<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
--------------
COMMISSION FILE NUMBER 1-7182
---------------
MERRILL LYNCH & CO., INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-2740599
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
WORLD FINANCIAL CENTER, NORTH TOWER,
NEW YORK, NEW YORK 10281-1332
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 449-1000
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
175,980,954 shares of Common Stock*
(as of the close of business on May 5, 1995)
* Does not include 5,306,924 unallocated reversion shares held in the Employee
Stock Ownership Plan that are not considered outstanding for accounting
purposes.
<PAGE>
Part I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. Financial Statements
--------------------
MERRILL LYNCH & CO., INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-------------------------- PERCENT
MARCH 31, APRIL 1, INCREASE
(In Thousands, Except Per Share Amounts) 1995 1994 (DECREASE)
------------ ------------ ----------
<S> <C> <C> <C>
REVENUES
Commissions................................ $ 685,295 $ 868,244 (21)%
Interest and dividends..................... 3,029,519 2,199,536 38
Principal transactions..................... 674,756 666,677 1
Investment banking......................... 248,497 444,395 (44)
Asset management and portfolio
service fees.............................. 448,437 444,228 1
Other...................................... 117,373 115,731 1
---------- ---------- ----
Total Revenues............................. 5,203,877 4,738,811 10
Interest Expense......................... 2,783,392 1,906,983 46
---------- ---------- ----
Net Revenues............................... 2,420,485 2,831,828 (15)
---------- ---------- ----
NON-INTEREST EXPENSES
Compensation and benefits.................. 1,269,888 1,430,517 (11)
Occupancy.................................. 109,889 113,008 (3)
Communications and equipment rental........ 111,737 103,524 8
Depreciation and amortization.............. 85,999 74,171 16
Advertising and market development......... 86,311 98,605 (12)
Professional fees.......................... 98,830 94,077 5
Brokerage, clearing, and exchange fees..... 83,845 86,490 (3)
Other...................................... 195,194 179,228 9
---------- ---------- ----
Total Non-Interest Expenses................ 2,041,693 2,179,620 (6)
---------- ---------- ----
EARNINGS BEFORE INCOME TAXES............... 378,792 652,208 (42)
Income tax expense......................... 151,517 280,449 (46)
---------- ---------- ----
NET EARNINGS............................... $ 227,275 $ 371,759 (39)%
========== ========== ====
NET EARNINGS APPLICABLE TO COMMON
STOCKHOLDERS.............................. $ 215,334 $ 370,423
========== ==========
EARNINGS PER COMMON SHARE:
Primary.................................. $ 1.08 $ 1.68
========== ==========
Fully diluted............................ $ 1.08 $ 1.68
========== ==========
DIVIDEND PAID PER COMMON SHARE............. $ .23 $ .20
========== ==========
AVERAGE SHARES USED IN COMPUTING EARNINGS
PER COMMON SHARE:
Primary.................................. 199,178 220,633
========== ==========
Fully diluted............................ 199,178 220,633
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
MERRILL LYNCH & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Per Share Amounts) MARCH 31, DEC. 30,
ASSETS 1995 1994
- --------------------------------------------------------- ------------ ------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS................................ $ 2,961,691 $ 2,311,743
------------ ------------
CASH AND SECURITIES SEGREGATED FOR REGULATORY PURPOSES
OR DEPOSITED WITH CLEARING ORGANIZATIONS................ 5,556,700 4,953,062
------------ ------------
MARKETABLE INVESTMENT SECURITIES......................... 2,409,826 2,325,453
------------ ------------
TRADING ASSETS, AT FAIR VALUE
Corporate debt and preferred stock....................... 15,028,545 14,818,157
Contractual agreements................................... 13,571,199 9,519,105
U.S. Government and agencies............................. 7,090,127 8,196,584
Non-U.S. governments and agencies........................ 8,269,381 6,468,341
Equities and convertible debentures...................... 6,271,017 6,263,492
Mortgages and mortgage-backed............................ 5,173,279 5,223,809
Municipals............................................... 808,796 1,291,688
Money markets............................................ 1,364,647 957,589
------------ ------------
Total.................................................... 57,576,991 52,738,765
------------ ------------
RESALE AGREEMENTS........................................ 45,089,532 44,459,036
------------ ------------
SECURITIES BORROWED...................................... 25,199,020 20,993,302
------------ ------------
RECEIVABLES
Customers (net of allowance for doubtful accounts of
$49,562 in 1995 and $42,290 in 1994).................... 13,117,075 14,030,466
Brokers and dealers...................................... 9,189,202 6,486,879
Interest and other....................................... 4,450,954 4,360,693
------------ ------------
Total.................................................... 26,757,231 24,878,038
------------ ------------
INVESTMENTS OF INSURANCE SUBSIDIARIES.................... 5,735,410 5,719,345
LOANS, NOTES, AND MORTGAGES (NET OF ALLOWANCE FOR
LOAN LOSSES OF $167,934 IN 1995 AND $180,799 IN 1994)... 1,529,007 1,586,718
OTHER INVESTMENTS........................................ 1,007,575 887,626
PROPERTY, LEASEHOLD IMPROVEMENTS, AND EQUIPMENT
(NET OF ACCUMULATED DEPRECIATION AND AMORTIZATION
OF $1,954,115 IN 1995 AND $1,867,476 IN 1994)........... 1,592,630 1,587,639
OTHER ASSETS............................................. 1,317,380 1,308,600
------------ ------------
TOTAL ASSETS............................................. $176,732,993 $163,749,327
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
MERRILL LYNCH & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Per Share Amounts) MARCH 31, DEC. 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- --------------------------------------------------------- ------------ ------------
<S> <C> <C>
LIABILITIES
REPURCHASE AGREEMENTS.................................... $ 57,110,193 $ 51,864,594
------------ ------------
COMMERCIAL PAPER AND OTHER SHORT-TERM BORROWINGS......... 30,486,399 26,439,645
------------ ------------
TRADING LIABILITIES, AT FAIR VALUE
U.S. Government and agencies............................. 13,170,544 15,989,928
Contractual agreements................................... 12,817,798 8,381,946
Non-U.S. governments and agencies........................ 5,722,599 4,009,757
Equities and convertible debentures...................... 3,477,125 3,990,146
Corporate debt and preferred stock....................... 2,522,924 2,564,192
Municipals............................................... 97,531 165,906
------------ ------------
Total.................................................... 37,808,521 35,101,875
------------ ------------
CUSTOMERS................................................ 10,986,016 11,608,891
INSURANCE................................................ 5,643,839 5,689,513
BROKERS AND DEALERS...................................... 7,179,582 4,637,957
OTHER LIABILITIES AND ACCRUED INTEREST................... 7,329,772 7,725,924
LONG-TERM BORROWINGS..................................... 14,484,523 14,863,383
------------ ------------
TOTAL LIABILITIES........................................ 171,028,845 157,931,782
------------ ------------
STOCKHOLDERS' EQUITY
PREFERRED STOCKHOLDERS' EQUITY........................... 618,800 618,800
------------ ------------
COMMON STOCKHOLDERS' EQUITY
Common stock, par value $1.33 1/3 per share;
authorized: 500,000,000 shares;
issued: 1995 and 1994 - 236,330,162 shares............. 315,105 315,105
Paid-in capital.......................................... 1,226,730 1,196,093
Foreign currency translation adjustment.................. 17,025 3,703
Net unrealized losses on investment securities
available-for-sale (net of applicable income tax
benefit of $18,580 in 1995 and $30,924 in 1994)........ (34,593) (56,957)
Retained earnings........................................ 5,778,548 5,605,616
------------ ------------
Subtotal............................................. 7,302,815 7,063,560
Less:
Treasury stock, at cost:
1995 - 54,501,770 shares;
1994 - 48,423,944 shares.......................... 1,892,155 1,627,108
Unallocated ESOP reversion shares, at cost:
1995 - 5,306,924 shares;
1994 - 6,427,091 shares........................... 83,625 101,227
Employee stock transactions............................ 241,687 136,480
------------ ------------
TOTAL COMMON STOCKHOLDERS' EQUITY........................ 5,085,348 5,198,745
------------ ------------
TOTAL STOCKHOLDERS' EQUITY............................... 5,704,148 5,817,545
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............... $176,732,993 $163,749,327
============ ============
BOOK VALUE PER COMMON SHARE.............................. $ 29.02 $ 28.87
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
MERRILL LYNCH & CO., INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------
(In Thousands) MARCH 31, APRIL 1,
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings............................................. $ 227,275 $ 371,759
Noncash items included in earnings:
Depreciation and amortization.......................... 85,999 74,171
Policyholder reserves.................................. 77,311 102,801
Other.................................................. 230,675 341,065
(Increase) decrease in operating assets:
Trading assets......................................... (4,838,226) (11,358,240)
Cash and securities segregated for regulatory purposes
or deposited with clearing organizations.............. (603,638) 40,601
Securities borrowed.................................... (4,205,718) (2,185,095)
Customers.............................................. 898,854 (1,260,679)
Maturities and sales of trading investment securities.. - 23,008
Purchases of trading investment securities............. - (13,212)
Other.................................................. (2,489,626) (2,249,372)
Increase (decrease) in operating liabilities:
Trading liabilities.................................... 2,706,646 12,796,018
Customers.............................................. (622,875) (108,992)
Insurance.............................................. (170,892) (586,710)
Other.................................................. 2,083,816 3,332,149
----------- ------------
CASH USED FOR OPERATING ACTIVITIES....................... (6,620,399) (680,728)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from (payments for):
Maturities of available-for-sale securities............ 286,882 842,998
Sales of available-for-sale securities................. 432,679 327,336
Purchases of available-for-sale securities............. (680,385) (683,106)
Maturities of held-to-maturity securities.............. 224,581 469,892
Purchases of held-to-maturity securities............... (345,275) (426,963)
Other investments and other assets..................... (127,943) (251,588)
Property, leasehold improvements, and equipment........ (90,990) (88,692)
----------- ------------
CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES......... (300,451) 189,877
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments for):
Repurchase agreements, net of resale agreements........ 4,615,103 (1,268,356)
Commercial paper and other short-term borrowings....... 4,046,754 84,759
Issuance and resale of long-term borrowings............ 2,094,681 3,978,405
Settlement and repurchase of long-term borrowings...... (2,719,385) (2,640,968)
Common stock transactions.............................. (412,012) (253,551)
Dividends.............................................. (54,343) (42,711)
----------- ------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES......... 7,570,798 (142,422)
----------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......... 649,948 (633,273)
Cash and cash equivalents, beginning of year............. 2,311,743 1,783,408
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD................. $ 2,961,691 $ 1,150,135
=========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Income taxes totaled $0 in 1995 and $136,036 in 1994.
Interest totaled $2,593,601 in 1995 and $1,861,182 in 1994.
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
MERRILL LYNCH & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1995
BASIS OF PRESENTATION
The consolidated financial statements, prepared in accordance with generally
accepted accounting principles, include the accounts of Merrill Lynch & Co.,
Inc. and all significant subsidiaries (collectively referred to as the
"Corporation"). All material intercompany balances and transactions have been
eliminated. The December 30, 1994 consolidated balance sheet was derived from
the audited financial statements. The interim consolidated financial statements
for the three-month periods are unaudited; however, in the opinion of the
management of the Corporation, all adjustments, consisting only of normal
recurring accruals, necessary for a fair statement of the results of operations
have been included.
These unaudited financial statements should be read in conjunction with the
audited financial statements included in the Corporation's Annual Report on Form
10-K for the year ended December 30, 1994 ("1994 10-K"). The nature of the
Corporation's business is such that the results of any interim period are not
necessarily indicative of results for a full year. Prior period financial
statements have been reclassified, where appropriate, to conform to the 1995
presentation.
ACCOUNTING CHANGES
In the first quarter of 1995, the Corporation adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan" and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures." SFAS No. 114 establishes accounting
standards for creditors to measure the impairment of certain loans. SFAS No. 118
amends SFAS No. 114 to allow creditors to use existing methods for recognizing
interest income on an impaired loan, rather than the method originally required
by SFAS No. 114. The impact of these pronouncements on the Corporation's
financial statements as of March 31, 1995 was not material.
INVESTMENTS
The Corporation's investments in debt and certain equity securities are
classified as trading, available-for-sale, or held-to-maturity. Investments that
are classified as trading and available-for-sale are recorded at fair value.
Investments in debt securities classified as held-to-maturity are carried at
amortized cost. Restricted equity investment securities are reported at the
lower of cost or net realizable value.
6
<PAGE>
The table that follows provides the components of the net unrealized loss
recorded in stockholders' equity for available-for-sale investments:
<TABLE>
<CAPTION>
March 31, Dec. 30,
(In thousands) 1995 1994
- -------------- ---------- ----------
<S> <C> <C>
Net unrealized gains (losses) on investment
securities available-for-sale $117,486 $(410,068)
Adjustments for policyholder liabilities (47,907) 214,537
Adjustments for deferred policy acquisition costs (34,871) 73,802
Deferred income tax (expense) benefit (12,344) 43,417
-------- ---------
Net activity 22,364 (78,312)
Net unrealized (losses) gains on investment
securities classified as available-for-sale,
beginning of year (56,957) 21,355
-------- ---------
Net unrealized losses on investment
securities classified as available-for-sale,
end of period $(34,593) $ (56,957)
======== =========
</TABLE>
The Corporation's insurance subsidiaries are required to adjust deferred
acquisition costs and certain policyholder liabilities associated with
investments classified as available-for-sale. These investments primarily
support in-force, universal life-type contracts under SFAS No. 97, "Accounting
and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and
for Realized Gains and Losses from the Sale of Investments." These adjustments
are recorded in stockholders' equity and assume that the unrealized gain or loss
on available-for-sale securities was realized.
Gross realized gains and losses related to available-for-sale investment
securities were $5.4 million and $9.7 million, respectively, in the 1995 first
quarter and $5.4 million and $5.5 million, respectively, in the 1994 first
quarter. The cost basis of each investment sold is specifically identified for
purposes of computing realized gains and losses. The net unrealized loss from
trading investment securities included in the 1995 and 1994 three-month
Statements of Consolidated Earnings was $.2 million and $7.2 million,
respectively.
INTEREST AND DIVIDEND EXPENSE
Interest expense includes payments in lieu of dividends of $2.4 million and $7.6
million for the first quarters of 1995 and 1994, respectively.
COMMERCIAL PAPER AND OTHER SHORT-TERM BORROWINGS
Commercial paper and other short-term borrowings at March 31, 1995 and December
30, 1994 follow:
<TABLE>
<CAPTION>
March 31, Dec. 30,
(In millions) 1995 1994
- ------------- --------- --------
<S> <C> <C>
Commercial paper $14,821 $14,759
Demand and time deposits 7,965 7,578
Securities loaned 5,406 2,180
Bank loans and other 2,294 1,923
------- -------
Total $30,486 $26,440
======= =======
</TABLE>
7
<PAGE>
COMMITMENTS
The Corporation enters into certain contractual agreements, referred to as
"derivatives" or off-balance-sheet financial instruments, involving futures,
forwards (including mortgage-backed securities requiring forward settlement),
options, and swap transactions, including swap options, caps, collars, and
floors. The Corporation uses derivatives in conjunction with on-balance-sheet
financial instruments to facilitate customer transactions, manage its own
interest rate, currency, and equity and commodity price risk, and to meet
trading and financing needs. Derivative contracts often involve commitments to
swap future interest payment streams, to purchase or sell financial instruments
or commodities at specified terms on a specified date, or to exchange
currencies. In addition, the Corporation purchases and writes options on a wide
range of financial instruments such as securities, currencies, futures, and
various market indices.
The contractual or notional amounts of derivative financial instruments provide
only a measure of involvement in these types of transactions and do not
represent the amounts subject to the various risks set forth below. The
contractual or notional amounts of these instruments used for trading purposes
by type of risk follow:
<TABLE>
<CAPTION>
(In billions)
- -------------
Interest Rate Currency Equity Price Commodity Price
March 31, 1995 Risk(a) Risk(a) Risk Risk
- -------------- ------------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Swap agreements $699 $ 82 $ 2 $ 5
Futures contracts $205 $ 1 $ 2 $ 1
Options held $ 90 $ 30 $26 $ 9
Options written $ 78 $ 31 $23 $ 6
Forward contracts $ 38 $135 $ - $40
December 30, 1994
- -----------------
Swap agreements $653 $ 73 $ 2 $ 2
Futures contracts $172 $ - $ 2 $ 2
Options held $ 75 $ 22 $22 $12
Options written $ 74 $ 22 $21 $ 7
Forward contracts $ 29 $103 $ - $ 7
</TABLE>
(a) A number of the Corporation's foreign currency contracts are subject to
both interest rate and currency risk.
The contractual or notional amounts of derivative financial instruments used
for purposes other than trading are set forth below:
<TABLE>
<CAPTION>
(In billions) March 31, December 30,
- ------------- 1995 1994
--------- ------------
<S> <C> <C>
Interest rate swap contracts $25 $22
Foreign exchange swap contracts $ 2 $ 3
Equity options held $ 1 $ 1
</TABLE>
Most of the above transactions are entered into with the Corporation's swaps and
foreign exchange dealer subsidiaries which intermediate interest rate and
currency risk with third parties in the normal course of their trading
activities.
In the normal course of business, the Corporation obtains letters of credit to
satisfy various collateral requirements in lieu of the Corporation depositing
securities or cash. At March 31, 1995, letters of credit aggregating $1,002
million were used for this purpose.
8
<PAGE>
In the normal course of business, the Corporation also enters into underwriting
commitments, when-issued transactions, and commitments to extend credit.
Settlement of these commitments as of March 31, 1995 would not have a material
effect on the consolidated financial condition of the Corporation.
REGULATORY REQUIREMENTS
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a registered
broker-dealer and a subsidiary of the Corporation, is subject to Net Capital
Rule 15c3-1 under the Securities Exchange Act of 1934. Under the alternative
method permitted by this rule, the minimum required net capital, as defined,
shall not be less than 2% of aggregate debit items arising from customer
transactions. At March 31, 1995, MLPF&S's regulatory net capital of $1,350
million was 11% of aggregate debit items, and its regulatory net capital in
excess of the minimum required was $1,104 million.
Merrill Lynch Government Securities Inc. ("MLGSI"), a primary dealer in U.S.
Government securities and a subsidiary of the Corporation, is subject to the
Capital Adequacy Rule under the Government Securities Act of 1986. This rule
requires dealers to maintain liquid capital in excess of market and credit risk,
as defined, by 20% (a 1.2-to-1 capital-to-risk standard). At March 31, 1995,
MLGSI's liquid capital of $817 million was 294% of its total market and credit
risk, and liquid capital in excess of the minimum required was $484 million.
Merrill Lynch International Limited ("MLIL"), a United Kingdom registered
broker-dealer and a subsidiary of the Corporation, is subject to capital
requirements of the Securities and Futures Authority ("SFA"). Regulatory
capital, as defined, must exceed the total financial resources requirement of
the SFA. At March 31, 1995, MLIL's regulatory capital was $1,374 million and
exceeded the minimum requirement by $366 million.
LITIGATION MATTER
On January 12, 1995, an action was commenced in the United States Bankruptcy
Court for the Central District of California by Orange County, California (the
"County") and The Orange County Investment Pools (the "Pools"), both of which
filed bankruptcy petitions in that Court on December 6, 1994, against the
Corporation and certain of its subsidiaries in connection with the Corporation's
business activities with the County. In addition, other actions have been
brought against the Corporation and/or certain of its officers, directors, and
employees and certain of its subsidiaries in Federal and state courts in
California and New York. These include class actions and stockholder derivative
actions brought by persons alleging harm to themselves or to the Corporation
arising out of the Corporation's dealings with the County and the Pools, or from
the purchase of debt instruments issued by the County that were underwritten by
MLPF&S. See "Commitments and Contingencies" in the notes to the audited
consolidated financial statements contained in the 1994 10-K.
9
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
- -------------------------------
To the Board of Directors and Stockholders of
Merrill Lynch & Co., Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Merrill Lynch & Co., Inc. and subsidiaries as of March 31, 1995, and the related
condensed statements of consolidated earnings and consolidated cash flows for
the three-month periods ended March 31, 1995 and April 1, 1994. These financial
statements are the responsibility of the management of Merrill Lynch & Co., Inc.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Merrill Lynch & Co., Inc. and
subsidiaries as of December 30, 1994, and the related statements of consolidated
earnings, changes in consolidated stockholders' equity and consolidated cash
flows for the year then ended (not presented herein); and in our report dated
February 27, 1995, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 30, 1994 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
/s/ Deloitte & Touche LLP
May 12, 1995
New York, New York
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
Merrill Lynch & Co., Inc. and its subsidiaries (collectively referred to as the
"Corporation") conduct their businesses in global financial markets that are
influenced by a number of factors including economic and market conditions,
political events, and investor sentiment. The reaction of issuers and investors
to a particular condition or event is unpredictable and can create volatility in
the marketplace. While higher volatility can increase risk, it may also
increase order flow, which drives many of the Corporation's businesses. Other
global market and economic conditions, including the liquidity of secondary
markets, the level and volatility of interest rates, currency and security
valuations, competitive conditions, and the size, number, and timing of
transactions may also affect earnings. As a result, revenues and net earnings
can vary significantly from year to year, and from quarter to quarter.
Financial markets, which steadily weakened throughout 1994, improved in the
first quarter of 1995 on the prospect of a slowing U.S. economy and relatively
stable interest rates. Inflationary fears eased in the first quarter after key
U.S. economic statistics indicated that the economy was slowing down following
the Federal Reserve's seventh interest rate increase in nearly a year. Investors
reacted favorably to these events, and were more active in stock and bond
markets during the 1995 first quarter.
Heightened institutional and retail investor volumes led to increased secondary
trading activity and higher commission levels industrywide from the 1994 fourth
quarter. Increased revenues, however, were limited due to the weakened U.S.
dollar and continued volatility in Latin American currencies. In addition,
investment banking revenues, particularly underwritings, remained depressed,
despite declining interest rates and stronger stock and bond markets in the 1995
first quarter as compared to the 1994 fourth quarter.
Underwriting volume was down industrywide in the 1995 first quarter, compared to
the 1994 first quarter, as domestic issuances of stocks and bonds decreased
50% to $141.6 billion, according to Securities Data Co. Quarterly volumes fell
in nearly every underwriting category, including initial public offerings,
corporate bonds, and mortgage-backed securities. Industrywide domestic
underwriting activity did improve from the 1994 fourth quarter with volume up
20% in the 1995 first quarter. Nevertheless, underwriting activity was limited
because funding needs of industrial companies were met by cash flows from strong
corporate earnings and refinancings had been completed in prior periods at more
attractive interest rates.
Strategic services revenues improved from the 1994 first quarter due to
increased mergers and acquisitions activity in various industries, including
health care, financial services, and consumer products. Compared with the 1994
fourth quarter, mergers and acquisitions volume was down industrywide, although
revenues increased for the Corporation.
Trading results for many equity and taxable fixed-income products decreased
industrywide from the 1994 first quarter as a result of higher interest rates,
the declining U.S. dollar, and continued volatility in Latin American
currencies. Trading revenues from interest rate and currency swaps remained
strong, while revenues from municipal securities increased due to more
attractive tax-exempt yields.
11
<PAGE>
The Dow Jones Industrial Average ("DJIA") daily closing index for the 1995 first
quarter averaged 3,966, 3% above the 1994 first quarter average closing index
and 4% above the 1994 fourth quarter average close. The DJIA reached a record
high of 4,173 at the end of the 1995 first quarter. In the bond market, the
price of the 30-year U.S. Treasury bond was down, with the yield climbing to
7.43% at the end of the 1995 first quarter, compared with 7.28% at the end of
the 1994 first quarter. The price of the 30-year U.S. Treasury bond, however,
increased from the end of the 1994 fourth quarter, with the yield decreasing
from 7.88%.
Retail and institutional market activity was up in the 1995 first quarter. The
New York Stock Exchange ("NYSE") average daily trading volume was 333 million
shares in the 1995 first quarter, 7% above the volume in the 1994 first quarter
and 11% above the volume in the 1994 fourth quarter. Sales of mutual funds
benefited from a shift from foreign to domestic stock funds as a result of
higher U.S. stock prices, particularly during the 1995 first quarter. Heightened
investor activity and appreciated asset values also contributed to increased
fee-based revenues during the period.
The Corporation's 1995 first quarter net earnings were down 39% from record
first quarter levels of a year ago, but were up 41% from the 1994 fourth
quarter. The Corporation's results benefited from its diversified global
revenue base, continued efforts to reduce discretionary costs and contain fixed
expenses, and management of risk.
FIRST QUARTER 1995 VERSUS FIRST QUARTER 1994
The discussion that follows emphasizes the comparison between the first quarters
of 1995 and 1994 and presents additional information on the comparison between
the first quarter of 1995 and the fourth quarter of 1994, where appropriate.
Net earnings for the 1995 first quarter were $227.3 million, down $144.5 million
(39%) from the $371.8 million reported in last year's record first quarter.
First quarter earnings per common share were $1.08 primary and fully diluted,
compared with $1.68 primary and fully diluted in the 1994 first quarter. After
deducting preferred stock dividends, net earnings applicable to common
stockholders in the 1995 first quarter totaled $215.3 million, down $155.1
million (42%) from $370.4 million in the prior year's quarter. The Corporation
repurchased 9.3 million shares of its common stock in the 1995 first quarter
compared with 7.0 million shares in the 1994 first quarter.
The Corporation's pretax profit margin in the 1995 first quarter was 15.6%
versus 23.0% in the year-ago period. The net profit margin decreased to 9.4% in
the 1995 first quarter compared with 13.1% in the 1994 first quarter. Total
revenues increased 10% from the 1994 first quarter to $5,204 million, while
revenues after interest expense (net revenues) declined 15% from the year-ago
period to $2,420 million. Non-interest expenses totaled $2,042 million in the
1995 first quarter, down 6% from the year-earlier period.
Net earnings were up 41% from the 1994 fourth quarter. Both total revenues and
net revenues increased 16% from the 1994 fourth quarter, with advances in all
major revenue categories. Non-interest expenses increased 11% from the 1994
fourth quarter as higher profitability led to increases in compensation and
benefits expense.
12
<PAGE>
Commission revenues were $685 million, down 21% from the 1994 first quarter.
Mutual fund commissions were down 33% from the year-ago period to $187 million
as volume decreased due to the decline in value experienced by most stock and
bond mutual funds during 1994. Commissions from listed securities decreased 15%
to $343 million with lower revenues from retail clients partially offset by
higher revenues from institutional clients. Other commission revenues declined
17% from the 1994 first quarter to $155 million due primarily to lower
commissions from money market instruments and commodities transactions.
Commission revenues increased 7% from the 1994 fourth quarter. Higher
commissions from listed securities and mutual funds, attributable to
improvements in the stock and bond markets in the 1995 period as compared to the
1994 fourth quarter, contributed to the advance.
Interest and dividend revenues advanced 38% over the year-ago period to $3,029
million due to increases in interest rates, growth in collateralized lending
activities, and higher levels of fixed-income inventories. Interest expense,
which includes dividend expense, rose 46% from the 1994 first quarter to $2,783
million as a result of higher interest rates and increased levels of interest-
bearing liabilities primarily related to the Corporation's funding and hedging
activities. Net interest profit declined 16% to $246 million as a result of the
continued flattening of the yield curve. The change in the yield curve, the
relationship between interest rates and maturities, resulted from short-term
interest rates rising faster than long-term interest rates from the year-ago
period. The one-year U.S. Treasury bill rate, for example, increased from 4.68%
at April 1, 1994 to 6.48% at March 31, 1995, while the 30-year U.S. Treasury
bond yield increased from 7.28% to 7.43% during the same period. As a result,
interest spreads declined, while financing and hedging costs increased from the
1994 first quarter.
Significant components of interest and dividend revenues and interest expense
for the three-month periods ended March 31, 1995 and April 1, 1994 follow:
<TABLE>
<CAPTION>
Three Months Ended
---------------------
(In millions) March 31, April 1,
- ------------- 1995 1994
--------- --------
<S> <C> <C>
Interest and
dividend revenues:
Trading assets $ 940 $ 861
Securities borrowed 686 550
Resale agreements 771 313
Margin lending 325 216
Other 307 260
------ ------
Subtotal 3,029 2,200
------ ------
Interest expense:
Borrowings 1,011 811
Repurchase agreements 956 443
Trading liabilities 575 446
Other 241 207
------ ------
Subtotal 2,783 1,907
------ ------
Net interest and
dividend profit $ 246 $ 293
====== ======
</TABLE>
Included in the "Borrowings" caption above is interest related to hedges on the
Corporation's long-term borrowings. As part of the Corporation's asset,
liability, and liquidity management strategies, substantially all fixed-rate,
13
<PAGE>
long-term borrowings are swapped into floating interest rates, while virtually
all foreign currency denominated fixed-rate obligations are swapped into U.S.
dollar variable rate liabilities. These liability hedges are in the form of
interest rate and currency swap agreements. Interest obligations on variable
rate debt may also be modified through swap agreements that change the
underlying interest rate basis or reset frequency. Contractual agreements used
to modify payment obligations, principally related to long-term borrowings,
increased interest expense by approximately $3 million for the 1995 first
quarter and decreased interest expense by approximately $75 million for the 1994
first quarter.
Principal transactions revenues increased 1% from the 1994 first quarter to $675
million. Taxable fixed-income trading revenues increased 29% to $164 million
benefiting from higher revenues in corporate bonds and preferred stock and money
market instruments. Corporate bonds and preferred stock trading revenues were
higher due, in part, to improved trading results in emerging market issues from
a year ago. The advance in money market trading revenues resulted from
increased retail investor demand for certificates of deposit yielding higher
interest rates. Taxable fixed-income trading revenues were negatively affected
by declines in trading results from mortgage-backed products and U.S. Government
and agencies securities. Trading revenues from mortgage-backed products were
down from a year ago, with a loss of $19 million in the 1995 first quarter, due
to increased interest rates and lower volumes. Nevertheless, net trading
results from mortgage-backed products, which include net interest revenues, were
positive. Trading revenues from U.S. Government and agencies securities were
also down from a strong 1994 first quarter due to lower volatility in the
declining interest rate environment during the current quarter.
Interest rate and currency swap revenues increased 21% to $234 million on higher
trading revenues from non-U.S. dollar and U.S. dollar denominated transactions.
Municipal securities revenues advanced 78% to $90 million due to continued
strong institutional and retail investor demand for tax-exempt investments.
Equities and equity derivatives trading revenues decreased 35% from the strong
1994 first quarter to $166 million due principally to lower trading revenues in
international equities, equity derivatives, and over-the-counter securities,
partially offset by higher revenues from convertible securities.
Foreign exchange and commodities trading revenues decreased 50% from the 1994
first quarter to $21 million due to lower commodity contract trading volume and
weakness in the U.S. dollar versus other major currencies.
Principal transactions revenues were up 49% from the 1994 fourth quarter as a
result of significant increases in trading revenues from taxable fixed-income
securities and equities and equity derivatives, partially offset by decreases in
municipal securities and foreign exchange and commodities trading.
Taxable fixed-income trading revenues increased 294% from the 1994 fourth
quarter on the strength of improved results from corporate bonds and preferred
stock, high-yield securities, mortgage-backed products, and U.S. Government and
agencies securities. Equities and equity derivatives trading revenues increased
110% from the 1994 fourth quarter due to higher volumes in convertible
securities, international equities, and equity derivatives.
Trading, hedging, and financing activities affect the recognition of both
principal transactions revenues and net interest and dividend profit. In
assessing the profitability of financial instruments, the Corporation views net
interest and principal transactions components in the aggregate. For financial
reporting purposes, however, realized and unrealized gains and losses on trading
positions, including hedges, are recorded in principal transactions revenues.
The net interest carry (i.e., the spread representing interest earned versus
financing costs on financial instruments) for trading positions, including
hedges, is recorded either as principal transactions revenues or net interest
profit, depending on the nature of the specific position. Interest income or
expense on a U.S. Treasury security, for example, is reflected in net interest,
while any realized or unrealized gain or loss is included in principal
transactions. Financial instruments requiring forward settlement, such as "to be
announced" mortgage pools, have interest components built into their market
value; any change in the market value, however, is recorded in principal
transactions revenues. Changes in the composition of trading inventories and
hedge positions can cause the recognition of revenues within these categories to
fluctuate. Consequently, net interest and principal transactions revenue
components should be evaluated collectively.
14
<PAGE>
The table that follows provides information on aggregate trading profits,
including net interest for the three months ended March 31, 1995 and April 1,
1994. Principal transactions revenues are based on financial reporting
categories. Interest revenue and expense components are based on financial
reporting categories and management's assessment of the cost to finance trading
positions, which considers the underlying liquidity of these positions.
<TABLE>
<CAPTION>
Principal Net Interest Net
(In millions) Transactions Revenue Trading
- ------------- Revenues (Expense) Revenue
------------ ------------ -------
<S> <C> <C> <C>
1995 First Quarter
- ------------------
Taxable fixed-income $164 $ 86 $250
Interest rate and
currency swaps 234 (17) 217
Equities and equity
derivatives 166 (27) 139
Municipals 90 (1) 89
Foreign exchange and
commodities 21 (5) 16
---- ---- ----
Total $675 $ 36 $711
==== ==== ====
1994 First Quarter
- ------------------
Taxable fixed-income $128 $117 $245
Interest rate and
currency swaps 193 15 208
Equities and equity
derivatives 254 (23) 231
Municipals 50 2 52
Foreign exchange and
commodities 42 1 43
---- ---- ----
Total $667 $112 $779
==== ==== ====
</TABLE>
Investment banking revenues were $248 million, down 44% from the first quarter
of 1994. Underwriting activity continued at low levels industrywide as
relatively higher interest rates and strong corporate earnings continued to
decrease demand for debt and equity issuance. As a result, underwriting revenues
declined 57% to $161 million. Lower underwriting revenues were reported in most
categories, including equities, convertible securities, high-yield securities,
and corporate bonds and preferred stock.
Despite a 50% decline in domestic underwriting volume and a 44% decrease in
global underwriting volume from the 1994 first quarter, the Corporation remained
the top underwriter of total debt and equity securities in the 1995 first
quarter with a market share of 16.9% domestically and 12.2% worldwide, according
to Securities Data Co.
Strategic services revenues rose 33% from the 1994 first quarter to $87 million,
benefiting from increased merger and acquisition advisory assignments primarily
in energy, financial services, and retail industries.
Asset management and portfolio service fees increased 1% from the 1994 first
quarter to $448 million. Increased fees earned from mutual fund services,
variable annuity products, and asset management activities were substantially
offset by a decline in fees from Merrill Lynch Consults(Registered Trademark)
("ML Consults"). Mutual fund services fees rose 45% to $33 million due to
increases in both the number of accounts and the average annual fees generated
per account. Fees from variable annuities increased 39% to $16 million.
15
<PAGE>
Asset management fees increased 1% from the 1994 first quarter to $200 million
due primarily to growth in stock and money market funds substantially offset by
declines in fixed-income funds. Assets under management by Merrill Lynch Asset
Management ("MLAM") rose 3% to $170 billion at quarter-end, compared with $165
billion at the close of the 1994 first quarter. Inflows of client assets and
higher portfolio values, particularly in the 1995 first quarter, contributed to
the advance. Assets under management by MLAM rose 4% from the end of the 1994
fourth quarter with increased asset levels in money market, stock, and fixed-
income funds.
Revenues from ML Consults declined 17% from the record 1994 first quarter to $68
million as the number of accounts decreased 13% to approximately 76,000 at
quarter-end. Asset levels for ML Consults were $14.9 billion, down 8% from the
1994 first quarter and up 3% from the 1994 fourth quarter. Fees earned on the ML
Consults product are based on a percentage of assets in investor portfolios.
Weak market conditions during the past year have contributed to a decline in the
number of accounts.
Other revenues were $117 million, up 1% from $116 million reported in the 1994
first quarter. Contributing to this increase were higher income distributions
from partnership investments partially offset by net losses on certain other
investments.
Non-interest expenses were $2,042 million, down 6% from the 1994 first quarter.
Compensation and benefits expense decreased 11% from the 1994 first quarter to
$1,270 million as lower incentive and production-related compensation was
partially offset by increases in base salaries. Incentive compensation decreased
with lower profitability, while production-related compensation was down due to
volume declines in certain businesses. The advance in base salaries is
primarily attributable to merit increases and the selective addition of
personnel from the year-ago period. Total headcount, however, was down by
approximately 180 employees from the 1994 fourth quarter to approximately 43,600
at the end of the 1995 first quarter. Compensation and benefits expense as a
percentage of net revenues was 52.5% for the 1995 first quarter as compared with
50.5% in the year-ago period.
Occupancy costs decreased 3% from the 1994 first quarter to $110 million,
benefiting from continued relocation of support staff to lower cost facilities
and reduced space requirements at the headquarters facility. Communications and
equipment rental expense was up 8% to $112 million due primarily to increased
use of market information services. Depreciation and amortization expense rose
16% from the 1994 first quarter to $86 million due to purchases of technology-
related equipment over the past year.
Advertising and market development expense decreased 12% to $86 million as a
result of lower discretionary travel costs and reduced production-related
recognition program costs. Professional fees increased 5% to $99 million.
Higher legal fees were partially offset by lower systems and management
consulting fees as development projects have been selectively delayed.
Brokerage, clearing, and exchange fees decreased 3% to $84 million due primarily
to lower commodity exchange fees related to reduced trading volume. Other
expenses totaled $195 million, up 9% from the 1994 first quarter. A $26 million
charge for the write-off of an asset related to a technology contract
contributed to the increase.
Income tax expense was $152 million in the 1995 first quarter. The effective
tax rate in the 1995 first quarter was 40.0%, compared with 43.0% in the year-
ago period. The decrease in the effective tax rate was primarily attributable
to lower state income taxes, higher tax-exempt interest, and increased
deductions for dividends received.
16
<PAGE>
LIQUIDITY AND LIABILITY MANAGEMENT
The primary objective of the Corporation's funding policies is to assure
liquidity at all times. To strengthen liquidity, the Corporation maintains a
strong capital base, obtains committed, unsecured, revolving credit facilities
(the "Credit Facilities"), issues term debt, concentrates debt issuance through
Merrill Lynch & Co., Inc. (the "Parent"), and pursues expansion and
diversification of funding sources.
There are three key elements to the Corporation's liquidity strategy. The first
is to maintain alternative funding sources such that all debt obligations
maturing within one year, including commercial paper and the current portion of
term debt, can be funded when due without issuing new unsecured debt or
liquidating any business assets. The most significant alternative funding
sources are the proceeds from executing repurchase agreements ("repos") and
obtaining secured bank loans, both principally employing unencumbered
investment-grade marketable securities. The calculation of proceeds available
from repos and secured bank loans takes into account both a conservative
estimate of excess collateral required by secured lenders, and restrictions on
upstreaming cash from subsidiaries to the Parent. The ability to execute this
secured funding is demonstrated by the Corporation's routine use of repo markets
to finance inventory and by periodic tests of secured borrowing procedures with
banks. Other alternative funding sources include liquidating cash equivalents,
securitizing additional home equity and other mortgage loan assets, and drawing
on Credit Facilities. At March 31, 1995, the Credit Facilities totaled $5.3
billion and have not been drawn upon.
As an additional measure, the Corporation regularly reviews the level and mix of
its assets and liabilities to ascertain its ability to conduct core businesses
beyond one year without reliance on issuing new unsecured debt or drawing upon
Credit Facilities. The composition of the Corporation's asset mix provides a
great degree of flexibility in managing liquidity, since most of the
Corporation's assets turn over frequently or are match-funded with a liability
whose cash flow characteristics closely match those of the asset. At March 31,
1995, approximately 3% of the Corporation's assets, principally certain other
investments, and fixed and other assets, were considered not readily marketable
by management. The Corporation monitors the liquidity of assets, the quality of
Credit Facilities, and the overall level of equity and term debt in assessing
financial strength and capital adequacy at any point in time.
The second element of the Corporation's liquidity strategy is to concentrate all
general purpose borrowing at the Parent level, except where tax regulations,
time differences, or other business considerations dictate otherwise. The
benefits of this strategy are: a) lower financing costs from the reduced
risks of a diversified asset and business base; b) simplicity, control, and
wider name recognition for banks, creditors, and rating agencies; and c)
flexibility to meet varying funding requirements within subsidiaries.
The third element is to expand and diversify the Corporation's funding
instruments and its investor and creditor base. The Corporation maintains strict
concentration standards for short-term lenders, which include limits for any
single investor. The Corporation's funding programs benefit from the ability to
market commercial paper through its own sales force to a large, diversified
customer base and the financial creativity of the Corporation's capital markets
and private client operations. Commercial paper remains the Corporation's major
source of short-term general purpose funding. Commercial paper outstanding
totaled $14.8 billion both at March 31,
17
<PAGE>
1995 and December 30, 1994, which represented 8% and 9% of total assets at first
quarter-end 1995 and year-end 1994, respectively.
At March 31, 1995, total long-term debt was $14.5 billion compared with $14.9
billion at year-end 1994. At March 31, 1995, the Corporations senior long-term
debt was rated by seven recognized credit rating agencies, as follows:
<TABLE>
<CAPTION>
Rating Agency Rating
------------- ------
<S> <C>
Duff & Phelps Credit Rating Co. AA-
Fitch Investors Service, Inc. AA
IBCA Ltd. AA-
Japan Bond Research Institute AA
Moodys Investors Service, Inc. A1
Standard & Poors Ratings Group A+
Thomson BankWatch, Inc. AA
</TABLE>
During the first three months of 1995, the Corporation issued $2.0 billion in
long-term debt. During the same period, maturities and repurchases were $2.4
billion. In addition, approximately $145 million of the Corporation's
securities held by subsidiaries were sold and $311 million were purchased.
Expected maturities of long-term debt over the next 12 months are $5.4 billion
as of March 31, 1995.
Approximately $30.1 billion of the Corporation's indebtedness at March 31, 1995
is considered senior indebtedness as defined under various indentures.
As part of the Corporations overall liquidity program, its insurance
subsidiaries regularly review the funding requirements of their contractual
obligations for in-force, fixed-rate life insurance and annuity contracts and
expected future acquisition and maintenance expenses for all contracts. The
liquidity and duration of the fixed-rate asset and liability portfolios are
closely monitored.
During the past few years, the Corporations insurance subsidiaries have changed
the mix of products offered to policyholders. Currently, variable life
insurance and variable annuity products are actively marketed. These products
do not subject the insurance subsidiaries to the interest rate, asset/liability
matching, and credit risks attributable to fixed-rate products, thereby reducing
the risk profile and liquidity demands on the insurance subsidiaries. The
insurance subsidiaries maintain predominantly high quality, liquid investment
portfolios to fund various business activities. At March 31, 1995,
approximately 80% of invested assets of insurance subsidiaries were considered
liquid by management.
In the 1995 three-month period, the Corporations cash and cash equivalents
increased by approximately $650 million to $2,962 million. Cash of $7,570
million was provided from financing activities in the first three months of
1995. During the same period, the Corporation used $6,620 million and $300
million for operating and investing activities, respectively.
CAPITAL RESOURCES AND CAPITAL ADEQUACY
The Corporation remains one of the most highly capitalized institutions in the
U.S. securities industry with an equity base of $5.7 billion at March 31, 1995,
including $5.1 billion in common equity, supplemented by $0.6 billion in
preferred equity. The Corporation's average leverage ratio, computed as the
ratio of average
18
<PAGE>
month-end assets to average month-end stockholders' equity, was 31.6x and 31.8x
for the first three months of 1995 and 1994, respectively. The Corporation's
leverage ratio at the end of the 1995 and 1994 first quarters was 31.0x and
32.1x, respectively.
To compute the Corporation's average adjusted leverage ratio, resale agreements
and securities borrowed transactions are subtracted from total assets. The
average adjusted leverage ratio was 18.3x and 19.4x for the first three months
of 1995 and 1994, respectively. The Corporation's adjusted leverage ratio at
the end of the 1995 and 1994 first quarters was 18.7x and 19.5x, respectively.
The Corporation operates in many regulated businesses that require various
minimum levels of capital to conduct business. (See Regulatory Requirements
Note to the Consolidated Financial Statements.) The Corporation's broker-
dealer, insurance, and futures commission merchant activities are subject to
regulatory requirements which may restrict the free flow of funds to
affiliates. Regulatory approval is required for certain transactions,
including payment of dividends in excess of certain established levels, making
affiliated investments, and entering into management and service agreements
with affiliated companies.
The Corporation's overall capital needs are continually reviewed to ensure that
its capital base can support the estimated risks of its businesses as well as
the regulatory and legal capital requirements of subsidiaries. Based upon these
analyses, management believes that the Corporation's equity base is adequate.
ASSETS AND LIABILITIES
The Corporation manages its balance sheet and risk limits according to market
conditions and business needs, subject to profitability and control of risk.
Asset and liability levels are primarily determined by order flow and fluctuate
daily, sometimes significantly, depending upon volume and demand. The liquidity
and maturity characteristics of assets and liabilities are monitored
continuously. The Corporation monitors and manages changes in its balance
sheet using point-in-time and average daily balances. Average daily balances
are derived from the Corporation's management information system which
summarizes balances on a settlement date basis. Financial statement balances,
as required under generally accepted accounting principles, are recorded on a
trade date basis. The discussion that follows compares the changes in
settlement date average daily balances, not quarter-end balances. The reasons
underlying the changes in average balances, however, are similar to those
underlying changes in quarter-end balances. The increase in average balance
sheet levels during the first three months of 1995 was attributable to many
factors, including increased trading activity and expanded match-funding of
repurchase and resale agreements.
For the first three months of 1995, average assets were $185 billion, up 2%
versus $181 billion for the 1994 fourth quarter. Average liabilities rose 2% to
$180 billion from $176 billion for the 1994 fourth quarter.
19
<PAGE>
The major components of the net growth of average assets and liabilities for the
1995 first quarter are summarized in the table below:
<TABLE>
<CAPTION>
Increase (Decrease) in Percent Increase
(In millions) Average Assets (Decrease)
- ------------- ---------------------- ----------------
<S> <C> <C>
Trading assets $ 3,155 5 %
Resale agreements $ 1,909 3 %
Securities borrowed $ 1,482 6 %
Interest earning deposits $(1,098) (20)%
</TABLE>
<TABLE>
<CAPTION>
Increase (Decrease) in Percent Increase
Average Liabilities (Decrease)
---------------------- ----------------
<S> <C> <C>
Repurchase agreements $ 7,950 12 %
Trading liabilities $ 1,368 4 %
Commercial paper and other
short-term borrowings $(3,661) (12)%
Long-term borrowings $(1,303) (8)%
</TABLE>
In managing its balance sheet, the Corporation strives to match-fund its
interest-earning assets with interest-bearing liabilities having similar
maturities. The Corporation match-funds its repurchase agreements/resale
agreements and its securities borrowed/securities loaned business, for example,
earning an interest spread on these transactions. In the 1995 first quarter,
inventory levels were higher due to increases in trading activity. On-balance-
sheet hedges, included in trading assets and liabilities were also up due, in
part, to increased market activity during 1995. The Corporation uses hedges
principally to reduce risk in connection with its trading activities.
Repurchase and resale agreements rose during the 1995 first quarter as a result
of an increase in match-funded transactions involving U.S. Government and agency
and non-U.S. government and agency securities. Increased use of repurchase
agreements as an alternate funding source for the Corporation also led to higher
repurchase agreement balances and reduced levels of commercial paper and other
short-term borrowings and long-term borrowings. Securities borrowed and loaned
levels also increased during the period, however, at March 31, 1995 and December
30, 1994 there were $3.4 billion and $1.1 billion, respectively, of securities
borrowed/loaned with the same counterparties that the Corporation did not
offset. In practice, the application of Interpretation No. 39, "Offsetting of
Amounts Related to Certain Contracts," varies among financial institutions with
some entities offsetting these balances.
The Corporation's assets, based on liquidity and maturity characteristics, are
funded through diversified sources which include repurchase agreements,
commercial paper and other short-term borrowings, long-term borrowings, and
equity.
NON-INVESTMENT GRADE HOLDINGS AND HIGHLY LEVERAGED TRANSACTIONS
In the normal course of business, the Corporation underwrites, trades, and holds
non-investment grade securities in connection with its investment banking,
market-making, and derivative structuring activities. During the past four
years, the Corporation has increased its non-investment grade trading
inventories to satisfy client demand for higher-yielding investments, including
emerging markets and other international securities.
20
<PAGE>
Non-investment grade securities have been defined as debt and preferred equity
securities rated as BB+ or lower, or equivalent ratings by recognized credit
rating agencies, certain sovereign debt in emerging markets, amounts due under
various derivative contracts from non-investment grade counterparties, and those
non-rated securities that, in the opinion of management, are non-investment
grade. At March 31, 1995, long and short non-investment grade trading
inventories accounted for 4.1% of aggregate consolidated trading inventories,
compared with 4.3% at year-end 1994. Non-investment grade trading inventories
are carried at fair value.
The Corporation provides financing and advisory services to, and invests in,
companies entering into leveraged transactions. Examples of leveraged
transactions may include leveraged buyouts, recapitalizations, and mergers and
acquisitions. The Corporation provides extensions of credit to leveraged
companies in the form of senior and subordinated debt, as well as bridge
financing on a select and limited basis. In addition, the Corporation syndicates
loans for non-investment grade counterparties or counterparties engaged in
highly leveraged transactions. Loans to highly leveraged companies are carried
at unpaid principal balances less a reserve for estimated losses. The allowance
for loan losses is estimated based on a review of each loan, and considerations
of economic, market, and credit conditions. At March 31, 1995 and December 30,
1994, there were no bridge loans outstanding.
The Corporation holds non-investment grade securities, direct equity investments
in leveraged companies, and interests in partnerships that invest in leveraged
transactions. Equity investments in privately-held companies for which sale is
restricted by government or contractual requirements are carried at the lower of
cost or estimated net realizable value. The Corporation has also committed to
participate in limited partnerships that invest in leveraged transactions.
Future commitments to participate in limited partnerships and other direct
equity investments will be determined on a select and limited basis.
The Corporation's involvement in non-investment grade securities and highly
leveraged transactions is subject to risks related to the creditworthiness of
the issuers of and the liquidity of the market for such securities, in addition
to the usual risks associated with investing in, financing, underwriting, and
trading investment grade instruments. The Corporation recognizes such risks
and, whenever possible, employs strategies to mitigate exposures.
The specific components and overall level of non-investment grade and highly
leveraged positions may vary significantly from period to period as a result of
inventory turnover, investment sales, and asset redeployment. The Corporation
continually monitors credit risk by individual issuer and industry
concentration.
In addition, valuation policies provide for recognition of market liquidity, as
well as the trading pattern of specific securities. In certain instances, the
Corporation will hedge the exposure associated with owning a high-yield or non-
investment grade position by selling short the related equity security. The
Corporation also uses certain non-investment grade trading inventories,
principally non-U.S. governments and agencies securities, to hedge the exposure
arising from structured derivative transactions. Collateral, consisting
principally of U.S. Government securities, may be obtained to reduce credit risk
related to these transactions.
The Corporation's insurance subsidiaries hold non-investment grade securities to
support fixed-rate liabilities. As a percentage of total insurance investments,
non-investment grade securities were 4.5%, compared with 5.5% at year-end 1994.
Non-investment grade securities of insurance subsidiaries are classified as
available-for-sale and are carried at fair value.
21
<PAGE>
A summary of the Corporation's non-investment grade holdings and highly
leveraged transactions is provided below:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 30,
(In millions) 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Non-investment grade trading assets $3,446 $3,309
Non-investment grade trading liabilities 471 456
Non-investment grade investments
of insurance subsidiaries 260 314
Loans (net of allowance for
loan losses) (a), (c) 225 257
Equity investments (b) 261 289
Partnership interests 102 93
- ----------------------------------------------------------------------------
Additional commitments to invest in
partnerships $ 91 $ 80
Unutilized revolving lines of
credit and other lending
commitments 45 50
</TABLE>
- ----------------------------------------------------------------------------
(a) Represented outstanding loans to 34 and 35 medium-sized companies at March
31, 1995 and December 30, 1994, respectively.
(b) Invested in 76 and 80 enterprises at March 31, 1995 and December 30, 1994,
respectively.
(c) Subsequent to quarter-end, the Corporation extended financing to a non-
investment grade counterparty totaling $15 million.
At March 31, 1995, the largest non-investment grade concentration consisted of
government and corporate obligations of a Latin American sovereign totaling $307
million, of which $38 million represented on-balance-sheet hedges for off-
balance-sheet instruments. No one industry sector accounted for more than 23%
of total non-investment grade positions. Included in the table above are debt
and equity securities of issuers in various stages of bankruptcy proceedings or
in default. At March 31, 1995, the carrying value of these securities totaled
$227 million, of which 75% resulted from the Corporation's market-making
activities in such securities.
22
<PAGE>
STATISTICAL DATA
Selected statistical data for the last five quarters is presented below for
informational purposes:
<TABLE>
<CAPTION>
(Dollars in millions, 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr.
except per share amounts) 1994 1994 1994 1994 1995
- ------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PRIVATE CLIENT ACCOUNTS (a):
Assets in Worldwide
Private Client Accounts $560,000 $553,000 $571,000 $568,000 $603,000
Assets in Domestic
Private Client Accounts $530,000 $523,000 $539,000 $537,000 $571,000
Assets under Professional
Management:
Money Markets $ 67,000 $ 65,000 $ 67,000 $ 67,000 $ 71,000
Equities 33,000 35,000 38,000 37,000 38,000
Fixed Income 40,000 39,000 38,000 36,000 37,000
Private Portfolio 19,000 17,000 19,000 20,000 20,000
Insurance 6,000 5,000 5,000 4,000 4,000
-------- -------- -------- -------- --------
Subtotal 165,000 161,000 167,000 164,000 170,000
ML Consults 16,200 15,400 15,500 14,400 14,900
-------- -------- -------- -------- --------
TOTAL $181,200 $176,400 $182,500 $178,400 $184,900
======== ======== ======== ======== ========
- --------------------------------------------------------------------------------------------
UNDERWRITING (b):
Global Debt and Equity:
Volume $ 52,300 $ 34,000 $ 30,200 $ 21,300 $ 27,600
Market Share 13.0% 13.8% 13.0% 10.0% 12.2%
U.S. Domestic Debt and
Equity:
Volume $ 46,100 $ 28,200 $ 24,600 $ 18,000 $ 24,000
Market Share 16.3% 17.2% 16.7% 15.3% 16.9%
- --------------------------------------------------------------------------------------------
FULL-TIME EMPLOYEES:
U.S. Domestic 38,050 38,400 38,650 38,700 38,550
International 4,600 4,800 5,000 5,100 5,050
-------- -------- -------- -------- --------
TOTAL 42,650 43,200 43,650 43,800 43,600
======== ======== ======== ======== ========
Financial Consultants and
Account Executives
Worldwide 13,200 13,200 13,300 13,400 13,500
Support Personnel to
Producer Ratio (c) 1.45 1.47 1.46 1.46 1.44
INCOME STATEMENT:
Net Earnings $ 371.8 $ 251.8 $ 231.6 $ 161.6 $ 227.3
Annualized Return on
Average Common
Stockholders' Equity 27.4% 18.5% 16.9% 11.5% 16.7%
Earnings Per Common
Share:
Primary $ 1.68 $ 1.18 $ 1.10 $ .76 $ 1.08
Fully Diluted $ 1.68 $ 1.18 $ 1.10 $ .75 $ 1.08
BALANCE SHEET:
Total Assets $179,684 $174,007 $168,395 $163,749 $176,733
Total Stockholders'
Equity $ 5,603 $ 5,628 $ 5,705 $ 5,818 $ 5,704
SHARE INFORMATION
(in thousands):
Weighted Average Shares
Outstanding:
Primary 220,633 212,489 209,030 203,157 199,178
Fully Diluted 220,633 212,489 209,030 203,618 199,178
Common Shares
Outstanding(d) 200,893 195,982 192,812 181,479 176,521
Shares Repurchased 7,000 6,325 4,058 12,512 9,309
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Client accounts were redefined in 1994 to include certain institutional
private portfolio accounts.
(b) Full credit to book manager. All market share data is derived from
Securities Data Co.
(c) Support personnel includes sales assistants.
(d) Does not include 7,742,069, 7,255,040, 6,816,714, 6,427,091, and 5,306,924
unallocated reversion shares held in the Employee Stock Ownership Plan at
period end April 1, 1994, July 1, 1994, September 30, 1994, December 30,
1994, and March 31, 1995, respectively, which are not considered
outstanding for accounting purposes.
23
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
As previously reported in the Corporation's Annual Report on Form 10-K
for the fiscal year ended December 30, 1994 (the "1994 10-K"), ML & Co. and
certain of its subsidiaries, including MLPF&S, have been named as parties in a
number of civil actions arising out of the Corporation's business activities
with Orange County, California ("Orange County"). Since the 1994 10-K was
filed, the following events have taken place with respect to several of the
actions described in the 1994 10-K. An action (the "McDermott Action"),
commenced on December 13, 1994 in the Supreme Court of the State of New York by
individuals who owned interests in the Merrill Lynch California Municipal Bond
Fund of the Merrill Lynch California Municipal Series Trust from January 1994
through December 1, 1994, was dismissed on April 13, 1995. Plaintiffs in an
action commenced in the Superior Court of the State of California on December
13, 1994 by individuals whose funds were deposited with the Orange County
Treasurer-Tax Collector in connection with proceedings in California Superior
Court (the "DeLeon Action") filed an amended complaint to include the
Corporation as a defendant and to add claims for aiding and abetting breach of
fiduciary duty, conspiracy to breach fiduciary duty, and negligence. The DeLeon
Action no longer asserts a claim for fraud, and no longer names Robert Citron,
formerly the Treasurer-Tax Collector of Orange County, Matthew Raabe, formerly
the Assistant to the Treasurer-Tax Collector of Orange County, or Steven Lewis,
the Auditor-Controller of Orange County, as defendants. Plaintiffs in an action
commenced on January 9, 1995 in the United States District Court for the Central
District of California on behalf of all investors and participants in funds
controlled by the Orange County Treasurer-Tax Collector between January 1, 1993
and December 6, 1994 (the Schools Excess Liability Fund Action or "SELF Action")
amended their complaint on April 5, 1995 to include the Corporation and other
subsidiaries of the Corporation as defendants. In the amended complaint, Robert
Citron is no longer named as a defendant and in addition to claims previously
asserted, the action now includes claims for violations of New York Stock
Exchange Rule 405 and National Association of Securities Dealers' Rule of Fair
Practice Article III, Section 2, and aiding and abetting breach of fiduciary
duty.
For more detailed information regarding litigation matters involving the
Corporation and its subsidiaries, see "Item 3.- Legal Proceedings" in the 1994
10-K.
24
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
On April 18, 1995, the Corporation held its Annual Meeting of
Stockholders, at which 91.3% of the shares of Common Stock, par value $1.33 1/3
per share, outstanding and eligible to vote, either in person or by proxy, were
represented, constituting a quorum. At this Annual Meeting, the following
matters were voted upon: (i) the election of four directors to the Board of
Directors to hold office for a term of three years; (ii) a stockholder proposal
concerning cumulative voting in the election of directors; and (iii) a
stockholder proposal concerning disclosure of the relationship of derivatives
claims to underlying assets. Proxies for the Annual Meeting of Stockholders
were solicited by the Board of Directors pursuant to Regulation 14A of the
Securities Exchange Act of 1934.
The stockholders elected all four nominees to three year terms as members
of the Board of Directors as set forth in the Corporation's Proxy Statement.
There was no solicitation in opposition to such nominees. The votes cast for or
withheld from the election of directors were as follows: Earle H. Harbison, Jr.
received 169,630,355 votes in favor and 1,150,392 votes were withheld; William
R. Hoover received 169,648,849 votes in favor and 1,131,898 votes were withheld;
Robert P. Luciano received 169,637,494 votes in favor and 1,143,253 votes were
withheld; and Daniel P. Tully received 169,674,505 votes in favor and 1,106,242
votes were withheld.
The stockholders did not approve the stockholder proposal concerning
cumulative voting in elections of directors. The votes cast for and against, as
well as the number of abstentions and broker non-votes, for this proposal were
as follows: 27,347,681 votes in favor, 104,737,909 votes against, 16,664,491
shares abstained, and 22,030,666 shares represented broker non-votes.
The stockholders did not approve the stockholder proposal concerning
disclosure of the relationship of derivatives claims to underlying assets. The
votes cast for and against, as well as the number of abstentions and broker non-
votes, for this proposal were as follows: 10,616,856 votes in favor, 133,164,251
votes against, 4,968,974 shares abstained, and 22,030,666 shares represented
broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
(4) Instruments defining the rights of security holders, including
indentures:
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the
Corporation hereby undertakes to furnish to the Securities and
Exchange Commission (the "Commission"), upon request, copies of
the instruments defining the rights of holders of long-term debt
securities of the Corporation that authorize an amount of
securities constituting 10% or less of the total assets of the
Corporation and its subsidiaries on a consolidated basis.
25
<PAGE>
(11) Statement re: computation of per share earnings.
(12) Statement re: computation of ratios.
(15) Letter re: unaudited interim financial information.
(27) Financial Data Schedule. (The Financial Data Schedule to be
contained in this Exhibit 27 is required to be submitted only
in the Corporation's electronic filing of this Quarterly Report
on Form 10-Q by means of the EDGAR System and therefore is
herein omitted.)
(b) Reports on Form 8-K
The following Current Reports on Form 8-K were filed by the
Corporation with the Commission during the quarterly period covered
by this Report:
(i) Current Report dated January 12, 1995 for the purpose of
reporting on litigation arising from the Corporation's business
dealings with Orange County, California.
(ii) Current Report dated January 23, 1995 for the purpose of filing
the Preliminary Unaudited Earnings Summary of the Corporation
for the three months and year ended December 30, 1994.
(iii) Current Report dated February 8, 1995 for the purpose of filing
the form of Registrant's Index Warrant Agreement, including
form of Global Warrant Certificate, relating to the
Corporation's Nikkei Stock Index 300 Call Warrants expiring
February 3, 1997.
(iv) Current Report dated February 9, 1995 for the purpose of filing
the form of Registrant's 8 3/8% Notes due February 9, 2000.
(v) Current Report dated March 3, 1995 for the purpose of filing
certain summary financial information of the Corporation as of
December 30, 1994.
(vi) Current Report dated March 9, 1995 for the purpose of filing
the audited financial statements of the Corporation for its
1994 fiscal year.
26
<PAGE>
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)
Date: May 12, 1995 By: /s/ Joseph T. Willett
---------------------------
Joseph T. Willett
Senior Vice President and
Chief Financial Officer
27
<PAGE>
INDEX TO EXHIBITS
Exhibits
(11) Statement re: computation of per share earnings.
(12) Statement re: computation of ratios.
(15) Letter re: unaudited interim financial information.
(27) Financial Data Schedule. (The Financial Data Schedule to be contained in
this Exhibit 27 is required to be submitted only in the Corporation's
electronic filing of this Quarterly Report on Form 10-Q by means of the
EDGAR System.)
<PAGE>
EXHIBIT 11
MERRILL LYNCH & CO., INC. AND SUBSIDIARIES
COMPUTATION OF PER COMMON SHARE EARNINGS
(In Thousands, Except Per Share Amounts)
For the Three Months Ended
--------------------------
March 31, April 1,
1995(A) 1994(A)
--------- --------
PRIMARY:
Net earnings.................................... $227,275 $371,759
Preferred stock dividends....................... (11,941) (1,336)
-------- --------
Net earnings applicable to common stockholders.. $215,334 $370,423
======== ========
Weighted average shares outstanding:
Common stock.................................. 180,396 202,774
Assuming issuance of shares relating to
employee incentive plans..................... 18,782 17,859
-------- --------
Total shares.................................... 199,178 220,633
======== ========
Per common share amounts:
Net earnings.................................... $ 1.08 $ 1.68
======== ========
FULLY DILUTED:
Net earnings.................................... $227,275 $371,759
Preferred stock dividends....................... (11,941) (1,336)
-------- --------
Net earnings applicable to common stockholders.. $215,334 $370,423
======== ========
Weighted average shares outstanding:
Common stock.................................. 180,396 202,774
Assuming issuance of shares relating to
employee incentive plans..................... 18,782 17,859
-------- --------
Total shares.................................... 199,178 220,633
======== ========
Per common share amounts:
Net earnings.................................... $ 1.08 $ 1.68
======== ========
(A) In accordance with Accounting Principles Board Opinion No. 15, the modified
treasury stock method was used to calculate per common share earnings.
<PAGE>
EXHIBIT 12
MERRILL LYNCH & CO., INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars In Thousands)
For the Three Months
Ended
-------------------------
March 31, April 1,
1995 1994
---------- ----------
Pretax earnings from continuing operations... $ 378,792 $ 652,208
Deduct equity in undistributed net earnings
of unconsolidated subsidiaries.............. - (3,048)
---------- ----------
Total pretax earnings from continuing
operations.................................. 378,792 649,160
---------- ----------
Add: Fixed Charges(A)
Interest............................. 2,781,009 1,899,427
Amortization of debt expense......... 709 797
---------- ----------
Total interest......................... 2,781,718 1,900,224
Interest factor in rents............... 32,355 33,564
---------- ----------
Total fixed charges.......................... 2,814,073 1,933,788
---------- ----------
Pretax earnings before fixed charges......... $3,192,865 $2,582,948
========== ==========
Ratio of earnings to fixed charges........... 1.13 1.34
========== ==========
(A) There was no capitalized interest for the 1995 and 1994 first quarters.
<PAGE>
EXHIBIT 15
May 12, 1995
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
New York, N.Y. 10281-1332
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim consolidated
financial information of Merrill Lynch & Co., Inc. and subsidiaries as of March
31, 1995 and for the three-month periods ended March 31, 1995 and April 1, 1994
as indicated in our report dated May 12, 1995; because we did not perform an
audit, we express no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, is
incorporated by reference in the following documents, as amended:
Filed on Form S-8:
Registration Statement No. 33-41942 (1986 Employee Stock Purchase Plan)
Registration Statement No. 33-17908 (Incentive Equity Purchase Plan)
Registration Statement No. 33-33336 (Long Term Incentive Compensation Plan)
Registration Statement No. 33-51831 (Long Term Incentive Compensation Plan)
Registration Statement No. 33-48846 (401(k) Savings and Investment Plan)
Registration Statement No. 33-51829 (401(k) Savings and Investment Plan)
Registration Statement No. 33-54154 (Non-Employee Directors' Equity Plan)
<PAGE>
Registration Statement No. 33-54572 (401(k) Savings and Investment Plan
(Puerto Rico))
Registration Statement No. 33-56427 (1994 Deferred Compensation Plan for a
Select Group of Eligible Employees)
Registration Statement No. 33-55155 (1995 Deferred Compensation Plan for a
Select Group of Eligible Employees)
Filed on Form S-3:
Debt Securities
Registration Statement No. 33-54218
Registration Statement No. 2-78338
Registration Statement No. 2-89519
Registration Statement No. 2-83477
Registration Statement No. 33-03602
Registration Statement No. 33-17965
Registration Statement No. 33-27512
Registration Statement No. 33-35456
Registration Statement No. 33-42041
Registration Statement No. 33-45327
Registration Statement No. 33-49947
Registration Statement No. 33-51489
Registration Statement No. 33-52647
Medium Term Notes
Registration Statement No. 2-96315
<PAGE>
Registration Statement No. 33-03079
Registration Statement No. 33-05125
Registration Statement No. 33-09910
Registration Statement No. 33-16165
Registration Statement No. 33-19820
Registration Statement No. 33-23605
Registration Statement No. 33-27549
Registration Statement No. 33-38879
Other Securities
Registration Statement No. 33-19975 (Remarketed Preferred Stock, Series C)
Registration Statement No. 33-33335 (Common Stock)
Registration Statement No. 33-45777 (Common Stock)
Registration Statement No. 33-55363 (Preferred Stock)
We are also aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
New York, New York
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
MERRILL LYNCH & CO., INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-START> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 2,961,691
<RECEIVABLES> 26,757,231
<SECURITIES-RESALE> 45,089,532
<SECURITIES-BORROWED> 25,199,020
<INSTRUMENTS-OWNED> <F1> 68,136,320
<PP&E> 1,592,630
<TOTAL-ASSETS> 176,732,993
<SHORT-TERM> 25,080,158
<PAYABLES> 18,165,598
<REPOS-SOLD> 57,110,193
<SECURITIES-LOANED> 5,406,241
<INSTRUMENTS-SOLD> 37,808,521
<LONG-TERM> 14,484,523
<COMMON> 315,105
0
618,800
<OTHER-SE> 4,770,243
<TOTAL-LIABILITY-AND-EQUITY> 176,732,993
<TRADING-REVENUE> 674,756
<INTEREST-DIVIDENDS> 3,029,519
<COMMISSIONS> 685,295
<INVESTMENT-BANKING-REVENUES> 248,497
<FEE-REVENUE> 448,437
<INTEREST-EXPENSE> 2,783,392
<COMPENSATION> 1,269,888
<INCOME-PRETAX> 378,792
<INCOME-PRE-EXTRAORDINARY> 227,275
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 227,275
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
<FN>
<F1>Financial Instruments owned includes commodity contracts but excludes
physical commodities and real estate owned totaling $122,489.
</FN>
</TABLE>
