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:
January 21, 1997
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.)
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Item 5. Other Events
On January 21, 1997, 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 January 21, 1997
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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: January 21, 1997 By: /s/ Richard J. Carbone
Controller
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SALOMON INC
Seven World Trade Center, New York, New York 10048 212 783-7000
Contact: Robert F. Baker
212-783-6299
For immediate release:
SALOMON INC REPORTS NET INCOME OF $228 MILLION FOR THE 1996 FOURTH
QUARTER AND $907 MILLION FOR THE YEAR
New York, January 21, 1997 -- Salomon Inc today announced net income of $228
million for the quarter ended December 31, 1996. Net income for the full year
was $907 million, nearly double the $457 million earned in 1995. Primary return
on equity for the three and twelve months ended December 31, 1996 was 18.9% and
19.8%, respectively. Primary earnings per share for the 1996 three and twelve
month periods were $1.98 and $7.88, respectively.
Chairman and Chief Executive Officer Robert E. Denham, said: "Strong
performances at Salomon Brothers and Phibro produced fourth quarter results
that are a suitable conclusion to a very successful year."
Salomon Brothers, the Company's global investment banking and securities
business, recorded pretax earnings of $1,365 million for the twelve months ended
December 31, 1996, nearly double the $704 million earned in 1995. Net revenues
for the year were $3.9 billion, an increase of $1 billion, or 34%, over 1995.
Salomon Brothers recorded pretax earnings of $296 million in the 1996 fourth
quarter, up 43% from $207 million in the fourth quarter of 1995. Revenues, net
of interest expense, for the 1996 fourth quarter were $951 million compared with
$743 million for the 1995 fourth quarter.
Commenting on Salomon Brothers' results, Deryck C. Maughan, Salomon Brothers'
Chairman and Chief Executive Officer, said: "Our sales and trading business
performed well this year, with $3 billion of revenues, while our investment
banking revenues doubled to a record $853 million."
Key items regarding Salomon Brothers' performance:
o Global investment banking revenues (underwriting plus advisory) for the
twelve months ended December 31, 1996, were $853 million, up 81% over $472
million in 1995. For the 1996 fourth quarter, investment banking revenues
were $234 million, up 39% from $168 million in the fourth quarter of 1995,
reflecting strength in underwriting results.
o Fixed income sales and trading net revenues were $2.6 billion in 1996
compared with $1.6 billion in 1995. For the 1996 fourth quarter, fixed
income sales and trading revenues were $588 million, up 55% from $379
million in the fourth quarter of 1995. Improvement in 1996 reflects
stronger results in both trading for the Firm's account and customer sales
and trading.
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o Equity sales and trading net revenues were $389 million in 1996 compared
with $828 million in 1995. The decrease predominantly reflects losses on
the Firm's long-term proprietary equity strategies. For the 1996 fourth
quarter, revenues were $83 million, down from $185 million in the
comparable 1995 quarter. This decrease reflects proprietary trading losses
and lower revenues from customer sales and trading.
As previously announced, Salomon Brothers' fourth quarter 1996 results include,
in other revenue, a $31 million pretax gain resulting from the sale of twelve
limited service hotel properties to Hudson Hotels. Salomon Brothers had obtained
ownership of the properties upon the resolution of certain legal matters arising
out of the financing of the properties.
Phibro, the Company's commodity trading business, recorded pretax earnings for
the full year of $192 million, more than double the $85 million earned in 1995.
Pretax earnings for the fourth quarter of 1996 were $57 million compared with
$56 million in the 1995 fourth quarter.
Basis Petroleum, the Company's oil refining and marketing business, recorded a
pretax loss of $123 million for the year and $9 million for the 1996 fourth
quarter. In 1995, Basis recorded pretax losses of $91 million for the year and
$32 million for the fourth quarter. Basis' fourth quarter 1996 results included
a pretax gain of $60 million in connection with the public offering of Genesis
Energy, L.P., a master limited partnership which gathers, markets and transports
crude oil and a $22 million pretax charge in connection with the planned
reconfiguration of certain operations and processes in its refining system.
These items are included in other revenues in the accompanying income statement.
Consolidated compensation and employee-related expenses for the twelve months
ended December 31, 1996 were $2.06 billion, up 19% from $1.74 billion in 1995.
For the 1996 fourth quarter, total compensation and employee-related expenses
were $507 million compared with $425 million in the comparable 1995 quarter. The
increases in 1996 were primarily attributable to the higher levels of earnings.
Noncompensation expenses were $191 million in the 1996 fourth quarter,
marginally above average recurring noncompensation expenses over the previous
four quarters.
In January 1997, Fitch upgraded Salomon Inc's senior debt and commercial paper
ratings to A- and F-1, respectively, from BBB+ and F-2. In addition, Moody's
revised its outlook for Salomon Inc to "positive" from "stable."
Total common and perpetual preferred equity has increased from $4.1 billion at
December 31, 1995 to $5.1 billion at December 31, 1996. In addition, at December
31, 1996, the Company had $345 million of 9.5% Trust Preferred Stock Units
("TruPS") outstanding, which are substantially equivalent to perpetual preferred
from a capital analysis standpoint. Book value per common share was $42.43 at
December 31, 1996, up from $35.84 at the end of 1995.
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 Year ended
-------------------------------------------- ----------------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
1996 1996 1995 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATING RESULTS BY BUSINESS:
Income (loss) before income taxes:
Salomon Brothers $ 296 $ 176 $ 207 $ 1,365 $ 704
Phibro 57 7 56 192 85
Basis Petroleum (9) (46) (32) (123) (91)
Corporate and other 12 49 3 53 10
------------ ------------ ------------ ------------ ------------
Income before income taxes $ 356 $ 186 $ 234 $ 1,487 $ 708
============ ============ ============ ============ ============
Salomon Brothers' revenues, net of interest expense:
Fixed income sales and trading $ 588 $ 598 $ 379 $ 2,624 $ 1,603
Equity sales and trading 83 (26) 185 389 828
Global investment banking 234 187 168 853 472
Asset management 15 13 11 51 39
Other 31 - - 31 6
------------ ------------ ------------ ------------ ------------
Total Salomon Brothers' revenues,
net of interest expense $ 951 $ 772 $ 743 $ 3,948 $ 2,948
============ ============ ============ ============ ============
RETURN ON AVERAGE COMMON STOCKHOLDERS' EQUITY:
Primary 18.9% 8.7% 16.4% 19.8% 10.8%
Fully diluted* 17.7 8.5 15.1 18.4 10.3
============ ============ ============ ============ ============
PER COMMON SHARE:
Cash dividends $ 0.16 $ 0.16 $ 0.16 $ 0.64 $ 0.64
High market price 49 46 7/8 40 5/8 49 43 1/4
Low market price 44 1/8 38 33 7/8 34 7/8 32 1/4
============ ============
Ending market price 47 1/8 45 5/8 35 3/8
Book value at quarter-end* 42.43 40.67 35.84
============ ============ ============
AT QUARTER-END:
Average assets for the quarter $ 209,000 $ 191,000 $ 184,000
Common equity 4,697 4,341 3,831
Redeemable preferred equity 420 560 560
Perpetual preferred equity 450 450 312
TRUPS** 345 345 -
============ ============ ============
<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.
** Guaranteed preferred beneficial interests in Company subordinated debt securities.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
SALOMON INC AND SUBSIDIARIES
Consolidated Statement of Income (unaudited)
(Dollars in millions, except per share data)
Quarter ended Year ended
------------------------------------------------- -------------------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
1996 1996 1995 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Interest and dividends $ 1,374 $ 1,367 $ 1,859 $ 5,750 $ 7,022
Principal transactions 448 307 268 1,990 1,077
Investment banking 234 187 168 853 472
Commissions 92 69 80 326 332
Other 64 30 - 83 30
------------- ------------- ------------- ------------- -------------
Total revenues 2,212 1,960 2,375 9,002 8,933
Interest expense 1,158 1,144 1,549 4,720 5,782
------------- ------------- ------------- ------------- -------------
Revenues, net of interest expense 1,054 816 826 4,282 3,151
------------- ------------- ------------- ------------- -------------
Noninterest expenses:
Compensation and employee-related 507 447 425 2,061 1,737
Technology 51 60 50 207 216
Professional services and business
development 54 45 53 194 178
Occupancy 42 42 45 171 173
Clearing and exchange fees 20 20 15 75 63
Other 24 16 4 87 76
------------- ------------- ------------- ------------- -------------
Total noninterest expenses 698 630 592 2,795 2,443
------------- ------------- ------------- ------------- -------------
Income before income taxes 356 186 234 1,487 708
Income tax expense 128 74 66 580 251
------------- ------------- ------------- ------------- -------------
Net income $ 228 $ 112 $ 168 $ 907 $ 457
============= ============= ============= ============= =============
EARNINGS AVAILABLE FOR FULLY
DILUTED EARNINGS PER SHARE $ 221 $ 102 $ 163 $ 875 $ 437
============= ============= ============= ============= =============
EARNINGS PER SHARE:
Primary $ 1.98 $ 0.88 $ 1.42 $ 7.88 $ 3.64
Fully diluted* 1.83 0.85 1.32 7.23 3.50
============= ============= ============= ============= =============
WEIGHTED AVERAGE SHARES
OF COMMON STOCK
OUTSTANDING (in thousands):
For primary earnings per share 108,100 105,500 106,600 106,400 106,500
For fully diluted earnings per share 120,700 120,600 123,000 120,900 124,700
============= ============= ============= ============= =============
<FN>
* Assumes conversion of redeemable preferred stock unless such assumptions result in higher earnings per share than
determined under the primary method.
</FN>
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