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 (Date of earliest event reported): April 8, 1998
Citicorp
(Exact name of registrant as specified in charter)
Delaware 1-5738 13-2614988
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
399 Park Avenue, New York, New York 10043
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (212) 559-1000
<PAGE>
Item 5. Other Events
CITICORP AND TRAVELERS GROUP INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On April 5, 1998, Citicorp and Travelers Group Inc. ("Travelers")
agreed to merge (the "Merger"). The Merger will be effected through a merger of
Citicorp into Travelers, which will apply to the Board of Governors of the
Federal Reserve System to become a bank holding company. The combined company
will be known as Citigroup. Travelers stockholders will retain their existing
shares, which will automatically become shares of Citigroup. Each share of
Citicorp Common Stock will be exchanged for 2.5 shares of Citigroup Common
Stock. The Merger, which is anticipated to be completed in the third quarter of
1998, is expected to be accounted for under the "pooling of interests" method
and, accordingly, Travelers' historical consolidated financial statements
presented in future reports will be restated to include the accounts and results
of Citicorp. The Merger is subject to customary closing conditions, including
regulatory approvals and the affirmative vote of a majority of the stockholders
of each of Citicorp and Travelers.
The following unaudited pro forma condensed combined statement of
financial position combines the historical consolidated statement of financial
position of Citicorp and the historical consolidated statement of financial
position of Travelers, giving effect to the Merger as though it had been
consummated on December 31, 1997. The following unaudited pro forma condensed
combined statements of income combine the historical statements of income of
Citicorp and Travelers giving effect to the Merger as if it had occurred on
January 1, 1995. This information should be read in conjunction with the
accompanying notes hereto, the separate historical financial statements of
Citicorp as of December 31, 1997 and for each of the three years ended December
31, 1997 which are contained in Citicorp's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997; and the separate historical financial
statements of Travelers as of December 31, 1997 and for each of the three years
ended December 31, 1997 which are contained in Travelers' Annual Report on Form
10-K for the fiscal year ended December 31, 1997.
The pro forma financial data is not necessarily indicative of the
results of operations that would have occurred had the Merger been consummated
on the dates indicated or of future operations of the combined company.
<PAGE>
Citicorp and Travelers Group Inc.
Unaudited Pro Forma Condensed Combined Statement of Financial Position
As of December 31, 1997
(in millions of dollars)
<TABLE>
<CAPTION>
Citicorp Travelers Pro Forma Pro Forma
Historical Historical Adjustments Combined
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Assets
- -------
Cash and cash equivalents $21,634 $4,033 $25,667
Investments 33,361 61,834 95,195
Federal funds sold and securities borrowed or
purchased under agreements to resell 10,233 109,734 119,967
Brokerage receivables 15,627 15,627
Trading securities and commodities owned 40,356 139,732 180,088
Consumer loans 108,066 11,137 119,203
Commercial loans 75,947 75,947
Allowance for credit losses (5,816) (321) (6,137)
- ------------------------------------------------------------------------------------------------------------------- --------------
Loans, net 178,197 10,816 189,013
Reinsurance recoverables 9,579 9,579
Separate and variable accounts 11,319 11,319
Other assets 27,116 23,881 50,997
- ------------------------------------------------------------------------------------------------------------------- ---------------
Total assets $310,897 $386,555 $697,452
=================================================================================================================== ===============
Liabilities
- ------------
Deposits $199,121 $199,121
Investment banking and brokerage borrowings $11,464 11,464
Short-term borrowings 10,049 3,979 14,028
Long-term debt 19,035 28,352 47,387
Federal funds purchased and securities loaned or
sold under agreements to repurchase 11,182 120,921 132,103
Brokerage payables 12,763 12,763
Trading securities and commodities sold not yet purchased 30,986 96,166 127,152
Insurance policy and claims reserves 43,782 43,782
Contractholder funds and separate and variable accounts 26,157 26,157
Other liabilities 18,578 19,418 37,996
- ------------------------------------------------------------------------------------------------------------------- --------------
Total liabilities 288,951 363,002 651,953
- ------------------------------------------------------------------------------------------------------------------- --------------
ESOP preferred stock - Series C 135 135
Redeemable preferred stock - Series I 280 280
Trust preferred securities - parent obligated 750 1,000 1,750
Trust preferred securities - subsidiary obligated 1,245 1,245
Stockholders' equity
- ---------------------
Preferred stock 1,903 1,450 3,353
Common stock 506 12 (494) 24
Additional paid-in capital 6,501 5,368 (3,918) 7,951
Retained earnings 16,789 15,451 32,240
Treasury stock, at cost (4,412) (2,183) 4,412 (2,183)
Unrealized gain on investment securities 535 1,157 1,692
Foreign currency translation (626) (12) (638)
Other, principally unearned compensation (350) (350)
- ------------------------------------------------------------------------------------------------------------------- --------------
Total stockholders' equity 21,196 20,893 42,089
- ------------------------------------------------------------------------------------------------------------------- --------------
Total liabilities and stockholders' equity $310,897 $386,555 $697,452
=================================================================================================================== ==============
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
<PAGE>
Citicorp and Travelers Group Inc.
Unaudited Pro Forma Condensed Combined Statement of Income
For the Year Ended December 31, 1997
(in millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
Citicorp Travelers Pro Forma
Historical Historical Combined
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Loan interest, including fees $18,967 $1,404 $20,371
Other interest and dividends 5,516 16,214 21,730
Insurance premiums 8,995 8,995
Commissions and fees 5,817 5,119 10,936
Principal transactions 1,727 2,504 4,231
Asset management and administration fees 1,715 1,715
Realized gains from sales of investments 668 406 1,074
Other income 2,002 1,252 3,254
- --------------------------------------------------------------------------------------------------------------
Total revenues 34,697 37,609 72,306
Interest expense 13,081 11,443 24,524
- --------------------------------------------------------------------------------------------------------------
Total revenues, net of interest expense 21,616 26,166 47,782
- --------------------------------------------------------------------------------------------------------------
Operating expenses:
Policyholder benefits and claims 7,714 7,714
Non-insurance compensation and benefits 6,617 6,345 12,962
Insurance underwriting, acquisition and operating 3,236 3,236
Provision for credit losses 1,907 277 2,184
Restructuring charge 889 838 1,727
Other operating 6,481 2,744 9,225
- --------------------------------------------------------------------------------------------------------------
Total operating expenses 15,894 21,154 37,048
- --------------------------------------------------------------------------------------------------------------
Income before income taxes and minority interest 5,722 5,012 10,734
Provision for income taxes 2,131 1,696 3,827
Minority interest, net of income taxes 212 212
- --------------------------------------------------------------------------------------------------------------
Net income $3,591 $3,104 $6,695
==============================================================================================================
Basic earnings per share:
Net income $7.53 $2.69 $2.85
==============================================================================================================
Weighted average common shares outstanding (in millions) 458.1 1,102.6 2,247.9
==============================================================================================================
Diluted earnings per share:
Net income $7.33 $2.54 $2.74
==============================================================================================================
Adjusted weighted average common shares
outstanding (in millions) 471.1 1,179.9 2,357.7
==============================================================================================================
Supplemental information:
Net interest revenue $11,402 $6,175 $17,577
Net interest revenue after provision for credit losses 9,495 5,898 15,393
==============================================================================================================
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed
Combined Financial Statements
<PAGE>
Citicorp and Travelers Group Inc.
Unaudited Pro Forma Condensed Combined Statement of Income
For the Year Ended December 31, 1996
(in millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
Citicorp Travelers Pro Forma
Historical Historical Combined
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Loan interest, including fees $18,509 $1,163 $19,672
Other interest and dividends 4,840 13,286 18,126
Insurance premiums 7,633 7,633
Commissions and fees 5,469 4,637 10,106
Principal transactions 1,501 3,027 4,528
Asset management and administration fees 1,390 1,390
Realized gains from sales of investments 210 55 265
Other income 2,076 1,223 3,299
- --------------------------------------------------------------------------------------------------------------
Total revenues 32,605 32,414 65,019
Interest expense 12,409 8,927 21,336
- --------------------------------------------------------------------------------------------------------------
Total revenues, net of interest expense 20,196 23,487 43,683
- --------------------------------------------------------------------------------------------------------------
Operating expenses:
Policyholder benefits and claims 7,366 7,366
Non-insurance compensation and benefits 6,244 5,804 12,048
Insurance underwriting, acquisition and operating 3,013 3,013
Provision for credit losses 1,926 260 2,186
Other operating 5,953 2,481 8,434
- --------------------------------------------------------------------------------------------------------------
Total operating expenses 14,123 18,924 33,047
- --------------------------------------------------------------------------------------------------------------
Gain on sale of subsidiaries and affiliates 445 445
- --------------------------------------------------------------------------------------------------------------
Income before income taxes and minority interest 6,073 5,008 11,081
Provision for income taxes 2,285 1,679 3,964
Minority interest, net of income taxes 47 47
- --------------------------------------------------------------------------------------------------------------
Income from continuing operations $3,788 $3,282 $7,070
==============================================================================================================
Basic earnings per share:
Income from continuing operations $7.73 $2.84 $2.97
==============================================================================================================
Weighted average common shares outstanding (in millions) 469.6 1,097.6 2,271.6
==============================================================================================================
Diluted earnings per share:
Income from continuing operations $7.43 $2.71 $2.84
==============================================================================================================
Adjusted weighted average common shares
outstanding (in millions) 489.3 1,170.6 2,393.9
==============================================================================================================
Supplemental information:
Net interest revenue $10,940 $5,522 $16,462
Net interest revenue after provision for credit losses 9,014 5,262 14,276
==============================================================================================================
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed
Combined Financial Statements
<PAGE>
Citicorp and Travelers Group Inc.
Unaudited Pro Forma Condensed Combined Statement of Income
For the Year Ended December 31, 1995
(in millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
Citicorp Travelers Pro Forma
Historical Historical Combined
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Loan interest, including fees $17,808 $1,119 $18,927
Other interest and dividends 5,155 13,045 18,200
Insurance premiums 4,977 4,977
Commissions and fees 5,165 3,713 8,878
Principal transactions 1,612 2,140 3,752
Asset management and administration fees 1,087 1,087
Realized gains from sales of investments 132 152 284
Other income 1,818 1,054 2,872
- --------------------------------------------------------------------------------------------------------------
Total revenues 31,690 27,287 58,977
Interest expense 13,012 9,378 22,390
- --------------------------------------------------------------------------------------------------------------
Total revenues, net of interest expense 18,678 17,909 36,587
- --------------------------------------------------------------------------------------------------------------
Operating expenses:
Policyholder benefits and claims 5,017 5,017
Non-insurance compensation and benefits 5,726 5,149 10,875
Insurance underwriting, acquisition and operating 1,912 1,912
Provision for credit losses 1,991 171 2,162
Other operating 5,376 2,320 7,696
- --------------------------------------------------------------------------------------------------------------
Total operating expenses 13,093 14,569 27,662
- --------------------------------------------------------------------------------------------------------------
Loss on sale of subsidiaries and affiliates (20) (20)
- --------------------------------------------------------------------------------------------------------------
Income before income taxes 5,585 3,320 8,905
Provision for income taxes 2,121 1,179 3,300
- --------------------------------------------------------------------------------------------------------------
Income from continuing operations $3,464 $2,141 $5,605
==============================================================================================================
Basic earnings per share:
Income from continuing operations $7.60 $1.81 $2.40
==============================================================================================================
Weighted average common shares outstanding (in millions) 411.5 1,099.4 2,128.2
==============================================================================================================
Diluted earnings per share:
Income from continuing operations $6.50 $1.74 $2.18
==============================================================================================================
Adjusted weighted average common shares
outstanding (in millions) 510.2 1,184.4 2,459.9
==============================================================================================================
Supplemental information:
Net interest revenue $9,951 $4,786 $14,737
Net interest revenue after provision for credit losses 7,960 4,615 12,575
==============================================================================================================
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed
Combined Financial Statements
<PAGE>
Citicorp and Travelers Group Inc.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. Description of Transaction and Basis of Presentation
The Merger Agreement provides that each share of Citicorp Common Stock
will be exchanged for 2.5 shares of Citigroup Common Stock. The Merger, which is
expected to be completed in the third quarter of 1998, is expected to be
accounted for under the "pooling of interests" method and, accordingly,
Travelers' historical consolidated financial statements presented in future
reports will be restated to include the accounts and results of Citicorp. The
Merger is subject to customary closing conditions, including regulatory and
Citicorp and Travelers stockholder approval.
2. Accounting Policies and Financial Statement Classifications
Citicorp and Travelers are in the process of reviewing their accounting
policies and financial statement classifications and, as a result of this
review, it may be necessary to restate either Citicorp's or Travelers' financial
statements to conform to those accounting policies and classifications that are
determined to be most appropriate.
3. Intercompany Transactions
Transactions between Citicorp and Travelers are not material in
relation to the pro forma combined financial statements and therefore
intercompany balances have not been eliminated from the pro forma combined
accounts.
4. Pro Forma Adjustments
The pro forma adjustments to common stock, additional paid-in capital
and treasury stock reflect the retirement of shares of Citicorp Common Stock
held in treasury and the issuance at December 31, 1997 of 1,134.8 million shares
of Citigroup Common Stock to effect the Merger. The number of shares to be
issued at consummation of the Merger will be based on the actual number of
shares of Citicorp Common Stock outstanding at that time.
5. Pro Forma Earnings Per Share
The pro forma combined basic and diluted earnings per share for the
respective periods presented is based on the combined weighted average number of
common shares and adjusted weighted average shares of Citicorp and Travelers.
The number of weighted average common shares and adjusted weighted average
shares of Citicorp is based on an exchange ratio of 2.5 shares of Citigroup
Common Stock for each issued and outstanding share of Citicorp. The pro forma
combined basic and diluted earnings per share have been calculated as follows:
<PAGE>
<TABLE>
<CAPTION>
(in millions, except per share amounts) 1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Income from continuing operations $6,695 $7,070 $5,605
Preferred dividends (279) (319) (491)
------------- ------------- -------------
Income from continuing operations available
to common stockholders for basic EPS 6,416 6,751 5,114
Effect of dilutive securities 36 56 259
============= ============= =============
Income from continuing operations available
to common stockholders for diluted EPS $6,452 $6,807 $5,373
============= ============= =============
Weighted average common shares
outstanding applicable to basic EPS 2,247.9 2,271.6 2,128.2
Effect of dilutive securities:
Convertible securities 25.2 44.9 264.0
Employee stock plans 77.6 72.4 66.1
Warrants 7.0 5.0 1.6
============= ============= =============
Adjusted weighted average common shares
outstanding applicable to diluted EPS 2,357.7 2,393.9 2,459.9
============= ============= =============
Basic earnings per share:
Continuing operations $ 2.85 $ 2.97 $ 2.40
============= ============= =============
Diluted earnings per share:
Continuing operations $ 2.74 $ 2.84 $ 2.18
============= ============= =============
</TABLE>
6. Restructuring Charges and Future Cost Savings
The pro forma condensed combined statements of income do not reflect
any restructuring costs related to the Merger. Management has not yet determined
the amount of such costs; however, a restructuring charge may be required after
the consummation of the Merger.
The pro forma condensed combined statements of income do not reflect
any future cost savings that may result from the reduction of overhead expenses,
changes in corporate infrastructure and the elimination of redundant expenses.
Although management expects that cost savings will result from the Merger, there
can be no assurance that cost savings will be achieved.
<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 thereunto duly authorized.
CITICORP
(Registrant)
By:/s/Roger W. Trupin
------------------------
Roger W. Trupin
Vice President and Controller
Dated: April 8, 1998
