-----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, HoslN44JfQXaYN5QjzaF6aLhbAd+QCHhk94tLDY86pMoqBQJ/YD/o6CBIVLHzjb8 F9j1JlRVuU5IfLIBcyQQgg== 0001047469-98-014747.txt : 19980414 0001047469-98-014747.hdr.sgml : 19980414 ACCESSION NUMBER: 0001047469-98-014747 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980413 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980413 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: 98592641 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 STREET STREET 2: WORLD FINACIAL CENTER FLR 23 CITY: NEW YORK STATE: NY ZIP: 10281 8-K 1 FORM 8-K 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): April 13, 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 April 13, 1998, for Merrill Lynch & Co., Inc. ("Merrill Lynch") for the three-month period ended March 27, 1998. The results of operations set forth therein for such period 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 period 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. Preferred stockholders' equity, common stockholders' equity, long-term borrowings, preferred securities issued by subsidiaries, and book value per common share as of March 27, 1998 were approximately $0.4 billion, $8.6 billion, $47.5 billion, $1.4 billion, and $24.90, respectively. Merrill Lynch on April 13, 1998 reported the highest quarterly net earnings in its history, $518 million for the 1998 first quarter. These earnings were 11% above both the 1997 first and fourth quarters. Return on average common equity was approximately 24.8% for the 1998 first quarter. Earnings per common share were $1.49 basic and $1.30 diluted in the 1998 first quarter, compared with $1.37 basic and $1.17 diluted in both the first and fourth quarters of 1997. Cash-based measures are the most relevant indicators of Merrill Lynch's performance because they best illustrate Merrill Lynch's operating results and ability to support growth. Excluding the effect of goodwill amortization, a non-cash charge, earnings were $573 million in the 1998 first quarter, 19% above the 1997 first quarter. On the same basis, diluted earnings per share were $1.44 in the 1998 first quarter, up 19% from $1.21 in the 1997 first quarter, and return on average common equity was approximately 26.9% for the 1998 first quarter. Net revenues reached a new high of $4.6 billion, with records achieved in commissions, principal transactions, and asset management and portfolio service fees. Commission revenues were $1.4 billion, up 23% from the 1997 first quarter due to increases in global listed securities volume and strong U.S. mutual fund activity. Principal transactions revenues rose 8% from a year ago to $1.2 billion, benefiting from a diversified product base and strong equity markets in both the U.S. and Europe. Record revenues from equities and equity derivatives as well as interest rate and currency swaps, and higher foreign exchange trading contributed to the increase. Non-U.S. trading revenues accounted for nearly 60% of total principal transactions revenues. Investment banking revenues increased 32% to $801 million, as a result of near-record underwriting revenues and strategic services fees. Underwriting revenues were sharply higher in equities, defined asset funds, and convertibles. Strategic services fees benefited 2 from strong merger and acquisition activity due in part to consolidations within and across various industries. Asset management and portfolio service fees were $970 million, up 50% from the 1997 first quarter. The integration of Mercury Asset Management, combined with continued growth in asset management and other fee-based products such as Merrill Lynch Consults(Registered Trademark), Mutual Fund Advisor(Service Mark), and Asset Power(Registered Trademark), led to the increase. Other revenues were $124 million, down 27% from the 1997 first quarter due to lower realized gains from merchant banking activities. Net interest profit decreased 25% to $178 million, primarily as a result of increased financing costs related to the Mercury Asset Management acquisition. Non-interest expenses increased 21% from the 1997 first quarter to $3.7 billion. Approximately 25% of the increase in non-interest expenses was attributable to the integration and ongoing operating costs of Mercury Asset Management. Compensation and benefits, the largest expense category, was up 19% to $2.4 billion due to higher incentive and production-related compensation and increased headcount. Compensation and benefits expense as a percentage of net revenues was 51.6% in the 1998 first quarter, down from 51.8% in the corresponding 1997 first quarter. Facilities-related costs, which include communications and equipment rental, occupancy, and depreciation and amortization, were up 20% to $459 million as increased business volume, continued emphasis on technology initiatives, and global expansion led to higher costs. Professional fees increased 33% to $263 million because of higher systems and management consulting costs related to various technology projects, including the Year 2000 and European Monetary Union initiatives, as well as other systems and strategic market studies. Advertising and market development expense was up 19% to $172 million due to increased advertising costs, partly related to the Roth IRA campaign, and higher travel costs related to business development. Brokerage, clearing, and exchange fees rose 27% to $150 million as a result of higher global securities trading volume and $18 million in custody and clearing costs for Mercury Asset Management. Goodwill amortization, a non-cash expense, increased $40 million to $55 million as a result of the Mercury Asset Management acquisition. Other expenses were up 11% to $254 million due in part to increases in office supplies and postage costs. The 1998 first quarter effective tax rate was 38.0%, unchanged from last year's first quarter. Pretax profit margin was 19.0% in the 1998 first quarter, compared with 20.0% in the 1997 first quarter. The decrease in the pretax profit margin was due to the effects of goodwill amortization and financing costs related to the Mercury Asset Management acquisition. The first quarter 1998 pretax profit margin excluding goodwill amortization was 20.2%, virtually unchanged from a year ago. 3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) EXHIBITS (99) Additional Exhibits (i) Preliminary Unaudited Earnings Summary for the three- month period ended March 27, 1998. 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/ E. Stanley O'Neal --------------------------------- E. Stanley O'Neal Executive Vice President and Chief Financial Officer Date: April 13, 1998 5 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION PAGE (99) Additional Exhibits (i) Preliminary Unaudited Earnings Summary for the 7 three-month period ended March 27, 1998. 6 EX-99.1 2 PREL. UNAUDITED EARNINGS SUMMARY
Exhibit 99(i) MERRILL LYNCH & CO., INC. PRELIMINARY UNAUDITED EARNINGS SUMMARY For the Three Months Ended Percent Inc / (Dec) March 27, December 26, March 28, 1Q98 vs. 1Q98 vs. [In millions, except per share amounts] 1998 1997 1997 4Q97 1Q97 --------- ------------ --------- -------- -------- Revenues: Commissions $1,377 $1,230 $1,115 11.9 % 23.5 % Interest and Dividends 4,742 4,512 3,848 5.1 23.2 Principal Transactions 1,152 603 1,063 90.9 8.3 Investment Banking 801 825 608 (2.9) 31.8 Asset Management and Portfolio Service Fees 970 751 646 29.3 50.2 Other 124 202 171 (38.5) (27.5) ------ ------ ------ Total Revenues 9,166 8,123 7,451 12.8 23.0 Interest Expense 4,564 4,255 3,610 7.3 26.4 ------ ------ ------ Net Revenues 4,602 3,868 3,841 19.0 19.8 ------ ------ ------ Non-Interest Expenses: Compensation and Benefits 2,375 1,962 1,988 21.0 19.5 Communications and Equipment Rental 198 166 158 19.5 25.7 Occupancy 135 122 120 10.2 12.1 Depreciation and Amortization 126 118 105 6.5 19.7 Professional Fees 263 206 198 27.5 33.1 Advertising and Market Development 172 153 144 13.1 19.4 Brokerage, Clearing, and Exchange Fees 150 138 118 8.7 27.1 Goodwill Amortization 55 19 15 N/M N/M Other 254 255 229 (0.5) 10.8 ------ ------ ------ Total Non-Interest Expenses 3,728 3,139 3,075 18.8 21.3 ------ ------ ------ Earnings Before Income Taxes and Dividends on Preferred Securities Issued by Subsidiaries 874 729 766 19.9 14.0 Income Tax Expense 332 250 291 32.8 14.1 Dividends on Preferred Securities Issued by Subsidiaries 24 13 9 87.3 136.7 ------ ------ ------ Net Earnings $ 518 $ 466 $ 466 11.2 11.4 ====== ====== ====== Preferred Stock Dividends $ 9 $ 10 $ 11 -- (8.9) ------ ------ ------ Net Earnings Applicable to Common Stockholders $ 509 $ 456 $ 455 11.5 11.9 ====== ====== ====== Earnings per Common Share (A): Basic $ 1.49 $ 1.37 $ 1.37 8.8 8.8 Diluted $ 1.30 $ 1.17 $ 1.17 11.1 11.1 Average Shares (A): Basic 340.6 333.9 331.2 2.0 2.8 Diluted 390.9 390.8 389.6 -- 0.3
(A) Share and per share amounts for the 1997 first quarter 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. Note: Percentages are based on actual numbers before rounding. 7 -----END PRIVACY-ENHANCED MESSAGE-----