income .... 810 714 - 1,524
NON-INTEREST EXPENSES
Salaries and benefits ............. 667 440 (2) 1,105
Net occupancy ..................... 86 101 - 187
Equipment rentals, depreciation
and maintenance ................. 88 98 3 189
Business development .............. 66 37 - 103
Communication ..................... 77 64 - 141
Data processing ................... 36 13 - 49
Intangible asset amortization ..... 42 148 - 190
Other ............................. 147 179 - 326
Total non-interest expenses .. 1,209 1,080 1 2,290
4
(Continued on page 5)
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NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
(in millions, except per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
(Continued from page 4)
INCOME BEFORE INCOME TAXES ........ 543 581 (1) 1,123
Income tax expense ................ 175 266 - 441
NET INCOME ........................ $ 368 315 (1) 682
NET INCOME PER COMMON SHARE
Basic ............................. $0.48 3.62 - 0.42
Diluted ........................... 0.47 3.58 - 0.41
WEIGHTED AVERAGE COMMON AND
POTENTIAL COMMON SHARES
Basic ............................. 757.7 85.8 772.2 1,615.7
Diluted ........................... 772.0 86.6 779.5 1,638.1
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
5
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NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997
(in millions, except for per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
INTEREST INCOME ON
Loans and leases ................... $1,095 1,523 - 2,618
Investment securities available
for sale ......................... 326 208 - 534
Investment securities .............. 7 6 - 13
Loans held for sale ................ 56 21 - 77
Mortgages held for sale ............ 98 5 - 103
Money market investments ........... 20 5 - 25
Trading account securities ......... 5 5 - 10
Total interest income ......... 1,607 1,773 - 3,380
INTEREST EXPENSE ON
Deposits ........................... 356 422 - 778
Short-term borrowings .............. 99 33 - 132
Long-term debt ..................... 194 81 - 275
Guaranteed preferred beneficial
interest in Wells Fargo
subordinated debentures .......... - 25 - 25
Total interest expense ........... 649 561 - 1,210
Net interest income .............. 958 1,212 - 2,170
Provision for credit losses ........ 109 105 - 214
Net interest income after
provision for credit losses . 849 1,107 - 1,956
NON-INTEREST INCOME
Mortgage banking ................... 222 6 - 228
Trust and investment fees
and commission ................... 102 125 - 227
Service charges and fees ........... 134 291 - 425
Credit card fee revenue ............ 28 67 - 95
Insurance .......................... 90 - - 90
Data processing .................... 18 - - 18
Net investment securities
available for sale
gains (losses) ................... (4) 4 - -
Net venture capital gains .......... 19 - - 19
Trading ............................ 25 16 - 41
Other .............................. 51 116 - 167
Total non-interest income ........ 685 625 - 1,310
NON-INTEREST EXPENSES
Salaries and benefits .............. 547 449 (2) 994
Net occupancy ...................... 80 102 - 182
Equipment rentals, depreciation
and maintenance .................. 82 94 3 179
Business development ............... 58 27 - 85
Communication ...................... 72 82 - 154
Data processing .................... 45 13 - 58
Intangible asset amortization ...... 40 153 - 193
Other .............................. 117 182 - 299
Total non-interest expenses ... 1,041 1,102 1 2,144
6
(continued on page 7)
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NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997
(in millions, except for per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
(Continued from page 6)
INCOME BEFORE INCOME TAXES ........ 493 630 (1) 1,122
Income tax expense ................ 171 291 - 462
NET INCOME ........................ $ 322 339 (1) 660
NET INCOME PER COMMON SHARE
Basic ............................. $0.43 3.62 - 0.39
Diluted ........................... 0.42 3.58 - 0.39
WEIGHTED AVERAGE COMMON AND
POTENTIAL COMMON SHARES
Basic ............................. 745.6 90.8 817.4 1,653.8
Diluted ........................... 755.9 91.9 826.9 1,674.7
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
7
<PAGE>
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1997
(in millions, except for per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
INTEREST INCOME ON
Loans and leases .................... $4,553 5,986 - 10,539
Investment securities
available for sale ................ 1,331 732 - 2,063
Investment securities ............... 28 25 - 53
Loans held for sale ................. 232 80 - 312
Mortgages held for sale ............. 462 28 - 490
Money market investments ............ 50 18 - 68
Trading account securities .......... 41 35 - 76
Total interest income .......... 6,697 6,904 - 13,601
INTEREST EXPENSE ON
Deposits ............................ 1,447 1,703 - 3,150
Short-term borrowings ............... 439 171 - 610
Long-term debt ...................... 778 315 - 1,093
Guaranteed preferred beneficial
interest in Wells Fargo
subordinated debentures ........... - 101 - 101
Total interest expense ......... 2,664 2,290 - 4,954
Net interest income ............ 4,033 4,614 - 8,647
Provision for credit losses ......... 525 615 - 1,140
Net interest income after
provision for credit losses . 3,508 3,999 - 7,507
NON-INTEREST INCOME
Mortgage banking .................... 876 51 - 927
Trust and investment fees
and commissions ................... 435 519 - 954
Service charges and fees ............ 579 1,168 - 1,747
Credit card fee revenue ............. 123 325 - 448
Insurance ........................... 336 - - 336
Data processing ..................... 71 - - 71
Net investment securities available
for sale gains .................... 38 20 - 58
Net venture capital gains ........... 191 - - 191
Trading ............................. 79 72 - 151
Other ............................... 234 494 - 728
Total non-interest income ...... 2,962 2,649 - 5,611
NON-INTEREST EXPENSES
Salaries and benefits ............... 2,361 1,715 (8) 4,068
Net occupancy ....................... 326 388 - 714
Equipment rentals, depreciation
and maintenance ................... 341 385 10 736
Business development ................ 254 136 - 390
Communication ....................... 295 295 - 590
Data processing ..................... 168 49 - 217
Intangible asset amortization ....... 169 610 - 779
Other ............................... 506 916 - 1,422
Total non-interest expenses .... 4,420 4,494 2 8,916
8
(continued on page 9)
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NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1997
(in millions, except for per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
(Continued from page 8)
INCOME BEFORE INCOME TAXES ......... 2,050 2,154 (2) 4,202
Income tax expense ................. 699 999 (1) 1,697
NET INCOME ......................... $1,351 1,155 (1) 2,505
NET INCOME PER COMMON SHARE
Basic .............................. $1.78 12.77 - 1.51
Diluted ............................ 1.75 12.64 - 1.49
WEIGHTED AVERAGE COMMON AND
POTENTIAL COMMON SHARES
Basic .............................. 750.1 88.4 796.0 1,634.5
Diluted ............................ 760.1 89.4 804.4 1,653.9
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
9
<PAGE>
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1996
(in millions, except for per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
INTEREST INCOME ON
Loans and leases ................... $4,302 5,592 - 9,894
Investment securities
available for sale ............... 1,170 779 - 1,949
Investment securities .............. 36 13 - 49
Loans held for sale ................ 254 74 - 328
Mortgages held for sale ............ 469 22 - 491
Money market investments ........... 62 33 - 95
Trading account securities ......... 25 10 - 35
Total interest income ......... 6,318 6,523 - 12,841
INTEREST EXPENSE ON
Deposits ........................... 1,325 1,586 - 2,911
Short-term borrowings .............. 453 108 - 561
Long-term debt ..................... 838 302 - 1,140
Guaranteed preferred beneficial
interest in Wells Fargo
subordinated debentures .......... - 6 - 6
Total interest expense ........ 2,616 2,002 - 4,618
Net interest income ........... 3,702 4,521 - 8,223
Provision for credit losses ........ 395 105 - 500
Net interest income after
provision for credit losses . 3,307 4,416 - 7,723
NON-INTEREST INCOME
Mortgage banking ................... 822 26 - 848
Trust and investment fees
and commissions .................. 360 438 - 798
Service charges and fees ........... 484 1,082 - 1,566
Credit card fee revenue ............ 122 228 - 350
Insurance .......................... 280 - - 280
Data processing .................... 73 - - 73
Net investment securities
available for sale
gains (losses) ................... (47) 10 - (37)
Net venture capital gains .......... 256 - - 256
Trading ............................ 35 44 - 79
Other .............................. 180 329 - 509
Total non-interest income ..... 2,565 2,157 - 4,722
NON-INTEREST EXPENSES
Salaries and benefits .............. 2,097 1,866 (8) 3,955
Net occupancy ...................... 316 366 - 682
Equipment rentals, depreciation
and maintenance .................. 328 399 10 737
Business development ............... 228 194 - 422
Communication ...................... 285 312 - 597
Data processing .................... 163 55 - 218
Intangible asset amortization....... 162 519 - 681
Other .............................. 511 883 - 1,394
Total non-interest expenses.... 4,090 4,594 2 8,686
10
(continued on page 11)
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NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1996
(in millions, except for per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
(Continued from page 10)
INCOME BEFORE INCOME TAXES ......... 1,782 1,979 (2) 3,759
Income tax expense ................. 628 908 (1) 1,535
NET INCOME ......................... $1,154 1,071 (1) 2,224
NET INCOME PER COMMON SHARE
Basic .............................. $1.55 12.21 - 1.38
Diluted ............................ 1.54 12.05 - 1.36
WEIGHTED AVERAGE COMMON AND
POTENTIAL COMMON SHARES
Basic .............................. 731.8 82.2 739.9 1,553.9
Diluted ............................ 739.5 83.3 749.5 1,572.3
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
11
<PAGE>
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995
(in millions, except for per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
INTEREST INCOME ON
Loans and leases ................... $3,956 3,435 - 7,391
Investment securities
available for sale ............... 1,065 599 - 1,664
Investment securities .............. 84 3 - 87
Loans held for sale ................ 196 31 - 227
Mortgages held for sale ............ 366 13 - 379
Money market investments ........... 35 4 - 39
Trading account securities ......... 15 - - 15
Total interest income ......... 5,717 4,085 - 9,802
INTEREST EXPENSE ON
Deposits ........................... 1,156 997 - 2,153
Short-term borrowings .............. 516 231 - 747
Long-term debt ..................... 776 203 - 979
Total interest expense ............. 2,448 1,431 - 3,879
Net interest income ........... 3,269 2,654 - 5,923
Provision for credit losses ........ 312 - - 312
Net interest income after
provision for credit losses . 2,957 2,654 - 5,611
NON-INTEREST INCOME
Mortgage banking ................... 536 19 - 555
Trust and investment fees
and commissions .................. 284 274 - 558
Service charges and fees ........... 342 581 - 923
Credit card fee revenue ............ 133 160 - 293
Insurance .......................... 225 - - 225
Data processing .................... 72 - - 72
Net investment securities gains .... 1 - - 1
Net investment securities
available for sale (losses) ..... (45) (17) - (62)
Net venture capital gains .......... 102 - - 102
Trading ............................ 40 27 - 67
Other .............................. 158 255 - 413
Total non-interest income ..... 1,848 1,299 - 3,147
NON-INTEREST EXPENSES
Salaries and benefits .............. 1,745 995 (8) 2,732
Net occupancy ...................... 254 211 - 465
Equipment rentals, depreciation
and maintenance .................. 273 193 10 476
Business development ............... 172 109 - 281
Communication ...................... 225 147 - 372
Data processing .................... 136 11 - 147
Intangible asset amortization ...... 125 88 - 213
Other .............................. 452 422 - 874
Total non-interest expenses ... 3,382 2,176 2 5,560
12
(continued on page 13)
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NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995
(in millions, except for per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
(Continued from page 12)
INCOME BEFORE INCOME TAXES ......... 1,423 1,777 (2) 3,198
Income tax expense ................. 467 745 (1) 1,211
NET INCOME ......................... $ 956 1,032 (1) 1,987
NET INCOME PER COMMON SHARE
Basic .............................. $1.39 20.37 - 1.67
Diluted ............................ 1.36 20.06 - 1.63
WEIGHTED AVERAGE COMMON AND
POTENTIAL COMMON SHARES
Basic .............................. 658.4 48.6 437.5 1,144.5
Diluted ............................ 680.2 49.4 444.1 1,173.7
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
13
<PAGE>
NORWEST CORPORATION
AND WELLS FARGO & COMPANY
Notes to Unaudited Pro Forma Condensed Financial Information
1. Basis of Presentation
The unaudited pro forma condensed financial information has been prepared
using the pooling of interests method of accounting, giving effect to the
Merger as if it had occurred as of the beginning of the earliest period
presented. The pro forma financial information presented is not
necessarily indicative of the results of operations had the Merger been
consummated at the beginning of the periods presented, nor is it
necessarily indicative of the results of operations in future periods or
the future financial position of the combined entities. Certain historical
financial information has been reclassified to conform with the current
presentation. The Merger, which is expected to be completed in the fourth
quarter of 1998, provides for issuance of ten shares of Norwest common
stock for each outstanding share of Wells Fargo common stock, and is
subject to regulatory and Norwest stockholder and Wells Fargo stockholder
approval. At March 31, 1998, Norwest had eight pending acquisitions
(exclusive of the Merger) with total assets of approximately $2.0 billion,
and it is expected that cash of approximately $86.4 million and
approximately 11.0 million common shares will be issued upon consummation
of these acquisitions. The pro forma information does not give effect to
such other pending acquisitions of Norwest as they are not material to the
pro forma condensed financial information, either individually or in the
aggregate. Norwest and Wells Fargo anticipate that, in order to comply
with DOJ merger guidelines, the companies will be requested to sell a
modest level of deposits. In this connection, the companies expect to
propose divestitures in various markets. The impact of such divestitures
is not expected to be material and no adjustment has been included in the
unaudited pro forma combined financial statements for the anticipated
divestitures.
2. Accounting Policies and Financial Statement Classifications
Norwest and Wells Fargo have identified and conformed certain accounting
policies, and as described below in Note (4), the accompanying pro forma
financial information reflects such conforming accounting adjustments. The
accounting policies of both Norwest and Wells Fargo are in the process of
being reviewed in detail. Upon completion of such review, other conforming
adjustments or financial statement reclassifications may be determined. At
March 31, 1998, Wells Fargo goodwill and intangibles amounted to $8.8
billion, and Norwest goodwill and intangibles amounted to $1.1 billion. In
conjunction with the Merger and recent financial projections, management
is currently in the process of assessing such intangibles for impairment.
Transactions between Norwest and Wells Fargo are not material in relation
to the pro forma financial information and therefore intercompany balances
have not been eliminated from the pro forma combined amounts.
3. Non-recurring Merger Charge
Pro forma stockholders' equity includes the effect of an estimated non-
recurring charge of approximately $950 million, $625 million net of income
taxes. Since the estimated charge is non-recurring, it has not been
reflected in the pro forma combined condensed statements of income and related
per common share calculations.
14
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The estimated non-recurring charge consists of the following (in millions):
Employee-related expense ......................................... $295
Costs associated with systems integration,
operations and customer conversions .............................. 350
Branch consolidations, name change and signage ................... 185
Investment banking, legal and accounting fees .................... 120
950
Income tax benefit ............................................... 325
Total estimated non-recurring charge ............................. $625
The pro forma condensed combined financial information does not reflect any
benefit expected from revenue enhancements or derived from potential cost
savings related to the Merger. Although management anticipates revenue
enhancements and cost savings will result from the Merger, there can be no
assurance these items will be achieved.
4. Pro Forma Adjustments
The following pro forma adjustments have been reflected in the pro forma
condensed combined financial information:
- Common stock and surplus were adjusted by $995 million, based on 85.3
million shares of Wells Fargo common stock outstanding at March 31,
1998, reflecting the exchange of 10 shares of Norwest common stock for
each share of Wells Fargo common stock, and accounting for the Merger
as a pooling of interests. The adjustment reflects the reclassification
from surplus to common stock to reflect the $1 2/3 par value of Norwest
common stock. The number of shares of Norwest common stock to be issued
upon consummation of the Merger will be based on the number of shares
of Wells Fargo common stock outstanding at that time and will include
approximately 2.7 million "tainted" shares of Wells Fargo common stock
that Wells Fargo intends to issue prior to the Merger. From June 1,
1996 to the announcement date of the Merger, Wells Fargo repurchased
shares of Wells Fargo common stock that are presumed to be tainted
under Accounting Principles Board (APB) Opinion No. 16 and
authoritative interpretations thereof. These tainted shares may be
deemed to result in certain conditions to the use of pooling of
interests accounting for the Merger not being met. Wells Fargo intends
to cure such "tainted" shares prior to the Effective Time by issuing
shares of Wells Fargo common stock in a manner that complies with the
requirements of APB Opinion No. 16 and authoritative interpretations
thereof.
- Other liabilities and retained earnings were adjusted by $950 million
($625 million net of income taxes), to reflect the non-recurring Merger
charge discussed in Note (3).
15
<PAGE>
- Other liabilities and retained earnings have been adjusted by $153
million before taxes reflecting the transition obligation for the Wells
Fargo postretirement medical and life insurance benefits upon initial
adoption of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
(FAS 106) at the beginning of 1992. Norwest adopted FAS 106 in 1992 and
immediately recognized the accumulated postretirement benefit
obligations at the time of adoption as a cumulative effect of change in
accounting principle. Salaries and benefits expense has been reduced to
eliminate the annual charge of $8 million related to the amortization
of the Wells Fargo transition obligations.
- Premises and equipment and retained earnings have been adjusted by $105
million before taxes reflecting the conforming of capitalization
policies for premises and equipment. Equipment expense has been
adjusted by $3 million for each of the quarters ended March 31, 1998
and 1997, respectively, and by $10 million for each of the years ended
December 31, 1997, 1996 and 1995, reflecting adjustments for
capitalization of such items, offset by related depreciation previously
recorded.
Exhibits
The following exhibits are filed or incorporated by reference in response to
Item 601 of Regulation S-K.
Exhibit No. Exhibit
23. Consent of KPMG Peat Marwick LLP.
99(a). Wells Fargo & Company audited consolidated financial statements
as of December 31, 1997 and 1996 and for the three-year period
ended December 31, 1997 (incorporated by reference to Item 8
of the Wells Fargo & Company Annual Report on Form 10-K for
the year ended December 31, 1997).
99(b). Wells Fargo & Company unaudited consolidated financial
statements as of March 31, 1998 and for the three months ended
March 31, 1998 and 1997 (incorporated by reference to Item 1
of the Wells Fargo & Company Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998).
16
<PAGE>
SIGNATURES
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 thereunto duly authorized.
NORWEST CORPORATION
August 5, 1998 By /s/ Michael A. Graf
Senior Vice President
and Controller
(Principal Accounting Officer)
17
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Exhibit 23
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Norwest Corporation:
We consent to the incorporation by reference of our report dated January 19,
1998 with respect to the consolidated balance sheet of Wells Fargo & Company
and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1997 which report is
incorporated by reference in the Form 8-K of Norwest Corporation dated
August 5, 1998.
/s/ KPMG Peat Marwick LLP
San Francisco, California
August 5, 1998
