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 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.)
<PAGE>
Item 5. Other Events
On October 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 October 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: October 21, 1997 By: /s/ Jerome H. Bailey
--------------------
Chief Financial Officer
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 $206 MILLION FOR THE
1997 THIRD QUARTER
New York, October 21, 1997 -- Salomon Inc today announced third quarter net
income of $206 million compared with income from continuing operations of $140
million (net income of $112 million including discontinued operations) in the
1996 third quarter. For the nine months ended September 30, 1997, net income was
$599 million, compared with income from continuing operations of $748 million
(net income of $679 million including discontinued operations) in the comparable
1996 period. Fully diluted return on equity for the three and nine month periods
ended September 30, 1997 was 15.4% and 15.3%, respectively. Fully diluted
earnings per share for the 1997 three and nine month periods were $1.66 and
$4.79, respectively.
Chairman of Salomon Inc Robert E. Denham stated: "Salomon's performance this
quarter was very solid. Taken as a whole our diversified sales and trading
businesses were strongly profitable, as has been the case in most quarters.
Investment banking continued to produce strong results. As previously announced,
Salomon Inc and Travelers Group agreed to combine Salomon Inc with Travelers
Group's Smith Barney Holdings Inc. subsidiary to form Salomon Smith Barney
Holdings Inc. We expect proxy materials in connection with this transaction to
be distributed to Salomon Inc shareholders shortly."
Key items regarding the Company's performance are as follows:
o Global investment banking revenues (underwriting plus advisory) were $233
million for the third quarter of 1997, a 25% increase over $187 million
reported in last year's third quarter. Advisory and debt underwriting
revenues strengthened year over year; equity underwriting revenues were
about even with last year's third quarter.
o Fixed income sales and trading net revenues for the third quarter of 1997
were $751 million compared with $598 million in the year ago quarter.
Results for the 1997 third quarter reflect continued strength in customer
sales and trading as well as strong proprietary trading results.
o Equity sales and trading net revenues were $96 million for the third
quarter of 1997, compared with negative revenues of $26 million in the
third quarter of 1996. Revenues for the third quarter of 1997 were
adversely affected by a loss on a risk arbitrage position in British
Telecommunications PLC and MCI Communications Corporation which has been
largely liquidated, partially offset by a gain on the sale of Valero Energy
Corporation common stock received in connection with the sale of Basis
Petroleum, Inc. Revenues for the third quarter of 1996 were also adversely
affected by losses on long-term proprietary equity strategies.
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o Net revenues from commodities trading activities, which are conducted by
Phibro Inc., were $16 million for the third quarter of 1997 compared with
$36 million in the year ago quarter.
o Asset management revenues were $17 million for the third quarter of 1997
compared with $13 million in the year ago quarter.
Consolidated compensation and employee-related expenses for the three and nine
month periods ended September 30, 1997 were $595 million and $1,706 million,
respectively, compared with $441 million and $1,537 million for the three and
nine month periods ended September 30, 1996, respectively. Although operating
results for the first nine months of 1997 were lower than the comparable 1996
period, compensation and employee-related expenses were higher, due to increased
headcount and higher levels of market compensation in 1997. Non-compensation
expenses for the three and nine month periods ended September 30, 1997 were $191
million and $563 million, respectively, compared with $180 million and $532
million for the three and nine month periods ended September 30, 1996,
respectively.
Total common and convertible preferred equity was $5.2 billion at September 30,
1997. Total equity capital, including perpetual preferred and TRUPS, was $6.0
billion at such date. Book value per common share was $43.93 at September 30,
1997, as compared with $40.03 at December 31, 1996. Average assets for the 1997
third quarter were $237 billion.
Salomon Inc's Selected Financial Information and Unaudited Consolidated
Statement of Income follow:
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<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,
1997 1997 1996 1997 1996
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SUMMARY OF REVENUES, NET OF
INTEREST EXPENSE:
Fixed income sales and trading $ 751 $ 532 $ 598 $ 1,802 $ 2,036
Equity sales and trading 96 229 (26) 568 306
Global investment banking 233 221 187 674 619
Commodities trading 16 91 36 132 253
Asset management 17 20 13 54 36
Other (5) (3) 45 (10) 64
------------ ------------ ----------- ----------- -----------
Total revenues, net of interest expense $ 1,108 $ 1,090 $ 853 $ 3,220 $ 3,314
============ ============ =========== =========== ===========
RETURN ON AVERAGE COMMON STOCKHOLDERS'
EQUITY FROM CONTINUING OPERATIONS:
Primary 16.2% 17.9% 12.4% 16.1% 24.9%
Fully diluted* 15.4 17.0 11.7 15.3 22.5
============ ============ =========== =========== ===========
PER COMMON SHARE:
Cash dividends $ 0.16 $ 0.16 $ 0.16 $ 0.48 $ 0.48
High market price 79 15/16 58 5/8 46 7/8 79 15/16 46 7/8
Low market price 53 13/16 49 38 46 34 7/8
Ending market price 75 3/16 55 5/8 45 5/8 =========== ===========
Book value at quarter-end* 43.93 42.52 40.67
============ ============ ===========
AT QUARTER-END:
Average assets for the quarter $ 237,000 $ 225,000 $ 191,000
Common equity 4,816 4,638 4,341
Redeemable convertible preferred equity 420 420 560
Perpetual preferred equity 450 450 450
TRUPS** 345 345 345
============ ============ ===========
Full-time employees:
Salomon Brothers 7,269 7,027 6,683
Salomon Inc (excluding Basis) 7,514 7,294 7,084
============ ============ ===========
<FN>
* Assumes conversion of redeemable convertible 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>
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<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,
1997 1997 1996 1997 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Interest and dividends $ 1,651 $ 1,678 $ 1,366 $ 4,696 $ 4,374
Principal transactions 522 443 307 1,449 1,542
Investment banking 233 221 187 674 619
Commissions 90 100 69 289 234
Other 29 13 56 56 78
----------- ----------- ----------- ----------- -----------
Total revenues 2,525 2,455 1,985 7,164 6,847
Interest expense 1,417 1,365 1,132 3,944 3,533
----------- ----------- ----------- ----------- -----------
Revenues, net of interest expense 1,108 1,090 853 3,220 3,314
----------- ----------- ----------- ----------- -----------
Noninterest expenses:
Compensation and employee-related 595 546 441 1,706 1,537
Technology 61 59 59 176 155
Professional services and business development 53 50 45 143 137
Occupancy 39 42 41 121 126
Clearing and exchange fees 23 22 21 63 55
Other 15 21 14 60 59
----------- ----------- ----------- ----------- -----------
Total noninterest expenses 786 740 621 2,269 2,069
----------- ----------- ----------- ----------- -----------
Income from continuing operations before income taxes 322 350 232 951 1,245
Income tax expense 116 130 92 352 497
----------- ----------- ----------- ----------- -----------
Income from continuing operations 206 220 140 599 748
----------- ----------- ----------- ----------- -----------
Loss from discontinued operations, net of tax benefit - - (28) - (69)
----------- ----------- ----------- ----------- -----------
Net income $ 206 $ 220 $ 112 $ 599 $ 679
=========== =========== =========== =========== ===========
EARNINGS PER SHARE:*
Primary earnings from continuing operations $ 1.77 $ 1.89 $ 1.15 $ 5.10 $ 6.56
Primary earnings 1.77 1.89 0.88 5.10 5.90
Fully diluted earnings from continuing operations** 1.66 1.77 1.08 4.79 5.98
Fully diluted earnings** 1.66 1.77 0.85 4.79 5.41
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OF COMMON STOCK
OUTSTANDING (in thousands):
For primary earnings per share 107,700 108,200 105,500 108,500 105,800
For fully diluted earnings per share 119,300 119,700 120,600 120,100 121,000
=========== =========== =========== =========== ===========
<FN>
* Quarterly earnings per share are based on average common shares outstanding
in the individual quarters; thus, the sum of quarterly earnings per share
may not equal the amounts reported for the year-to-date periods.
** Assumes conversion of redeemable convertible preferred stock unless such
assumptions result in higher earnings per share than determined under the
primary method.
</FN>
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