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:
March 17, 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 March 17, 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 March 17, 1997
<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: March 17, 1997 By: /s/ Richard J. Carbone
Controller
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 ANNOUNCES ITS INTENTION TO SELL BASIS
PETROLEUM TO VALERO ENERGY CORPORATION
New York, March 17, 1997 - Salomon Inc (the "Company") today announced that its
Board of Directors has approved a letter of intent to sell all of the stock of
Basis Petroleum to Valero Energy Corporation (NYSE: VLO). Closing is expected in
May 1997. This sale will result in an aftertax loss of approximately $290
million. Proceeds from the sale will include cash, Valero common stock and
participation payments. The participation payments are based on a fixed notional
throughput and the difference, if any, between an average market crackspread and
a base crackspread over each of the next ten years. The sale is subject to
negotiation of a final agreement and to the satisfaction of other customary
conditions.
Robert E. Denham, Chairman and Chief Executive Officer of Salomon Inc, stated:
"This sale provides Salomon a good way to exit a non-core business, and it
places Basis in the hands of a company committed to refining."
The Company's investment in Genesis Energy, L. P. (NYSE: GEL), presently held
through Basis, is not part of the sale, and the transaction with Valero is not
expected to have a material impact on Genesis. The Company will continue to
provide credit support and common unit distribution support to Genesis under the
existing agreements between the Company and Genesis, and certain administrative
services will continue to be provided for a limited time period.
The estimated loss includes severance costs and anticipated operating losses to
be incurred prior to the completion of the sale, and reflects other estimates of
values at time of closing. Pursuant to applicable accounting standards, the
Company is required to include the loss in its previously reported fourth
quarter 1996 results. In addition, Basis Petroleum is presented as a
discontinued operation in the Company's financial statements.
After giving effect to the estimated loss from the sale of Basis, the Company's
net income for 1996 was $617 million, with a $62 million loss for the fourth
quarter of 1996. Income from continuing operations was $982 million in 1996
compared with $513 million in 1995. Fully diluted earnings per share from
continuing operations was $7.85 in 1996 compared with $3.95 in 1995. The
Company's fully diluted return on equity from continuing operations was 21.7% in
1996 compared with 12.5% in 1995.
Attached are the Company's 1996 Financial Highlights and Statement of Income
reflecting the sale of Basis, as well as a Fact Sheet describing the principal
terms of the letter of intent.
<PAGE>
<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
------------ ------------ ------------ ------------ ------------
SUMMARY OF OPERATING RESULTS FROM
CONTINUING OPERATIONS BY BUSINESS:
<S> <C> <C> <C> <C> <C>
Income before income taxes:
Salomon Brothers $ 296 $ 176 $ 207 $ 1,365 $ 704
Phibro 57 7 56 192 85
Corporate and other 12 49 3 53 10
------------ ------------ ------------ ------------ ------------
Income before income taxes $ 365 $ 232 $ 266 $ 1,610 $ 799
============ ============ ============ ============ ============
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
FROM CONTINUING OPERATIONS:
Primary 21.1% 12.4% 20.2% 23.7% 13.6%
Fully diluted* 19.6 11.7 18.2 21.7 12.5
============ ============ ============ ============ ============
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* 40.03 40.67 35.84
============ ============ ============
AT QUARTER-END:
Average assets for the quarter $ 209,000 $ 191,000 $ 184,000
Common equity 4,407 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>
<PAGE>
<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 $ 1,366 $ 1,858 $ 5,748 $ 7,021
Principal transactions 448 307 268 1,990 1,077
Investment banking 234 187 168 853 472
Commissions 92 69 80 326 332
Other 51 56 14 129 51
----------- ----------- ----------- ------------ ------------
Total revenues 2,199 1,985 2,388 9,046 8,953
Interest expense 1,146 1,132 1,541 4,679 5,754
----------- ----------- ----------- ------------ ------------
Revenues, net of interest expense 1,053 853 847 4,367 3,199
----------- ----------- ----------- ------------ ------------
Noninterest expenses:
Compensation and employee-related 502 441 418 2,039 1,710
Technology 51 59 50 206 215
Professional services and business
development 52 45 52 189 172
Occupancy 41 41 44 168 170
Clearing and exchange fees 20 20 15 74 63
Other 22 15 2 81 70
----------- ----------- ----------- ------------ ------------
Total noninterest expenses 688 621 581 2,757 2,400
----------- ----------- ----------- ------------ ------------
Income from continuing operations before income taxes 365 232 266 1,610 799
Income tax expense 131 92 79 628 286
----------- ----------- ----------- ------------ ------------
Income from continuing operations 234 140 187 982 513
----------- ----------- ----------- ------------ ------------
Discontinued Operations:
Loss, net of tax benefit of $3, $18, $13,
$48 and $35 (6) (28) (19) (75) (56)
Loss on disposition of Basis,
net of tax benefit of $215 (290) - - (290) -
----------- ----------- ----------- ------------ ------------
Net income (loss) $ (62) $ 112 $ 168 $ 617 $ 457
=========== =========== =========== ============ ============
EARNINGS (LOSS) PER SHARE:
Primary earnings from continuing operations $ 2.03 $ 1.15 $ 1.61 $ 8.59 $ 4.17
Primary earnings (loss) (0.71) 0.88 1.42 5.16 3.64
Fully diluted earnings from continuing operations* 1.88 1.08 1.48 7.85 3.95
Fully diluted earnings (loss)* (0.71) 0.85 1.32 4.84 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>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Salomon Inc
Sale of Basis Petroleum
Letter of Intent Fact Sheet
<S> <C>
Proposed Terms of Sale
Sales Price: Approximately $485 million plus potential participation payments
Net Working Capital*: Purchase price includes approximately $200 million for net working
capital
Participation Payment: $200 million aggregate cap; 10-year term from closing;
payment, if any, computed and paid annually based on a fixed notional
throughput and the difference between an average market crack
spread and a base crack spread; $35 million annual cap; adjusted
for incremental inflation above a base level beginning in second
year after closing
Form of Payment: Approximately $365 million cash and $120 million VLO
stock paid at closing; participation payments, if any,
paid in cash. As a result of VLO's merger agreement with PG&E, VLO
stock is expected to be exchanged for stock of PG&E and a new stock
representing VLO's refining assets
Tax Treatment: Asset sale, as a result of Salomon Inc taking 338(h)(10) election
Closing: May 1997
Company Information
Refineries: Texas City Refinery (Texas City, TX) - 160,000 b/d
Houston Refinery (Houston, TX) - 85,000 b/d
Krotz Springs Refinery (Krotz Springs, LA) - 65,000 b/d
Total distillation capacity 310,000 b/d
Other Assets and Businesses: Wholesale marketing, bunkering, various terminals, hydrogen plant,
corporate and other assets
Book Impact of Sale: $290 million after-tax loss for Salomon Inc
<FN>
*Net working capital is defined as current assets (e.g. cash, accounts receivable and inventories) less current liabilities
(e.g. accounts payable, accrued liabilities).
</FN>
</TABLE>
