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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 1-10000
WACHOVIA CORPORATION
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0898180
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
WACHOVIA CORPORATION
ONE FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288-0013
(Address of principal executive offices)
(Zip Code)
(704) 374-6565
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
1,360,878,340 shares of Common Stock, par value $3.33 1/3 per share, were
outstanding as of October 31, 2001.
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Wachovia Corporation (formerly named First Union Corporation, "Wachovia")
may from time to time make written or oral forward-looking statements, including
statements contained in Wachovia's filings with the Securities and Exchange
Commission (including this Quarterly Report on Form 10-Q and the Exhibits hereto
and thereto), in its reports to stockholders and in other Wachovia
communications, which are made in good faith by Wachovia pursuant to the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, among others, statements with
respect to Wachovia's beliefs, plans, objectives, goals, guidelines,
expectations, financial condition, results of operations, future performance and
business of Wachovia, including without limitation, (i) statements relating to
the benefits of the merger between the former Wachovia Corporation ("Legacy
Wachovia") and Wachovia completed on September 1, 2001 (the "Merger"), including
future financial and operating results, cost savings, enhanced revenues, and the
accretion to reported earnings that may be realized from the Merger, (ii)
statements regarding certain of Wachovia's goals and expectations with respect
to earnings, earnings per share, revenue, expenses, and the growth rate in such
items, as well as other measures of economic performance, including statements
relating to estimates of credit quality trends, and (iii) statements preceded
by, followed by or that include the words "may", "could", "should", "would",
"believe", "anticipate", "estimate", "expect", "intend", "plan", "projects" or
similar expressions. These forward-looking statements involve certain risks and
uncertainties that are subject to change based on various factors (many of which
are beyond Wachovia's control). The following factors, among others, could cause
Wachovia's financial performance to differ materially from that expressed in
such forward-looking statements: (1) the risk that the businesses of Wachovia
and Legacy Wachovia in connection with the Merger will not be integrated
successfully or such integration may be more difficult, time-consuming or costly
than expected; (2) expected revenue synergies and cost savings from the Merger
may not be fully realized or realized within the expected time frame; (3)
revenues following the Merger may be lower than expected; (4) deposit attrition,
operating costs, customer loss and business disruption following the Merger,
including, without limitation, difficulties in maintaining relationships with
employees, may be greater than expected; (5) the strength of the United States
economy in general and the strength of the local economies in which Wachovia
conducts operations may be different than expected resulting in, among other
things, a deterioration in credit quality or a reduced demand for credit,
including the resultant effect on Wachovia's loan portfolio and allowance for
loan losses; (6) 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; (7) inflation, interest rate, market and monetary
fluctuations; (8) adverse conditions in the stock market, the public debt market
and other capital markets (including changes in interest rate conditions) and
the impact of such conditions on Wachovia's capital markets and capital
management activities, including, without limitation, Wachovia's mergers and
acquisition advisory business, equity and debt underwriting activities, private
equity investment activities, derivative securities activities, investment and
wealth management advisory businesses, and brokerage activities; (9) the timely
development of competitive new products and services by Wachovia and the
acceptance of these products and services by new and existing customers; (10)
the willingness of customers to accept third party products marketed by
Wachovia; (11) the willingness of customers to substitute competitors' products
and services for Wachovia's products and services and vice versa; (12) the
impact of changes in financial services' laws and regulations (including laws
concerning taxes, banking, securities and insurance); (13) technological
changes; (14) changes in consumer spending and saving habits; (15) the effect of
corporate restructurings, acquisitions and/or dispositions, including, without
limitation, the Merger, and the actual restructuring and other charges related
thereto, and the failure to achieve the expected revenue growth and/or expense
savings from such corporate restructurings, acquisitions and/or dispositions;
(16) the growth and profitability of Wachovia's noninterest or fee income being
less than expected; (17) unanticipated regulatory or judicial proceedings; (18)
the impact of changes in accounting policies by the Securities and Exchange
Commission; (19) adverse changes in financial performance and/or condition of
Wachovia's borrowers which could impact repayment of such borrowers' outstanding
loans; (20) the impact on Wachovia's businesses, as well as on the risks set
forth above, of various domestic or international military or terrorist
activities or conflicts; and (21) Wachovia's success at managing the risks
involved in the foregoing.
Wachovia cautions that the foregoing list of important factors is not
exclusive. Wachovia does not undertake to update any forward-looking statement,
whether written or oral, that may be made from time to time by or on behalf of
Wachovia.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following unaudited consolidated financial statements of Wachovia
within Item 1 include, in the opinion of management, all adjustments (consisting
only of normal recurring adjustments) necessary for fair presentation of such
consolidated financial statements for the periods indicated.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT.
Note 1: Basic and Diluted Earnings Per Common Share
The reconciliation between basic and diluted earnings per common share for the
three and nine months ended September 30, 2001 and September 30, 2000 is
presented below:
Three Months Nine Months
Ended Ended
September 30, September 30,
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(Dollars in millions, except per share data) 2001 2000 2001 2000
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Net income (loss) $ (334) 852 883 (507)
Less imputed interest on the Corporation's transactions
in its common stock (1) (6) (14) (16)
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Income (loss) available to common stockholders $ (335) 846 869 (523)
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Basic earnings per common share $ (0.31) 0.87 0.86 (0.54)
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Diluted earnings per common share $ (0.31) 0.86 0.85 (0.54)
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Average common shares - basic (In thousands) 1,094,398 971,453 1,010,467 971,111
Common share equivalents, unvested restricted stock,
incremental common shares from forward purchase
contracts and convertible long-term debt assumed
converted (In thousands) N/A 3,170 9,254 n/a
Incremental common shares from equity forward transactions
(In thousands) N/A 12,140 - n/a
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Average common shares - diluted (In thousands) 1,094,398 986,763 1,019,721 971,111
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n/a - The result of including common share amounts in determining diluted
earnings per common share in periods for which there was a net loss would be
antidilutive, and therefore, the common share amounts for the three-month period
ended September 30, 2001 and the nine-month period ended September 30, 2000,
have been appropriately excluded.
Note 2: Information Related to Merger
Information related to the Merger with Legacy Wachovia is included in
Exhibit (99).
WACHOVIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Consolidated Balance Sheets of Wachovia and subsidiaries at September
30, 2001, September 30, 2000, and December 31, 2000, respectively, set forth on
page 58 of Wachovia's Third Quarter Financial Supplement for the nine months
ended September 30, 2001 (the "Financial Supplement"), are incorporated herein
by reference.
The Consolidated Statements of Income (Loss) of Wachovia and subsidiaries
for the three and nine months ended September 30, 2001 and 2000, set forth on
pages 59 and 60 of the Financial Supplement, are incorporated herein by
reference.
The Consolidated Statements of Cash Flows of Wachovia and subsidiaries for
the nine months ended September 30, 2001 and 2000, set forth on page 61 of the
Financial Supplement, are incorporated herein by reference.
A copy of the Financial Supplement is being filed as Exhibit (19) to this
Report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations appears on pages 2 through 21 of the Financial Supplement and is
incorporated herein by reference.
A copy of the Financial Supplement is being filed as Exhibit (19) to this
Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Quantitative and Qualitative Disclosures About Market Risk appears on pages
17 through 19 and pages 49 through 51 of the Financial Supplement and is
incorporated herein by reference.
A copy of the Financial Supplement is being filed as Exhibit (19) to this
Report.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In 1999, in connection with its stock repurchase program, Wachovia sold 17
million shares of its common stock to an investment banking firm. In connection
therewith, Wachovia agreed to repurchase the 17 million shares or otherwise
settle the contract, at Wachovia's option. In October 2000, Wachovia repurchased
4 million of those shares and in August 2001, Wachovia repurchased an additional
10 million shares leaving 3 million shares to be repurchased as of September 30,
2001. The offer and sale of the shares of common stock by Wachovia were exempt
from registration under the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof because such offer and sale did not involve a public
offering.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
EXHIBIT NO. DESCRIPTION
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(2) Agreement and Plan of Merger, dated as of April 15, 2001, as
amended and restated, by and between First Union and Wachovia
(incorporated by reference to Exhibit 2.1 of First Union's
Registration Statement on Form S-4 (No. 333-59616), and to
Exhibit 2.1 of First Union's Current Report on Form 8-K dated
July 23, 2001).
(3)(a) Restated Articles of Incorporation of Wachovia.
(3)(b) Amended and Restated By-laws of Wachovia.
(4) Instruments defining the rights of security holders, including
indentures.*
(12) Computations of Consolidated Ratios of Earnings to Fixed
Charges.
(19) Wachovia's Third Quarter 2001 Financial Supplement.
(99) First Union and Former Wachovia - Unaudited Statement of Net
Assets Acquired and unaudited Pro Forma Consolidated Condensed
Statements of Income (Loss)
* Wachovia agrees to furnish to the Commission upon request, copies of the
instruments, including indentures, defining the rights of the holders of the
long-term debt of Wachovia and its consolidated subsidiaries.
(b) Reports on Form 8-K.
During the quarter ended September 30, 2001, Current Reports on Form 8-K,
dated July 12, 2001, July 20, 2001, July 23, 2001, August 30, 2001, and
September 6, 2001, were filed with the Commission by Wachovia. In addition, a
Current Report on Form 8-K dated October 23, 2001 has been filed with the
Commission by Wachovia.
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 hereunto duly authorized.
WACHOVIA CORPORATION
Date: November 14, 2001
By: /s/ DAVID M. JULIAN
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DAVID M. JULIAN
SENIOR VICE PRESIDENT AND CORPORATE CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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(2) Agreement and Plan of Merger, dated as of April 15, 2001, as
amended and restated, by and between First Union and Wachovia
(incorporated by reference to Exhibit 2.1 of First Union's
Registration Statement on Form S-4 (No. 333-59616), and to
Exhibit 2.1 of First Union's Current Report on Form 8-K dated
July 23, 2001).
(3)(a) Restated Articles of Incorporation of Wachovia.
(3)(b) Amended and Restated By-laws of Wachovia.
(4) Instruments defining the rights of security holders, including
indentures.*
(12) Computations of Consolidated Ratios of Earnings to Fixed
Charges.
(19) Wachovia's Third Quarter 2001 Financial Supplement.
(99) First Union and Former Wachovia - Unaudited Statement of Net
Assets Acquired and unaudited Pro Forma Consolidated Condensed
Statements of Income (Loss)
* Wachovia agrees to furnish to the Commission upon request, copies of the
instruments, including indentures, defining the rights of the holders of the
long-term debt of Wachovia and its consolidated subsidiaries.