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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): October 15, 1997
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Merrill Lynch & Co., Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-7182 13-2740599
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(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
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 449-1000
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(Former Name or Former Address, if Changed Since Last Report.)
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ITEM 5. OTHER EVENTS
Filed herewith is the Preliminary Unaudited Earnings Summary, as contained in
a press release dated October 14, 1997, for Merrill Lynch & Co., Inc.
("Merrill Lynch") for the three- and nine-month periods ended September 26,
1997. The results of operations set forth therein for such periods are
unaudited. All adjustments, consisting only of normal recurring accruals,
that are in the opinion of management, necessary for a fair presentation of
the results of operations for the periods presented have been included. The
nature of Merrill Lynch's business is such that the results for any interim
period are not necessarily indicative of the results for a full year.
Merrill Lynch reported on October 14, 1997 the highest quarterly net earnings
in its history. Third quarter 1997 net earnings were $493 million, 49% above
the 1996 third quarter and 2% above the previous record of $481 million in
the 1997 second quarter. Earnings per common share were $1.25 primary and
$1.24 fully diluted, compared with $.84 primary and fully diluted in the 1996
third quarter and $1.24 primary and $1.23 fully diluted in the 1997 second
quarter.
Annualized return on average common equity was approximately 27.3% for the 1997
third quarter, compared with 21.5% in the 1996 third quarter and 28.5% in the
1997 second quarter. For the first nine months of 1997, the annualized return
on average common equity was approximately 28.0%, compared with 26.3% for the
corresponding 1996 period.
Net earnings for the first nine months of 1997 were a record $1.4 billion, 23%
above the comparable 1996 period. Nine-month 1997 earnings per common share
were $3.66 primary, up 24% from $2.96 primary in the comparable 1996 period.
During the third quarter, private client assets surpassed $1 trillion for the
first time, reaching $1,018,000,000,000 at quarter-end. Client assets were up
$239 billion from the 1996 third quarter, and $78 billion from the 1997 second
quarter.
3RD QUARTER REVENUES
Net revenues rose 29% from the 1996 third quarter to $4.0 billion, with
increases in all major categories. Commission revenues were a record $1.2
billion, up 45% from the 1996 third quarter due to increases in global listed
securities volume and strong mutual fund activity.
Principal transactions revenues rose 16% from a year ago to $951 million.
Higher trading revenues from interest rate and currency swaps, equities and
equity derivatives, high yield debt, and foreign exchange contributed to the
increase.
Investment banking revenues increased 47% to a new high of $691 million as a
result of record strategic services fees and continued strong levels of
underwriting in virtually all categories. Strategic services fees benefited
from robust merger and acquisition activity and significant gains in market
share from a year ago.
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Asset management and portfolio service fees were a record $722 million, up
27% from the 1996 third quarter. Continued growth in assets under management
and other fee-based products, such as Merrill Lynch Consults (Registered
Trademark), Mutual Fund Advisor (Service Mark), and Asset Power (Registered
Trademark), led to the increase.
Other revenues increased 13% from a year ago to $141 million. Net interest
profit decreased 2% to $244 million.
3RD QUARTER EXPENSES
Non-interest expenses increased 25% from the 1996 third quarter to $3.2
billion. Compensation and benefits, the largest expense category, was up 25%
to $2.0 billion due to higher variable compensation associated with increased
production and profitability. Compensation and benefits expense as a
percentage of net revenues was 50.3% in the 1997 third quarter, compared with
52.1% in the corresponding 1996 quarter.
Communications and equipment rental expense rose 24% to $175 million resulting
from the expanded use of market data services, increased business volume, and
higher technology maintenance costs. Other facilities-related costs, which
include occupancy and depreciation and amortization, were up 9% to $239 million
as continued global expansion led to higher costs.
Professional fees increased 39% to $211 million. Higher systems and management
consulting costs related to various technology projects contributed to the
increase. Advertising and market development expense was up 16% to $145 million
due primarily to increased global travel and client promotion costs. Brokerage,
clearing, and exchange fees rose 33% to $137 million as a result of higher
global securities trading volume. Other expenses were up 40% to $307 million
due in part to increases in provisions related to various business activities
and legal matters.
The 1997 third quarter effective tax rate was 34.4%, compared with 36.6% a year
ago, benefiting from reductions in state and local taxes.
Preferred stockholders' equity, common stockholders' equity, long-term
borrowings, preferred securities issued by subsidiaries, and book value per
common share as of September 26, 1997 were approximately $.4 billion, $7.4
billion, $40.0 billion, $.6 billion, and $22.24, respectively.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) EXHIBITS.
(99) Additional Exhibits
(i) Preliminary Unaudited Earnings Summary for the three-and
nine-month periods ended September 26, 1997.
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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.
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(Registrant)
By: /s/ Joseph T. Willett
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Joseph T. Willett
Senior Vice President
Chief Financial Officer
Date: October 15, 1997
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EXHIBIT INDEX
Exhibit No. Description Page
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(99) Additional Exhibits
(i) Preliminary Unaudited Earnings Summary for the three- 6-7
and nine-month periods ended September 26, 1997.
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<TABLE>
<CAPTION>
Exhibit 99(i)
MERRILL LYNCH & CO., INC.
PRELIMINARY UNAUDITED EARNINGS SUMMARY
For Three Months Ended Increase / (Decrease)
September 26, June 27, September 27, 3Q97 Versus
[In millions, except per share amounts] 1997 1997 1996 2Q97 3Q96
------------- ------------ ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Commissions $ 1,244 $ 1,078 $ 860 15.4% 44.7%
Interest and Dividends 4,397 4,330 3,357 1.6 31.0
Principal Transactions 951 1,151 818 (17.4) 16.2
Investment Banking 691 625 471 10.5 46.7
Asset Management and Portfolio Service Fees 722 670 570 7.7 26.6
Other 141 157 125 (10.0) 13.0
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Total Revenues 8,146 8,011 6,201 1.7 31.4
Interest Expense 4,153 4,044 3,108 2.7 33.6
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Net Revenues 3,993 3,967 3,093 0.7 29.1
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Non-Interest Expenses:
Compensation and Benefits 2,008 2,004 1,612 0.2 24.6
Communications and Equipment Rental 175 170 141 2.9 24.1
Occupancy 124 124 116 (0.2) 6.6
Depreciation and Amortization 115 108 104 6.5 10.9
Professional Fees 211 197 152 7.2 39.2
Advertising and Market Development 145 156 125 (7.2) 15.9
Brokerage, Clearing, and Exchange Fees 137 112 103 22.9 32.9
Other 307 312 218 (1.6) 40.5
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Total Non-Interest Expenses 3,222 3,183 2,571 1.3 25.3
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Earnings Before Income Taxes and Dividends
on Preferred Securities Issued by Subsidiaries 771 784 522 (1.7) 47.7
Income Tax Expense 266 290 191 (8.5) 38.8
Dividends on Preferred Securities Issued
by Subsidiaries 12 13 - (2.9) N/M
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Net Earnings $ 493 $ 481 $ 331 2.4 49.0
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Preferred Stock Dividends $ 9 $ 9 $ 12 - (17.1)
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Net Earnings Applicable to Common
Stockholders $ 484 $ 472 $ 319 2.5 51.4
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Earnings per Common Share (A):
Primary $1.25 $1.24 $0.84 0.8 48.8
Fully Diluted $1.24 $1.23 $0.84 0.8 47.6
Average Shares (A):
Primary 387.6 379.4 378.4 2.2 2.4
Fully Diluted 389.7 384.4 381.3 1.4 2.2
</TABLE>
(A) All share and per share amounts have been restated for the two-for-one
common stock split, effected in the form of a 100% stock dividend,
paid on May 30, 1997.
Note: Percentages are based on actual numbers before rounding.
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<TABLE>
<CAPTION>
Exhibit 99(i)
MERRILL LYNCH & CO., INC.
PRELIMINARY UNAUDITED EARNINGS SUMMARY
For Nine Months Ended
September 26, September 27,
[In millions, except per share amounts] 1997 1996 Inc / (Dec)
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<S> <C> <C>
Revenues:
Commissions $ 3,437 $ 2,819 21.9%
Interest and Dividends 12,575 9,407 33.7
Principal Transactions 3,166 2,709 16.8
Investment Banking 1,924 1,428 34.7
Asset Management and Portfolio Service Fees 2,038 1,661 22.7
Other 468 386 21.4
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Total Revenues 23,608 18,410 28.2
Interest Expense 11,807 8,675 36.1
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Net Revenues 11,801 9,735 21.2
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Non-Interest Expenses:
Compensation and Benefits 6,000 5,044 19.0
Communications and Equipment Rental 503 409 23.1
Occupancy 368 345 6.7
Depreciation and Amortization 328 300 9.3
Professional Fees 606 422 43.5
Advertising and Market Development 445 364 22.3
Brokerage, Clearing, and Exchange Fees 367 310 18.2
Other 862 650 32.7
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Total Non-Interest Expenses 9,479 7,844 20.9
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Earnings Before Income Taxes and Dividends
on Preferred Securities Issued by Subsidiaries 2,322 1,891 22.8
Income Tax Expense 847 717 18.0
Dividends on Preferred Securities Issued
by Subsidiaries 35 - N/M
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Net Earnings $ 1,440 $ 1,174 22.7
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Preferred Stock Dividends $ 30 $ 35 (14.5)
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Net Earnings Applicable to Common
Stockholders $ 1,410 $ 1,139 23.8
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Earnings per Common Share (A):
Primary $3.66 $2.96 23.6
Fully Diluted $3.62 $2.95 22.7
Average Shares (A):
Primary 385.4 385.3 -
Fully Diluted 389.5 386.5 0.8
</TABLE>
(A) All share and per share amounts have been restated for the two-for-one
common stock split, effected in the form of a 100% stock dividend, paid
on May 30, 1997.
Note: Percentages are based on actual numbers before rounding.
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