EXHIBIT 99.02
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On April 5, 1998, Travelers Group Inc. ("Travelers") and Citicorp
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 become 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 stockolders of each
of Travelers and Citicorp.
The following unaudited pro forma condensed combined statement of
financial position combines the historical consolidated statement of
financial position of Travelers and the historical consolidated statement
of financial position of Citicorp giving effect to the Merger as if 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 Travelers and Citicorp 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 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, and
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.
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 date indicated or of future operations of the combined
company.
TRAVELERS GROUP INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 1997
(in millions of dollars)
Assets Travelers Citicorp Pro Forma Pro Forma
Historical Historical Adjustments Combined
----------- ---------- ----------- ----------
Cash and cash equivalents $4,033 $21,634 $25,667
Investments 61,834 33,361 95,195
Federal funds sold and securities borrowed or
purchased under agreements to resell 109,734 10,233 119,967
Brokerage receivables 15,627 15,627
Trading securities and commodities owned 139,732 40,356 180,088
Consumer loans 11,137 108,066 119,203
Commercial loans - 75,947 75,947
Allowance for credit losses (321) (5,816) (6,137)
- ---------------------------------------------------------------------------------------------------------
Loans, net 10,816 178,197 189,013
Reinsurance recoverables 9,579 9,579
Separate and variable accounts 11,319 11,319
Other assets 23,881 27,116 50,997
=========================================================================================================
Total assets $386,555 $310,897 $697,452
=========================================================================================================
Liabilities
Investment banking and brokerage borrowings $11,464 $11,464
Deposits $199,121 199,121
Short-term borrowings 3,979 10,049 14,028
Long-term debt 28,352 19,035 47,387
Federal funds purchased and securities loaned or
sold under agreements to repurchase 120,921 11,182 132,103
Brokerage payables 12,763 12,763
Trading securities and commodities sold not yet purchased 96,166 30,986 127,152
Insurance policy and claims reserves 43,782 43,782
Contractholder funds and separate and variable accounts 26,157 26,157
Other liabilities 19,418 18,578 37,996
- ---------------------------------------------------------------------------------------------------------
Total liabilities 363,002 288,951 651,953
- ---------------------------------------------------------------------------------------------------------
ESOP preferred stock - Series C 135 135
Redeemable preferred stock - Series I 280 280
Trust preferred securities - parent obligated 1,000 750 1,750
Trust preferred securities - subsidiary obligated 1,245 1,245
Stockholders' equity
Preferred stock 1,450 1,903 3,353
Common stock 12 506 $(494) 24
Additional paid-in capital 5,368 6,501 (3,918) 7,951
Retained earnings 15,451 16,789 32,240
Treasury stock, at cost (2,183) (4,412) 4,412 (2,183)
Unrealized gain (loss) on investment securities 1,157 535 1,692
Foreign currency translation (12) (626) (638)
Other, principally unearned compensation (350) (350)
- ---------------------------------------------------------------------------------------------------------
Total stockholders' equity 20,893 21,196 - 42,089
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
Total liabilities and stockholders' equity $386,555 $310,897 - $697,452
=========================================================================================================
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
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)
Travelers Citicorp Pro Forma
Historical Historical Combined
----------- ------------ ----------
REVENUES:
Loan interest, including fees * $1,404 $18,967 $20,371
Other interest and dividends * 16,214 5,516 21,730
Insurance premiums 8,995 8,995
Commissions and fees 5,119 5,817 10,936
Principal transactions 2,504 1,727 4,231
Asset management and administration fees 1,715 1,715
Realized gains from sales of investments 406 668 1,074
Other income 1,252 2,002 3,254
- ------------------------------------------------------------------------------------------
Total revenues 37,609 34,697 72,306
Interest expense * 11,443 13,081 24,524
- ------------------------------------------------------------------------------------------
Total revenues, net of interest expense 26,166 21,616 47,782
- ------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Policyholder benefits and claims 7,714 7,714
Non-insurance compensation and benefits 6,345 6,617 12,962
Insurance underwriting, acquisition and operating 3,236 3,236
Provision for credit losses * 277 1,907 2,184
Restructuring charge 838 889 1,727
Other operating 2,744 6,481 9,225
- ------------------------------------------------------------------------------------------
Total operating expenses 21,154 15,894 37,048
- ------------------------------------------------------------------------------------------
Income before income taxes and minority interest 5,012 5,722 10,734
Provision for income taxes 1,696 2,131 3,827
Minority interest, net of income taxes 212 212
==========================================================================================
NET INCOME $3,104 $3,591 $6,695
==========================================================================================
BASIC EARNINGS PER SHARE:
Net income $2.69 $2.85
==========================================================================================
Weighted average common shares outstanding (in
millions) 1,102.6 2,247.9
==========================================================================================
DILUTED EARNINGS PER SHARE:
Net income $2.54 $2.74
==========================================================================================
Adjusted weighted average common shares
outstanding (in millions) 1,179.9 2,357.7
==========================================================================================
* SUPPLEMENTAL INFORMATION:
Net interest revenue $6,175 $11,402 $17,577
==========================================================================================
Net interest revenue after provision for
credit losses $5,898 $ 9,495 $15,393
==========================================================================================
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
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)
Travelers Citicorp Pro Forma
Historical Historical Combined
----------- ------------ ------------
REVENUES:
Loan interest, including fees * $1,163 $18,509 $19,672
Other interest and dividends * 13,286 4,840 18,126
Insurance premiums 7,633 7,633
Commissions and fees 4,637 5,469 10,106
Principal transactions 3,027 1,501 4,528
Asset management and administration fees 1,390 1,390
Realized gains from sales of investments 55 210 265
Other income 1,223 2,076 3,299
- --------------------------------------------------------------------------------------------
Total revenues 32,414 32,605 65,019
Interest expense * 8,927 12,409 21,336
- --------------------------------------------------------------------------------------------
Total revenues, net of interest expense 23,487 20,196 43,683
- --------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Policyholder benefits and claims 7,366 7,366
Non-insurance compensation and benefits 5,804 6,244 12,048
Insurance underwriting, acquisition and operating 3,013 3,013
Provision for credit losses * 260 1,926 2,186
Other operating 2,481 5,953 8,434
- --------------------------------------------------------------------------------------------
Total operating expenses 18,924 14,123 33,047
- --------------------------------------------------------------------------------------------
Gain on sale of subsidiaries and affiliates 445 445
- --------------------------------------------------------------------------------------------
Income before income taxes and minority interest 5,008 6,073 11,081
Provision for income taxes 1,679 2,285 3,964
Minority interest, net of income taxes 47 47
- --------------------------------------------------------------------------------------------
Income from continuing operations $3,282 $3,788 $7,070
============================================================================================
BASIC EARNINGS PER SHARE:
Income from continuing operations $2.84 $2.97
============================================================================================
Weighted average common shares outstanding (in
millions) 1,097.6 2,271.6
============================================================================================
DILUTED EARNINGS PER SHARE:
Income from continuing operations $2.71 $2.84
============================================================================================
Adjusted weighted average common shares
outstanding (in millions) 1,170.6 2,393.9
============================================================================================
* SUPPLEMENTAL INFORMATION:
Net interest revenue $5,522 $10,940 $16,462
===========================================================================================
Net interest revenue after provision for
credit losses $5,262 $ 9,014 $14,276
===========================================================================================
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
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)
Travelers Citicorp Pro Forma
Historical Historical Combined
----------- ------------ ----------
REVENUES:
Loan interest, including fees * $1,119 $17,808 $18,927
Other interest and dividends * 13,045 5,155 18,200
Insurance premiums 4,977 4,977
Commissions and fees 3,713 5,165 8,878
Principal transactions 2,140 1,612 3,752
Asset management and administration fees 1,087 1,087
Realized gains from sales of investments 152 132 284
Other income 1,054 1,818 2,872
- ------------------------------------------------------------------------------------------
Total revenues 27,287 31,690 58,977
Interest expense * 9,378 13,012 22,390
- ------------------------------------------------------------------------------------------
Total revenues, net of interest expense 17,909 18,678 36,587
- ------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Policyholder benefits and claims 5,017 5,017
Non-insurance compensation and benefits 5,149 5,726 10,875
Insurance underwriting, acquisition and operating 1,912 1,912
Provision for credit losses * 171 1,991 2,162
Other operating 2,320 5,376 7,696
- ------------------------------------------------------------------------------------------
Total operating expenses 14,569 13,093 27,662
- ------------------------------------------------------------------------------------------
Loss on sale of subsidiaries and affiliates (20) (20)
- ------------------------------------------------------------------------------------------
Income before income taxes 3,320 5,585 8,905
Provision for income taxes 1,179 2,121 3,300
- ------------------------------------------------------------------------------------------
Income from continuing operations $2,141 $3,464 $5,605
==========================================================================================
BASIC EARNINGS PER SHARE:
Income from continuing operations $1.81 $2.40
==========================================================================================
Weighted average common shares outstanding (in
millions) 1,099.4 2,128.2
==========================================================================================
DILUTED EARNINGS PER SHARE:
Income from continuing operations $1.74 $2.18
==========================================================================================
Adjusted weighted average common shares
outstanding (in millions) 1,184.4 2,459.9
==========================================================================================
* SUPPLEMENTAL INFORMATION:
Net interest revenue $4,786 $9,951 $14,737
=========================================================================================
Net interest revenue after provision for
credit losses $4,615 $7,960 $12,575
=========================================================================================
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements
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 Travelers and Citicorp stockholder approval.
2. ACCOUNTING POLICIES AND FINANCIAL STATEMENT CLASSIFICATIONS
Travelers and Citicorp 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 Travelers' or
Citicorp's financial statements to conform to those accounting policies and
classifications that are determined to be most appropriate.
3. INTERCOMPANY TRANSACTIONS
Transactions between Travelers and Citicorp 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 -- CITICORP
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 Travelers
and Citicorp. 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:
(in millions except per share amounts) 1997 1996 1995
---------- ----------- -----------
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
========== =========== ===========
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.
The statements contained in note 6 above may be deemed to be
forward-looking statements within the meaning of Section 27A of the
Securities Act. 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. Travelers undertakes no obligation to update publicly or revise
any forward-looking statements.