Merrill Lynch Reports Record Net Revenues of $8.2 Billion for the Second Quarter of 2006; Second Quarter Diluted EPS of $1.63, up 43% from 2005; Net Earnings of $1.6 Billion, up 44%.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. ) today reported record quarterly net revenues of $8.2 billion for the second quarter of 2006, up 29% from the prior-year quarter and 2% from the 2006 first 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. Second quarter 2006 net earnings were $1.6 billion and $1.63 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, up 44% and 43%, respectively, from the year-ago quarter. Net earnings and 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. were 1% lower than the $1.7 billion and $1.65 per diluted share reported for the first quarter of 2006, excluding the impact in that period of $1.2 billion, after taxes, of one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. , non-cash compensation expenses. Pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta earnings of $2.3 billion were up 47% from the prior-year quarter and essentially unchanged from the first quarter of 2006, on the same basis. The pre-tax profit margin for the 2006 second quarter was 28.8%, up 3.6 percentage points from the prior-year period, 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 common equity was 18.6%, up 4.3 percentage points. At the end of the second quarter, book value per share was $37.31, up 11% from the end of second quarter of 2005 and essentially unchanged sequentially, even as Merrill Lynch repurchased $3 billion in common stock during the quarter. "Merrill Lynch continued to perform well in the second quarter despite uncertainty in the markets," 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 of Merrill Lynch. "All three of our business segments delivered substantial year-over-year and sequential One after the other in some consecutive order such as by name or number. top-line growth, underscoring the importance of the investments we have been making to diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. and expand our capabilities and geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. footprints. We continue to invest in talent and technology to build further capabilities in various areas. These areas--along with our continued focus on disciplined execution throughout the organization--are critical to our future growth and our ability to perform in more uncertain markets." Net revenues for the first six months of 2006 also set a record, at $16.1 billion, up 28% from the first half of 2005. Net earnings of $2.1 billion for the first six months include $1.2 billion, after taxes, of one-time compensation expenses incurred in the first quarter of 2006. Excluding these one-time expenses, net earnings of $3.3 billion for the first six months of 2006 were up 40% from the prior-year period. On the same basis, pre-tax earnings of $4.7 billion increased 44% from the first six months of 2005, the first half pre-tax profit margin was 29.2%, up 3.2 percentage points from the first half of 2005, and the annualized return on average common equity was 19.0%, up 4.1 percentage points from the 14.9% reported for the first six months of 2005. Business Segment Review: The six-month comparisons in the following discussion of business segment results exclude the impact of the $1.8 billion, pre-tax, in one-time compensation expenses incurred in the first quarter of 2006. These one-time compensation expenses were recorded in the first quarter in the business segments as follows: $1.4 billion in Global Markets and Investment Banking, $281 million in Global Private Client and $109 million in Merrill Lynch Investment Managers. A reconciliation of segment results with these amounts appear on Attachment See attach a file. IV to this release. Global Markets and Investment Banking (GMI GMI Governance Metrics International (New York, New York) GMI Giant Magneto-Impedance GMI Global MSF Interoperability GMI General Motors Institute GMI General Mills, Inc. ) GMI generated record second quarter 2006 net revenues despite more challenging market conditions during the period, with a particularly strong performance in private equity, as well as principal investing and investment banking, demonstrating the cumulative benefits of numerous targeted investments to grow and diversify revenues globally.
-- GMI's second quarter 2006 net revenues were a record $4.6
billion, up 33% from the year-ago quarter. Compared with the
second quarter of 2005, net revenues increased in all three
major business lines:
-- Equity Markets net revenues increased 84%, including
record revenues from private equity investments, which
were up nearly threefold from the prior-year period.
Equity-linked and cash equity trading revenues also grew
strongly, and equity financing and services revenues set a
new record.
-- Debt Markets net revenues increased 7%, driven primarily
by record revenues in the principal investing and secured
finance business and increased revenues from foreign
exchange.
-- Investment Banking net revenues were 21% higher, and a
record for a second fiscal quarter, largely due to
increases in merger and acquisition advisory and equity
origination revenues, partially offset by a slight decline
in debt origination revenues. Investment Banking net
revenues for the first six months of 2006 set a new record
for a half-year period.
Pre-tax earnings for GMI were $1.5 billion, up 36% from the
year-ago quarter, driven by strong revenue growth and
operating leverage. The second quarter 2006 pre-tax profit
margin was 32.6%.
-- GMI's year-to-date net revenues were a record $9.1 billion, up
35% from the first half of 2005, driven by strong revenue
growth across most business lines. Pre-tax earnings were $3.1
billion, up 38% from the prior year period. GMI's year-to-date
pre-tax profit margin was 33.7%, compared with 32.9% in the
first half of 2005, demonstrating continued operating leverage
in the segment even as investments are being made in the
business.
Global Private Client (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 ) In the second quarter of 2006, GPC achieved record pre-tax earnings and pre-tax profit margin, 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. , despite a market environment that became less favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. midway Midway, island group (2 sq mi/5.2 sq km), central Pacific, c.1,150 mi (1,850 km) NW of Honolulu, comprising Sand and Eastern islands with the surrounding atoll. Discovered by Americans in 1859, Midway was annexed in 1867. A cable station was opened in 1903. through the period. --GPC's second quarter 2006 net revenues were $3.0 billion, up 19% from the year-ago quarter. The increase was primarily driven by fee-based revenues, including record fees from annuitized-revenue products, record net interest profit, and higher transaction and 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 revenues. GPC's second quarter pre-tax earnings of $701 million increased 53% from the year-ago quarter, as the pre-tax profit margin of 23.0% improved by more than 5 percentage points, demonstrating the operating leverage inherent in GPC's scale platform. --Turnover among Financial Advisors (FAs), particularly top-producing FAs, remained near historical lows. 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 15,520 at quarter-end, as GPC continued to successfully employ its disciplined strategy of actively recruiting and training FAs. --Total client assets in GPC accounts increased 11% from the year-ago quarter, to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $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. . Second quarter net inflows of client assets into annuitized-revenue products were $10 billion. --For the first six months of 2006, GPC's net revenues increased 16% to $6.0 billion, driven by growth in nearly every major revenue category. Pre-tax earnings increased 39% to $1.3 billion, demonstrating the continued operating discipline in this business. GPC's year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. pre-tax profit margin was 22.5%, up 3.8 percentage points from 18.7% in the first half of 2005. Merrill Lynch Investment Managers (MLIM MLIM Merrill Lynch Investment Managers (UK) ) MLIM continued its positive momentum during the second quarter of 2006, as strong relative investment performance drove solid net flows despite a market environment that became less favorable midway through the period. 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, while working toward completion of the pending merger 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) ). --MLIM's second quarter 2006 net revenues were $630 million, up 56% from the 2005 second quarter. The year-over-year increase in net revenues was driven principally by net inflows and higher long-term asset Long-term assets or noncurrent assets are those assets usually in service over one year such as lands and buildings, plants and equipment, and long-term investments. These often receive favorable tax treatment over current assets. values. Pre-tax earnings were $240 million, nearly double those of the year-ago quarter, due to significantly higher net revenues and strong operating leverage, which was enhanced by net benefits related to the pending merger. MLIM's pre-tax profit margin for the quarter was 38.1%. --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 $589 billion at the end of the second quarter, up 23% from a year ago. Net inflows for the quarter were $8 billion, primarily driven by 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 from a channel perspective and by equity and fixed income from a product perspective. --MLIM's net revenues for the first half of 2006 increased 47% over the first half of 2005, to $1.2 billion, driven by strong net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight and asset appreciation. Pre-tax earnings were up 86% to $462 million, and the year-to-date pre-tax profit margin was 38.5%, up over 8 percentage points from 30.3% in the first half of 2005, due to strong operating leverage arising from expense discipline. Compensation Expenses Excluding the one-time compensation expenses in the first quarter, year-to-date compensation and benefits expenses were 49.4% of net revenues, compared to 49.7% for the prior-year period. Non-compensation Expenses Non-compensation expenses were $1.8 billion for the second quarter of 2006, up 16% from the second quarter of 2005. Non-compensation expenses as a percentage of net revenues were 22.4% in the 2006 second quarter, down from 24.9% in the year-ago quarter. Details of the significant changes in non-compensation expenses from the second quarter of 2005 are as follows: --Communication and technology costs were $429 million, up 9% due primarily to higher systems consulting costs related to investments for growth, and higher market information and communication costs. --Brokerage, clearing, and exchange fees were $253 million, up 17% due primarily to higher transaction volumes. --Occupancy costs and related depreciation were $249 million, up 10% due principally to higher office rental RENTAL. A roll or list of the rents of an estate containing the description of the lands let, the names of the tenants, and other particulars connected with such estate. This is the same as rent roll, from which it is said to be corrupted. expenses. --Advertising and market development costs were $191 million, up 19% due primarily to higher travel expenses associated with increased activity levels, and increased advertising costs. --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 $145 million, up from $35 million due principally to increased expenses associated with the related increase in revenues from consolidated investments. Total non-compensation expenses increased 13% sequentially, largely due to increased minority interest associated with investment gains and 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. provisions. Income Taxes Merrill Mer·rill , James 1926-1995. American poet whose works include Divine Comedies (1976), which won a Pulitzer Prize. Lynch's effective tax rate was 30.5% for the second quarter, bringing the year-to-date effective rate to 28.3%. Excluding the one-time compensation expenses, Merrill Lynch's year-to-date effective tax rate was 30.1%, up from 28.1% for the prior-year period. Share Repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. As part of its active management of equity capital, Merrill Lynch repurchased 41.4 million shares of its common stock for $3.0 billion during the second quarter. At quarter end, $2.3 billion of 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: 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. capacity remained of the $6 billion repurchase program authorized in February February: see month. 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 56,000 at the end of the second quarter of 2006, a net increase of 500 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 second 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 $589 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 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. 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 10-Q Form 10-Q See 10-Q. and 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 and 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. . 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
----------------------------------------------------------------------
Preliminary Unaudited Earnings Summary
Percent Inc /
For the Three Months Ended (Dec)
-------------------------- ---------------
June 30, March 31, July 1, 2Q06 2Q06
(in millions, except per vs. vs.
share amounts) 2006 2006 2005 1Q06 2Q05
-------- --------- ------- ------ ------
Net Revenues
Asset management and
portfolio service fees $1,773 $1,679 $1,431 6 % 24 %
Commissions 1,586 1,602 1,247 (1) 27
Investment banking 1,162 965 920 20 26
Principal transactions 1,182 1,993 1,006 (41) 17
Revenues from consolidated
investments 186 104 84 79 121
Other 1,110 554 664 100 67
-------- --------- -------
Subtotal 6,999 6,897 5,352 1 31
Interest and dividend
revenues 9,690 8,664 5,974 12 62
Less interest expense 8,531 7,599 5,007 12 70
-------- --------- -------
Net interest profit 1,159 1,065 967 9 20
-------- --------- -------
Total Net Revenues 8,158 7,962 6,319 2 29
-------- --------- -------
Non-Interest Expenses
Compensation and benefits 3,980 5,750 3,148 (31) 26
Communications and
technology 429 453 395 (5) 9
Brokerage, clearing, and
exchange fees 253 248 216 2 17
Occupancy and related
depreciation 249 241 227 3 10
Professional fees 196 200 183 (2) 7
Advertising and market
development 191 144 160 33 19
Expenses of consolidated
investments 145 47 35 209 314
Office supplies and
postage 57 57 51 0 12
Other 309 229 309 35 0
-------- --------- -------
Total Non-Interest
Expenses 5,809 7,369 4,724 (21) 23
-------- --------- -------
Earnings Before Income
Taxes 2,349 593 1,595 296 47
Income tax expense 716 118 460 507 56
-------- --------- -------
Net Earnings $1,633 $475 $1,135 244 44
======== ========= =======
Preferred Stock Dividends $45 $43 $17 5 165
======== ========= =======
Net Earnings Applicable to
Common Stockholders $1,588 $432 $1,118 268 42
======== ========= =======
Earnings Per Common Share
Basic $1.79 $0.49 $1.25 265 43
Diluted $1.63 $0.44 $1.14 270 43
Average Shares Used in
Computing Earnings Per
Common Share
Basic 885.4 883.7 897.5 0 (1)
Diluted 973.3 981.1 978.5 (1) (1)
Annualized Return on
Average Common Equity 18.6% 5.1% 14.3%
----------------------------------------------------------------------
Merrill Lynch & Co., Inc. Attachment II
----------------------------------------------------------------------
Preliminary Unaudited Earnings Summary
For the Six Months
Ended
------------------
June 30, July 1, Percent
Inc /
(in millions, except per share amounts) 2006 2005 (Dec)
-------- -------- ----------
Net Revenues
Asset management and portfolio service
fees $3,452 $2,866 20 %
Commissions 3,188 2,588 23
Investment banking 2,127 1,733 23
Principal transactions 3,175 1,951 63
Revenues from consolidated investments 290 211 37
Other 1,664 1,034 61
-------- --------
Subtotal 13,896 10,383 34
Interest and dividend revenues 18,354 11,505 60
Less interest expense 16,130 9,337 73
-------- --------
Net interest profit 2,224 2,168 3
-------- --------
Total Net Revenues 16,120 12,551 28
-------- --------
Non-Interest Expenses
Compensation and benefits 9,730 6,244 56
Communications and technology 882 791 12
Brokerage, clearing, and exchange fees 501 435 15
Occupancy and related depreciation 490 460 7
Professional fees 396 361 10
Advertising and market development 335 286 17
Expenses of consolidated investments 192 120 60
Office supplies and postage 114 103 11
Other 538 487 10
-------- --------
Total Non-Interest Expenses 13,178 9,287 42
-------- --------
Earnings Before Income Taxes 2,942 3,264 (10)
Income tax expense 834 917 (9)
-------- --------
Net Earnings $2,108 $2,347 (10)
======== ========
Preferred Stock Dividends $88 $24 267
======== ========
Earnings Per Common Share
Basic $2.28 $2.57 (11)
Diluted $2.07 $2.36 (12)
Average Shares Used in Computing
Earnings Per Common Share
Basic 884.6 902.7 (2)
Diluted 977.2 985.9 (1)
Annualized Return on Average Common
Equity 11.9% 14.9%
----------------------------------------------------------------------
Merrill Lynch & Co., Inc. Attachment III
----------------------------------------------------------------------
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 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 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 de·pict tr.v. de·pict·ed, de·pict·ing, de·picts 1. To represent in a picture or sculpture. 2. To represent in words; describe. See Synonyms at represent. 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
-------------------------------------
(in millions, except per share Excluding One- Impact of One-
amounts) time time
Compensation Compensation GAAP
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
For the Six Months Ended
June 30, 2006
-------------------------------------
(in millions, except per share Excluding One- Impact of
amounts) time One-time
Compensation Compensation GAAP
Expenses(1) Expenses(1) Basis
-------------- -------------- -------
Net Revenues $16,120 $- $16,120
-------------- -------------- -------
Non-Interest Expenses
Compensation and benefits 7,971 1,759 9,730
Non-compensation expenses 3,448 - 3,448
-------------- -------------- -------
Total Non-Interest Expenses 11,419 1,759 13,178
-------------- -------------- -------
Earnings Before Income Taxes 4,701 (1,759) 2,942
Income Tax Expense 1,416 (582) 834
-------------- -------------- -------
Net Earnings $3,285 $(1,177) $2,108
============== ============== =======
Preferred Stock Dividends $88 $- $88
============== ============== =======
Net Earnings Applicable to Common
Stockholders $3,197 $(1,177) $2,020
============== ============== =======
Earnings Per Common Share
Basic $3.63 $(1.35) $2.28
Diluted $3.28 $(1.21) $2.07
Average Shares Used in Computing
Earnings Per Common Share
Basic 881.7 2.9 884.6
Diluted 974.4 2.8 977.2
----------------------------------------------------------------------
Financial Ratios
----------------
For the Three Months For the Six Months
Ended Ended
March 31, 2006 June 30, 2006
---------------------- ---------------------
Excluding Excluding
One-time One-time
Compensation GAAP Compensation GAAP
(in millions) Expenses Basis Expenses(1) Basis
---------------------- ---------------------
Compensation and
benefits (a) $3,991 $5,750 $7,971 $9,730
Net Revenues (b) 7,962 7,962 16,120 16,120
Ratio of compensation
and benefits to net
revenues (a)/(b) 50.1% 72.2% 49.4% 60.4%
----------------------------------------------- ---------------------
Income Tax Expense (a) $700 $118 $1,416 $834
Earnings Before Income
Taxes (b) 2,352 593 4,701 2,942
Effective Tax Rate (a)/(b) 29.8% 19.9% 30.1% 28.3%
----------------------------------------------- ---------------------
Earnings Before Income
Taxes (a) $2,352 $593 $4,701 $2,942
Net Revenues (b) 7,962 7,962 16,120 16,120
Pre-tax Profit Margin
(a)/(b) 29.5% 7.4% 29.2% 18.3%
----------------------------------------------- ---------------------
Average Common Equity $33,800 $33,800 $33,848 $33,848
Average impact of one-
time compensation
expenses (145) - (145) -
------------ --------- ------------ --------
Average Common Equity
(a) 33,655 33,800 33,703 33,848
Annualized Net Earnings
Applicable to Common
Stockholders (b) 6,436 1,728 6,394 4,040
Annualized Return on
Average Common Equity
(b)/(a) 19.1% 5.1% 19.0% 11.9%
----------------------------------------------------------------------
(1) For purposes of comparison with previously published results,
data excluding the impact of the one-time compensation
expenses for the first six months of 2006 assumes the impact
of the one-time compensation expenses is limited to the first
quarter of 2006.
Merrill Lynch & Co., Inc. Attachment IV
----------------------------------------------------------------------
Preliminary Segment Data (unaudited)
Percent
For the Three Months Ended Inc / (Dec)
-----------------------------------------
2Q06 2Q06
June 30, March 31, July 1, vs. vs.
(dollars in millions) 2006 2006 2005 1Q06 2Q05
-------- -------- -------- ------- ------
Global Markets & Investment
Banking
Global Markets
Debt Markets $1,725 $2,091 $1,606 (18)% 7 %
Equity Markets 1,877 1,573 1,022 19 84
-------- -------- --------
Total Global Markets
net revenues 3,602 3,664 2,628 (2) 37
Investment Banking (1)
Origination:
Debt 367 395 374 (7) (2)
Equity 315 237 223 33 41
Strategic Advisory
Services 296 257 214 15 38
-------- -------- --------
Total Investment
Banking net revenues 978 889 811 10 21
-------- -------- --------
Total net revenues (a) 4,580 4,553 3,439 1 33
-------- -------- --------
Pre-tax earnings 1,493 212 1,098 604 36
Impact of one-time
compensation expenses - 1,369 - (100) N/M
-------- -------- --------
Pre-tax earnings
excluding one-time
compensation expenses
(b) 1,493 1,581 1,098 (6) 36
Pre-tax profit margin 32.6% 4.7% 31.9%
Pre-tax profit margin
excluding one-time
compensation expenses
(b)/(a) 32.6% 34.7% 31.9%
----------------------------------------------------------------------
Global Private Client
Fee-based revenues $1,533 $1,458 $1,286 5 19
Transactional and
origination revenues 902 899 786 0 15
Net interest profit and
related hedges(2) 554 527 420 5 32
Other revenues 56 55 76 2 (26)
-------- -------- --------
Total net revenues (a) 3,045 2,939 2,568 4 19
-------- -------- --------
Pre-tax earnings 701 365 457 92 53
Impact of one-time
compensation expenses - 281 - (100) N/M
-------- -------- --------
Pre-tax earnings
excluding one-time
compensation expenses
(b) 701 646 457 9 53
Pre-tax profit margin 23.0% 12.4% 17.8%
Pre-tax profit margin
excluding one-time
compensation expenses
(b)/(a) 23.0% 22.0% 17.8%
----------------------------------------------------------------------
Merrill Lynch Investment
Managers
Total net revenues (a) $630 $570 $405 11 56
Pre-tax earnings 240 113 121 112 98
Impact of one-time
compensation expenses - 109 - (100) N/M
-------- -------- --------
Pre-tax earnings
excluding one-time
compensation expenses
(b) 240 222 121 8 98
Pre-tax profit margin 38.1% 19.8% 29.9%
Pre-tax profit margin
excluding one-time
compensation expenses
(b)/(a) 38.1% 38.9% 29.9%
----------------------------------------------------------------------
Corporate
Total net revenues $(97) $(100) $(93) 3 (4)
Pre-tax earnings (85) (97) (81) 12 (5)
----------------------------------------------------------------------
Total
Total net revenues (a) $8,158 $7,962 $6,319 2 29
Pre-tax earnings 2,349 593 1,595 296 47
Impact of one-time
compensation expenses - 1,759 - (100) N/M
-------- -------- --------
Pre-tax earnings
excluding one-time
compensation expenses
(b) 2,349 2,352 1,595 (0) 47
Pre-tax profit margin 28.8% 7.4% 25.2%
Pre-tax profit margin
excluding one-time
compensation expenses
(b)/(a) 28.8% 29.5% 25.2%
----------------------------------------------------------------------
Preliminary Segment Data (unaudited)
For the Six Months Ended
------------------------------
Percent
June 30, July 1, Inc /
(dollars in millions) 2006 2005 (Dec)
---------- --------- ----------
Global Markets & Investment Banking
Global Markets
Debt Markets $3,816 $3,268 17 %
Equity Markets 3,450 1,993 73
---------- ---------
Total Global Markets net revenues 7,266 5,261 38
Investment Banking (1)
Origination:
Debt 762 656 16
Equity 552 465 19
Strategic Advisory Services 553 374 48
---------- ---------
Total Investment Banking net
revenues 1,867 1,495 25
---------- ---------
Total net revenues (a) 9,133 6,756 35
---------- ---------
Pre-tax earnings 1,705 2,222 (23)
Impact of one-time compensation
expenses 1,369 - N/M
---------- ---------
Pre-tax earnings excluding one-
time compensation expenses (b) 3,074 2,222 38
Pre-tax profit margin 18.7% 32.9%
Pre-tax profit margin excluding
one-time compensation expenses
(b)/(a) 33.7% 32.9%
----------------------------------------------------------------------
Global Private Client
Fee-based revenues $2,991 $2,557 17
Transactional and origination
revenues 1,801 1,643 10
Net interest profit and related
hedges(2) 1,081 821 32
Other revenues 111 150 (26)
---------- ---------
Total net revenues (a) 5,984 5,171 16
---------- ---------
Pre-tax earnings 1,066 967 10
Impact of one-time compensation
expenses 281 - N/M
---------- ---------
Pre-tax earnings excluding one-
time compensation expenses (b) 1,347 967 39
Pre-tax profit margin 17.8% 18.7%
Pre-tax profit margin excluding
one-time compensation expenses
(b)/(a) 22.5% 18.7%
----------------------------------------------------------------------
Merrill Lynch Investment Managers
Total net revenues (a) $1,200 $818 47
Pre-tax earnings 353 248 42
Impact of one-time compensation
expenses 109 - N/M
---------- ---------
Pre-tax earnings excluding one-
time compensation expenses (b) 462 248 86
Pre-tax profit margin 29.4% 30.3%
Pre-tax profit margin excluding
one-time compensation expenses
(b)/(a) 38.5% 30.3%
----------------------------------------------------------------------
Corporate
Total net revenues $(197) $(194) (2)
Pre-tax earnings (182) (173) (5)
----------------------------------------------------------------------
Total
Total net revenues (a) $16,120 $12,551 28
Pre-tax earnings 2,942 3,264 (10)
Impact of one-time compensation
expenses 1,759 - N/M
---------- ---------
Pre-tax earnings excluding one-
time compensation expenses (b) 4,701 3,264 44
Pre-tax profit margin 18.3% 26.0%
Pre-tax profit margin excluding
one-time compensation expenses
(b)/(a) 29.2% 26.0%
----------------------------------------------------------------------
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 V
----------------------------------------------------------------------
Consolidated Quarterly (in millions)
Earnings (unaudited)
2Q05 3Q05 4Q05 1Q06 2Q06
------- ------- ------- ------ ----------
Net Revenues
Asset management and
portfolio service fees
Portfolio service fees $670 $689 $760 $747 $797
Asset management fees 472 527 556 619 641
Account fees 121 123 123 111 114
Other fees 168 188 199 202 221
------- ------- ------- ------ ----------
Total 1,431 1,527 1,638 1,679 1,773
Commissions
Listed and over-the-
counter securities 747 823 878 990 1,027
Mutual funds 353 383 401 490 470
Other 147 136 162 122 89
------- ------- ------- ------ ----------
Total 1,247 1,342 1,441 1,602 1,586
Investment banking
Underwriting 706 720 632 720 865
Strategic advisory 214 160 349 245 297
------- ------- ------- ------ ----------
Total 920 880 981 965 1,162
Principal transactions 1,006 917 715 1,993 1,182
Revenues from consolidated
investments 84 142 85 104 186
Other 664 548 613 554 1,110
------- ------- ------- ------ ----------
Subtotal 5,352 5,356 5,473 6,897 6,999
Interest and dividend
revenues 5,974 7,039 8,027 8,664 9,690
Less interest expense 5,007 5,717 6,720 7,599 8,531
------- ------- ------- ------ ----------
Net interest profit 967 1,322 1,307 1,065 1,159
------- ------- ------- ------ ----------
Total Net Revenues 6,319 6,678 6,780 7,962 8,158
------- ------- ------- ------ ----------
Non-Interest Expenses
Compensation and benefits 3,148 3,270 2,927 5,750 3,980
Communications and
technology 395 405 412 453 429
Brokerage, clearing, and
exchange fees 216 190 217 248 253
Occupancy and related
depreciation 227 235 243 241 249
Professional fees 183 173 193 200 196
Advertising and market
development 160 138 175 144 191
Office supplies and
postage 51 48 59 57 57
Expenses of consolidated
investments 35 91 47 47 145
Other 309 192 476 229 309
------- ------- ------- ------ ----------
Total Non-Interest
Expenses 4,724 4,742 4,749 7,369 5,809
------- ------- ------- ------ ----------
Earnings Before Income Taxes 1,595 1,936 2,031 593 2,349
Income tax expense 460 560 638 118 716
------- ------- ------- ------ ----------
Net Earnings $1,135 $1,376 $1,393 $475 $1,633
----------------------------------------------------------------------
Per Common Share Data
2Q05 3Q05 4Q05 1Q06 2Q06
------- ------- ------- ------ ----------
Earnings - Basic $1.25 $1.54 $1.56 $0.49 $1.79
Earnings - Diluted 1.14 1.40 1.41 0.44 1.63
Dividends paid 0.20 0.20 0.20 0.25 0.25
Book value 33.63 34.66 35.82 37.19 37.31 Est.
----------------------------------------------------------------------
Merrill Lynch & Co., Inc. Attachment VI
----------------------------------------------------------------------
Percentage of Quarterly Net Revenues (unaudited)
2Q05 3Q05 4Q05 1Q06 2Q06
------ ------ ------ ------ ------
Net Revenues
Asset management and portfolio
service fees
Portfolio service fees 10.6% 10.3% 11.2% 9.4% 9.8%
Asset management fees 7.5% 7.9% 8.2% 7.8% 7.9%
Account fees 1.9% 1.8% 1.8% 1.4% 1.4%
Other fees 2.6% 2.9% 3.0% 2.5% 2.6%
------ ------ ------ ------ ------
Total 22.6% 22.9% 24.2% 21.1% 21.7%
Commissions
Listed and over-the-counter
securities 11.8% 12.3% 12.9% 12.4% 12.6%
Mutual funds 5.6% 5.7% 5.9% 6.2% 5.8%
Other 2.3% 2.1% 2.5% 1.5% 1.0%
------ ------ ------ ------ ------
Total 19.7% 20.1% 21.3% 20.1% 19.4%
Investment banking
Underwriting 11.2% 10.8% 9.3% 9.0% 10.6%
Strategic advisory 3.4% 2.4% 5.1% 3.1% 3.6%
------ ------ ------ ------ ------
Total 14.6% 13.2% 14.4% 12.1% 14.2%
Principal transactions 15.9% 13.7% 10.5% 25.0% 14.5%
Revenues from consolidated
investments 1.3% 2.1% 1.3% 1.3% 2.3%
Other 10.6% 8.2% 9.0% 7.0% 13.7%
------ ------ ------ ------ ------
Subtotal 84.7% 80.2% 80.7% 86.6% 85.8%
Interest and dividend revenues 94.5% 105.4% 118.4% 108.8% 118.8%
Less interest expense 79.2% 85.6% 99.1% 95.4% 104.6%
------ ------ ------ ------ ------
Net interest profit 15.3% 19.8% 19.3% 13.4% 14.2%
------ ------ ------ ------ ------
Total Net Revenues 100.0% 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------ ------
Non-Interest Expenses
Compensation and benefits 49.8% 49.0% 43.2% 72.2% 48.8%
Communications and technology 6.3% 6.1% 6.1% 5.7% 5.3%
Brokerage, clearing, and
exchange fees 3.4% 2.8% 3.2% 3.1% 3.1%
Occupancy and related
depreciation 3.6% 3.5% 3.6% 3.0% 3.1%
Professional fees 2.9% 2.6% 2.8% 2.5% 2.4%
Advertising and market
development 2.5% 2.1% 2.6% 1.8% 2.3%
Office supplies and postage 0.8% 0.7% 0.9% 0.7% 0.7%
Expenses of consolidated
investments 0.6% 1.4% 0.7% 0.6% 1.8%
Other 4.9% 2.8% 6.9% 3.0% 3.7%
------ ------ ------ ------ ------
Total Non-Interest Expenses 74.8% 71.0% 70.0% 92.6% 71.2%
------ ------ ------ ------ ------
Earnings Before Income Taxes 25.2% 29.0% 30.0% 7.4% 28.8%
Income tax expense 7.2% 8.4% 9.5% 1.4% 8.8%
------ ------ ------ ------ ------
Net Earnings 18.0% 20.6% 20.5% 6.0% 20.0%
----------------------------------------------------------------------
Common shares outstanding (in
millions):
2Q05 3Q05 4Q05 1Q06 2Q06
------ ------ ------ ------ ------
Weighted-average - basic 897.5 881.4 876.2 883.7 885.4
Weighted-average - diluted 978.5 968.5 970.7 981.1 973.3
Period-end 930.9 921.7 919.2 933.4 898.1
----------------------------------------------------------------------
Merrill Lynch & Co., Inc. Attachment VII
----------------------------------------------------------------------
Supplemental Data (unaudited) (dollars in billions)
2Q05 3Q05 4Q05 1Q06 2Q06
------- ------- ------- ------- -------
Client Assets
Private Client
U.S. $1,234 $1,271 $1,341 $1,381 $1,370
Non - U.S. 115 113 117 121 124
------- ------- ------- ------- -------
Total Private Client Assets 1,349 1,384 1,458 1,502 1,494
MLIM direct sales (1) 236 272 291 316 326
------- ------- ------- ------- -------
Total Client Assets $1,585 $1,656 $1,749 $1,818 $1,820
======= ======= ======= ======= =======
Assets Under Management (2) $478 $524 $544 $581 $589
Retail 218 231 245 272 275
Institutional 215 246 250 259 266
Retail Separate Accounts 45 47 49 50 48
U.S. 311 322 333 347 346
Non-U.S. 167 202 211 234 243
Equity 249 285 299 330 333
Retail Money Market 46 45 45 48 46
Institutional Liquidity
Funds 68 74 77 78 83
Fixed Income 115 120 123 125 127
----------------------------------------------------------------------
Net New Money
All Private Client
Accounts (3) $7 $11 $17 $18 $7
Annuitized-Revenue
Products (3) (4) $8 $10 $10 $13 $10
Assets Under Management $(2) $12 $11 $15 $8
----------------------------------------------------------------------
Balance Sheet Information: (5)
Commercial Paper and
Other Short-term
Borrowings $6.8 $4.1 $3.9 $9.4 $13.3
Deposits 79.5 77.8 80.0 81.1 79.4
Long-term Borrowings 117.5 129.6 132.4 134.7 140.1
Long-term debt issued to
TOPrS(SM) Partnerships 3.1 3.1 3.1 3.1 3.1
Stockholders' Equity: (5)
Preferred Stockholders'
Equity 1.7 1.7 2.7 3.1 3.1
Common Stockholders'
Equity 31.3 31.9 32.9 34.7 33.6
------- ------- ------- ------- -------
Total Stockholders' Equity 33.0 33.6 35.6 37.8 36.7
----------------------------------------------------------------------
Full-Time Employees (6) 51,800 53,100 54,600 55,500 56,000
Private Client Financial
Advisors (7) 14,420 14,690 15,160 15,350 15,520
----------------------------------------------------------------------
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 at the end of 2Q05,
3Q05, 4Q05 and 1Q06, and $6 billion at the end of 2Q06.
(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 system conversion in early March.
(4) Includes both net new client assets into annuitized-revenue
products, as well as existing client assets transferred into
annuitized-revenue products.
(5) Balance Sheet Information and Stockholders' Equity are estimated
for 2Q06.
(6) Excludes 100 full-time employees on salary continuation severance
at the end of 2Q05 and 3Q05; 200 at the end of 4Q05 and 1Q06; and
300 at the end of 2Q06.
(7) Includes 140 Financial Advisors associated with the Mitsubishi UFJ
joint venture at the end of 2Q06.
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