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 27, 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 27, 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.
Kenneth K. Marshall is now the acting Chief Accounting Officer
and Controller of Salomon Inc.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
Exhibits:
(99) Press release dated February 27, 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 hereunto duly authorized.
SALOMON INC
(Registrant)
Date: February 27, 1995 By: /s/ Jerome H. Bailey
Chief Financial Officer
Press Contact: Robert F. Baker Jr.
(212) 783-6299
SALOMON INC REPORTS ADJUSTMENT TO PRELIMINARY 1994 RESULTS
NEW YORK, FEBRUARY 27, 1995 -- Salomon Inc today announced that in
connection with the completion of its 1994 financial statements, it is
revising its preliminary results released on February 2. There are two
revisions.
As previously reported, the Company took charges arising from detailed
reviews of general ledger accounts and supporting databases for Salomon
Brothers' interest rate swaps business. Additional errors, which the
Company believes were unintentional, have since been discovered
resulting in an after-tax charge of $35 million ($61 million pre-tax)
relating almost entirely to a 1988 yen swap transaction. These errors were
discovered due to the cross checking procedures the Company is now
applying. The yen swap error existed in an account that the Company
believed had been reconciled in January 1991. The application of these
cross checking procedures globally to all Salomon Brothers swap accounts
indicates that, with the charges now taken, swap-related general ledger
balances are appropriately supported.
The second revision is an income statement reclassification with no impact
on total revenues or net income. It reclassifies revenues previously
attributed to principal transactions as instead being revenues from
interest and dividends. The effect of this reclassification is to increase
interest and dividend revenues by $328 million and $182 million
respectively in 1994 and 1993, and to decrease principal transaction
revenues by the same amounts for those years. The misclassifications arose
because the computer systems did not accurately distinguish between
interest income and principal gains and losses upon the redemption of
certain non-dollar securities, principally Mexican Tesobonos and Cetes.
The misclassifications had no effect on the reported results of any of our
business units.
Robert E. Denham, Chairman and CEO of Salomon Inc, said "Nothing is more
important to this Company than an absolute insistence on the highest
possible standards of control and of accuracy in reporting. We must have
both people and systems that can achieve the high standards which our
shareholders expect. We will therefore accelerate the implementation of a
variety of steps to strengthen our financial reporting and control
procedures. We are also making appropriate changes in Financial Division
and Operations personnel. Finally, our external auditors have stated to us
that these items were not uncovered in prior year audits. Accordingly, the
Board will look with particular care this year at the designation of
outside auditors."
Selected financial information and the consolidated statement of income,
revised for these changes, is attached.
<PAGE>
SALOMON INC AND SUBSIDIARIES
Selected Financial Information
(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
(see Note below) (278) - (278) -
------ ------ ------ ------
Total Salomon Brothers (416) 862 (963) 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 $ (421) $ 807 $ (831) $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 (See Note below) (278) - (278) -
------ ------ ------ ------
Total Salomon Brothers' revenues,
net of interest expense $ 56 $1,665 $ 1,078 $4,135
====== ====== ====== ======
RETURN ON AVERAGE COMMON STOCKHOLDERS'
EQUITY BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLES:
Primary (19.2)% 47.7% (11.7)% 21.9%
Fully diluted* (19.2)% 39.9% (11.7)% 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 32.65 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.
Note: Salomon Brothers' unallocatd charges for 1994 (full year and fourth
quarter) include $61 million attributable to the additional interest rate
swap differences discussed herein.
</TABLE>
<PAGE>
SALOMON INC AND SUBSIDIARIES
Consolidated Statement of Income
(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
(see Note below) $1,635 $1,444 $5,902 $6,171
Principal transactions
(see Note below) (326) 965 (560) 1,482
Investment banking 109 250 486 791
Commissions 79 79 336 285
Other 31 26 114 70
------ ------ ------ ------
Total revenues 1,528 2,764 6,278 8,799
Interest expense 1,432 1,080 4,892 4,600
------ ------ ------ ------
Revenues, net of interest expense 96 1,684 1,386 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 (421) 807 (831) 1,465
Income tax expense (benefit) (264) 331 (432) 601
------ ------ ------ ------
Income (loss) before cumulative
effect of change in accounting
principles (157) 476 (399) 864
Cumulative effect of change in
accounting principles, net of
tax benefit of $28 - - - (37)
------ ------ ------ ------
Net income (loss) $ (157) $ 476 $ (399) $ 827
====== ====== ====== ======
EARNINGS PER SHARE:
Primary earnings (loss) before
cumulative effect of change in
accounting principles $(1.65) $4.33 $(4.31) $ 7.34
Cumulative effect of change in
accounting principles - - - (0.33)
------ ------ ------ ------
Primary earnings (loss) $(1.65) $4.33 $(4.31) $ 7.01
====== ====== ====== ======
Fully diluted earnings (loss)
before cumulative effect of
change in accounting principles* $(1.65) $3.64 $(4.31) $ 6.57
Cumulative effect of change in
accounting principles - - - (0.29)
------ ------ ------ ------
Fully diluted earnings (loss)* $(1.65) $3.64 $(4.31) $ 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.
Note: Principal transactions for 1994 (full year and fourth quarter) were
reduced by $61 million as a result of the interest rate swap differences
discussed herein. In addition, to reflect the reclassification discussed
herein, Interest and dividends revenues were increased and Principal
transactions revenues were reduced as follows: 1994 full year - $328
million; 1994 fourth quarter - $225 million; 1993 full year - $182 million;
1993 fourth quarter - $20 million.
</TABLE>
