<PAGE> 1
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
March 21, 1994
------------------------------------------
(Date of earliest event reported)
BankAmerica Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 1-7377 94-1681731
- ---------------------------- --------------- ------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
</TABLE>
<TABLE>
<S> <C>
Bank of America Center
555 California Street
San Francisco, California 94104
- -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
415-622-3530
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
Item 5. Other Events.
As previously reported, BankAmerica Corporation ("BAC") and
Continental Bank Corporation ("CBC") have entered into a Restated Agreement and
Plan of Merger dated as of January 27, 1994 (the "Agreement"), pursuant to
which CBC will be merged with and into BAC in a transaction in which BAC will
be the surviving entity (such transaction, the "Merger").
The following pro forma combined financial information is set
forth in Exhibit 99.a:
BankAmerica Corporation and Continental Bank Corporation.
(1) BankAmerica Corporation and Subsidiaries and Continental
Bank Corporation and Subsidiaries Pro Forma Combined
Balance Sheet at December 31, 1993 (unaudited).
(2) BankAmerica Corporation and Subsidiaries and Continental
Bank Corporation and Subsidiaries Pro Forma Combined
Statement of Operations for the year ended
December 31, 1993 (unaudited).
(3) BankAmerica Corporation and Subsidiaries and Continental
Bank Corporation and Subsidiaries Notes to Pro Forma
Combined Financial Information (unaudited).
Also, set forth in Exhibit 99.b are historical and pro forma
combined ratios of earnings to fixed charges and ratios of earnings to
combined fixed charges and preferred stock dividends for the year ended
December 31, 1993 (unaudited).
Portions of CBC's Annual Report on Form 10-K for the year ended
December 31, 1993 previously filed with the Securities and Exchange Commission
are hereby incorporated by reference in this Current Report at Exhibit 99.c.
The following audited consolidated financial statements and accompanying notes
of CBC and its subsidiaries are incorporated:
1
<PAGE> 3
Continental Bank Corporation.
(1) Consolidated Balance Sheet - December 31, 1993.
(2) Consolidated Statement of Operations - year ended
December 31, 1993.
(3) Consolidated Statement of Cash Flows - year ended
December 31, 1993.
(4) Consolidated Statement of Changes in Stockholders' Equity
- year ended December 31, 1993.
(5) Notes to Financial Statements (to the extent applicable
to the foregoing financial statements and except for the
portions of those notes that are specifically
identified therein as unaudited).
Such audited consolidated financial statements and accompanying notes of CBC
and its subsidiaries have been included herein in reliance on the report of
Price Waterhouse, independent accountants, which is also incorporated by
reference in this Current Report at Exhibit 99.c, given on the authority of
said firm as experts in accounting and auditing. The consent of Price
Waterhouse is attached as Exhibit 23. All such information relating to CBC and
its subsidiaries has been supplied by CBC and not by BAC, and BAC does not
warrant the accuracy or completeness of such information.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired
Not applicable.
(b) Pro Forma Financial Information
Not applicable.
(c) Exhibits
The following exhibits are filed with this Current Report, except
for Exhibit 99.c, which is incorporated by reference from CBC's filing as
indicated.
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
23. Consent of Price Waterhouse.
99.a. Pro Forma Combined Financial Information
for BankAmerica Corporation and Subsidiaries and
Continental Bank Corporation and Subsidiaries
(unaudited).
99.b. BankAmerica Corporation and Subsidiaries and
Continental Bank Corporation and Subsidiaries
Historical and Pro Forma Combined Ratios of
Earnings to Fixed Charges and Ratios of Earnings
to Combined Fixed Charges and Preferred Stock
Dividends (unaudited).
99.c. The following audited financial statements
of CBC and its subsidiaries and accompanying
notes and Report of
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C>
Independent Accountants are incorporated by
reference from CBC's Annual Report on Form 10-K
for the year ended December 31, 1993 (File
No. 1-5872): Consolidated Balance Sheet -
December 31, 1993, Consolidated Statement of
Operations, Consolidated Statement of Cash Flows
and Consolidated Statement of Changes in
Stockholders' Equity for the year ended December
31, 1993; Notes to Financial Statements (to the
extent applicable to the foregoing financial
statements and except for the portions of
those notes that are specifically identified
therein as unaudited); and Report of Independent
Accountants. (Portions of CBC's Form 10-K not
specifically incorporated by reference are not
required for this Current Report and are not
incorporated by reference herein).
</TABLE>
3
<PAGE> 5
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.
BANKAMERICA CORPORATION
____________________________
(Registrant)
/s/ Joseph B. Tharp
Date: March 21, 1994 By: ________________________
Joseph B. Tharp
Executive Vice President
and Financial Controller
4
<PAGE> 6
EXHIBIT INDEX*
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
23. Consent of Price Waterhouse.
99.a. Pro Forma Combined Financial Information
for BankAmerica Corporation and Subsidiaries
and Continental Bank Corporation and
Subsidiaries (unaudited).
99.b. BankAmerica Corporation and Subsidiaries and
Continental Bank Corporation and
Subsidiaries Historical and Pro Forma
Combined Ratios of Earnings to Fixed Charges
and Ratios of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
(unaudited).
99.c. The following audited financial statements
of CBC and its subsidiaries and accompanying
notes and Report of Independent Accountants
are incorporated by reference from CBC's
Annual Report on Form 10-K for the year ended
December 31, 1993 (File No. 1-5872):
Consolidated Balance Sheet - December 31,
1993, Consolidated Statement of Operations,
Consolidated Statement of Cash Flows and
Consolidated Statement of Changes in
Stockholders' Equity for the year ended
December 31, 1993; Notes to Financial
Statements (to the extent applicable to the
foregoing financial statements and
except for the portions of those notes that
are specifically identified therein as
unaudited); and Report of Independent
Accountants. (Portions of CBC's Form 10-K
not specifically incorporated by reference
are not required for this Current Report and
are not incorporated by reference herein).
</TABLE>
__________________________________
* These exhibits are filed with this Current Report, except for Exhibit
99.c, which is incorporated by reference from CBC's filing as indicated.
5
<PAGE> 1
EXHIBIT 23.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in Registration Statement
No. 33-51333 on Form S-4 filed December 8, 1993, as amended by Pre-Effective
Amendment No. 1 filed January 12, 1994; Registration Statement No. 33-60648 on
Form S-8 filed April 2, 1993; Registration Statement No. 33-59892 on Form S-3
filed March 23, 1993, as amended by Pre-Effective Amendment No. 1 filed May 14,
1993; Registration Statement No. 33-51064 on Form S-3 filed August 20, 1992, as
amended by Pre-Effective Amendment No. 1 filed October 23, 1992; Registration
Statement No. 33-50124 on Form S-8 filed July 29, 1992; Registration Statement
No. 33-65326 on Form S-8 filed July 1, 1993; Registration Statement No. 33-
43862 on Form S-3 filed November 12, 1991, as amended by Pre-Effective
Amendment No. 1 filed January 17, 1992 (to which the prospectus in 33- 51064
also applies); Registration Statement No. 33-36718 on Form S-3 filed September
7, 1990, as amended by Pre-Effective Amendment No. 1 filed November 28, 1990
(to which the prospectus in 33-51064 also applies); Registration Statement No.
33-26755 on Form S-3 filed January 27, 1989, as amended by Pre-Effective
Amendment No. 1 filed February 16, 1989 and Post-Effective Amendment No. 1
filed November 3, 1992; Registration Statement No. 33-23192 on Form S-3 filed
July 21, 1988, as amended by Pre-Effective Amendment No. 1 filed September 13,
1988 (to which the prospectus in 33-51064 also applies); Registration Statement
No. 33-11516 on Form S-3 filed January 26, 1987, as amended by Amendment No. 1
filed March 12, 1987 and Amendment No. 2 filed April 3, 1987 (to which the
prospectus in 33-36718 also applies); Registration Statement No. 2-93664 on
Form S-3 filed on October 9, 1984, as amended by Amendment No. 1 filed November
23, 1984; Registration Statement No. 33-28252 on Form S-8 filed April 19, 1989,
as amended by Post-Effective Amendment No. 1 filed August 15, 1989 and
Post-Effective Amendment No. 2 filed February 22, 1990; Registration Statement
No. 33-13368 on Form S-8 (to which the prospectus in 33-28252 also applies);
Registration Statement No. 33-29646 on Form S-8 filed June 30, 1989, as amended
by Post-Effective Amendment No. 1 filed August 3, 1990; and Registration
Statement Nos. 2-82873, 2-71577, 2-64201, 2-58595, 2-57423, 2-53068, 2-47747,
2-32651 and 33-14135 on Form S-8 (to all of which the prospectus in 33-29646
also applies) of BankAmerica Corporation of our report dated January 18, 1994,
except as to Note 1, which is as of January 28, 1994, relating to the
consolidated financial statements of Continental Bank Corporation, which is
included in Continental Bank Corporation's Annual Report on Form 10-K for the
year ended December 31, 1993, and which is incorporated by reference in the
Current Report on Form 8-K of BankAmerica Corporation. We also consent to the
reference to our firm as experts in accounting and auditing in Item 5 of such
Form 8-K.
/s/ PRICE WATERHOUSE
PRICE WATERHOUSE
Chicago, Illinois
March 21, 1994
1
<PAGE> 1
Exhibit 99.a
PRO FORMA COMBINED FINANCIAL INFORMATION
On January 27, 1994, BankAmerica Corporation ("BAC") and Continental
Bank Corporation ("Continental") entered into a definitive agreement to merge
(the "Merger"), as more fully explained in Note A of the Notes to Pro Forma
Combined Financial Information.
The following unaudited Pro Forma Combined Balance Sheet as of
December 31, 1993 combines the historical consolidated balance sheets of BAC and
subsidiaries and Continental and subsidiaries as if the Merger had been
effective on December 31, 1993 after giving effect to the purchase accounting
and other Merger-related adjustments described in the Notes to Pro Forma
Combined Financial Information. The unaudited Pro Forma Combined Statement of
Operations presents the combined results of operations of BAC and subsidiaries
and Continental and subsidiaries for the year ended December 31, 1993 as if the
Merger had been effective on January 1, 1993 after giving effect to the purchase
accounting and other Merger-related adjustments described in the accompanying
notes. These pro forma combined financial statements do not give effect to the
proposed BAC acquisition of Liberty Bank that was pending at December 31, 1993
as this transaction was not considered significant to BAC and subsidiaries.
The unaudited pro forma combined financial statements and accompanying
notes reflect the application of the purchase method of accounting. Under this
method of accounting, the purchase price will be allocated to the assets
acquired and liabilities assumed based on their estimated fair values at the
effective time of the Merger (the "Effective Time"). As described in the
accompanying notes, estimates of the fair values of Continental and
subsidiaries' assets and liabilities have been combined with the recorded values
of the assets and liabilities of BAC and subsidiaries. However, changes to the
adjustments included in the unaudited pro forma combined financial statements
are expected as evaluations of assets and liabilities are completed and as
additional information becomes available. In addition, the results of
operations of Continental subsequent to December 31, 1993 will affect the
allocation of the purchase price. Accordingly, the final pro forma combined
amounts will differ from those set forth in the unaudited pro forma combined
financial statements.
The unaudited pro forma combined financial statements are intended for
informational purposes only and are not necessarily indicative of the future
financial position or future results of operations of the combined company, or
of the financial position or results of operations of the combined company that
would have actually occurred had the Merger been in effect as of the date or for
the period presented.
These unaudited pro forma combined financial statements and the
accompanying notes should be read in conjunction with and are qualified in
their entirety by the consolidated financial statements, including accompanying
notes, of BAC in its Annual Report on Form 10-K for the year ended December 31,
1993. These unaudited pro forma combined financial statements and the
accompanying notes should also be read in conjunction with and are also
qualified in their entirety by the consolidated financial statements, including
the accompanying notes, of Continental in its Annual Report on Form 10-K for
the year ended December 31, 1993. Portions of Continental's Annual Report on
Form 10-K are incorporated by reference and filed as part of BAC's report on
Form 8-K, which includes this Exhibit, dated March 21, 1994.
1
<PAGE> 2
BANKAMERICA CORPORATION AND SUBSIDIARIES AND
CONTINENTAL BANK CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
OTHER
MERGER-
RELATED PRO FORMA
ADJUSTMENTS ADJUSTMENTS
DEBIT DEBIT PRO FORMA
(IN MILLIONS) BAC CONTINENTAL (CREDIT) (CREDIT) COMBINED
-------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Securities available for sale and
securities held for investment....... $ 19,697 $ 1,527 $ -- $ 4(C) $ 21,228
Loans.................................. 126,379 11,729 -- 74(D) 138,182
Less: Allowance for credit losses...... 3,508 328 -- -- 3,836
-------- ----------- ----------- ---------
Net loans............................ 122,871 11,401 -- 74 134,346
Goodwill, net.......................... 3,973 -- -- -- 3,973
Identifiable intangibles, net.......... 2,191 -- -- -- 2,191
Unallocated portion of purchase
price................................ -- -- -- 547(B) 547
Other assets........................... 38,201 9,673 (500)(J) (939)(A)
282(F) 46,717
-------- ----------- ----------- ----------- ---------
Total Assets.................... $186,933 $22,601 $(500) $ (32) $ 209,002
-------- ----------- ----------- ----------- ---------
-------- ----------- ----------- ----------- ---------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits............................... $141,618 $13,542 $ -- $ (178)(G) $ 155,338
Other liabilities...................... 14,056 5,968 -- (260)(H) 20,284
Long-term debt and subordinated capital
notes................................ 14,115 1,168 -- (72)(I) 15,355
-------- ----------- ----------- ---------
Total Liabilities.................... 169,789 20,678 -- (510) 190,977
STOCKHOLDERS' EQUITY
Preferred stock........................ 2,979 389 -- 389(J)
(389)(J) 3,368
Common stock........................... 560 216 -- 216(J)
(16)(J) 576
Additional paid-in capital............. 7,118 1,000 -- 1,000(J)
(456)(J)
(26)(J) 7,600
Retained earnings...................... 6,502 358 -- 358(J)
6(K) 6,496
Net unrealized security gains, net of
income tax effect.................... -- 35 -- 35(J) --
Common stock in treasury, at cost...... (15) (70) 500(J) (70)(J)
(500)(J) (15)
Loans to ESOP trust.................... -- (5) -- (5)(J) --
-------- ----------- ----------- ----------- ---------
Total stockholders' equity........... 17,144 1,923 500 542 18,025
-------- ----------- ----------- ----------- ---------
Total Liabilities and
Stockholders' Equity......... $186,933 $22,601 $ 500 $ 32 $ 209,002
-------- ----------- ----------- ----------- ---------
-------- ----------- ----------- ----------- ---------
</TABLE>
See notes to unaudited Pro Forma Combined Financial Information.
2
<PAGE> 3
BANKAMERICA CORPORATION AND SUBSIDIARIES AND
CONTINENTAL BANK CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
DEBIT PRO FORMA
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) BAC CONTINENTAL (CREDIT) COMBINED
------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees...................................... $ 9,463 $ 766 $ 57(D) $10,172
Trading account assets..................................... 372 73 -- 445
Securities available for sale and securities held for
investment............................................... 1,389 66 3(C) 1,452
Other...................................................... 403 216 5(F) 614
------- ------------ ----- ---------
Total interest income.................................... 11,627 1,121 65 12,683
INTEREST EXPENSE:
Deposits................................................... 2,971 391 (71)(G) 3,291
Long-term debt and subordinated capital notes.............. 840 78 (11)(I) 907
Other...................................................... 375 188 (10)(H) 553
------- ------------ ----- ---------
Total interest expense................................... 4,186 657 (92) 4,751
------- ------------ ----- ---------
Net interest income...................................... 7,441 464 (27) 7,932
Provision for credit losses................................ 803 181 -- 984
------- ------------ ----- ---------
Net interest income after provision for credit
losses.......................................... 6,638 283 (27) 6,948
NONINTEREST INCOME:
Deposit account fees....................................... 1,198 -- -- 1,198
Credit card fees........................................... 354 -- -- 354
Trust fees................................................. 294 98 -- 392
Other fees and commissions................................. 1,083 194 -- 1,277
Trading income............................................. 569 102 -- 671
Other income............................................... 775 246 -- 1,021
------- ------------ ----- ---------
Total noninterest income................................. 4,273 640 -- 4,913
NONINTEREST EXPENSE:
Salaries................................................... 2,886 259 -- 3,145
Employee benefits.......................................... 573 54 -- 627
Occupancy.................................................. 684 50 (2)(F)
(2)(H) 730
Equipment.................................................. 610 19 -- 629
Amortization of intangibles................................ 421 -- 40(B) 461
Communications............................................. 330 -- -- 330
Regulatory fees and related expenses....................... 309 -- -- 309
Professional services...................................... 268 -- -- 268
Other expense.............................................. 1,402 301 -- 1,703
------- ------------ ----- ---------
Total noninterest expense................................ 7,483 683 36 8,202
------- ------------ ----- ---------
Income from continuing operations before income
taxes........................................... 3,428 240 9 3,659
Provision for (benefit from) income taxes.................. 1,474 (18) 106(L) 1,562
------- ------------ ----- ---------
Income from continuing operations............. $ 1,954 $ 258 $ 115 $ 2,097
------- ------------ ----- ---------
------- ------------ ----- ---------
EARNINGS PER SHARE(M)
Average number of shares (in thousands):
Primary.................................................. 357,680 368,001
Fully diluted............................................ 363,244 373,565
Income from continuing operations per common share
Primary.................................................. $4.79 $4.95(M)
Fully diluted............................................ 4.76 4.88(M)
</TABLE>
See notes to unaudited Pro Forma Combined Financial Information.
3
<PAGE> 4
BANKAMERICA CORPORATION AND SUBSIDIARIES AND
CONTINENTAL BANK CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
NOTE A: BASIS OF PRESENTATION
The Restated Agreement and Plan of Merger dated as of January 27, 1994
(the "Merger Agreement") provides that, at the Effective Time and subject to
the election and allocation procedures provided for therein, each share of
Continental common stock, par value $4 per share ("Continental Common Stock")
outstanding at the Effective Time (other than shares for which appraisal rights
are perfected), subject to certain exceptions, will be converted into either a
number of shares of common stock of BAC, par value $1.5625 per share (the
"Stock Consideration") or an amount in cash without interest (the "Cash
Consideration").
Under the Merger Agreement, the aggregate number of shares of common
stock of BAC, par value $1.5625 per share (the "BAC Common Stock") to be issued
in the Merger (the "Stock Amount") is equal to the product of (x) 0.8152 and
(y) 51% of the total number of shares of Continental Common Stock outstanding
ending on the tenth calendar day prior to the anticipated Effective Time (the
"Determination Date"). The Merger Agreement also provides that if, at the
Effective Time of the Merger, more shares of Continental Common Stock are
outstanding than are contemplated to be outstanding or subject to option
pursuant to the representations and warranties of Continental in the Merger
Agreement, then, at BAC's election, the Stock Amount, the Cash Consideration
and the Stock Consideration will be adjusted downward to reflect the greater
number of shares outstanding. The Stock Amount will be approximately 21,250,000
shares of BAC Common Stock assuming that there are 51,110,000 shares of
Continental Common Stock outstanding at the Determination Date. Under the
Merger Agreement, in addition to the impact of the number of shares of
Continental Common Stock outstanding or subject to option at the Determination
Date, the Stock Amount (i) will not change if the average of the closing prices
per share of BAC Common Stock as reported on the New York Stock Exchange, Inc.
("NYSE") composite transactions tape for the ten consecutive days on which
shares of BAC Common Stock are traded on the NYSE ending on the Determination
Date (such average price, the "Final BAC Stock Price") is between $36.16 (the
"Floor Price") and $55.84 (the "Ceiling Price"), (ii) will be adjusted downward
if the Final BAC Stock Price is greater than the Ceiling Price, and (iii) is
subject to possible adjustment upward if the Final BAC Stock Price is less than
the Floor Price and if BAC elects to make the per share stock and cash
adjustments set forth in the Merger Agreement.
Under the Merger Agreement, the aggregate cash payable by BAC to holders of
record of Continental Common Stock ("Continental Common Stockholders") pursuant
to the Merger will equal a fixed amount regardless of the Final BAC Stock Price
(except for immaterial changes due to rounding) and will vary only according to
the total number of shares of Continental Common Stock outstanding at the
Determination Date. For example, if there are 51,110,000 shares of Continental
Common Stock outstanding at the Determination Date, then the aggregate cash
payable by BAC to Continental Common Stockholders who are to receive cash
will equal approximately $939 million and this will not change (except for
immaterial changes due to rounding) regardless of changes in the Final BAC
Stock Price.
Under the Merger Agreement, if the Final BAC Stock Price is less than the
Floor Price, Continental will have the ability to terminate the Merger Agreement
prior to the Effective Time unless BAC, within five days of Continental's
election to terminate the Merger Agreement, exercises its option to adjust
upward the Stock Consideration, the Cash Consideration and the Stock Amount so
that the Stock Amount will be increased and the Stock Consideration and the Cash
Consideration will be at least equal in value to the per share stock and cash
consideration that would have been received if the Final BAC Stock Price had
been equal to the Floor Price. This adjustment will only be made, at BAC's
option, if the Final BAC Stock Price is less than the Floor Price, and may be
made whether or not Continental has exercised its rights to terminate the Merger
Agreement. If BAC elects to increase the Cash Consideration, the Stock
Consideration and the Stock Amount, then such right of Continental to terminate
the Merger Agreement will be extinguished.
Under the Merger Agreement, if the Final BAC Stock Price is greater than
the Ceiling Price, then the Cash Consideration, the Stock Consideration and the
Stock Amount will be decreased so that the value of the per share cash and stock
consideration that would be receivable by Continental Common Stockholders will
be the same as if the Final BAC Stock Price were equal to the Ceiling Price.
Under the Merger Agreement, such downward adjustment in the Cash Consideration,
the Stock Consideration and the Stock Amount will automatically be made if the
Final BAC Stock Price is greater than the Ceiling Price.
At the Effective Time, subject to certain exceptions, each outstanding
share of Continental Adjustable Rate Preferred Stock, Series 1, $50 stated
value (the "Continental Series 1 Preferred Stock"), and Continental Adjustable
Rate Cumulative Preferred Stock, Series 2, $100 stated value (the "Continental
Series 2 Preferred Stock," and collectively with the Continental Series 1
Preferred Stock, the "Continental Preferred Stock"), except for shares of
Continental Series 2 Preferred Stock
4
<PAGE> 5
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)
as to which appraisal rights are perfected, will be converted into one share
of BAC Adjustable Rate Preferred Stock, Series 1, $50 stated value (the "BAC
Series 1 Preferred Stock") and one share of BAC Adjustable Rate Cumulative
Preferred Stock, Series 2, $100 stated value (the "BAC Series 2 Preferred
Stock," and together with the BAC Series 1 Preferred Stock, the "BAC Mirror
Preferred"), respectively. The BAC Series 1 Preferred Stock and the BAC Series
2 Preferred Stock will have substantially the same terms as the Continental
Series 1 Preferred Stock and the Continental Series 2 Preferred Stock,
respectively.
BAC currently anticipates that, after the Effective Time, it will redeem
all or a portion of the BAC Mirror Preferred. The decision to redeem, and the
amount of BAC Mirror Preferred to be so redeemed, are dependent upon receipt of
regulatory approval, interest rates at the time such decision is made and the
aggregate amount of cash and number of shares of BAC Common Stock to be issued
in the Merger, among other things.
The following summarizes the total purchase price:
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C>
Total market price of the Stock Amount (based
on market price per share of $45.75 of BAC
Common Stock on January 27, 1994)........... $ 972
Estimated cash to be paid..................... 939
Estimated fair value of BAC Mirror
Preferred................................... 415
Estimated BAC legal, investment banking and
issuance costs.............................. 5
-------
Total purchase price................ $2,331
-------
-------
</TABLE>
The closing of the Merger is subject to the satisfaction of certain
conditions, including the approval of the transaction by the holders of a
majority of the outstanding shares of Continental Common Stock and the obtaining
of certain regulatory approvals. While the precise time of the Merger closing
cannot be determined with certainty, the parties presently anticipate that
the closing will take place in the third quarter of 1994.
The Merger will be accounted for by BAC under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations" ("APB No. 16"), and accordingly, this method has been
applied in the unaudited pro forma combined financial statements. Under this
method of accounting, the purchase price will be allocated to assets acquired
and liabilities assumed based on their estimated fair values at the Effective
Time. Estimates of the fair values of Continental and subsidiaries' assets and
liabilities as of December 31, 1993 have been combined with the recorded
December 31, 1993 values of the assets and liabilities of BAC and subsidiaries
in the unaudited pro forma combined financial statements. However, purchase
accounting adjustment amounts included in these unaudited pro forma combined
financial statements will change as additional information becomes available.
Based upon the available information, management of BAC currently estimates
that the combined company's results of operations over the next five years will
not be significantly affected as a result of purchase accounting.
The unaudited Pro Forma Combined Balance Sheet is based on the consolidated
balance sheet of BAC and subsidiaries and on the consolidated balance sheet of
Continental and subsidiaries as of December 31, 1993. The unaudited Pro Forma
Combined Statement of Operations is based on the consolidated statements of
operations of BAC and subsidiaries and of Continental and subsidiaries for the
year ended December 31, 1993. In addition, the unaudited Pro Forma Combined
Statement of Operations presents Continental's income before cumulative effect
of accounting change for income taxes.
5
<PAGE> 6
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)
NOTE B: ALLOCATION OF THE PURCHASE PRICE
The purchase price has been allocated as described in the table below.
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Net assets of Continental at December 31, 1993.................. $1,923
Increase (decrease) to Continental's net asset value at December
31, 1993 as a result of estimated fair value adjustments:
Securities available for sale and securities held for
investment............................................... 4
Loans...................................................... 74
Other assets............................................... 278
Deposits................................................... (178)
Other liabilities.......................................... (227)
Long-term debt and subordinated capital notes.............. (72)
-------
Total estimated fair value adjustments................ (121)
Accrual of liability for Merger-related costs................... (18)
-------
Total preliminary allocation of the purchase price.... 1,784
Unallocated portion of the purchase price....................... 547
-------
Total purchase price.................................. $2,331
-------
-------
</TABLE>
Each of the allocations in the table above is described in more detail in
the following Notes to Pro Forma Combined Financial Information.
As explained in Note A, purchase accounting adjustments will change as
additional information becomes available, which will have an effect on the
ultimate allocation of the purchase price. Accordingly, the allocation of the
purchase price has not been finalized and the unallocated portion of the
purchase price of $547 million has been separately disclosed in the unaudited
Pro Forma Combined Balance Sheet. In addition, the unallocated portion of the
purchase price will change as a result of Continental's results of operations
for the period subsequent to December 31, 1993.
When the ultimate allocation of the purchase price is made, identifiable
intangible assets and goodwill will be recorded and the unallocated portion of
the purchase price will be eliminated from the unaudited Pro Forma Combined
Balance Sheet. For purposes of calculating the amortization of identifiable
intangibles and goodwill, BAC's management has preliminarily estimated that the
amount of identifiable intangibles, including core deposit intangibles, will be
approximately $200 million. The remaining amount of the current unallocated
portion of the purchase price has been considered goodwill.
Amortization expense of $40 million for the year ended December 31, 1993
related to the unallocated portion of the purchase price has been included in
the unaudited Pro Forma Combined Statement of Operations. This amount was
calculated based on an accelerated method of amortization over a 10-year life
for the estimated identifiable intangible balance and on the straight-line
method of amortization over a 25-year life for the estimated goodwill balance.
However, the final amounts and periods of benefit of intangible assets, as well
as the final methods of amortization, have not been determined. An increase in
the amount of the unallocated portion of the purchase price will result in a
greater final allocation to goodwill, which will have a corresponding impact on
amortization expense and will reduce tangible common equity. Accordingly, pro
forma combined income from continuing operations for the year ended December 31,
1993 and the related pro forma combined per share amounts will change.
NOTE C: SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD FOR INVESTMENT
Continental's securities available for sale and securities held for
investment, primarily debt securities, have been valued at their estimated fair
values as of December 31, 1993, resulting in a premium on securities held for
investment of $4 million from their recorded values. The amortization of this
premium has been
6
<PAGE> 7
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)
included in the unaudited Pro Forma Combined Statement of Operations based on
the remaining maturities of the securities held for investment as of December
31, 1993.
NOTE D: LOANS
Continental's carrying value of loans has been adjusted to its estimated
fair value based on interest rates as of December 31, 1993, resulting in a
premium of $74 million.
The premium related to changes in interest rates includes the effect
resulting from futures contracts and interest rate swaps used to hedge certain
loans. The total fair value premium resulting from changes in interest rates has
been amortized to offset interest income on loans over the estimated remaining
maturities of the related loans, which range from one to seven years.
NOTE E: ALLOWANCE FOR CREDIT LOSSES
Under the terms of the Merger Agreement, Continental's reserving policies
and practices will be modified prior to the Effective Time to the degree
necessary, consistent with generally accepted accounting principles and
Securities and Exchange Commission accounting procedures, to make them
consistent with those of BAC. Any resulting adjustment to Continental's
allowance for credit losses is not expected to be significant, will be
recognized in Continental's statement of operations prior to the Effective
Time and, therefore, has not been included in the pro forma combined financial
statements. The pro forma combined allowance for credit losses will also be
affected by other provisions for credit losses or net charge-offs of loans
recorded by BAC or Continental subsequent to December 31, 1993 but prior to
the Effective Time.
NOTE F: OTHER ASSETS
Continental's other assets have been adjusted as described in the table
below.
<TABLE>
<CAPTION>
(IN MILLIONS) DEBIT (CREDIT)
<S> <C>
Fair value adjustment for interest-earning deposits in banks.... $ 5
Fair value adjustment for trading account assets and equity
investments................................................... 144
Fair value adjustment for premises.............................. (91)
Net adjustment of prepaid pension expenses...................... (20)
Net deferred tax asset resulting from purchase accounting
adjustments................................................... 240
------
Subtotal................................................... 278
Income tax effect of BAC restructuring expenses (see Note K).... 4
------
$282
------
------
</TABLE>
The fair value premium on interest-earning deposits in banks has been
amortized to offset interest income over one year.
A fair value adjustment for trading account assets of $70 million was
recorded for those trading account assets that are traded in an illiquid market.
These trading account assets were generally carried by Continental at the lower
of cost or market value as of December 31, 1993. In addition, a fair value
adjustment for equity investments of $74 million was recorded for those equity
investments that are traded in an illiquid market. As of December 31, 1993,
Continental generally carried these equity investments at cost.
Continental's premises have been adjusted to their estimated fair values as
of December 31, 1993 based on preliminary appraisals, valuations and other
review procedures. Occupancy expense in the unaudited Pro Forma Combined
Statement of Operations has been decreased by $2 million to reflect amortization
of the fair value adjustment to premises using the straight-line method over 33
years.
A net deferred tax asset was recorded related to the book and tax bases
differences of assets acquired and liabilities assumed that resulted from
purchase accounting adjustments, as well as for previously unrecognized
7
<PAGE> 8
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)
tax benefits of Continental that are expected to be realized in the future from
the combined results of operations.
NOTE G: DEPOSITS
Continental's total deposits have been adjusted to their estimated fair
values as of December 31, 1993 based on interest rates as of that date. The
estimated fair value premium of $178 million relates to both domestic and
foreign deposits and includes futures contracts and interest rate swaps used to
hedge certain of these deposits. The premium has been amortized to offset
interest expense over the estimated lives of the deposits, which range from one
to ten years.
NOTE H: OTHER LIABILITIES
Other liabilities have been adjusted as described in the table below.
<TABLE>
<CAPTION>
(IN MILLIONS) (CREDIT)
-------------
<S> <C>
Accrual of pension and postretirement benefit liability.......... $ (82)
Accrual of stock option liability................................ (122)
Fair value adjustment for lease commitments...................... (11)
Accrual of vacation liability.................................... (2)
Fair value adjustment for short-term borrowings.................. (10)
-------------
Subtotal.................................................... (227)
Accrual of Merger-related costs.................................. (18)
Accrual of BAC restructuring expenses (see Note K)............... (10)
Accrual of estimated BAC legal, investment banking and issuance
costs.......................................................... (5)
-------------
$(260)
-------------
-------------
</TABLE>
The accrual of the pension and postretirement benefit liability represents
the recognition of the existing benefit obligation related to Continental's
supplemental retirement plan and postretirement healthcare plan.
A liability of $122 million was recorded for the intrinsic value of
Continental stock options outstanding. This liability represents the total of
the differences between the option exercise prices and the anticipated per share
consideration to be received by Continental Common Stockholders in the Merger.
Continental's lease commitments have been adjusted to their estimated
fair values based on market rental rates as of December 31, 1993. The fair
value adjustment resulted in a liability of $11 million related to leased
premises. The fair value adjustment related to these leased premises has been
amortized to offset occupancy expense using the straight-line method over the
remaining lives of the respective lease terms, which range from one to nineteen
years. A reduction to occupancy expense of $2 million has been included in the
unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1993 related to the estimated amortization of this fair value
adjustment.
Continental's short-term borrowings have been adjusted to their estimated
fair value as of December 31, 1993 based on interest rates as of that date. The
estimated fair value premium of $10 million has been amortized to offset
interest expense over an estimated life of one year.
In addition, a liability for Merger-related costs of $18 million has been
recorded in the unaudited Pro Forma Combined Balance Sheet, reflecting
management's best estimate of separation and benefits costs related to
Continental employees and employment assistance costs for separated Continental
employees.
NOTE I: LONG-TERM DEBT AND SUBORDINATED CAPITAL NOTES
Continental's long-term debt has been adjusted to its estimated fair value
as of December 31, 1993 based on interest rates as of that date. The estimated
fair value premium of $72 million includes the effect of futures
8
<PAGE> 9
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)
contracts and interest rate swaps used to hedge certain long-term debt
instruments. The total fair value premium has been amortized to offset interest
expense over the estimated lives of the instruments, which range from two to ten
years.
NOTE J: STOCKHOLDERS' EQUITY
Continental's stockholders' equity balances have been eliminated.
At the Effective Time, the Continental Preferred Stock will be converted
into an equal number of shares of newly issued BAC Mirror Preferred. The BAC
Mirror Preferred is included in the unaudited Pro Forma Combined Balance Sheet
at its estimated market value as of January 27, 1994. The fair value premium of
$26 million over the $389 million stated value of the BAC Mirror Preferred has
been included in additional paid-in capital.
BAC expects to repurchase approximately $500 million of BAC Common Stock
prior to the Effective Time. In the Other Merger-Related Adjustments column in
the unaudited Pro Forma Combined Balance Sheet, treasury stock has been
increased by this amount.
As explained in Note A, Continental's Common Stock will be converted into
approximately 21,250,000 shares of BAC Common Stock at the Effective Time at an
aggregate market value of approximately $972 million based on the market price
of BAC Common Stock as of January 27, 1994. In the unaudited Pro Forma Combined
Balance Sheet, treasury stock has been reduced by $500 million, the amount of
BAC Common Stock expected to be repurchased prior to the Effective Time. The Pro
Forma Combined Balance Sheet assumes $500 million in value of treasury shares
will be issued, thus reducing the number of shares of newly issued BAC Common
Stock to approximately 10,321,000 shares. Common stock and additional paid-in
capital have been increased by $16 million and $456 million, respectively,
representing the value of the approximately 10,321,000 shares of newly issued
BAC Common Stock.
BAC's retained earnings have been reduced by $6 million for BAC
restructuring expenses, net of applicable income taxes (see Note K).
NOTE K: BAC RESTRUCTURING EXPENSES
A restructuring liability of $10 million has been recorded in the unaudited
Pro Forma Combined Balance Sheet to reflect management's best estimate of
separation and benefits costs related to BAC employees, employment assistance
costs for separated BAC employees, systems conversion costs, and other
restructuring expenses of BAC associated with the Merger. This liability
resulted in a $6 million charge (after applicable income tax effects of $4
million) to retained earnings in the unaudited Pro Forma Combined Balance Sheet
(see Notes F, H and J). These BAC restructuring expenses are subject to change
as further information becomes available. BAC restructuring expenses will be
recorded at or immediately prior to the Effective Time and have not been
included in the unaudited Pro Forma Combined Statement of Operations.
NOTE L: PROVISION FOR (BENEFIT FROM) INCOME TAXES
The provision for (benefit from) income taxes has been increased by $104
million in the unaudited Pro Forma Combined Statement of Operations to remove
tax benefits that would not be reflected in the statement of operations under
purchase accounting if the Merger had been effective on January 1, 1993.
In addition, the related tax provision for the amortization of fair value
adjustments for the year ended December 31, 1993 has been included in the
unaudited Pro Forma Combined Statement of Operations.
NOTE M: EARNINGS PER SHARE
Primary earnings per share are computed by dividing income from continuing
operations applicable to common shareholders (income from continuing operations
reduced by dividends on preferred stock) by the
9
<PAGE> 10
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)
total of the average number of common shares outstanding and the additional
dilutive effect of the stock options and warrants outstanding during the period.
The dilutive effect of the stock options and warrants is computed using the
average market price of BAC Common Stock for the period.
Fully-diluted earnings per share are computed based on the average number
of common shares outstanding during the period and the additional dilutive
effect of stock options and warrants outstanding during the period. The dilutive
effect of outstanding stock options and warrants is computed using the greater
of the closing market price or the average market price of BAC Common Stock for
the period. In addition, fully-diluted earnings per share for the year ended
December 31, 1993 for BAC included the additional dilution that would result if
BAC's outstanding shares of 6 1/2% Cumulative Convertible Preferred Stock,
Series G (the "BAC Series G Preferred") had been converted at the beginning of
the period. Correspondingly, income from continuing operations applicable to
common stock was adjusted for dividends declared on the BAC Series G Preferred.
As explained in Note A, Continental's Common Stock will be converted into
approximately 21,250,000 shares of BAC Common Stock at the Effective Time. In
addition, BAC expects to repurchase approximately $500 million of BAC Common
Stock prior to the Effective Time. The Pro Forma Combined Balance Sheet assumes
that $500 million in value of treasury shares will be issued to Continental
Common Stockholders, thus reducing the number of shares of newly issued BAC
Common Stock to approximately 10,321,000 shares.
10
<PAGE> 1
Exhibit 99.b
BANKAMERICA CORPORATION AND SUBSIDIARIES AND
CONTINENTAL BANK CORPORATION AND SUBSIDIARIES
HISTORICAL AND PRO FORMA COMBINED RATIOS OF EARNINGS
TO FIXED CHARGES AND RATIOS OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. The ratio of earnings to combined fixed charges and preferred
stock dividends is computed by dividing earnings by the sum of fixed charges
and preferred stock dividend requirements. Earnings consist primarily of income
(loss) before income taxes adjusted for fixed charges. Fixed charges consist
primarily of interest expense on short- and long-term borrowings and one-third
(the portion deemed representative of the interest factor) of net rents under
long-term leases.
The following table sets forth (i) the historical ratios of earnings to
fixed charges and the ratios of earnings to combined fixed charges and
preferred stock dividends for the periods indicated for BankAmerica Corporation
and its consolidated subsidiaries ("BAC") and for Continental Bank Corporation
and its consolidated subsidiaries ("Continental") and (ii) the pro forma
combined ratios of earnings to fixed charges and ratios of earnings to combined
fixed charges and preferred stock dividends for the periods indicated, giving
effect to the merger provided for in the Restated Agreement and Plan of Merger
dated as of January 27, 1994 between BAC and Continental (the "Merger") as if
it had been consummated on January 1, 1993. The pro forma combined ratios do
not give effect to the proposed BAC acquisition of Liberty Bank that was
pending at December 31, 1993 as this transaction was not considered significant
to BAC and subsidiaries. The pro forma combined ratios have been calculated
using the pro forma combined financial information as of and for the year ended
December 31, 1993, and should be read in conjunction with and are qualified in
their entirety by such pro forma combined financial information at Exhibit 99.a
of BAC's report on Form 8-K dated March 21, 1994, and the consolidated
financial statements, including the accompanying notes, of BAC and Continental
included in their respective 1993 Form 10-Ks and elsewhere in BAC's report on
Form 8-K dated March 21, 1994. Pro forma adjustments made to arrive at the pro
forma combined ratios are based on the purchase method of accounting and a
preliminary allocation of the purchase price. However, changes to the
adjustments already included in the pro forma combined ratios set forth on the
following pages are expected as evaluations of assets and liabilities are
completed and additional information becomes available. In addition, the
results of operations of Continental subsequent to December 31, 1993 will
affect the allocation of the purchase price. Accordingly, the final pro forma
combined ratios are expected to differ from those set forth on the following
pages.
The pro forma combined ratios are intended for informational purposes and
are not necessarily indicative of the future ratios of earnings to fixed
charges and ratios of earnings to combined fixed charges and preferred stock
dividends of the combined company or the ratios of earnings to fixed charges
and ratios of earnings to combined fixed charges and preferred stock dividends
of the combined company that would have actually occurred had the Merger been
effective on January 1, 1993.
1
<PAGE> 2
BANKAMERICA CORPORATION AND SUBSIDIARIES AND
CONTINENTAL BANK CORPORATION AND SUBSIDIARIES
Historical and Pro Forma Combined Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Year Ended December 31, 1993
---------------------------------------
Historical
--------------------------------- Pro Forma
(dollar amounts in millions) BAC Continental Combined
-------- ----------- --------
<S> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS
Fixed charges:
Interest expense (other
than interest on deposits) $1,215 $ 266 $1,460
Interest factor in rent expense 112 7 119
Other 2 - 2
--------- --------- ---------
$1,329 $ 273 $1,581
====== ====== ======
Earnings:
Income from operations $1,954 $ 258 $2,097
Applicable income taxes 1,474 (18) 1,562
Fixed charges 1,329 273 1,581
Other (39) - (39)
------- -------- -------
$4,718 $ 513 $5,201
====== ====== ======
Ratio of earnings to fixed charges,
excluding interest on deposits 3.55 1.88 3.29
INCLUDING INTEREST ON DEPOSITS
Fixed charges:
Interest expense $4,186 $ 657 $4,751
Interest factor in rent expense 112 7 119
Other 2 - 2
-------- -------- --------
$4,300 $ 664 $4,872
====== ====== ======
Earnings:
Income from operations $1,954 $ 258 $2,097
Applicable income taxes 1,474 (18) 1,562
Fixed charges 4,300 664 4,872
Other (39) - (39)
-------- -------- --------
$7,689 $ 904 $8,492
====== ====== ======
Ratio of earnings to fixed charges,
including interest on deposits 1.79 1.36 1.74
See notes attached to this exhibit.
</TABLE>
2
<PAGE> 3
BANKAMERICA CORPORATION AND SUBSIDIARIES AND
CONTINENTAL BANK CORPORATION AND SUBSIDIARIES
Historical and Pro Forma Combined Ratio of Earnings to Fixed Charges and
Preferred Dividends
<TABLE>
<CAPTION>
Year Ended December 31, 1993
---------------------------------------
Historical
------------------------------------ Pro Forma
(dollar amounts in millions) BAC Continental Combined
-------- ----------- --------
<S> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS
Fixed charges and preferred dividends:
Interest expense (other
than interest on deposits) $1,215 $ 266 $1,460
Interest factor in rent expense 112 7 119
Preferred dividend requirements(a) 423 34 480
Other 2 - 2
--------- -------- ---------
$1,752 $ 307 $2,061
====== ====== ======
Earnings:
Income from operations $1,954 $ 258 $2,097
Applicable income taxes 1,474 (18) 1,562
Fixed charges 1,329(b) 307(c) 1,581(b)
Other (39) - (39)
------- ------ ------
$4,718 $ 547 $5,201
====== ====== ======
Ratio of earnings to fixed charges
and preferred dividends, excluding
interest on deposits 2.69 1.78 2.52
INCLUDING INTEREST ON DEPOSITS
Fixed charges and preferred dividends:
Interest expense $4,186 $ 657 $4,751
Interest factor in rent expense 112 7 119
Preferred dividend requirements(a) 423 34 480
Other 2 - 2
------- ------- -------
$4,723 $ 698 $5,352
====== ====== ======
Earnings:
Income from operations $1,954 $ 258 $2,097
Applicable income taxes 1,474 (18) 1,562
Fixed charges 4,300(b) 698(c) 4,872(b)
Other (39) - (39)
--------- ------- --------
$7,689 $ 938 $8,492
====== ====== ======
Ratio of earnings to fixed charges,
and preferred dividends, including
interest on deposits 1.63 1.34 1.59
</TABLE>
See notes attached to this exhibit.
3
<PAGE> 4
BANKAMERICA CORPORATION AND SUBSIDIARIES AND
CONTINENTAL BANK CORPORATION AND SUBSIDIARIES
Notes to
Historical and Pro Forma Combined Ratios of Earnings To Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
(a) Preferred dividend requirements represent pretax earnings necessary to cover
preferred dividends declared during the year ended December 31, 1993 of $241
million by BAC, $34 million by Continental, and $275 million on a pro forma
combined basis.
(b) Excluding preferred dividend requirements.
(c) Including preferred dividend requirements.
4
