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 22, 1996
SALOMON INC
(Exact name of registrant as specified in its charter)
Delaware I-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 22, 1996, 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 22, 1996
<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 22, 1996 By: /s/ Richard J. Carbone
Controller
<PAGE>
Contact: Robert F. Baker
212-783-6299
For immediate release:
SALOMON INC REPORTS QUARTERLY NET INCOME OF $112 MILLION
New York, October 22, 1996 -- Salomon Inc today announced third quarter net
income of $112 million compared with $268 million in the 1995 third quarter. For
the nine months ended September 30, 1996, net income was $679 million, up from
$289 million in the comparable 1995 period. Primary return on equity for the
three and nine month periods ended September 30, 1996 was 8.7% and 20.2%,
respectively. Primary earnings per share for the 1996 three and nine month
periods were $.88 and $5.90, respectively.
Chairman and Chief Executive Officer Robert E. Denham, said: "While
quarter-to-quarter trading results are variable, overall Salomon Inc results for
the first nine months of 1996 ($679 million net income) and the latest twelve
months ($847 million net income) are very strong."
Salomon Brothers, the Company's global investment banking and securities
business, recorded pretax earnings of $176 million for the third quarter of 1996
and $1.1 billion for the nine months ended September 30, 1996. For the
comparable 1995 three and nine month periods, Salomon Brothers earned $381
million and $497 million, respectively, before taxes. Revenues, net of interest
expense, for the 1996 nine month period were $3.0 billion, up 36% from the $2.2
billion reported in the comparable 1995 period. Commenting on Salomon Brothers'
results, Deryck C. Maughan, Salomon Brothers' Chairman and Chief Executive
Officer, said: "This was a relatively quiet quarter for our sales and trading
business; our investment banking business continued to show good momentum."
Key items regarding Salomon Brothers performance:
Global investment banking revenues (underwriting plus advisory) were $187
million for the quarter, up 46% from the 1995 third quarter, reflecting a
doubling of underwriting revenues. For the 1996 nine month period,
investment banking revenues were $619 million compared with $304 million in
the 1995 nine month period.
Fixed income sales and trading net revenues were $598 million for the
quarter, down from $733 million in the 1995 third quarter, reflecting lower
revenues from trading for the Firm's account and from customer sales and
trading. For the 1996 nine month period, revenues were $2.0 billion
compared with $1.2 billion in the 1995 nine month period.
<PAGE>
Equity sales and trading net revenues were negative $26 million for the
quarter, compared with positive results of $196 million in the 1995 third
quarter, primarily the result of losses on the Firm's long-term proprietary
equity arbitrage strategies. For the 1996 nine month period, revenues were
$306 million compared with $643 million in the 1995 nine month period.
Sales and trading net revenues for both fixed income and equities include the
results of customer sales and trading as well as long-term arbitrage strategies
carried out in the Firm's proprietary trading business.
Phibro, the Company's commodity trading business, recorded pretax earnings of $7
million in the third quarter, down from $68 million in the third quarter of
1995. Pretax earnings for the nine months ended September 30, 1996 were $135
million, up from $29 million in the comparable period of 1995.
Basis Petroleum, the Company's oil refining and marketing business, recorded a
pretax loss of $46 million in the third quarter of 1996 compared with a pretax
loss of $9 million in the 1995 third quarter. The decline in Basis' results was
primarily attributable to weaker U.S. Gulf Coast refining margins. For the nine
months ended September 30, 1996, Basis recorded a pretax loss of $114 million
compared with a pretax loss of $59 million in the comparable 1995 period. Basis'
second quarter 1996 results include $23 million of nonrecurring income in
connection with the reduction of the minimum crude oil inventory needed to
support its refining activities.
In August 1996, Basis' Residfiner/ROSE unit complex became operational at its
Texas City refinery. This enables Basis to improve margins by processing
heavier, lower cost, crude oil feedstocks into higher valued refined products
while significantly reducing Basis' exposure to the residual fuel oil market.
For several weeks after becoming operational the complex was in a start-up mode,
resulting in a less than optimal throughput and yield. Nevertheless, the complex
contributed to an improvement in gross refining margins later in the quarter
that substantially offset incremental operating costs attributable to the
complex that were incurred throughout the quarter. Although the aggregate impact
of the Residfiner/ROSE unit complex on Basis' third quarter results were not
significant, Basis estimates that its pretax loss would have been reduced by
$20-$25 million assuming the operation of a fully optimized Residfiner/ROSE unit
complex for the entire quarter. In periods of depressed crackspreads and
tightness in the spreads between heavy and light crudes, a fully optimized
Residfiner/ROSE unit complex, in and of itself, is not enough to restore Basis'
refining operations to profitability.
Corporate and other includes a pretax gain of $48 million ($31 million aftertax)
resulting from the third quarter sale of The Mortgage Corporation Limited
("TMC") and its affiliates to First National Building Society of Ireland.
<PAGE>
The decrease in the Company's compensation and employee-related expenses in the
1996 third quarter reflects the lower level of earnings. Compensation and
employee-related expenses for the nine months ended September 30, 1996 were $1.6
billion, up 18% from the comparable period of 1995, reflecting the improvement
in nine month earnings. Total noncompensation expenses for the 1996 third
quarter were $183 million, consistent with average recurring noncompensation
expenses over the prior four quarters. The increase in technology expenses in
the quarter reflects a higher level of technology hardware purchases.
Total common and perpetual preferred equity has increased from $4.1 billion at
December 31, 1995, to $4.8 billion at September 30, 1996. In addition, in July
1996, the Company issued $345 million of 9.5% Trust Preferred Stock Units
("TRUPS"), which are substantially equivalent to perpetual preferred from a
capital analysis standpoint. Book value per common share was $40.67 at September
30, 1996, compared with $35.84 at the end of 1995. Average assets for the
quarter were $191 billion.
Salomon Inc selected financial information and the Unaudited Consolidated
Statement of Income follow:
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<TABLE>
<CAPTION>
SALOMON INC AND SUBSIDIARIES
Selected Financial Information (unaudited)
(Dollars in millions, except per share data)
Quarter ended Nine months ended
--------------------------------------------- ----------------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
1996 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATING RESULTS BY BUSINESS:
Income (loss) before income taxes:
Salomon Brothers $ 176 $ 525 $ 381 $ 1,069 $ 497
Phibro 7 (17) 68 135 29
Basis Petroleum (46) (13) (9) (114) (59)
Corporate and other 49 (11) (1) 41 7
------------ ------------ ------------ ------------ ------------
Income before income taxes $ 186 $ 484 $ 439 $ 1,131 $ 474
============ ============ ============ ============ ============
Salomon Brothers' revenues, net of interest expense:
Fixed income sales and trading $ 598 $ 706 $ 733 $ 2,036 $ 1,224
Equity sales and trading (26) 268 196 306 643
Global investment banking 187 251 128 619 304
Asset management 13 11 9 36 28
Other - - - - 6
------------ ------------ ------------ ------------ ------------
Total Salomon Brothers' revenues,
net of interest expense $ 772 $ 1,236 $ 1,066 $ 2,997 $ 2,205
============ ============ ============ ============ ============
RETURN ON AVERAGE COMMON STOCKHOLDERS' EQUITY:
Primary 8.7 % 26.1% 28.0% 20.2% 8.9%
Fully diluted* 8.5 23.8 24.6 18.6 8.6
============ ============ ============ ============ ============
PER COMMON SHARE:
Cash dividends $ 0.16 $ 0.16 $ 0.16 $ 0.48 $ 0.48
High market price 46 7/8 44 1/4 41 1/8 46 7/8 43 1/4
Low market price 38 36 1/8 34 3/4 34 7/8 32 1/4
Ending market price 45 5/8 44 38 1/2 ============ ============
Book value at quarter-end* 40.67 40.08 34.49
============ ============ ============
AT QUARTER-END:
Average assets for the quarter $ 191,000 $ 193,000 $ 163,000
Common equity 4,341 4,266 3,687
Redeemable preferred equity 560 560 700
Perpetual preferred equity 450 562 312
TRUPS 345 - -
============ ============ ============
<FN>
*Assumes conversion of redeemable preferred stock unless such assumptions result in higher returns on equity or book value 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
------------------------------------------------- -------------------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
1996 1996 1995 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Interest and dividends $ 1,367 $ 1,436 $ 1,611 $ 4,376 $ 5,163
Principal transactions 307 584 691 1,542 809
Investment banking 187 251 128 619 304
Commissions 69 75 82 234 252
Other 30 16 24 19 30
------------- ------------- ------------- ------------- -------------
Total revenues 1,960 2,362 2,536 6,790 6,558
Interest expense 1,144 1,143 1,355 3,562 4,233
------------- ------------- ------------- ------------- -------------
Revenues, net of interest expense 816 1,219 1,181 3,228 2,325
------------- ------------- ------------- ------------- -------------
Noninterest expenses:
Compensation and employee-related 447 551 557 1,554 1,312
Technology 71 59 64 185 192
Professional services and business
development 45 51 45 140 125
Occupancy 42 44 45 129 128
Clearing and exchange fees 20 18 15 55 48
Other 5 12 16 34 46
------------- ------------- ------------- ------------- ------------
Total noninterest expenses 630 735 742 2,097 1,851
------------- ------------- ------------- ------------- ------------
Income before income taxes 186 484 439 1,131 474
Income tax expense 74 193 171 452 185
------------- ------------- ------------- ------------- ------------
Net income $ 112 $ 291 $ 268 $ 679 $ 289
============= ============= ============= ============= ============
EARNINGS AVAILABLE FOR FULLY
DILUTED EARNINGS PER SHARE $ 102 $ 282 $ 263 $ 654 $ 274
============= ============= ============= ============= ============
EARNINGS PER SHARE:
Primary $ 0.88 $ 2.58 $ 2.36 $ 5.90 $ 2.22
Fully diluted* 0.85 2.34 2.10 5.41 2.19
============= ============= ============= ============= ============
WEIGHTED AVERAGE SHARES
OF COMMON STOCK
OUTSTANDING (in thousands):
For primary earnings per share 105,500 105,400 106,600 105,800 106,500
For fully diluted earnings per share 120,600 120,600 125,400 121,000 125,300
============= ============= ============= ============= ============
<FN>
*Assumes conversion of redeemable preferred stock unless such assumptions result in higher earnings per share than
determined under the primary method.
</FN>
</TABLE>
