-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OVbzOWA2xVVA4ghnGT957ZTriX9gAGkdffV/fkzrkOZwg9rkNU+cTg2UxApmJRc/ Uh/qaWrO0iNz+o45oI7m3Q== 0001047469-98-001551.txt : 19980122 0001047469-98-001551.hdr.sgml : 19980122 ACCESSION NUMBER: 0001047469-98-001551 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980120 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980121 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH & CO INC CENTRAL INDEX KEY: 0000065100 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 132740599 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07182 FILM NUMBER: 98509637 BUSINESS ADDRESS: STREET 1: 250 VESEY ST STREET 2: WORLD FINANCIAL CTR N TOWER CITY: NEW YORK STATE: NY ZIP: 10281-1334 BUSINESS PHONE: 2124491000 MAIL ADDRESS: STREET 1: 250 VESEY ST STREET 2: WORLD FINANCIAL CTR N TOWER CITY: NEW YORK STATE: NY ZIP: 10281-1334 8-K 1 FORM 8K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported):January 20, 1998 ------------------------------------------------------------------ Merrill Lynch & Co., Inc. ------------------------------------------------------------------ (Exact Name of Registrant as Specified in Charter) Delaware 1-7182 13-2740599 ------------------------------------------------------------------ (State or Other (Commission (I.R.S. Employer Jurisdiction of File Number) Identification No.) Incorporation) World Financial Center, North Tower, New York, New York 10281-1332 --------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (212) 449-1000 --------------------------------------------------------------------- --------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report.) ITEM 5. OTHER EVENTS Filed herewith is the Preliminary Unaudited Earnings Summary, as contained in a press release dated January 20, 1998 for Merrill Lynch & Co., Inc. ("Merrill Lynch") for the three months and the year ended December 26, 1997. The results of operations set forth therein for such periods are unaudited. All adjustments, consisting only of normal recurring accruals, that are, in the opinion of management, necessary for a fair presentation of the results of operations for the periods presented have been included. The nature of Merrill Lynch's business is such that the results for any interim period are not necessarily indicative of the results for a full year. For the three months and the year ended December 26, 1997, Merrill Lynch repurchased in the open market 0.1 million and 13.7 million shares of its common stock, respectively. Merrill Lynch reported on January 20, 1998 fourth quarter net earnings of $466 million, up 5% from last year's fourth quarter. Earnings per common share were $1.37 basic and $1.17 diluted, compared with $1.32 basic and $1.14 diluted in the 1996 fourth quarter and $1.46 basic and $1.25 diluted in the 1997 third quarter. Excluding the effect of two special items that added 18 cents to diluted earnings per share in the fourth quarter of 1996, diluted earnings rose 22%. Net earnings for 1997 were a record $1.9 billion, up 18% from the $1.6 billion reported in 1996. Earnings per common share were $5.63 basic and $4.83 diluted in 1997, compared with $4.65 basic and $4.11 diluted in 1996. Record revenues were attained in commissions, principal transactions, investment banking, and asset management and portfolio service fees. Annualized return on average common equity for the 1997 fourth quarter was approximately 23.9%. For the year, ROE was approximately 26.8%, the same as for 1996. 4TH QUARTER REVENUES Net revenues rose 14% from the 1996 fourth quarter to $3.9 billion. Quarterly revenue records were achieved in investment banking and asset management and portfolio service fees. Commission revenues were $1.2 billion, up 27% from the 1996 fourth quarter due to increases in global listed securities volume and strong domestic mutual fund activity. Principal transactions revenues, affected by market declines in Asia and other emerging markets, decreased 19% from a year ago to $603 million. Trading revenues were lower in most fixed-income products, with losses incurred in medium term notes and corporate bonds. Revenues also declined in interest rate and currency swaps and in non-U.S. equities. These declines were partially offset by increased revenues in equity derivatives, foreign exchange, and commodities trading. 2 Investment banking revenues increased 60% to $825 million, primarily as a result of record underwriting revenue. Fees from equity issuances nearly doubled and were sharply higher in convertibles and defined asset funds. Merrill Lynch's share of lead-managed equity and equity-linked issues worldwide increased to 18.0% in the fourth quarter, compared to 12.7% for the second-ranked firm, according to Securities Data Co., illustrating Merrill Lynch's strong underwriting capabilities in difficult markets. Strategic services fees continued to benefit from strong merger and acquisition activity, attributed in part to consolidation across various industries. Asset management and portfolio service fees were $751 million, up 25% from the 1996 fourth quarter, as a result of continued growth in assets under management and other fee-based products, such as Merrill Lynch Consults (Registered Trademark), Mutual Fund Advisor (Service Mark), and Asset Power (Registered Trademark). Other revenues were $202 million, down 28% from last year's fourth quarter that included a $155 million pre-tax gain from the partial sale of a minority interest in Bloomberg L.P. Net interest profit decreased 6% to $257 million. 4TH QUARTER EXPENSES Non-interest expenses increased 16% from the 1996 fourth quarter to $3.1 billion. The largest expense category, compensation and benefits, was up 18% to $2.0 billion due to higher incentive and production-related compensation and increased headcount. Compensation and benefits expense was 50.7% of net revenues in the 1997 fourth quarter, compared with 49.1% in the corresponding 1996 fourth quarter. Communications and equipment rental and depreciation and amortization expenses rose 8% in the aggregate to $284 million. Higher business volume and ongoing investments in technology contributed to the increase. Occupancy costs decreased 25% to $122 million as a result of a non-recurring 1996 fourth quarter pre-tax charge of $40 million. Professional fees increased 29% to $206 million because of higher systems and management consulting costs related to various technology projects and other strategic market studies. Advertising and market development expense was up 2% to $153 million due in part to increased business development and related travel costs. Brokerage, clearing, and exchange fees rose 34% to $138 million as a result of higher global securities trading volume. Other expenses were up 31% to $274 million, with increases in provisions for various business activities and office and postage costs. The 1997 fourth quarter effective tax rate was 34.3%, compared with 34.1% a year ago. Preferred stockholders' equity, common stockholders' equity, long-term borrowings, preferred securities issued by subsidiaries, and book value per common share as of December 26, 1997 were approximately $0.4 billion, $7.9 billion, $43.1 billion, $0.6 billion, and $23.63, respectively. 3 EFFECT OF MERCURY ACQUISITION The acquisition of Mercury Asset Management was recorded at year-end 1997. The effect on the statement of earnings was not material. Goodwill of approximately $4.8 billion was recorded and will be amortized over 30 years as a non-cash expense. Going forward, cash earnings and cash return on equity will be the most relevant measures of financial performance because they best illustrate Merrill Lynch's operating performance and ability to support growth. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) EXHIBITS (99) Additional Exhibits (i) Preliminary Unaudited Earnings Summary for the three months and the year ended December 26, 1997. 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. MERRILL LYNCH & CO., INC. ----------------------------- (Registrant) By: /s/ Joseph T. Willett ----------------------------- Joseph T. Willett Senior Vice President Chief Financial Officer Date: January 20, 1998 5 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION PAGE (99) Additional Exhibits (i) Preliminary Unaudited Earnings Summary for the three months and the year ended December 26, 1997 7-8 6 EX-99.(I) 2 EXHIBIT 99(I)
Exhibit 99(i) MERRILL LYNCH & CO., INC. PRELIMINARY UNAUDITED EARNINGS SUMMARY For Three Months Ended Percent Inc/(Dec) December 26, September 26, December 27, 4Q97 vs. 4Q97 vs. [In millions, except per share amounts] 1997 1997 1996 3Q97 4Q96 ------------ ------------- ------------ -------- -------- Revenues: Commissions $ 1,230 $ 1,244 $ 967 (1.1)% 27.2 % Interest and Dividends 4,512 4,397 3,492 2.6 29.2 Principal Transactions 603 951 744 (36.6) (19.0) Investment Banking 825 691 517 19.4 59.7 Asset Management and Portfolio Service Fees 751 722 601 4.1 25.1 Other 202 141 280 42.8 (28.2) ------------ ------------- ------------ Total Revenues 8,123 8,146 6,601 (0.3) 23.1 Interest Expense 4,255 4,153 3,219 2.5 32.2 ------------ ------------- ------------ Net Revenues 3,868 3,993 3,382 (3.1) 14.4 ------------ ------------- ------------ Non-Interest Expenses: Compensation and Benefits 1,962 2,008 1,660 (2.3) 18.2 Communications and Equipment Rental 166 175 151 (5.2) 10.1 Occupancy 122 124 163 (1.4) (24.9) Depreciation and Amortization 118 115 111 2.9 6.3 Professional Fees 206 211 160 (2.4) 29.0 Advertising and Market Development 153 145 150 5.5 1.6 Brokerage, Clearing, and Exchange Fees 138 137 103 0.3 34.1 Other 274 307 209 (10.7) 31.2 ------------ ------------- ------------ Total Non-Interest Expenses 3,139 3,222 2,707 (2.6) 16.0 ------------ ------------- ------------ Earnings Before Income Taxes and Dividends on Preferred Securities Issued by Subsidiaries 729 771 675 (5.5) 7.9 Income Tax Expense 250 266 230 (5.8) 8.7 Dividends on Preferred Securities Issued by Subsidiaries 13 12 - - N/M ------------ ------------- ------------ Net Earnings $ 466 $ 493 $ 445 (5.5) 4.7 ------------ ------------- ------------ ------------ ------------- ------------ Preferred Stock Dividends $ 10 $ 9 $ 12 - (16.7) ------------ ------------- ------------ Net Earnings Applicable to Common Stockholders $ 456 $ 484 $ 433 (5.6) 5.3 ------------ ------------- ------------ ------------ ------------- ------------ Earnings per Common Share (A)(B): Basic $1.37 $1.46 $1.32 (6.2) 3.8 Diluted $1.17 $1.25 $1.14 (6.4) 2.6 Average Shares (A): Basic 333.9 331.0 328.8 0.9 1.5 Diluted 390.8 387.6 378.9 0.8 3.1
(A) Share and per share amounts have been restated for the two-for-one common stock split, effected in the form of a 100% stock dividend, paid on May 30, 1997. (B) Effective December 1997, basic and diluted earnings per share replaced the primary and fully diluted calculations in accordance with Statement of Financial Accounting Standards No. 128. Note: Percentages are based on actual numbers before rounding. 7 Exhibit 99(i) MERRILL LYNCH & CO., INC. PRELIMINARY UNAUDITED EARNINGS SUMMARY
For the Year Ended [In millions, except per share amounts] December 26, December 27, Percent 1997 1996 Inc / (Dec) ------------ ------------ ----------- Revenues: Commissions $ 4,667 $ 3,786 23.3 % Interest and Dividends 17,087 12,899 32.5 Principal Transactions 3,769 3,454 9.1 Investment Banking 2,749 1,945 41.3 Asset Management and Portfolio Service Fees 2,789 2,261 23.3 Other 670 666 0.6 ------------ ------------ Total Revenues 31,731 25,011 26.9 Interest Expense 16,062 11,895 35.0 ------------ ------------ Net Revenues 15,669 13,116 19.5 ------------ ------------ Non-Interest Expenses: Compensation and Benefits 7,962 6,704 18.8 Communications and Equipment Rental 669 559 19.6 Occupancy 491 508 (3.5) Depreciation and Amortization 446 411 8.5 Professional Fees 813 582 39.6 Advertising and Market Development 597 514 16.3 Brokerage, Clearing, and Exchange Fees 505 413 22.1 Other 1,136 859 32.3 ------------ ------------ Total Non-Interest Expenses 12,619 10,550 19.6 ------------ ------------ Earnings Before Income Taxes and Dividends on Preferred Securities Issued by Subsidiaries 3,050 2,566 18.9 Income Tax Expense 1,097 947 15.7 Dividends on Preferred Securities Issued by Subsidiaries 47 - N/M ------------ ------------ Net Earnings $ 1,906 $ 1,619 17.8 ------------ ------------ ------------ ------------ Preferred Stock Dividends $ 39 $ 47 (15.1) ------------ ------------ Net Earnings Applicable to Common Stockholders $ 1,867 $ 1,572 18.7 ------------ ------------ ------------ ------------ Earnings per Common Share (A)(B): Basic $5.63 $4.65 21.1 Diluted $4.83 $4.11 17.5 Average Shares (A): Basic 331.5 337.8 (1.9) Diluted 386.7 382.3 1.2
(A) Share and per share amounts have been restated for the two-for-one common stock split, effected in the form of a 100% stock dividend, paid on May 30, 1997. (B) Effective December 1997, basic and diluted earnings per share replaced the primary and fully diluted calculations in accordance with Statement of Financial Accounting Standards No. 128. Note: Percentages are based on actual numbers before rounding. 8 -----END PRIVACY-ENHANCED MESSAGE-----