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:
October 19, 1995
SALOMON INC
(Exact name of registrant as specified in its charter)
Delaware 1-4346 22-1660266
(State of Incorporation) (Commission File No.) (I.R.S. 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 October 19, 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 October 19, 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: October 19, 1995 By: /s/ Richard Carbone
--------------------
Controller
<PAGE>
Contact: Robert F. Baker
212-783-6299
For immediate release:
SALOMON INC REPORTS QUARTERLY NET INCOME OF $268 MILLION
New York, October 19, 1995 -- Salomon Inc today announced third quarter net
income of $268 million, representing its most profitable quarter since 1993. For
the nine months ended September 30, 1995, the Company recorded net income of
$289 million, compared to a net loss of $242 million in the same period a year
ago. Fully diluted earnings per share were $2.10 and $2.19 for the three and
nine months ended September 30, 1995. Robert E. Denham, Chairman and Chief
Executive Officer of Salomon Inc, stated: "This quarter's very good results
occurred because of strong performances from most of the Company's businesses.
We made money in what, for Salomon, is the old fashioned way, by effectively
serving client needs in our sales and trading, corporate finance, advisory and
underwriting businesses, while also trading intelligently for our own account.
For the first nine months of 1995, fully diluted return on equity for Salomon
Brothers and the Phibro Division was 10.8% (8.6% for all of Salomon Inc); while
this is below our long-term targets, it represents a significant recovery."
Salomon Brothers, the Company's global investment banking and securities
business, recorded pretax income of $381 million in the third quarter and $497
million for the nine months ended September 30, 1995. The third quarter results
represent Salomon Brothers' best quarterly performance since 1993. Revenues for
the quarter were $1.1 billion, nearly double those reported in the second
quarter of 1995. The results reflect strong performances in both the
Client-Related and Proprietary Trading Businesses.
Client-Related revenues of $568 million, slightly below the second quarter of
1995, continued to reflect the rebound in client-related activities. The fixed
income business, in particular, has evidenced a strong recovery. The strong
revenue performance in the Client-Related business was not fully reflected in
income, because of an increase in Client-Related expenses, versus the second
quarter of 1995, of $90 million. This increase was due to higher compensation
expense intended to adjust compensation levels for the entire compensation year
to reflect improved company performance and industry conditions. Client-Related
expenses in the quarter were thus higher than would normally be expected at this
level of revenues.
Because management and compensation of Salomon Brothers' Client-Related and
Proprietary Trading businesses have been increasingly connected, in future
quarters Salomon Brothers will not report results of these businesses
separately. Attached is a summary of historical Salomon Brothers' results,
restated to reflect this change in reporting, which will commence with next
quarter's earnings release.
<PAGE>
The Phibro Division recorded pretax income of $68 million in the third quarter.
For the nine months ended September 30, 1995, the Phibro Division recorded
pretax income of $29 million, compared with $105 million for the same period of
1994.
Phibro USA, the Company's oil refining and marketing business, recorded a pretax
loss of $9 million in the third quarter. For the nine months ended September 30,
1995, Phibro USA recorded a pretax loss of $59 million, compared with pretax
earnings of $13 million for the same period in 1994.
Berkshire Hathaway Inc. has advised the Company that it will not convert the
first of five tranches of Series A Preferred Stock owned by its subsidiaries. As
a result, the preferred shares in this tranche will be redeemed for $140 million
on October 31, 1995.
Warren E. Buffett, Chairman of Berkshire Hathaway, made the following statement
regarding Berkshire's decision: "The decision not to exercise in no way predicts
what I will decide when each of the four remaining options expires. Rather, I am
making a single decision about whether I want to put $140 million into Salomon
common stock at $38 today or whether there is something else I would rather have
Berkshire do with the money. Every day the stock market offers Berkshire an
option to buy shares of Coca-Cola, Gillette, Salomon or thousands of other
companies. So far this year, Berkshire has not exercised this "market" option to
buy shares in any of the three mentioned companies (including Salomon when it
was trading below $38). Obviously, the fact that Berkshire has not exercised its
market option to buy more Coca-Cola or Gillette does not mean that I am negative
on these companies nor should that interpretation be placed upon the
non-exercise of a "company" option to purchase more Salomon common shares." Mr.
Buffett further noted that following the redemption, Berkshire Hathaway will
still be a major shareholder (with common and preferred shares representing
17.6% of total voting power), and he expects to remain an active director of the
Company and Chairman of the Executive Committee of its Board of Directors.
Regarding Berkshire's decision, Mr. Denham stated: "This redemption, in an
amount representing less than 1% of our total long-term capital, does not impact
the Company's business or business strategy."
The shareholder derivative action filed on behalf of the Company against certain
of its former executives relating to the Salomon Brothers' 1991 Treasury auction
matter has been settled, subject to approval by the Court. While this action was
not filed or prosecuted by the Company, but by plaintiffs' lawyers suing
derivatively on the Company's behalf, the Company will receive most of the
benefit of the settlement, estimated (after expected fees of plaintiffs'
counsel) at $22.5 million of cash consideration plus additional non-cash
consideration, including the surrender of indemnification claims. The cash
consideration will be reflected in earnings upon Court approval, currently
expected to occur in the fourth quarter of this year.
Book value per common share was $34.49 at September 30, 1995 compared with
$32.65 at the end of 1994. Average assets for the third quarter were $163
billion.
Salomon Inc selected financial information, the Unaudited Consolidated Statement
of Income and Salomon Brothers selected supplemental financial information
follow:
<PAGE>
<TABLE>
<CAPTION>
SALOMON INC AND SUBSIDIARIES
Selected Financial Information (unaudited)
(Dollars in millions, except per share data)
Quarter ended Nine months ended
September 30, June 30, September 30, September 30, September 30,
1995 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATING RESULTS BY BUSINESS:
Income (loss) before taxes:
Salomon Brothers' business unit contributions:
Client-Related Business $ 32 $ 149 $ (62) $ 2 $ (526)
Proprietary Trading Businesses 349 (93) (114) 495 (21)
Total Salomon Brothers 381 56 (176) 497 (547)
Phibro Division 68 (162) (27) 29 105
Phibro USA (9) 1 (4) (59) 13
Corporate and other (1) 6 31 7 19
Income (loss) before taxes $ 439 $ (99) $ (176) $ 474 $ (410)
Salomon Brothers' revenues, net of interest expense:
Client-Related Business:
Global investment banking $ 128 $ 154 $ 121 $ 304 $ 377
Fixed income secondary markets 266 224 134 625 207
Equity secondary markets 127 201 137 383 183
Foreign exchange 38 6 (12) 42 (68)
Asset management 9 10 9 28 29
Private Investment Department - - 9 6 20
Total Client-Related Business 568 595 398 1,388 748
Proprietary Trading Businesses 498 (43) (7) 817 274
Total Salomon Brothers' revenues,
net of interest expense $ 1,066 $ 552 $ 391 $ 2,205 $ 1,022
RETURN ON AVERAGE COMMON STOCKHOLDERS' EQUITY:
Primary 28.0 % (8.8) % (12.8) % 8.9 % (9.5) %
Fully diluted* 24.6 (8.8) (12.8) 8.6 (9.5)
PER COMMON SHARE:
Cash dividends $ 0.16 $ 0.16 $ 0.16 $ 0.48 $ 0.48
High market price 41 1/8 43 1/4 48 1/4 43 1/4 52 3/4
Low market price 34 3/4 33 1/4 38 1/2 32 1/4 38 1/2
Ending market price 38 1/2 40 1/8 39 1/2
Book value at quarter-end 34.49 32.38 34.50
AT QUARTER-END (in billions):
Average assets for the quarter $ 163 $ 176 $ 175
Common equity 3.7 3.5 3.7
Convertible preferred equity 0.7 0.7 0.7
Perpetual preferred equity 0.3 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.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SALOMON INC AND SUBSIDIARIES
Consolidated Statement of Income (unaudited)
(Dollars in millions, except per share data)
Quarter ended Nine months ended
September 30, June 30, September 30, September 30, September 30,
1995 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C>
Revenues:
Interest and dividends $ 1,611 $ 1,944 $ 1,520 $ 5,163 $ 4,267
Principal transactions 691 (252) (42) 809 (234)
Investment banking 128 154 121 304 377
Commissions 82 81 82 252 257
Other 24 27 17 30 83
Total revenues 2,536 1,954 1,698 6,558 4,750
Interest expense 1,355 1,553 1,290 4,233 3,460
Revenues, net of interest expense 1,181 401 408 2,325 1,290
Noninterest expenses:
Compensation and employee-related 557 324 399 1,312 1,154
Technology 64 64 69 192 190
Occupancy 45 42 44 128 133
Professional services and business
development 45 35 48 125 121
Clearing and exchange fees 15 17 18 48 53
Other 16 18 6 46 49
Total noninterest expenses 742 500 584 1,851 1,700
Income (loss) before taxes 439 (99) (176) 474 (410)
Income taxes 171 (39) (72) 185 (168)
Net income (loss) $ 268 $ (60) $ (104) $ 289 $ (242)
EARNINGS AVAILABLE FOR FULLY
DILUTED EARNINGS PER SHARE $ 263 $ (78) $ (120) $ 274 $ (286)
EARNINGS (LOSS) PER SHARE:
Primary $ 2.36 $ (0.73) $ (1.13) $ 2.22 $ (2.67)
Fully diluted* 2.10 (0.73) (1.13) 2.19 (2.67)
WEIGHTED AVERAGE SHARES
OF COMMON STOCK
OUTSTANDING (in thousands):
For primary earnings per share 106,600 106,500 105,700 106,500 107,200
For fully diluted earnings per share 125,400 106,500 105,700 125,300 107,200
<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.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SALOMON INC AND SUBSIDIARIES
Salomon Brothers Selected Supplemental Financial Information (unaudited)
(Dollars in millions)
Nine months
ended Year Ended December 31,
September 30,
Salomon Brothers Revenues, net of interest expense: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Global investment banking $ 304 $ 486 $ 791 $ 450 $ 496
Fixed income sales and trading 1,182 707 2,177 2,448 2,189
Equity sales and trading 643 157 867 793 530
Foreign exchange 42 (63) 204 189 14
Asset management and Private Investment Department 34 69 96 48 46
Other - (278) - 23 44
Total revenues, net of interest expense $ 2,205 $ 1,078 $ 4,135 $ 3,951 $ 3,319
Salomon Brothers expense information:
Compensation and employee related expenses $ 1,217 $ 1,355 $ 1,810 $ 1,577 $ 1,272
Non-compensation expenses 491 686 750 984 1,011
Compensation Ratio* 55 % 126 % 44 % 40 % 38 %
Non-compensation Ratio ** 22 % 64 % 18 % 25 % 30 %
Quarter Ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
Salomon Brothers Revenues, net of interest expense: 1995 1995 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Global investment banking $ 128 $ 154 $ 22 $ 109 $ 121 $ 86 $ 170
Fixed income sales and trading 695 87 400 264 116 (129) 456
Equity sales and trading 196 295 152 (64) 148 6 67
Foreign exchange 38 6 (2) 5 (12) 55 (111)
Asset management and Private Investment Department 9 10 15 20 18 17 14
Unallocated charges - - - (278) - - -
Total revenues, net of interest expense $ 1,066 $ 552 $ 587 $ 56 $ 391 $ 35 $ 596
Salomon Brothers expense information:
Compensation and employee related expenses $ 515 $ 336 $ 366 $ 304 $ 382 $ 281 $ 388
Non-compensation expenses 170 160 161 168 185 164 169
<FN>
* Compensation as a percentage of Salomon Brothers' revenues, net of interest
expense
** Non-compensation expenses as a percentage of Salomon Brothers'
revenues, net of interest expense
</FN>
</TABLE>
