Wachovia May Take Charge of up to $1 Billion
CHARLOTTE, N.C., April 30 /PRNewswire-FirstCall/ -- Wachovia
Corporation (NYSE: WB) today announced that, as a result of its analysis of
a ruling in BB&T Corporation v. the United States on April 29, 2008, it
expects to record an after-tax non-cash charge of between $800 million and
$1 billion in the second quarter of 2008. Wachovia expects to provide
additional information when it files its 2008 First Quarter Report on Form
10-Q.
Wachovia entered into various leasing transactions between 1999 and
2003 involving lease-to-service contracts and leases of qualified
technological equipment, which are widely known as sale-in, lease-out or
"SILO" transactions. Wachovia stopped originating these transactions in
2003.
In 2006, the FASB issued guidance on the accounting treatment of
leveraged leasing transactions. Previously, changes in the timing of tax
cash flows did not require any change in the amount of income recognized
under a leveraged lease. With the issuance of FASB Staff Position FAS 13-2,
"Accounting for a Change or Projected Change in the Timing of Cash Flows
Relating to Income Taxes Generated by a Leveraged Lease Transaction" (FSP
13-2), and FASB Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes -- an interpretation of FASB Statement No. 109" (FIN 48),
changes affecting the timing of income tax cash flows but not the total net
income under a leveraged lease trigger a recalculation of the net
investment in the lease. Where tax cash flows are reduced or delayed, this
recalculation results in a one-time non-cash charge to earnings.
On April 29, 2008, the U.S. Court of Appeals for the Fourth Circuit
issued an opinion in the BB&T case that disallowed tax benefits associated
with certain of BB&T's lease-in, lease-out ("LILO") transactions. Although
the BB&T decision involved LILOs, Wachovia believes some portions of the
decision may also apply to SILO transactions. There has not yet been any
judicial decision that directly involves SILOs, so the tax law as applied
to SILOs remains unsettled. However, applicable accounting standards
require Wachovia to update the assessment of its SILO transactions in light
of the BB&T decision. The decision has no impact on Wachovia's LILO
transactions, which were settled in their entirety in 2004.
Although Wachovia continues to believe its SILO transactions comply
with applicable laws, in light of the BB&T decision, under the principles
established by FSP 13-2 and FIN 48, the non-cash charge to earnings is
currently estimated to be in the range of $800 million to $1 billion and
this approximate amount would be recognized as income over the remaining
terms of the affected leases, generally 35 to 40 years.
About Wachovia
Wachovia Corporation (NYSE: WB) is one of the nation's largest
diversified financial services companies, with assets of $808.9 billion and
market capitalization of $53.8 billion at March 31, 2008. Wachovia provides
a broad range of retail banking and brokerage, asset and wealth management,
and corporate and investment banking products and services to customers
through 3,300 retail financial centers in 21 states from Connecticut to
Florida and west to Texas and California, and nationwide retail brokerage,
mortgage lending and auto finance businesses. Globally, clients are served
in selected corporate and institutional sectors and through more than 40
international offices. Our retail brokerage operations under the Wachovia
Securities brand name manage more than $1.1 trillion in client assets
through 18,600 registered representatives in 1,500 offices nationwide.
Online banking is available at wachovia.com; online brokerage products and
services at wachoviasec.com; and investment products and services at
evergreeninvestments.com .
Forward-Looking Statements
This news release contains various forward-looking statements. A
discussion of various factors that could cause Wachovia Corporation's
actual results to differ materially from those expressed in such
forward-looking statements is included in Wachovia's filings with the
Securities and Exchange Commission.
SOURCE Wachovia Corporation
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Related links:
http://www.wachovia.com
http://www.wachoviasec.com
http://www.evergreeninvestments.com
http://www.prnewswire.com/comp/314125.html/
CONTACT:
Media Contact, Christy Phillips-Brown,
+1-704-383-8178, or Mary Eshet, +1-704-383-7777; or Investor
Contacts, Alice Lehman, +1-704-374-4139, or Ellen Taylor,
+1-212-214-1904, all of Wachovia Corporation
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