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:
February 2, 1995
Salomon Inc
(Exact name of registrant as specified in its charter)
Delaware 1-4346 22-1660266
(State of Incorporation) (Commission File No.) (IRS
Employer Identification No.)
Seven World Trade Center, New York, New York 10048
(Address of Principal Executive Offices) (Zip Code)
(212) 783-7000
(Registrant's Telephone No.)
<PAGE>
Item 5. Other Events
On February 2, 1995, the Registrant issued a press release,
a copy of which is filed herewith as Exhibit 99 and
incorporated herein by reference in its entirety.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
Exhibits:
(99) Press release dated February 2, 1995
<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.
SALOMON INC
(Registrant)
Date: February 2, 1995 By: /s/ David C.Fisher
Controller
Contact: Robert F. Baker
212-783-6299
For immediate release:
SALOMON INC REPORTS A QUARTERLY NET LOSS OF $122 MILLION
New York, February 2, 1995 - Salomon Inc today announced a
fourth quarter net loss of
$122 million or $1.32 per share, compared with net income of
$476 million or $3.64 per
share (fully diluted) in the 1993 fourth quarter. For the
full year, the Company recorded a net
loss of $364 million or $3.98 per share compared with net
income of $827 million or $6.28
per share (fully diluted) in 1993. The Company's 1994
fourth quarter results reflect certain
charges and benefits discussed below, which, in the
aggregate, reduced net income by $38
million.
Salomon Brothers, the Company's global investment banking
and securities business,
recorded a fourth quarter pretax loss of $138 million and a
full year loss of $685 million,
excluding the charges discussed below.
Salomon Brothers was profitable in January 1995, as positive
results for its Proprietary
Trading Businesses more than offset continuing weakness for
the Client-Driven Business.
Salomon Brothers' Client-Driven Business recorded a pretax
loss of $110 million in the fourth
quarter compared with pretax earnings of $354 million in the
1993 fourth quarter. For the
full year, the Client-Driven Business recorded a pretax loss
of $636 million compared with
1993 pretax earnings of $1.2 billion. Results for 1994
reflect the depressed levels of
underwriting volume and customer trading activity that
prevailed for much of the year and
inventory and trading losses incurred by certain units
within the Client-Driven Business.
Salomon Brothers' Proprietary Trading Businesses recorded a
pretax loss of $28 million for
the 1994 fourth quarter and $49 million for the full year.
Salomon Brothers will maintain
strict control of headcount and, if poor business conditions
persist, will reduce its
compensation expenses. The Company is also engaged in a
thorough review of non-
compensation expenses.
The Phibro Division, the Company's commodities trading
business, had a pretax loss of $24
million in the 1994 fourth quarter compared with a pretax
loss of $21 million in the fourth
quarter of 1993. For the year, the Phibro Division recorded
pretax earnings of $81 million
compared with a pretax loss of $15 million in 1993.
Phibro USA, the Company's oil refining business, recorded
pretax earnings of $5 million in the
fourth quarter compared with a pretax loss of $31 million in
the 1993 fourth quarter, which
included a $30 million pretax charge to write down the
carrying value of the business's core
refining and marketing inventories, which are carried at the
lower of aggregate cost or market
value. Phibro USA recorded pretax earnings of $18 million
for the full year compared with a
pretax loss of $46 million in 1993.
The Company's Corporate and Other segment recorded pretax
earnings of $14 million in the
fourth quarter, primarily attributable to a recovery in the
earnings of The Mortgage
Corporation, an indirect wholly-owned mortgage lending
subsidiary in the United Kingdom.
Salomon Brothers has been engaged in a continuing multi-year
effort to strengthen its internal
control structure, including the enhancement of financial
and operational systems. In
connection with such efforts, in mid-1993 Salomon Brothers'
management commissioned a
detailed review by the Company's Financial Division staff
and its independent auditors, Arthur
Andersen LLP, of all material general ledger accounts at
each major operating entity
worldwide. The objective of such review was to determine
that general ledger accounts were
properly supported and that appropriate reconciliation
procedures were in place. The
Company has also worked for several years to develop a new
global interest rate swap
transaction processing system and has now completed detailed
reviews of Salomon Brothers'
general ledger accounts related to interest rate swaps and
the interest rate swaps
transactions database. As adjustments have arisen from
these reviews, appropriate charges
have been taken.
Given the substantial completion of the general ledger
balances review, the Company is
confident that all material unreconciled balances have been
identified and appropriate charges
have been recorded. To prevent a similar accumulation of
unreconciled balances in the
future, the Company believes that appropriate steps are
being taken, including the
implementation of several new systems, improvements in
reconciliation procedures and the
continued development of new systems. The issues that led
to these charges affected the
Company only. The Company knows of no situation where the
conditions that led to these
charges had an adverse impact on the Company's customers nor
has the Company found any
evidence that the charges were caused by employee
wrongdoing.
The resolution of unreconciled balances related to Salomon
Brothers' London-based
companies resulted in an aftertax charge of $126 million
($194 million pretax) to the
Company's fourth quarter results. These balances were
identified as Salomon Brothers
changed operational systems and conducted its detailed
review of databases supporting
general ledger balances. The review, which has been
substantially completed, necessitated a
number of adjustments affecting transactions going back at
least until 1989 involving many
different instruments, positions and related currency
effects. Although the charge relates to a
number of years, the impact on any single year would not
have been material. A detailed
review of general ledger balances related to Salomon
Brothers' U.S.-based operations was
completed in the 1993 fourth quarter and an aftertax charge
of $49 million ($87 million
pretax), which was not material to the 1993 fourth quarter,
was reflected in such period.
The Company's and Salomon Brothers' 1994 fourth quarter
results also include a $14 million
aftertax charge ($23 million pretax) arising from the
completion of the detailed reviews of
Salomon Brothers' general ledger accounts related to
interest rate swaps and the interest rate
swap transactions database. Problems in recording the
results of interest rate swap activities
date back to the mid-1980s. Since 1992, aftertax charges of
approximately $56 million
($100 million pretax) have been recorded in connection with
this effort, including an
aggregate of $25 million before taxes in the first three
quarters of 1994 and the $23 million
pretax charge in the 1994 fourth quarter; the impact on
earnings in any single period was not
material.
In the accompanying consolidated statement of income, the
pretax charges are reflected as
reductions in revenues from principal transactions.
The Company's fourth quarter results include a $102 million
income tax benefit from the
reversal of reserves established in prior years to cover
potential tax liabilities. Favorable
developments pertaining to certain U.S. federal, state and
local, and non-U.S. income tax
matters permitted the reversal.
Total assets were $173 billion at December 31, 1994 and
average assets for the quarter were
$175 billion. Book value per common share was $32.97 at
year end 1994 compared with
$37.93 at the end of 1993. During 1994, the Company
repurchased approximately 5.2
million of its common shares at an aggregate cost of $252
million. The substantial majority
of these repurchases occured in the first quarter of the
year. Shares authorized for
repurchase by the Company's Board of Directors remained at
9.8 million at December 31,
1994.
Selected financial information and the unaudited
consolidated statement of income follow:
<PAGE>
SALOMON INC AND SUBSIDIARIES
Selected Financial Information (unaudited)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
SUMMARY OF OPERATING RESULTS BY
SEGMENT:
Income (loss) before taxes and
change in accounting principles:
Salomon Brothers' business unit
contributions:
Client-Driven Business $ (110) $ 354 $ (636) $ 1,159
Proprietary Trading Businesses (28) 508 (49) 416
Unallocated charges (217) - (217) -
------ ------ ------ ------
Total Salomon Brothers (355) 862 (902) 1,575
Phibro Division (24) (21) 81 (15)
Phibro USA 5 (31) 18 (46)
Corporate and Other 14 (3) 33 (49)
------ ------ ------ ------
Income (loss) before taxes and
cumulative effect of change in
accounting principles $ (360) $ 807 $ (770) $1,465
====== ====== ====== ======
Salomon Brothers' revenues, net of
interest expense:
Client-Driven Business:
Global investment banking $ 109 $ 250 $ 486 $ 791
Fixed income secondary markets 153 446 360 1,612
Equity secondary markets 4 194 187 536
Foreign exchange 5 54 (63) 204
Private Investment Department and
asset management 20 32 69 96
------ ------ ------ ------
Total Client-Driven Business 291 976 1,039 3,239
Proprietary Trading Businesses 43 689 317 896
Unallocated charges (217) - (217) -
------ ------ ------ ------
Total Salomon Brothers' revenues,
net of interest expense $ 117 $1,665 $ 1,139 $4,135
====== ====== ====== ======
RETURN ON AVERAGE COMMON STOCKHOLDERS'
EQUITY BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLES:
Primary (15.3)% 47.7% (10.8)% 21.9%
Fully diluted* (15.3)% 39.9% (10.8)% 19.3%
====== ====== ====== ======
PER COMMON SHARE:
Cash dividends $ 0.16 $ 0.16 $ 0.64 $ 0.64
High market price 42 50 1/2 52 3/4 51 7/8
Low market price 35 41 1/2 35 34 3/8
Ending market price 37 1/2 47 5/8 ====== ======
Book value at year-end 32.97 37.93
====== ======
AT YEAR-END (in billions):
Total assets $ 173 $ 185
Average assets for the quarter 175 181
Common and convertible preferred
equity 4.2 4.9
Perpetual preferred equity 0.3 0.3
====== ======
<FN>
* Assumes conversion of convertible notes and redeemable preferred stock,
unless such assumptions result in a higher return on equity than
determined under the primary method.
</TABLE>
<PAGE>
SALOMON INC AND SUBSIDIARIES
Consolidated Statement of Income (unaudited)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Quarter ended Year ended
December 31, December 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Interest and dividends $1,410 $1,424 $5,574 $5,989
Principal transactions (40) 985 (171) 1,664
Investment banking 109 250 486 791
Commissions 79 79 336 285
Other 31 26 114 70
------ ------ ------ ------
Total revenues 1,589 2,764 6,339 8,799
Interest expense 1,432 1,080 4,892 4,600
------ ------ ------ ------
Revenues, net of interest expense 157 1,684 1,447 4,199
------ ------ ------ ------
Noninterest expenses:
Compensation and employee-related 332 655 1,486 1,900
Technology 65 61 255 262
Occupancy 32 42 165 231
Professional services and business
development 46 35 167 142
Clearing and exchange fees 17 15 70 62
Other 25 69 74 137
------ ------ ------ ------
Total noninterest expenses 517 877 2,217 2,734
------ ------ ------ ------
Income (loss) before taxes and
cumulative effect of change in
accounting principles (360) 807 (770) 1,465
Income taxes (238) 331 (406) 601
------ ------ ------ ------
Income (loss) before cumulative
effect of change in accounting
principles (122) 476 (364) 864
Cumulative effect of change in
accounting principles, net of
tax benefit of $28 - - - (37)
------ ------ ------ ------
Net income (loss) $ (122) $ 476 $ (364) $ 827
====== ====== ====== ======
EARNINGS PER SHARE:
Primary earnings (loss) before
cumulative effect of change in
accounting principles $ (1.32) $ 4.33 $(3.98) $7.34
Cumulative effect of change in
accounting principles - - - (0.33)
------ ------ ------ ------
Primary earnings (loss) $ (1.32) $ 4.33 $(3.98) $7.01
====== ====== ====== ======
Fully diluted earnings (loss)
before cumulative effect of
change in accounting principles* $(1.32) $ 3.64 $(3.98) $ 6.57
Cumulative effect of change in
accounting principles - - - (0.29)
------ ------ ------ ------
Fully diluted earnings (loss)* $(1.32) $ 3.64 $(3.98) $ 6.28
====== ====== ====== ======
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING
(in thousands):
For primary earnings per share 105,800 111,200 106,800 111,000
For fully diluted earnings per share 105,800 130,200 106,800 130,000
======= ======= ======= =======
<FN>
* Assumes conversion of convertible notes and redeemable preferred stock,
unless such assumptions result in higher earnings per share than
determined under the primary method.
</TABLE>
