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): April 17, 2000
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Merrill Lynch & Co., Inc.
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(Exact Name of Registrant as Specified in its 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)
4 World Financial Center, New York, New York 10080
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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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World Financial Center, North Tower, New York, New York 10281-1332
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events
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Filed herewith is the Preliminary Unaudited Earnings Summary, as contained in a
press release dated April 17, 2000, for Merrill Lynch & Co., Inc. ("Merrill
Lynch") for the three-month period ended March 31, 2000. The results of
operations set forth therein for such period are unaudited. All adjustments,
consisting only of normal recurring accruals that are, in the opinion of
management, necessary for a fair presentation of the results of operations for
the period presented, have been included. The nature of Merrill Lynch's business
is such that the results for any interim period are not necessarily indicative
of the results for a full year.
Preferred stockholders' equity, common stockholders' equity, long-term
borrowings, preferred securities issued by subsidiaries, and book value per
common share as of March 31, 2000 were approximately $425 million, $14.0
billion, $56.9 billion, $2.7 billion, and $36.37, respectively.
On April 17, 2000, Merrill Lynch reported record quarterly net earnings of
$1.037 billion, up 70% from the $609 million reported in the 1999 first quarter,
and surpassing the previous record of $764 million set in the 1999 fourth
quarter. Earnings per common share were $2.69 basic and $2.38 diluted, compared
with $1.65 basic and $1.44 diluted in the 1999 first quarter.
Annualized return on average common equity was approximately 31.1%, compared
with 24.6% in the first quarter a year ago. The pre-tax profit margin of 21.7%
for the quarter was the highest level reported since the full year 1993 and the
first quarter of 1994.
The company also announced that its Board of Directors declared a quarterly cash
dividend of $0.30 per common share, an 11% increase from $0.27 per common share
in the previous quarter. The dividend is payable May 24, 2000 to common
shareholders of record as of May 5, 2000.
Net revenues reached a record $7.2 billion, up 38% from the 1999 first quarter,
as new highs were achieved in most categories, including commissions, principal
transactions, asset management and portfolio service fees, and net interest.
Commissions revenues were a record $2.2 billion, up 37% from the 1999 first
quarter, mainly due to increased global trading volume of listed securities and
higher mutual fund sales.
Principal transaction revenues reached a new quarterly high of $1.8 billion, up
24% from the previous record reported in the 1999 first quarter. Equity trading
revenues achieved record levels as a result of exceptionally high trading volume
in both US and non-US equities and equity derivatives. The debt trading
businesses were also strong, benefiting from improved global market conditions.
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Investment banking revenues rose 57% from the 1999 first quarter to $996
million, as a result of an increase in equity underwriting revenues. Strategic
advisory service revenues increased from the 1999 first quarter due to higher
levels of activity, particularly in Europe.
Asset management and portfolio service fees increased 25% from the 1999 first
quarter to a record $1.4 billion. Asset management fees were up 21% from a year
ago. Portfolio service fees increased 45% from the 1999 first quarter as
fee-based assets continued to grow, principally Unlimited Advantage
(Service Mark) and Merrill Lynch Consults (Registered Trademark).
Other revenues were up 80% from the first quarter of 1999 to $238 million,
primarily as a result of higher income from partnership investments and net
investment gains.
Net interest profit was $684 million, up significantly from the 1999 first
quarter, but only marginally above the fourth quarter level. The year-over-year
increase was due to higher dividends, increased customer lending balances, and
changes in the asset/liability mix.
Compensation and benefits rose 38% from the 1999 first quarter to $3.8 billion,
as increased profitability led to higher incentive compensation. Compensation
and benefits were 52.5% of net revenues for the first quarter of 2000, virtually
unchanged from the first quarter of 1999.
Non-compensation expenses were 25.7% of net revenues for the first quarter, a
record low ratio and down from 28.6% for the comparable period in 1999.
Communications and technology expenses totaled $578 million, up 20% from the
1999 first quarter, as a result of increased systems consulting costs, higher
technology-related depreciation, and increased communication maintenance costs.
Occupancy and related depreciation was $250 million, up from $227 million in the
1999 first quarter.
Advertising and market development expenses increased 61% from the comparable
quarter a year ago to $244 million, due to higher travel and entertainment
expenses and sales promotion costs associated with increased business activity,
as well as higher advertising costs resulting from the launch of new products
and a new corporate branding campaign.
Brokerage, clearing, and exchange fees increased 25% to $192 million, largely
due to increased transaction volume.
Professional fees were $147 million, up $30 million from the 1999 first quarter
and down 10% from the prior quarter.
Goodwill amortization was $56 million in the first quarter of 2000. Other
expenses were $397 million, increasing 24% from the 1999 first quarter due to
higher provisions related to various matters and increased business activity.
The effective tax rate in the quarter was 31.0%.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits
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(99) Additional Exhibits
(i) Preliminary Unaudited Earnings Summary for
the three-month period ended March 31, 2000.
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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/ Thomas H. Patrick
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Thomas H. Patrick
Executive Vice President and
Chief Financial Officer
Date: April 17, 2000
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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-month period ended March 31, 2000. 7
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<TABLE>
<CAPTION>
Exhibit 99(i)
MERRILL LYNCH & CO., INC.
PRELIMINARY UNAUDITED EARNINGS SUMMARY
For the Three Months Ended Percent Inc / (Dec)
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March 31, December 31, March 26, 1Q00 vs. 1Q00 vs.
(in millions, except per share amounts) 2000 1999 1999 4Q99 1Q99
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<S> <C> <C> <C> <C> <C>
NET REVENUES
Commissions $ 2,152 $ 1,735 $ 1,567 24.0% 37.3%
Principal transactions 1,787 794 1,444 125.1 23.8
Investment banking 996 1,125 633 (11.5) 57.3
Asset management and portfolio service fees 1,390 1,301 1,110 6.8 25.2
Other 238 296 132 (19.6) 80.3
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Subtotal 6,563 5,251 4,886 25.0 34.3
Interest revenue and dividends 4,463 4,019 3,681 11.0 21.2
Less interest expense 3,779 3,375 3,301 12.0 14.5
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Net interest profit 684 644 380 6.2 80.0
TOTAL NET REVENUES 7,247 5,895 5,266 22.9 37.6
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NON-INTEREST EXPENSES
Compensation and benefits 3,808 2,916 2,762 30.6 37.9
Communications and technology 578 541 480 6.8 20.4
Occupancy and related depreciation 250 252 227 (0.8) 10.1
Advertising and market development 244 236 152 3.4 60.5
Brokerage, clearing, and exchange fees 192 184 154 4.3 24.7
Professional fees 147 163 117 (9.8) 25.6
Goodwill amortization 56 57 57 (1.8) (1.8)
Other 397 386 321 2.8 23.7
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TOTAL NON-INTEREST EXPENSES 5,672 4,735 4,270 19.8 32.8
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EARNINGS BEFORE INCOME TAXES AND DIVIDENDS
ON PREFERRED SECURITIES ISSUED BY SUBSIDIARIES 1,575 1,160 996 35.8 58.1
Income tax expense 489 346 338 41.3 44.7
Dividends on preferred securities issued by subsidiaries 49 50 49 (2.0) -
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NET EARNINGS $ 1,037 $ 764 $ 609 35.7 70.3
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Preferred stock dividends $ 9 $ 9 $ 10 - (10.0)
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NET EARNINGS APPLICABLE TO COMMON STOCKHOLDERS $ 1,028 $ 755 $ 599 36.2 71.6
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EARNINGS PER COMMON SHARE
Basic $ 2.69 $ 2.03 $ 1.65 32.5 63.0
Diluted 2.38 1.80 1.44 32.2 65.3
AVERAGE SHARES
Basic 381.6 372.0 364.0 2.6 4.8
Diluted 432.4 420.6 415.7 2.8 4.0
</TABLE>
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