Merrill Lynch Reports Highest-Ever Net Revenues of $8.0 Billion for First Quarter 2006, up 28%.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Merrill Lynch Merrill Lynch & Co., Inc. (NYSE: MER TYO: 8675 ), through its subsidiaries and affiliates, provides capital markets services, investment banking and advisory services, wealth management, asset management, insurance, banking and related products and services on a global basis. (NYSE NYSE See: New York Stock Exchange : MER mer Among the Cheremi and Udmurt peoples of Russia, a sacred grove where people of several villages gathered periodically to hold religious festivals and sacrifice animals to nature gods. ): --Net Earnings of $475 Million, $0.44 Per Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. Share, Including Previously Announced One-Time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. Non-Cash Expenses Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) --Excluding One-Time Expenses, Diluted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. up 36%, to $1.65 Merrill Lynch (NYSE: MER) today reported its highest quarterly net revenues ever, at $8.0 billion, for the first quarter 2006, up 28% from the prior-year quarter and 17% from the 2005 fourth quarter. Net revenues increased both sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen and year-over-year in all three business segments and all global regions. First quarter 2006 net earnings of $475 million, or $0.44 per diluted share, include $1.2 billion, after taxes, of previously announced one-time, non-cash compensation expenses. Excluding these one-time expenses, diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of were $1.65, up 36% from $1.21 for the year-ago quarter and up 17% from $1.41 for the fourth quarter of 2005. On the same basis, first quarter 2006 net earnings were $1.7 billion, up 36% from the first quarter of 2005 and 19% from the fourth quarter of 2005; pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta earnings of $2.4 billion were up 41% from the first quarter of 2005 and 16% from the fourth quarter of 2005; the pre-tax profit margin for the first quarter was 29.5%; and the annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on average common equity was 19.1%. At the end of the first quarter, book value per share was $37.18, up 13% from the end of first quarter of 2005 and 4% from year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2005. As previously announced, the first quarter of 2006 results included $1.8 billion, or $1.2 billion after taxes, for the one-time, non-cash acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of compensation expenses arising from modifications to the retirement eligibility requirements of existing stock-based employee compensation awards and the adoption of Statement of Financial Accounting Standards No. 123 (as revised in 2004); (together "one-time compensation expenses"). Details of the one-time compensation expenses were outlined in the company's April 3, 2006 Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. , and reconciliations of results both including and excluding the one-time compensation expenses appear on Attachments II and III to this release. Fourth quarter 2005 results included a charge of $170 million, or $102 million after taxes, for litigation-related expenses, as well as $113 million in income tax expense associated with Merrill Mer·rill , James 1926-1995. American poet whose works include Divine Comedies (1976), which won a Pulitzer Prize. Lynch's repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. of $1.8 billion of foreign earnings under the provisions of the American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Jobs Creation Act of 2004. These items combined to reduce earnings per diluted share in the fourth quarter of 2005 by $0.22. "Our revenue and operating performance overall, and for each of our three businesses, was very strong," said Stan O'Neal E. Stanley "Stan" O'Neal is the present Chief Executive Officer and Chairman of the Board of Merrill Lynch & Co. Inc., having served in numerous senior management positions at the company prior to this appointment. , chairman and chief executive officer. "Our strategy of building a diversified diversified (di·verˑ·s , balanced business mix and targeting investments for areas with the potential for strong growth has enabled us to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. business environment. We remain focused on disciplined execution of our strategy." Business Segment Review: The one-time compensation expenses, before taxes, were recorded in the business segments as follows: $1.4 billion to Global Markets and Investment Banking, $281 million to Global Private Client and $109 million to Merrill Lynch Investment Managers. The following discussion of business segment results excludes the impact of these one-time expenses. A reconciliation of segment results with these amounts appears on Attachment See attach a file. III to this release. Global Markets and Investment Banking (GMI) ------------------------------------------- GMI's strong first quarter 2006 results demonstrate the benefits of targeted organic and inorganic inorganic /in·or·gan·ic/ (in?or-gan´ik) 1. having no organs. 2. not of organic origin. in·or·gan·ic n. 1. investments for diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. and profitable growth, executed executed 1) adj. to have been completed. (Example: "it is an executed contract") 2) v. to have completed or fully performed. (Example: "he executed all the promises made in the contract") 3) v. with strong operating discipline in a favorable market environment. --GMI's first quarter 2006 net revenues were a record $4.6 billion, up 31% from the fourth quarter and 37% from the year-ago quarter. Excluding the one-time compensation expenses, pre-tax earnings were $1.6 billion, up 41% from the year-ago quarter and the first quarter pre-tax profit margin was 34.7%. --Compared with the prior-year quarter, net revenues increased in all three major businesses lines. Equity Markets net revenues increased 62%, with strong performance in every major revenue category. Debt Markets net revenues set a new record, up 26%, driven primarily by the trading of interest rate and credit products. Investment Banking net revenues were 30% higher, with increases from merger and acquisition advisory and debt origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real mandates mandates, system of trusteeships established by Article 22 of the Covenant of the League of Nations for the administration of former Turkish territories and of former German colonies. . --Sequentially, Global Markets net revenues increased 42% while Investment Banking net revenues were essentially unchanged. Debt Markets net revenues increased 52%, driven primarily by the trading of credit and interest rate products. Equity Markets net revenues increased 32%, as increases in revenues from equity-linked and cash equity trading In finance, equity trading is the buying and selling of company stock shares. Shares in large publicly-traded companies are bought and sold through one of the major stock exchanges, such as the New York Stock Exchange, London Stock Exchange or Tokyo Stock Exchange, which serve as , proprietary trading Proprietary Trading When a firm trades for direct gain instead of commission dollars. Essentially, the firm has decided to profit from the market rather than commissions from processing trades. and equity financing Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. and services were partially offset by a decline in private equity revenues. Investment Banking net revenues were essentially unchanged, as an increase in debt origination revenues was offset by seasonal declines in both merger and acquisition advisory and equity origination revenues. Global Private Client (GPC) --------------------------- GPC (1) A PC that uses the Linux-based gOS operating system. See gOS. (2) (GPC Group) Originally the Graphics Performance Characterization committee of the NCGA, the GPC Group is now part of Standard Performance Evaluation Corporation (SPEC) and oversees the following performed strongly in the first quarter of 2006, demonstrating the benefits of industry-leading scale and operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. in a favorable market environment. These results, in turn, continue to enable significant investments across the franchise in people, products and technology. --GPC's first quarter 2006 net revenues were $2.9 billion, up 13% from the year-ago quarter. The increase was primarily driven by record fee-based revenues, record net interest profit driven by bank-related activities and stronger client transaction volumes. Excluding the one-time compensation expenses, GPC's first quarter pre-tax earnings of $646 million increased 27% from the year-ago quarter, and the pre-tax margin of 22.0% improved by over two percentage points, demonstrating the operating leverage inherent in GPC's highly scalable platform. --Total assets in GPC accounts increased 12% from the year-ago quarter, to over $1.5 trillion One thousand times one billion, which is 1, followed by 12 zeros, or 10 to the 12th power. See space/time. (mathematics) trillion - In Britain, France, and Germany, 10^18 or a million cubed. In the USA and Canada, 10^12. . Excluding net outflows in the recently acquired Amvescap retirement business and the former Advest franchise prior to systems conversion, net client assets into annuitized-revenue products were $12.3 billion, and total net new money was $16.9 billion for the quarter. --Financial Advisor (FA) headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. reached 15,350 at quarter-end, as GPC continues to actively recruit RECRUIT. A newly made soldier. and train FAs. Turnover among FAs, particularly top producing and longer-serving FAs, remained at historical lows. Merrill Lynch Investment Managers (MLIM) ---------------------------------------- MLIM MLIM Merrill Lynch Investment Managers (UK) generated outstanding results during the first quarter of 2006, as strong relative investment performance in a favorable market drove improved net flows. MLIM also remained focused on broadening broad·en tr. & intr.v. broad·ened, broad·en·ing, broad·ens To make or become broad or broader. broad distribution and maintaining operating discipline. --MLIM's first quarter 2006 net revenues were $570 million, up 38% from the 2005 first quarter. The year-over-year increase in net revenues was driven by higher asset values and robust net inflows. Excluding the one-time compensation charge, pre-tax earnings were $222 million, up 75% from the year-ago quarter, due primarily to higher net revenues. On the same basis, MLIM's pre-tax margin for the quarter was 38.9%. --Firmwide assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. totaled $581 billion at the end of the first quarter, up 21% from a year ago. Net inflows for the quarter were $15.4 billion, the highest since the second quarter of 2000, with nearly every channel across regions generating net inflows. The EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. Pacific retail business was the most significant contributor to net flows, followed by the Americas A·mer·i·cas , the See America. proprietary retail and the Americas institutional channels. --More than 70% of MLIM's global assets under management continued to be ahead of their respective benchmarks or category medians for the three- and five-year periods ended February February: see month. 2006. --During the first quarter, Merrill Lynch announced that it had entered into a definitive agreement to combine MLIM with BlackRock BlackRock Inc. (NYSE: BLK) is a major American investment management firm. As of September 30, 2007, BlackRock’s assets under management totaled $1.3 trillion[2] across fixed income, liquidity, equity, alternative investment and real estate strategies. , Inc. (NYSE: BLK BLK Black BLK Blank BLK Block BLK Bulk BLK Blocked Shot (basketball) BLK Blocked Kick (football) BLK Blackpool, England, United Kingdom - Blackpool (Airport Code) ) in exchange for stock that will equate e·quate v. e·quat·ed, e·quat·ing, e·quates v.tr. 1. To make equal or equivalent. 2. To reduce to a standard or an average; equalize. 3. to an economic ownership interest in the combined firm of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 49.8%. The merger is expected to close in the third quarter of 2006, subject to regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. and BlackRock shareholder approval. Compensation Expenses --------------------- As previously announced, Merrill Lynch adopted Statement of Financial Accounting Standards No. 123 (as revised in 2004) to account for stock-based employee compensation during the first quarter of 2006. Additionally, as a result of a comprehensive review of the retirement provisions in its stock-based compensation plans, Merrill Lynch also modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. the retirement eligibility requirements of existing stock awards in order to facilitate transition to more stringent retirement eligibility requirements for future stock awards. These modifications and the adoption of the new accounting standard required Merrill Lynch to accelerate the recognition of compensation expenses for the affected stock awards, resulting in the one-time compensation expenses. These changes represent timing differences and are not economic in substance. Compensation and benefits expenses were $5.8 billion for the first quarter of 2006. Excluding the one-time compensation expenses, compensation and benefits expenses were $4.0 billion, or 50.1% of net revenues for the first quarter of 2006, compared to 49.7% in the year-ago quarter. Non-compensation Expenses ------------------------- Overall, non-compensation expenses were $1.6 billion for the first quarter of 2006, up 10% from the year-ago quarter and down 11% from the fourth quarter of 2005. Excluding the litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. charge of $170 million in the fourth quarter of 2005, first quarter non-compensation expenses decreased 2% sequentially. Non-compensation expenses as a percentage of net revenues decreased from 23.5% in the 2005 first quarter to 20.3% in the 2006 first quarter. Details of the significant changes in non-compensation expenses from the first quarter of 2005 are as follows: --Communications and technology costs were $453 million, up 14%, due primarily to higher market information and communications costs and increased systems consulting costs related to investments for growth. --Brokerage, clearing, and exchange fees were $248 million, up 13% due primarily to higher transaction volumes. --Professional fees were $200 million, an increase of 12% due to higher legal, consulting and other professional fees. --Expenses of consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: investments totaled $47 million, a decrease of 45%, due to the deconsolidation of certain investments in 2005; and --Other expenses were $229 million, up 29%. Income Taxes ------------ Merrill Lynch's first quarter effective tax rate was 19.9%. Excluding the one-time compensation expenses, the effective tax rate for the first quarter of 2006 was 29.8%. Share Repurchases ----------------- As part of its active management of equity capital, Merrill Lynch repurchased 25.8 million shares of its common stock for $2.0 billion during the first quarter, completing the $4 billion repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. program authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: in April 2005 and utilizing $644 million of the additional $6 billion repurchase program authorized in February 2006. Staffing -------- Merrill Lynch's full-time full-time adj. Employed for or involving a standard number of hours of working time: a full-time administrative assistant. full employees totaled 55,500 at the end of the first quarter of 2006, a net increase of 900 during the quarter. Jeff Edwards, senior vice president and chief financial officer, will host a conference call today at 10:00 a.m. ET to discuss the company's 2006 first quarter results. The conference call can be accessed via a live audio webcast available through the Investor Relations Investor relations The process by which the corporation communicates with its investors. website at www.ir.ml.com or by dialing (888) 810-0245 (U.S. callers) or (706) 634-0180 (non-U non-U adj. Chiefly British Not characteristic of the upper class, especially in language usage. [non- + U2. .S. callers). On-demand On-Demand refers to a service or feature which addresses the user's need for instant gratification and immediacy of use. In most cases the value proposition for an on-demand service is wrapped up in the fact that the user or consumer of the service avoids a significant up-front replay of the webcast will be available from approximately 1:00 p.m. ET today at the same web address. Merrill Lynch is one of the world's leading wealth management, capital markets and advisory companies with offices in 36 countries and territories and total client assets of approximately $1.8 trillion. As an investment bank, it is a leading global trader and underwriter underwriter n. a company or person which/who underwrites an insurance policy, issue of corporate securities, business, or project. (See: underwrite) UNDERWRITER, insurances. One who signs a policy of insurance, by which he becomes an insurer. of securities and derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. across a broad range of asset classes and serves as a strategic advisor to corporations, governments, institutions, and individuals worldwide. Through Merrill Lynch Investment Managers, the company is one of the world's largest managers of financial assets Financial assets Claims on real assets. . Firmwide, assets under management total $581 billion. For more information on Merrill Lynch, please visit www.ml.com. Merrill Lynch may make forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , including, for example, statements about management expectations, strategic objectives, growth opportunities, business prospects, investment banking pipelines, anticipated financial results, the impact of off balance sheet arrangements, significant contractual obligations, anticipated results of litigation and regulatory investigations and proceedings, and other similar matters. These forward-looking statements are not statements of historical facts and represent only Merrill Lynch's beliefs regarding future performance, which is inherently uncertain. There are a variety of factors, many of which are beyond Merrill Lynch's control, which affect the operations, performance, business strategy and results and could cause its actual results and experience to differ materially from the expectations and objectives expressed in any forward-looking statements. These factors include, but are not limited to, financial market volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the ; actions and initiatives taken by current and potential competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. ; general economic conditions; the effect of current, pending and future legislation, regulation, and regulatory actions; and the other additional factors described in the Risk Factors section of Merrill Lynch's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December December: see month. 30, 2005 and also disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). from time to time in its subsequent reports on Form 8-K, which are available on the Merrill Lynch Investor Relations website at www.ir.ml.com and at the SEC's website, www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Merrill Lynch does not undertake to update forward-looking statements to reflect the impact of circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or or events that arise after the date the forward-looking statements are made. The reader should, however, consult any further disclosures Merrill Lynch may make in its future filings of its reports on Form 10-K, Form 10-Q Form 10-Q See 10-Q. and Form 8-K. Merrill Lynch may also, from time to time, disclose financial information on a non-GAAP basis where management believes this information will be valuable to investors in gauging the quality of Merrill Lynch's financial performance and identifying trends.
Merrill Lynch & Co., Inc. Attachment I
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Preliminary Unaudited Earnings Summary
For the Three Months Percent Inc /
Ended (Dec)
-------------------------------------
March December April 1Q06 1Q06
31, 30, 1, vs. vs.
(in millions, except per share 2006 2005 2005 4Q05 1Q05
amounts) ------ ------ ------ ----- ------
Net Revenues
Asset management and portfolio
service fees $1,679 $1,638 $1,435 3 % 17 %
Commissions 1,602 1,441 1,341 11 19
Investment banking 965 981 813 (2) 19
Principal transactions 1,993 715 945 179 111
Revenues from consolidated
investments 104 85 127 22 (18)
Other 554 613 370 (10) 50
------ ------ ------
Subtotal 6,897 5,473 5,031 26 37
Interest and dividend revenues 8,664 8,027 5,531 8 57
Less interest expense 7,599 6,720 4,330 13 75
------ ------ ------
Net interest profit 1,065 1,307 1,201 (19) (11)
------ ------ ------
Total Net Revenues 7,962 6,780 6,232 17 28
------ ------ ------
Non-Interest Expenses
Compensation and benefits 5,750 2,927 3,096 96 86
Communications and technology 453 412 396 10 14
Brokerage, clearing, and
exchange fees 248 217 219 14 13
Occupancy and related
depreciation 241 243 233 (1) 3
Professional fees 200 193 178 4 12
Advertising and market
development 144 175 126 (18) 14
Office supplies and postage 57 59 52 (3) 10
Expenses of consolidated
investments 47 47 85 0 (45)
Other 229 476 178 (52) 29
------ ------ ------
Total Non-Interest Expenses 7,369 4,749 4,563 55 61
------ ------ ------
Earnings Before Income Taxes 593 2,031 1,669 (71) (64)
Income tax expense 118 638 457 (82) (74)
------ ------ ------
Net Earnings $ 475 $1,393 $1,212 (66) (61)
====== ====== ======
Preferred Stock Dividends $ 43 $ 28 $ 7 54 514
====== ====== ======
Net Earnings Applicable to
Common Stockholders $ 432 $1,365 $1,205 (68) (64)
====== ====== ======
Earnings Per Common Share
Basic $ 0.49 $ 1.56 $ 1.33 (69) (63)
Diluted $ 0.44 $ 1.41 $ 1.21 (69) (64)
Average Shares Used in Computing
Earnings Per Common Share
Basic 883.7 876.2 907.8 1 (3)
Diluted 981.1 970.7 993.3 1 (1)
Annualized Return on Average
Common Equity 5.1% 16.9% 15.5%
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Merrill Lynch & Co., Inc. Attachment II
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Reconciliation of "Non-GAAP" Measures
Merrill Lynch adopted Statement of Financial Accounting Standards
No. 123 (as revised in 2004) for stock-based employee compensation
during the first quarter 2006. Additionally, as a result of a
comprehensive review of the retirement provisions in its stock-based
compensation plans, Merrill Lynch also modified the retirement
eligibility requirements of existing stock awards in order to
facilitate transition to more stringent retirement eligibility
requirements for future stock awards. These modifications and the
adoption of the new accounting standard required Merrill Lynch to
accelerate the recognition of compensation expenses for affected stock
awards, resulting in the "one-time compensation expenses." These
changes represent timing differences and are not economic in
substance. Management believes that while the results excluding the
one-time expenses are considered "non-GAAP" measures, they depict the
operating performance of the company more clearly and enable more
appropriate period-to-period comparisons.
----------------------------------------------------------------------
Preliminary Unaudited Earnings Summary
--------------------------------------
For the Three Months Ended
March 31, 2006
-----------------------------------
Excluding the First Quarter
Impact of Impact of
One-time One-time
(in millions, except per share Compensation Compensation GAAP
amounts) Expenses Expenses Basis
-----------------------------------
Net Revenues $ 7,962 $ - $ 7,962
------- ------- -------
Non-Interest Expenses
Compensation and benefits 3,991 1,759 5,750
Non-compensation expenses 1,619 - 1,619
------- ------- -------
Total Non-Interest Expenses 5,610 1,759 7,369
------- ------- -------
Earnings Before Income Taxes 2,352 (1,759) 593
Income Tax Expense 700 (582) 118
------- ------- -------
Net Earnings $ 1,652 $(1,177) $ 475
======= ======= =======
Preferred Stock Dividends $ 43 $ - $ 43
======= ======= =======
Net Earnings Applicable to Common
Stockholders $ 1,609 $(1,177) $ 432
======= ======= =======
Earnings Per Common Share
Basic $ 1.83 $ (1.34) $ 0.49
Diluted $ 1.65 $ (1.21) $ 0.44
Average Shares Used in Computing
Earnings Per Common Share
Basic 878.0 5.7 883.7
Diluted 975.4 5.7 981.1
----------------------------------------------------------------------
Financial Ratios Excluding the
---------------- Impact of
(in millions) One-time
Compensation GAAP
Expenses Basis
------------------------
Compensation and benefits (a) $ 3,991 $ 5,750
Net Revenues (b) 7,962 7,962
Ratio of compensation and benefits
to net revenues (a)/(b) 50.1% 72.2%
----------------------------------------------------------------------
Income Tax Expense (a) $ 700 $ 118
Earnings Before Income Taxes (b) 2,352 593
Effective Tax Rate (a)/(b) 29.8% 19.9%
----------------------------------------------------------------------
Earnings Before Income Taxes (a) $ 2,352 $ 593
Net Revenues (b) 7,962 7,962
Pre-tax Profit Margin (a)/(b) 29.5% 7.4%
----------------------------------------------------------------------
Average Common Equity $33,800 $33,800
Average impact of one-time
compensation expenses (145) -
------- -------
Average Common Equity (a) 33,655 33,800
Annualized Net Earnings Applicable
to Common Stockholders (b) 6,436 1,728
Annualized Return on Average
Common Equity (b)/(a) 19.1% 5.1%
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Merrill Lynch & Co., Inc. Attachment III
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Preliminary Segment Data (unaudited)
For the Three Months Percent Inc /
Ended (Dec)
-------------------------------------------
March December April 1Q06 1Q06
31, 30, 1, vs. vs.
(dollars in millions) 2006 2005 2005 4Q05 1Q05
------- ------- ------- ------ ------
Global Markets & Investment
Banking
Global Markets
Debt Markets $ 2,091 $ 1,376 $ 1,662 52 % 26 %
Equity Markets 1,573 1,196 971 32 62
------- ------- -------
Total Global Markets
net revenues 3,664 2,572 2,633 42 39
Investment Banking (1)
Origination:
Debt 395 278 282 42 40
Equity 237 268 242 (12) (2)
Strategic Advisory
Services 257 350 160 (27) 61
------- ------- -------
Total Investment
Banking net revenues 889 896 684 (1) 30
------- ------- -------
Total net revenues (a) 4,553 3,468 3,317 31 37
------- ------- -------
Pre-tax earnings 212 1,517 1,124 (86) (81)
Impact of one-time
compensation expenses 1,369 - - N/M N/M
------- ------- -------
Pre-tax earnings
excluding one-time
compensation expenses
(b) 1,581 1,517 1,124 4 41
Pre-tax profit margin 4.7% 43.7% 33.9%
Pre-tax profit margin
excluding one-time
compensation expenses
(b)/(a) 34.7% 43.7% 33.9%
----------------------------------------------------------------------
Global Private Client
Fee-based revenues $ 1,458 $ 1,432 $ 1,271 2 15
Transactional and
origination revenues 899 868 857 4 5
Net interest profit and
related hedges(2) 527 519 401 2 31
Other revenues 55 83 74 (34) (26)
------- ------- -------
Total net revenues (a) 2,939 2,902 2,603 1 13
------- ------- -------
Pre-tax earnings 365 620 510 (41) (28)
Impact of one-time
compensation expenses 281 - - N/M N/M
------- ------- -------
Pre-tax earnings
excluding one-time
compensation expenses
(b) 646 620 510 4 27
Pre-tax profit margin 12.4% 21.4% 19.6%
Pre-tax profit margin
excluding one-time
compensation expenses
(b)/(a) 22.0% 21.4% 19.6%
----------------------------------------------------------------------
Merrill Lynch Investment
Managers
Total net revenues (a)$ 570 $ 533 $ 413 7 38
Pre-tax earnings 113 176 127 (36) (11)
Impact of one-time
compensation expenses 109 - - N/M N/M
------- ------- -------
Pre-tax earnings
excluding one-time
compensation expenses
(b) 222 176 127 26 75
Pre-tax profit margin 19.8% 33.0% 30.8%
Pre-tax profit margin
excluding one-time
compensation expenses
(b)/(a) 38.9% 33.0% 30.8%
----------------------------------------------------------------------
Corporate
Total net revenues $ (100) $ (123) $ (101) 19 1
Pre-tax earnings (97) (282) (92) 66 (5)
----------------------------------------------------------------------
Total
Total net revenues (a)$ 7,962 $ 6,780 $ 6,232 17 28
Pre-tax earnings 593 2,031 1,669 (71) (64)
Impact of one-time
compensation expenses 1,759 - - N/M N/M
------- ------- -------
Pre-tax earnings
excluding one-time
compensation expenses
(b) 2,352 2,031 1,669 16 41
Pre-tax profit margin 7.4% 30.0% 26.8%
Pre-tax profit margin
excluding one-time
compensation expenses
(b)/(a) 29.5% 30.0% 26.8%
----------------------------------------------------------------------
N/M= Not Meaningful
(1) A portion of Origination revenue is recorded in the Global Private
Client segment.
(2) Includes interest component of non-qualifying derivatives which
are included in Other Revenues in Attachment I.
Merrill Lynch & Co., Inc. Attachment IV
----------------------------------------------------------------------
Consolidated Quarterly Earnings (unaudited) (in millions)
1Q05 2Q05 3Q05 4Q05 1Q06
------- ------- ------- ------- -------
Net Revenues
Asset management and
portfolio service fees
Portfolio service fees $650 $670 $689 $760 $747
Asset management fees 481 472 527 556 619
Account fees 124 121 123 123 111
Other fees 180 168 188 199 202
------- ------- ------- ------- -------
Total 1,435 1,431 1,527 1,638 1,679
Commissions
Listed and over-the-counter
securities 842 747 823 878 990
Mutual funds 364 353 383 401 490
Other 135 147 136 162 122
------- ------- ------- ------- -------
Total 1,341 1,247 1,342 1,441 1,602
Investment banking
Underwriting 652 706 720 632 720
Strategic advisory 161 214 160 349 245
------- ------- ------- ------- -------
Total 813 920 880 981 965
Principal transactions 945 1,006 917 715 1,993
Revenues from consolidated
investments 127 84 142 85 104
Other 370 664 548 613 554
------- ------- ------- ------- -------
Subtotal 5,031 5,352 5,356 5,473 6,897
Interest and dividend
revenues 5,531 5,974 7,039 8,027 8,664
Less interest expense 4,330 5,007 5,717 6,720 7,599
------- ------- ------- ------- -------
Net interest profit 1,201 967 1,322 1,307 1,065
------- ------- ------- ------- -------
Total Net Revenues 6,232 6,319 6,678 6,780 7,962
------- ------- ------- ------- -------
Non-Interest Expenses
Compensation and benefits 3,096 3,148 3,270 2,927 5,750
Communications and technology 396 395 405 412 453
Brokerage, clearing, and
exchange fees 219 216 190 217 248
Occupancy and related
depreciation 233 227 235 243 241
Professional fees 178 183 173 193 200
Advertising and market
development 126 160 138 175 144
Office supplies and postage 52 51 48 59 57
Expenses of consolidated
investments 85 35 91 47 47
Other 178 309 192 476 229
------- ------- ------- ------- -------
Total Non-Interest Expenses 4,563 4,724 4,742 4,749 7,369
------- ------- ------- ------- -------
Earnings Before Income Taxes 1,669 1,595 1,936 2,031 593
Income tax expense 457 460 560 638 118
------- ------- ------- ------- -------
Net Earnings $1,212 $1,135 $1,376 $1,393 $475
----------------------------------------------------------------------
Per Common Share Data
1Q05 2Q05 3Q05 4Q05 1Q06
------- ------- ------- ------- -------
Earnings - Basic $1.33 $1.25 $1.54 $1.56 $0.49
Earnings - Diluted 1.21 1.14 1.40 1.41 0.44
Dividends paid 0.16 0.20 0.20 0.20 0.25
Book value 32.91 33.63 34.66 35.82 37.18
Est.
----------------------------------------------------------------------
Merrill Lynch & Co., Inc. Attachment V
----------------------------------------------------------------------
Percentage of Quarterly Net Revenues (unaudited)
1Q05 2Q05 3Q05 4Q05 1Q06
------- ------- ------- ------- -------
Net Revenues
Asset management and
portfolio service fees
Portfolio service fees 10.4% 10.6% 10.3% 11.2% 9.4%
Asset management fees 7.7% 7.5% 7.9% 8.2% 7.8%
Account fees 2.0% 1.9% 1.8% 1.8% 1.4%
Other fees 2.9% 2.6% 2.9% 3.0% 2.5%
------- ------- ------- ------- -------
Total 23.0% 22.6% 22.9% 24.2% 21.1%
Commissions
Listed and over-the-counter
securities 13.5% 11.8% 12.3% 12.9% 12.4%
Mutual funds 5.8% 5.6% 5.7% 5.9% 6.2%
Other 2.2% 2.3% 2.1% 2.5% 1.5%
------- ------- ------- ------- -------
Total 21.5% 19.7% 20.1% 21.3% 20.1%
Investment banking
Underwriting 10.5% 11.2% 10.8% 9.3% 9.0%
Strategic advisory 2.6% 3.4% 2.4% 5.1% 3.1%
------- ------- ------- ------- -------
Total 13.1% 14.6% 13.2% 14.4% 12.1%
Principal transactions 15.2% 15.9% 13.7% 10.5% 25.0%
Revenues from consolidated
investments 2.0% 1.3% 2.1% 1.3% 1.3%
Other 5.9% 10.6% 8.2% 9.0% 7.0%
------- ------- ------- ------- -------
Subtotal 80.7% 84.7% 80.2% 80.7% 86.6%
Interest and dividend
revenues 88.8% 94.5% 105.4% 118.4% 108.8%
Less interest expense 69.5% 79.2% 85.6% 99.1% 95.4%
------- ------- ------- ------- -------
Net interest profit 19.3% 15.3% 19.8% 19.3% 13.4%
------- ------- ------- ------- -------
Total Net Revenues 100.0% 100.0% 100.0% 100.0% 100.0%
------- ------- ------- ------- -------
Non-Interest Expenses
Compensation and benefits 49.7% 49.8% 49.0% 43.2% 72.2%
Communications and
technology 6.4% 6.3% 6.1% 6.1% 5.7%
Brokerage, clearing, and
exchange fees 3.5% 3.4% 2.8% 3.2% 3.1%
Occupancy and related
depreciation 3.7% 3.6% 3.5% 3.6% 3.0%
Professional fees 2.9% 2.9% 2.6% 2.8% 2.5%
Advertising and market
development 2.0% 2.5% 2.1% 2.6% 1.8%
Office supplies and postage 0.8% 0.8% 0.7% 0.9% 0.7%
Expenses of consolidated
investments 1.4% 0.6% 1.4% 0.7% 0.6%
Other 2.8% 4.9% 2.8% 6.9% 3.0%
------- ------- ------- ------- -------
Total Non-Interest Expenses 73.2% 74.8% 71.0% 70.0% 92.6%
------- ------- ------- ------- -------
Earnings Before Income Taxes 26.8% 25.2% 29.0% 30.0% 7.4%
Income tax expense 7.4% 7.2% 8.4% 9.5% 1.4%
------- ------- ------- ------- -------
Net Earnings 19.4% 18.0% 20.6% 20.5% 6.0%
----------------------------------------------------------------------
Common shares outstanding (in
millions):
1Q05 2Q05 3Q05 4Q05 1Q06
------- ------- ------- ------- -------
Weighted-average - basic 907.8 897.5 881.4 876.2 883.7
Weighted-average -
diluted 993.3 978.5 968.5 970.7 981.1
Period-end 948.7 930.9 921.7 919.2 933.4
----------------------------------------------------------------------
Merrill Lynch & Co., Inc. Attachment VI
----------------------------------------------------------------------
Supplemental Data (unaudited) (dollars in billions)
1Q05 2Q05 3Q05 4Q05 1Q06
------- ------- ------- ------- -------
Client Assets
Private Client
U.S. $1,223 $1,234 $1,271 $1,341 $1,381
Non - U.S. 116 115 113 117 121
------- ------- ------- ------- -------
Total Private Client Assets 1,339 1,349 1,384 1,458 1,502
MLIM direct sales (1) 233 236 272 291 316
------- ------- ------- ------- -------
Total Client Assets $1,572 $1,585 $1,656 $1,749 $1,818
======= ======= ======= ======= =======
Assets Under Management (2) $479 $478 $524 $544 $581
Retail 218 218 231 245 272
Institutional 217 215 246 250 259
Retail Separate Accounts 44 45 47 49 50
U.S. 312 311 322 333 347
Non-U.S. 167 167 202 211 234
Equity 245 249 285 299 330
Retail Money Market 49 46 45 45 48
Institutional Liquidity
Funds 70 68 74 77 78
Fixed Income 115 115 120 123 125
----------------------------------------------------------------------
Net New Money
All Private Client
Accounts (3) $17 $9 $15 $22 $17
Annuitized-Revenue
Products (3)(4) $13 $8 $11 $13 $12
Assets Under Management $(16) $(2) $12 $11 $15
----------------------------------------------------------------------
Balance Sheet Information
(estimated)
Commercial Paper and
Other Short-term
Borrowings $2.7 $6.8 $4.1 $3.9 $9.4
Deposits 79.9 79.5 77.8 80.0 81.1
Long-term Borrowings 115.7 117.5 129.6 132.4 136.2
Long-term debt issued to
TOPrS(SM) Partnerships 3.1 3.1 3.1 3.1 3.1
Stockholders' Equity
(estimated):
Preferred Stockholders'
Equity 1.6 1.7 1.7 2.7 3.1
Common Stockholders'
Equity 31.3 31.3 31.9 32.9 34.7
------- ------- ------- ------- -------
Total Stockholders' Equity 32.9 33.0 33.6 35.6 37.8
----------------------------------------------------------------------
Full-Time Employees (5) 50,900 51,800 53,100 54,600 55,500
Private Client Financial
Advisors 14,180 14,420 14,690 15,160 15,350
----------------------------------------------------------------------
Note: Certain prior period amounts have been reclassified to
conform to the current period presentation.
(1) Reflects funds managed by MLIM not sold through Private Client
channels.
(2) Includes $5 billion of accounts managed by GPC.
(3) GPC net new money excludes flows associated with the Institutional
Advisory Division which serves certain small- and middle-market
companies, as well as net outflows in the recently acquired
Amvescap retirement business and the Advest acquisition prior to
its systems conversion in early March.
(4) Includes both new client assets into annuitized-revenue products
as well as existing client assets transferred into
annuitized-revenue products.
(5) Excludes 100 full-time employees on salary continuation severance
at the end of 1Q05, 2Q05, 3Q05, and 200 at the end of 4Q05 and
1Q06.
For more information, please contact:
Investor Relations Phone: 866-607-1234
Merrill Lynch & Co., Inc. Fax: 212-449-7461
investor_relations@ml.com
www.ir.ml.com
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