<PAGE> 1
8-K/A-1
Form 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) September 24, 1997
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Smith Barney Holdings Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-12484 06-1274088
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
388 Greenwich Street, New York, New York 10013
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(Address of principal executive offices) (Zip Code)
(212) 816-6000
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(Registrant's telephone number, including area code)
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SMITH BARNEY HOLDINGS INC.
Current Report on Form 8-K
EXPLANATORY NOTE
This Form 8-K/A-1 is being filed by Smith Barney Holdings Inc. (the
"Company") to revise certain pro forma financial information previously filed.
The pro forma financial information, which relates to the proposed merger of the
Company with Salomon Inc ("Salomon") after the acquisition of Salomon by
Travelers Group Inc., is being filed as Exhibit 99.03 to this Form 8-K/A-1 and
is incorporated herein by reference.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits:
Exhibit No. Description
23.01 Consent of Arthur Andersen LLP
99.01 Consolidated financial statements of Salomon Inc and its
subsidiaries as of December 31, 1996 and 1995 and for each of the
years in the three-year period ended December 31, 1996, together
with the notes thereto and the report of the independent auditors
99.02 Unaudited consolidated financial statements of Salomon Inc as of
June 30, 1997 and for the six-month periods ended June 30, 1997
and 1996, together with the notes thereto
99.03* Unaudited Pro Forma Condensed Combined Statement of Financial
Condition as of June 30, 1997, and Unaudited Pro Forma Condensed
Combined Statement of Operations for the six months ended June
30, 1997 and 1996 and for each of the years in the three-year
period ended December 31, 1996
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* Filed herewith. All other exhibits were filed with the initial filing of this
Form 8-K on September 25, 1997.
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SIGNATURE
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.
Dated: October 28, 1997
SMITH BARNEY HOLDINGS INC.
By: /s/ Steven D. Black
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Steven D. Black
Vice Chairman
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EXHIBIT INDEX
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Exhibit No. Description
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23.01 Consent of Arthur Andersen LLP
99.01 Consolidated financial statements of Salomon Inc and its
subsidiaries as of December 31, 1996 and 1995 and for each of the
years in the three-year period ended December 31, 1996, together
with the notes thereto and the report of the independent auditors
99.02 Unaudited consolidated financial statements of Salomon Inc as of
June 30, 1997 and for the six-month periods ended June 30, 1997
and 1996, together with the notes thereto
99.03* Unaudited Pro Forma Condensed Combined Statement of Financial
Condition as of June 30, 1997, and Unaudited Pro Forma Condensed
Combined Statement of Operations for the six months ended June
30, 1997 and 1996 and for each of the years in the three-year
period ended December 31, 1996
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* Filed herewith. All other exhibits were filed with the initial filing of this
Form 8-K on September 25, 1997.
<PAGE> 1
Exhibit 99.03
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On September 24, 1997, Travelers Group Inc. ("Travelers Group") announced that
it had agreed to acquire Salomon Inc ("Salomon") through a merger of Salomon
with a wholly owned subsidiary of Travelers Group. The merger, which is expected
to be completed in the fourth quarter of 1997, is expected to be accounted for
under the pooling of interests method. In connection with the proposed
transaction, Salomon will be merged with Smith Barney Holdings Inc. ("Smith
Barney"), a wholly owned subsidiary of Travelers Group. The assets and
liabilities of both companies will be combined at historical cost. Historical
consolidated financial statements presented in future reports will be restated
to include the accounts and results of Salomon. The merger is subject to
customary closing conditions, including regulatory and Salomon stockholder
approval.
The following unaudited pro forma condensed combined statement of financial
condition combines the historical consolidated statement of financial condition
of Smith Barney and the historical consolidated statement of financial condition
of Salomon giving effect to the merger as though the transaction had been
consummated on June 30, 1997. The following unaudited pro forma condensed
combined statements of operations combine the historical statements of
operations of Smith Barney and Salomon giving effect to the merger as if it had
occurred on January 1, 1994. This information should be read in conjunction with
the accompanying notes hereto; the separate historical financial statements of
Smith Barney as of June 30, 1997 and for the six months ended June 30, 1997 and
1996, and for each of the three years ended December 31, 1996 which are
contained in Smith Barney's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997 and its Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, respectively; and the separate historical
financial statements of Salomon as of June 30, 1997 and for the six months ended
June 30, 1997 and 1996, and for each of the three years ended December 31, 1996
which are contained in Salomon's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997 and its Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, respectively.
The pro forma financial data is not necessarily indicative of the results of
operations that would have occurred had the merger been consummated or of future
operations of the combined company.
<PAGE> 2
SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
AS OF JUNE 30, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
SMITH BARNEY SALOMON PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
------------ ---------- ----------- --------
ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 232 $ 2,081 $ 2,313
Cash segregated and on deposit for Federal and other
regulations and deposits with clearing organizations 1,421 -- 1,421
Securities purchased under agreements to resell 14,610 62,547 77,157
Deposits paid for securities borrowed 13,340 28,773 42,113
Receivables:
Customers 7,561 4,877 12,438
Brokers and dealers 946 1,137 2,083
Other 762 624 1,386
Securities owned, at market value 14,014 132,848 146,862
Commodities and related products and instruments -- 1,533 1,533
Property, equipment and leasehold improvements, at
cost, net of accumulated depreciation and amortization 450 505 955
Excess of purchase price over fair value of net assets
acquired, net of accumulated amortization 274 -- 274
Other assets 2,127 1,028 -- 3,155
-----------------------------------------------------------
Total assets $ 55,737 $ 235,953 $ -- $ 291,690
===========================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Commercial paper and other short-term borrowings $ 4,268 $ 8,036 12,304
Securities sold under agreements to repurchase 19,479 105,999 125,478
Deposits received for securities loaned 6,431 2,815 9,246
Payables to customers 4,784 3,290 8,074
Payables to brokers and dealers 258 3,979 4,237
Securities sold not yet purchased, at market value 9,640 87,058 96,698
Notes payable 2,735 16,050 18,785
Other payables and accrued liabilities 4,927 2,843 450 8,220
Subordinated indebtedness 224 30 254
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Total liabilities 52,746 230,100 450 283,296
----------------------------------------------------------
Redeemable preferred stock -- 420 (420) --
Guaranteed preferred beneficial interests in
subordinated debt securities -- 345 345
Stockholder's equity:
Preferred stock -- 450 (450) --
Common stock -- 159 (53) 106
Additional paid-in capital 1,803 438 750 2,991
Retained earnings 1,183 5,811 (1,596) 4,948
(450)
Treasury stock, at cost -- (1,769) 1,769 --
Cumulative translation adjustment 5 (1) 4
----------------------------------------------------------
Total stockholder's equity 2,991 5,088 (30) 8,049
----------------------------------------------------------
Total liabilities and stockholder's equity $ 55,737 $ 235,953 $ -- $ 291,690
==========================================================
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
</TABLE>
<PAGE> 3
SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
SMITH BARNEY SALOMON PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- --------
Revenues:
<S> <C> <C> <C>
Commissions $ 1,183 $ 199 $ 1,382
Principal transactions 514 927 1,441
Investment banking 518 441 959
Asset management and administration fees 762 29 791
Other 52 -- 52
---------------------------------------
Total non-interest revenues 3,029 1,596 4,625
Interest and dividends 1,160 3,045 4,205
Interest expense 926 2,527 3,453
---------------------------------------
Net interest and dividends 234 518 752
---------------------------------------
Net revenues 3,263 2,114 5,377
Expenses, excluding interest:
Employee compensation and benefits 1,812 1,111 2,923
Communications, occupancy and equipment 274 197 471
Floor brokerage and other production 84 40 124
Other operating and administrative expenses 306 137 443
---------------------------------------
Total expenses, excluding interest 2,476 1,485 3,961
---------------------------------------
Income before income taxes 787 629 1,416
Income tax expense 318 236 554
---------------------------------------
Income from continuing operations $ 469 $ 393 $ 862
=======================================
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
</TABLE>
<PAGE> 4
SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
SMITH BARNEY SALOMON PRO FORMA
HISTORICAL HISTORICAL COMBINED
------------ ---------- ---------
Revenues:
<S> <C> <C> <C>
Commissions $ 1,182 $ 165 $ 1,347
Principal transactions 543 1,235 1,778
Investment banking 576 432 1,008
Asset management and administration fees 648 22 670
Other 57 -- 57
-----------------------------------------
Total non-interest revenues 3,006 1,854 4,860
Interest and dividends 908 3,008 3,916
Interest expense 713 2,401 3,114
-----------------------------------------
Net interest and dividends 195 607 802
-----------------------------------------
Net revenues 3,201 2,461 5,662
Expenses, excluding interest:
Employee compensation and benefits 1,811 1,096 2,907
Communications, occupancy and equipment 278 181 459
Floor brokerage and other production 74 34 108
Other operating and administrative expenses 298 137 435
-----------------------------------------
Total expenses, excluding interest 2,461 1,448 3,909
-----------------------------------------
Income before income taxes 740 1,013 1,753
Income tax expense 288 405 693
-----------------------------------------
Income from continuing operations $ 452 $ 608 $ 1,060
=========================================
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
<PAGE> 5
SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
SMITH BARNEY SALOMON PRO FORMA
HISTORICAL HISTORICAL COMBINED
------------ ---------- ---------
Revenues:
<S> <C> <C> <C>
Commissions $ 2,250 $ 326 $ 2,576
Principal transactions 990 1,990 2,980
Investment banking 1,148 853 2,001
Asset management and administration fees 1,349 48 1,397
Other 111 81 192
----------------------------------------
Total non-interest revenues 5,848 3,298 9,146
Interest and dividends 1,926 5,748 7,674
Interest expense 1,507 4,679 6,186
----------------------------------------
Net interest and dividends 419 1,069 1,488
----------------------------------------
Net revenues 6,267 4,367 10,634
Expenses, excluding interest:
Employee compensation and benefits 3,522 2,039 5,561
Communications, occupancy and equipment 565 374 939
Floor brokerage and other production 147 74 221
Other operating and administrative expenses 579 270 849
----------------------------------------
Total expenses, excluding interest 4,813 2,757 7,570
----------------------------------------
Income before income taxes 1,454 1,610 3,064
Income tax expense 571 628 1,199
----------------------------------------
Income from continuing operations $ 883 $ 982 $ 1,865
=========================================
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
<PAGE> 6
SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
SMITH BARNEY SALOMON PRO FORMA
HISTORICAL HISTORICAL COMBINED
------------ ---------- ---------
Revenues:
<S> <C> <C> <C>
Commissions $ 2,008 $ 332 $ 2,340
Principal transactions 1,016 1,077 2,093
Investment banking 847 472 1,319
Asset management and administration fees 1,052 39 1,091
Other 108 12 120
----------------------------------------
Total non-interest revenues 5,031 1,932 6,963
Interest and dividends 1,752 7,021 8,773
Interest expense 1,375 5,754 7,129
----------------------------------------
Net interest and dividends 377 1,267 1,644
----------------------------------------
Net revenues 5,408 3,199 8,607
Expenses, excluding interest:
Employee compensation and benefits 3,193 1,710 4,903
Communications, occupancy and equipment 572 385 957
Floor brokerage and other production 137 63 200
Other operating and administrative expenses 485 242 727
----------------------------------------
Total expenses, excluding interest 4,387 2,400 6,787
----------------------------------------
Income before income taxes 1,021 799 1,820
Income tax expense 426 286 712
----------------------------------------
Income from continuing operations $ 595 $ 513 $ 1,108
========================================
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
<PAGE> 7
SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
SMITH BARNEY SALOMON PRO FORMA
HISTORICAL HISTORICAL COMBINED
------------ ---------- ---------
Revenues:
<S> <C> <C> <C>
Commissions $ 1,800 $ 336 $ 2,136
Principal transactions 900 (560) 340
Investment banking 680 486 1,166
Asset management and administration fees 941 23 964
Other 98 7 105
----------------------------------------
Total non-interest revenues 4,419 292 4,711
Interest and dividends 1,099 5,902 7,001
Interest expense 770 4,873 5,643
----------------------------------------
Net interest and dividends 329 1,029 1,358
----------------------------------------
Net revenues 4,748 1,321 6,069
Expenses, excluding interest:
Employee compensation and benefits 2,953 1,455 4,408
Communications, occupancy and equipment 574 383 957
Floor brokerage and other production 138 70 208
Other operating and administrative expenses 441 262 703
----------------------------------------
Total expenses, excluding interest 4,106 2,170 6,276
----------------------------------------
Gain on sale of equity investment 34 -- 34
----------------------------------------
Income (loss) before income taxes 676 (849) (173)
Income tax expense (benefit) 288 (439) (151)
----------------------------------------
Income (loss) from continuing operations $ 388 $ (410) $ (22)
========================================
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
<PAGE> 8
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. Description of Transaction and Basis of Presentation
On September 24, 1997, Travelers Group Inc. ("Travelers Group")
announced that it had agreed to acquire Salomon Inc ("Salomon")
through a merger of Salomon with a wholly owned subsidiary of Travelers
Group. The merger, which is expected to be completed in the fourth
quarter of 1997, is expected to be accounted for under the pooling of
interests method. In connection with the proposed transaction, Salomon
will be merged with Smith Barney Holdings Inc. ("Smith Barney"), a
wholly owned subsidiary of Travelers Group. The assets and liabilities
of both companies will be combined at historical cost. Historical
consolidated financial statements presented in future reports will be
restated to include the accounts and results of Salomon. The merger is
subject to customary closing conditions, including regulatory and
Salomon stockholder approval.
2. Accounting Policies
Smith Barney and Salomon are in the process of reviewing their
accounting policies and, as a result of this review, it may be
necessary to restate either Smith Barney's or Salomon's financial
statements to conform to those accounting policies that are determined
to be most appropriate. No such restatements have been made to the pro
forma combined financial statements.
3. Intercompany Transactions
Transactions between Smith Barney and Salomon 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 amounts.
4. Pro Forma Adjustments
The pro forma adjustments at June 30, 1997 reflect (1) the cancellation
and retirement of all Salomon common stock held in treasury pursuant to
the Merger Agreement, (2) the conversion of Salomon redeemable
preferred stock and preferred stock into redeemable preferred stock and
preferred stock of Travelers Group with substantially identical terms,
and (3) the after-tax effect on retained earnings of an estimated
charge for restructuring (see note 5).
5. Restructuring Charge
The pro forma condensed combined statements of operations do not
reflect a planned merger-related restructuring charge of between $400
million and $500 million (after-tax) primarily for severance and costs
related to excess or unused office space and other facilities since
such restructuring charge is non-recurring. Although there can be no
assurance that the restructuring charge will fall within the range
provided, this range represents management's best estimate based on the
currently available information.
<PAGE> 9
6. Future Cost Savings
As Salomon's operations are integrated with the existing operations of
Smith Barney, management expects to achieve, by the end of a three-year
period, annual cost savings in excess of $200 million (after-tax) from
the reduction of overhead expenses, changes in corporate infrastructure
and the elimination of redundant expenses. There can be no assurance
that these projected cost savings will be achieved. These expected
future cost savings are not reflected in the pro forma financial data.
The statements contained in notes 5 and 6 above may be deemed to be
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended. Forward-looking statements are typically identified by
the words "believe," "expect," "anticipate," "intend," "estimate" and similar
expressions. These forward-looking statements are based largely on management's
expectations and are subject to a number of uncertainties. Actual results could
differ materially from these forward-looking statements as a result of a number
of factors, including (1) determination of the number, job classification and
location of employee positions to be eliminated, (2) compatibility of the
operating systems of the combining companies, (3) the degree to which existing
administrative and back-office functions and costs are complementary or
redundant, and (4) the timing of implementation of changes in operations to
effect cost savings. Smith Barney undertakes no obligation to update publicly or
revise any forward-looking statements.
