Exhibit 99.02
TRAVELERS GROUP INC. AND CITICORP
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 a newly formed, wholly owned subsidiary of Travelers. Travelers has applied
to the Federal Reserve Board to become a bank holding company. Subsequent to the
Merger, Travelers will become known as Citigroup. Travelers stockholders will
retain their existing shares, which will automatically represent 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 and/or related transactions are subject to
customary closing conditions including regulatory approvals. The stockholders of
both Travelers and Citicorp approved the Merger on July 22, 1998.
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 if it had been consummated
on June 30, 1998. 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, 1997.
This information should be read in conjunction with the accompanying notes
hereto, the separate historical financial statements of Travelers as of June 30,
1998 and for the three and six month periods ended June 30, 1998 and 1997, which
are contained in Travelers' Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998, and the separate historical financial statements of Citicorp as
of June 30, 1998 and for the three and six month periods ended June 30, 1998 and
1997, which are contained in Citicorp's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998.
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.
Travelers Group Inc. and Citicorp
Unaudited Pro Forma Condensed Combined Statement of Financial Position
As of June 30, 1998
(in millions)
Travelers Citicorp Pro Forma Pro Forma
Assets Historical Historical Adjustments Combined
---------- ---------- ----------- --------
Cash and cash equivalents $ 4,895 $ 23,476 $ -- $ 28,371
Investments 64,442 37,277 101,719
Federal funds sold and securities borrowed or
purchased under agreements to resell 131,318 12,375 143,693
Brokerage receivables 22,734 22,734
Trading account assets 138,766 37,121 175,887
Consumer loans 12,171 107,410 119,581
Commercial loans 84,856 84,856
Allowance for credit losses (347) (6,182) (6,529)
- ------------------------------------------------------------------------------------------------------------
Loans, net 11,824 186,084 -- 197,908
Reinsurance recoverables 9,487 9,487
Separate and variable accounts 13,878 13,878
Other assets 22,732 34,418 57,150
- ------------------------------------------------------------------------------------------------------------
Total assets $ 420,076 $ 330,751 $ -- $ 750,827
============================================================================================================
Liabilities
Deposits $ -- $ 215,982 $ -- $ 215,982
Investment banking and brokerage borrowings 18,682 18,682
Short-term borrowings 4,392 10,389 14,781
Long-term debt 30,551 18,982 49,533
Federal funds purchased and securities loaned or
sold under agreements to repurchase 124,258 11,413 135,671
Brokerage payables 27,053 27,053
Trading account liabilities 95,348 29,121 124,469
Insurance policy and claims reserves 43,744 43,744
Contractholder funds and separate and variable accounts 29,418 29,418
Other liabilities 21,078 22,172 43,250
- ------------------------------------------------------------------------------------------------------------
Total liabilities 394,524 308,059 -- 702,583
- ------------------------------------------------------------------------------------------------------------
Redeemable preferred stock - Series I 280 280
Trust preferred securities - parent obligated 1,200 975 (975) 1,200
Trust preferred securities - subsidiary obligated 1,645 975 2,620
Stockholders' equity
Preferred stock 1,450 1,275 2,725
Common stock 12 506 (494) 24
Additional paid-in capital 5,988 6,512 (4,083) 8,417
Retained earnings 17,309 18,371 35,680
Treasury stock, at cost (3,118) (4,577) 4,577 (3,118)
Accumulated other changes in equity from nonowner sources 1,263 (370) 893
Unearned compensation (477) -- (477)
- ------------------------------------------------------------------------------------------------------------
Total stockholders' equity 22,427 21,717 -- 44,144
- ------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 420,076 $ 330,751 $ -- $ 750,827
============================================================================================================
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Travelers Group Inc. and Citicorp
Unaudited Pro Forma Condensed Combined Statement of Income
For the Three Months Ended June 30, 1998
(in millions, except per share amounts)
Travelers Citicorp Pro Forma
Historical Historical Combined
---------- ---------- ---------
Revenues:
Loan interest, including fees ........................... $ 421 $5,096 $ 5,517
Other interest and dividends ............................ 4,556 1,562 6,118
Insurance premiums ...................................... 2,395 2,395
Commissions and fees .................................... 1,432 1,553 2,985
Principal transactions .................................. 315 563 878
Asset management and administration fees ................ 553 553
Realized gains from sales of investments ................ 44 300 344
Other income ............................................ 380 791 1,171
- -------------------------------------------------------------------------------------------
Total revenues .......................................... 10,096 9,865 19,961
Interest expense ........................................ 3,333 3,663 6,996
- -------------------------------------------------------------------------------------------
Total revenues, net of interest expense ............. 6,763 6,202 12,965
- -------------------------------------------------------------------------------------------
Operating expenses:
Policyholder benefits and claims ........................ 2,047 2,047
Non-insurance compensation and benefits ................. 1,609 1,825 3,434
Insurance underwriting, acquisition and operating ....... 811 811
Provision for credit losses ............................. 91 564 655
Other operating ......................................... 382 2,058 2,440
- -------------------------------------------------------------------------------------------
Total operating expenses ............................ 4,940 4,447 9,387
- -------------------------------------------------------------------------------------------
Income before income taxes and minority interest ........ 1,823 1,755 3,578
Provision for income taxes .............................. 630 658 1,288
Minority interest, net of income taxes .................. 52 52
- -------------------------------------------------------------------------------------------
Net income .............................................. $ 1,141 $1,097 $ 2,238
===========================================================================================
Basic earnings per share:
Net income .............................................. $ 0.99 $ 2.37 $ 0.97
===========================================================================================
Weighted average common shares outstanding .............. 1,117.7 451.8 2,247.2
===========================================================================================
Diluted earnings per share:
Net income .............................................. $ 0.95 $ 2.30 $ 0.94
===========================================================================================
Adjusted weighted average common shares
outstanding ......................................... 1,172.1 464.4 2,333.1
===========================================================================================
Supplemental information:
Net interest revenue ................................. $ 1,644 $2,995 $ 4,639
Net interest revenue after provision for credit losses 1,553 2,431 3,984
===========================================================================================
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Travelers Group Inc. and Citicorp
Unaudited Pro Forma Condensed Combined Statement of Income
For the Three Months Ended June 30, 1997
(in millions, except per share amounts)
Travelers Citicorp Pro Forma
Historical Historical Combined
---------- ---------- --------
Revenues:
Loan interest, including fees $ 321 $ 4,717 $ 5,038
Other interest and dividends 4,047 1,424 5,471
Insurance premiums 2,220 2,220
Commissions and fees 1,172 1,441 2,613
Principal transactions 709 408 1,117
Asset management and administration fees 399 399
Realized gains from sales of investments 7 124 131
Other income 309 475 784
- ------------------------------------------------------------------------------------------------
Total revenues 9,184 8,589 17,773
Interest expense 2,792 3,278 6,070
- ------------------------------------------------------------------------------------------------
Total revenues, net of interest expense 6,392 5,311 11,703
- ------------------------------------------------------------------------------------------------
Operating expenses:
Policyholder benefits and claims 1,906 1,906
Non-insurance compensation and benefits 1,511 1,607 3,118
Insurance underwriting, acquisition and operating 799 799
Provision for credit losses 73 512 585
Other operating 654 1,566 2,220
- ------------------------------------------------------------------------------------------------
Total operating expenses 4,943 3,685 8,628
- ------------------------------------------------------------------------------------------------
Income before income taxes and minority interest 1,449 1,626 3,075
Provision for income taxes 517 602 1,119
Minority interest, net of income taxes 49 49
- ------------------------------------------------------------------------------------------------
Net income $ 883 $ 1,024 $ 1,907
================================================================================================
Basic earnings per share:
Net income $ 0.77 $ 2.16 $ 0.82
================================================================================================
Weighted average common shares outstanding 1,101.1 458.5 2,247.4
================================================================================================
Diluted earnings per share:
Net income $ 0.73 $ 2.10 $ 0.78
================================================================================================
Adjusted weighted average common shares
outstanding 1,178.0 471.3 2,356.3
================================================================================================
Supplemental information:
Net interest revenue $ 1,576 $ 2,863 $ 4,439
Net interest revenue after provision for credit losses 1,503 2,351 3,854
================================================================================================
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Travelers Group Inc. and Citicorp
Unaudited Pro Forma Condensed Combined Statement of Income
For the Six Months Ended June 30, 1998
(in millions, except per share amounts)
Travelers Citicorp Pro Forma
Historical Historical Combined
---------- ---------- --------
Revenues:
Loan interest, including fees $ 828 $ 9,939 $10,767
Other interest and dividends 8,977 3,022 11,999
Insurance premiums 4,735 4,735
Commissions and fees 2,866 2,994 5,860
Principal transactions 1,095 1,148 2,243
Asset management and administration fees 1,051 1,051
Realized gains from sales of investments 188 541 729
Other income 724 1,290 2,014
- ------------------------------------------------------------------------------------------------
Total revenues 20,464 18,934 39,398
Interest expense 6,510 7,127 13,637
- ------------------------------------------------------------------------------------------------
Total revenues, net of interest expense 13,954 11,807 25,761
- ------------------------------------------------------------------------------------------------
Operating expenses:
Policyholder benefits and claims 4,041 4,041
Non-insurance compensation and benefits 3,391 3,539 6,930
Insurance underwriting, acquisition and operating 1,623 1,623
Provision for credit losses 178 1,071 1,249
Other operating 1,138 3,738 4,876
- ------------------------------------------------------------------------------------------------
Total operating expenses 10,371 8,348 18,719
- ------------------------------------------------------------------------------------------------
Income before income taxes and minority interest 3,583 3,459 7,042
Provision for income taxes 1,239 1,297 2,536
Minority interest, net of income taxes 110 110
- ------------------------------------------------------------------------------------------------
Net income $ 2,234 $ 2,162 $ 4,396
================================================================================================
Basic earnings per share:
Net income $ 1.94 $ 4.65 $ 1.90
================================================================================================
Weighted average common shares outstanding 1,116.8 452.0 2,246.8
================================================================================================
Diluted earnings per share:
Net income $ 1.87 $ 4.53 $ 1.84
================================================================================================
Adjusted weighted average common shares
outstanding 1,170.5 463.8 2,330.0
================================================================================================
Supplemental information:
Net interest revenue $ 3,295 $ 5,834 $ 9,129
Net interest revenue after provision for credit losses 3,117 4,763 7,880
================================================================================================
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Travelers Group Inc. and Citicorp
Unaudited Pro Forma Condensed Combined Statement of Income
For the Six Months Ended June 30, 1997
(in millions, except per share amounts)
Travelers Citicorp Pro Forma
Historical Historical Combined
---------- ---------- --------
Revenues:
Loan interest, including fees $ 627 $ 9,271 $ 9,898
Other interest and dividends 7,545 2,727 10,272
Insurance premiums 4,444 4,444
Commissions and fees 2,378 2,793 5,171
Principal transactions 1,471 903 2,374
Asset management and administration fees 788 788
Realized gains from sales of investments 24 232 256
Other income 607 912 1,519
- ------------------------------------------------------------------------------------------------
Total revenues 17,884 16,838 34,722
Interest expense 5,170 6,331 11,501
- ------------------------------------------------------------------------------------------------
Total revenues, net of interest expense 12,714 10,507 23,221
- ------------------------------------------------------------------------------------------------
Operating expenses:
Policyholder benefits and claims 3,811 3,811
Non-insurance compensation and benefits 3,059 3,272 6,331
Insurance underwriting, acquisition and operating 1,604 1,604
Provision for credit losses 145 935 1,080
Other operating 1,299 3,070 4,369
- ------------------------------------------------------------------------------------------------
Total operating expenses 9,918 7,277 17,195
- ------------------------------------------------------------------------------------------------
Income before income taxes and minority interest 2,796 3,230 6,026
Provision for income taxes 1,000 1,211 2,211
Minority interest, net of income taxes 98 98
- ------------------------------------------------------------------------------------------------
Net income $ 1,698 $ 2,019 $ 3,717
================================================================================================
Basic earnings per share:
Net income $ 1.47 $ 4.23 $ 1.59
================================================================================================
Weighted average common shares outstanding 1,102.5 460.0 2,252.5
================================================================================================
Diluted earnings per share:
Net income $ 1.40 $ 4.11 $ 1.52
================================================================================================
Adjusted weighted average common shares
outstanding 1,179.6 473.5 2,363.4
================================================================================================
Supplemental information:
Net interest revenue $ 3,002 $ 5,667 $ 8,669
Net interest revenue after provision for credit losses 2,857 4,732 7,589
================================================================================================
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Travelers Group Inc. and Citicorp
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
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 and/or related transactions are subject to customary closing conditions
including regulatory approval. The stockholders of both Travelers and Citicorp
approved the Merger on July 22, 1998.
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
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 June 30, 1998 of 1,129.8 million shares of
Citigroup Common Stock to effect the Merger, calculated by multiplying the
number of shares of Citicorp Common Stock outstanding at June 30, 1998 (451.9
million shares) by the exchange ratio (2.5). 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. Additionally, the pro forma
adjustments transfer Citicorp's trust preferred securities to subsidiary
obligated to reflect the merger of Citicorp into a newly formed, wholly owned
subsidiary of Travelers.
5. Pro Forma Capital Ratios
The pro forma combined risk-based capital and leverage ratios at June 30,
1998 are estimated to be:
Tier 1 Capital Ratio......................... 8.5%
Total Capital Ratio.......................... 11.0%
Leverage Ratio............................... 5.7%
6. 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:
For the quarter For the six months
ended June 30, ended June 30,
-----------------------------------------------
(in millions, except per share amounts) 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------
Net income ...................................... $2,238 $1,907 $4,396 $3,717
Preferred dividends ............................. (58) (70) (121) (144)
-----------------------------------------------
Income available to common
stockholders for basic EPS .................... 2,180 1,837 4,275 3,573
Effect of dilutive securities ................... 6 10 12 20
-----------------------------------------------
Income available to common
stockholders for diluted EPS .................. $2,186 $1,847 $4,287 $3,593
===============================================
Weighted average common shares
outstanding applicable to basic EPS ........... 2,247.2 2,247.4 2,246.8 2,252.5
Effect of dilutive securities:
Convertible securities ....................... 13.2 26.6 13.2 26.6
Employee stock plans ......................... 69.3 75.3 66.7 77.4
Warrants ..................................... 3.4 7.0 3.3 6.9
-----------------------------------------------
Adjusted weighted average common
shares outstanding applicable to diluted EPS .. 2,333.1 2,356.3 2,330.0 2,363.4
===============================================
Basic earnings per share ........................ $0.97 $0.82 $1.90 $1.59
===============================================
Diluted earnings per share ...................... $0.94 $0.78 $1.84 $1.52
===============================================
7. Restructuring Charge and Future Cost Savings
The pro forma financial statements 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 recorded after the consummation of
the Merger. Management does not anticipate that any such charge will be material
to the financial position of the combined company.
The pro forma financial statements do not reflect any future cost savings
that may result from the reduction of overhead expense, 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 7 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.