Exhibit 99.1
Merrill Lynch & Co., Inc.
Reconciliation of “Non-GAAP” Measures
Merrill Lynch adopted Statement of Financial Accounting Standards No. 123 (as revised in 2004) for stock-based employee compensation during the first quarter of 2006. Additionally, as a result of a comprehensive review of the retirement provisions in its stock-based compensation plans, Merrill Lynch also modified the retirement eligibility requirements of existing stock awards in order to facilitate transition to more stringent retirement eligibility requirements for future stock awards. These modifications and the adoption of the new accounting standard required Merrill Lynch to accelerate the recognition of compensation expenses for affected stock awards, resulting in the “one-time compensation expenses.” These changes represent timing differences and are not economic in substance. Management believes that while the results excluding the one-time expenses are considered “non-GAAP” measures, they depict the operating performance of the company more clearly and enable more appropriate period-to-period comparisons.
Unaudited Earnings Summary
                                                   
(in millions, except per share amounts)
 
    For the Three Months Ended March 31, 2006   For the Six Months Ended June 30, 2006
         
    Excluding   Impact of       Excluding   Impact of    
    One-time   One-time       One-time   One-time    
    Compensation   Compensation   GAAP   Compensation   Compensation   GAAP
    Expenses   Expenses   Basis   Expenses(1)   Expenses(1)   Basis
 
Net Revenues
   $ 7,962     $ -     $ 7,962     $ 16,120     $ -     $ 16,120  
                                     
Non-Interest Expenses
                                                
 
Compensation and benefits
     3,991       1,759       5,750       7,971       1,759       9,730  
 
Non-compensation expenses
     1,619       -       1,619       3,448       -       3,448  
                                     
 
Total Non-Interest Expenses
     5,610       1,759       7,369       11,419       1,759       13,178  
                                     
Earnings Before Income Taxes
     2,352       (1,759 )     593       4,701       (1,759 )     2,942  
Income Tax Expense
     700       (582 )     118       1,416       (582 )     834  
                                     
Net Earnings
   $ 1,652     $ (1,177 )   $ 475     $ 3,285     $ (1,177 )   $ 2,108  
                                     
Preferred Stock Dividends
   $ 43     $ -     $ 43     $ 88     $ -     $ 88  
                                     
Net Earnings Applicable to Common Stockholders
   $ 1,609     $ (1,177 )   $ 432     $ 3,197     $ (1,177 )   $ 2,020  
                                     
Earnings Per Common Share
                                                
 
Basic
   $ 1.83     $ (1.34 )   $ 0.49     $ 3.63     $ (1.35 )   $ 2.28  
 
Diluted
   $ 1.65     $ (1.21 )   $ 0.44     $ 3.28     $ (1.21 )   $ 2.07  
Average Shares Used in Computing Earnings Per Common Share
                                                
 
Basic
     878.0       5.7       883.7       881.7       2.9       884.6  
 
Diluted
     975.4       5.7       981.1       974.4       2.8       977.2  
 

 

Financial Ratios (unaudited)
                                 
(in millions)
 
    For the Three Months Ended   For the Six Months Ended
    March 31, 2006   June 30, 2006
         
    Excluding       Excluding    
    One-time       One-time    
    Compensation   GAAP   Compensation   GAAP
    Expenses   Basis   Expenses(1)   Basis
 
Compensation and benefits(a)
   $ 3,991     $ 5,750     $ 7,971     $ 9,730  
Net Revenues(b)
     7,962       7,962       16,120       16,120  
Ratio of compensation and benefits to net revenues(a)/(b)
     50.1 %     72.2 %     49.4 %     60.4 %
 
Income Tax Expense(a)
   $ 700     $ 118     $ 1,416     $ 834  
Earnings Before Income Taxes(b)
     2,352       593       4,701       2,942  
Effective Tax Rate(a)/(b)
     29.8 %     19.9 %     30.1 %     28.3 %
 
Earnings Before Income Taxes(a)
   $ 2,352     $ 593     $ 4,701     $ 2,942  
Net Revenues(b)
     7,962       7,962       16,120       16,120  
Pre-tax Profit Margin(a)/(b)
     29.5 %     7.4 %     29.2 %     18.3 %
 
Average Common Equity
   $ 33,800     $ 33,800     $ 33,831     $ 33,831  
Average impact of one-time compensation expenses
     (145 )     -       (145 )     -  
                         
Average Common Equity(a)
     33,655       33,800       33,686       33,831  
Annualized Net Earnings Applicable to Common Stockholders(b)
     6,436       1,728       6,394       4,040  
Annualized Return on Average Common Equity(b)/(a)
     19.1 %     5.1 %     19.0 %     11.9 %
 
(1)  For purposes of comparison with previously published results, data excluding the impact of the one-time compensation expenses for the first six months of 2006 assumes the impact of the one-time compensation expenses is limited to the first quarter of 2006.

 

Segment Data (unaudited)
                                                                     
(dollars in millions)
 
            For the Six    
    For the Three Months Ended   Percent Inc/ (Dec)   Months Ended    
                 
    June 30,   March 31,   July 1,   2Q06 vs.   2Q06 vs.   June 30,   July 1,   Percent
    2006   2006   2005   1Q06   2Q05   2006   2005   Inc/ (Dec)
 
Global Markets & Investment Banking Global Markets
                                                                
   
Debt Markets
   $ 1,725     $ 2,091     $ 1,606       (18 )%     7 %   $ 3,816     $ 3,268       17 %
   
Equity Markets
     1,877       1,573       1,022       19       84       3,450       1,993       73  
                                                 
   
Total Global Markets net revenues
     3,602       3,664       2,628       (2 )     37       7,266       5,261       38  
Investment Banking(1)
                                                                
 
Origination:
                                                                
   
Debt
     367       395       374       (7 )     (2 )     762       656       16  
   
Equity
     315       237       223       33       41       552       465       19  
 
Strategic Advisory Services
     296       257       214       15       38       553       374       48  
                                                 
 
Total Investment Banking net revenues
     978       889       811       10       21       1,867       1,495       25  
                                                 
 
Total net revenues(a)
     4,580       4,553       3,439       1       33       9,133       6,756       35  
                                                 
 
Pre-tax earnings
     1,493       212       1,098       604       36       1,705       2,222       (23 )
 
Impact of one-time compensation expenses
     -       1,369       -       (100 )     N/M       1,369       -     N/M
                                                 
 
Pre-tax earnings excluding one-time compensation expenses(b)
     1,493       1,581       1,098       (6 )     36       3,074       2,222       38  
 
Pre-tax profit margin
     32.6 %     4.7 %     31.9 %                     18.7 %     32.9 %        
 
Pre-tax profit margin excluding one-time compensation expenses(b)/(a)
     32.6 %     34.7 %     31.9 %                     33.7 %     32.9 %        
 
Global Private Client
                                                                
 
Fee-based revenues
   $ 1,533     $ 1,458     $ 1,286       5       19     $ 2,991     $ 2,557       17  
 
Transactional and origination revenues
     902       899       786       0       15       1,801       1,643       10  
 
Net interest profit and related hedges(2)
     554       527       420       5       32       1,081       821       32  
 
Other revenues
     56       55       76       2       (26 )     111       150       (26 )
                                                 
 
Total net revenues(a)
     3,045       2,939       2,568       4       19       5,984       5,171       16  
                                                 
 
Pre-tax earnings
     701       365       457       92       53       1,066       967       10  
 
Impact of one-time compensation expenses
     -       281       -       (100 )     N/M       281       -     N/M
                                                 
 
Pre-tax earnings excluding one-time compensation expenses(b)
     701       646       457       9       53       1,347       967       39  
 
Pre-tax profit margin
     23.0 %     12.4 %     17.8 %                     17.8 %     18.7 %        
 
Pre-tax profit margin excluding one-time compensation expenses(b)/(a)
     23.0 %     22.0 %     17.8 %                     22.5 %     18.7 %        
 
Merrill Lynch Investment Managers
                                                                
 
Total net revenues(a)
   $ 630     $ 570     $ 405       11       56     $ 1,200     $ 818       47  
 
Pre-tax earnings
     240       113       121       112       98       353       248       42  
 
Impact of one-time compensation expenses
     -       109       -       (100 )     N/M       109       -     N/M
                                                 
 
Pre-tax earnings excluding one-time compensation expenses(b)
     240       222       121       8       98       462       248       86  
 
Pre-tax profit margin
     38.1 %     19.8 %     29.9 %                     29.4 %     30.3 %        
 
Pre-tax profit margin excluding one-time compensation expenses(b)/(a)
     38.1 %     38.9 %     29.9 %                     38.5 %     30.3 %        
 
Corporate
                                                                
 
Total net revenues
   $ (97 )   $ (100 )   $ (93 )     3       (4 )   $ (197 )   $ (194 )     (2 )
 
Pre-tax earnings
     (85 )     (97 )     (81 )     12       (5 )     (182 )     (173 )     (5 )
 
Total
                                                                
 
Total net revenues(a)
   $ 8,158     $ 7,962     $ 6,319       2       29     $ 16,120     $ 12,551       28  
 
Pre-tax earnings
     2,349       593       1,595       296       47       2,942       3,264       (10 )
 
Impact of one-time compensation expenses
     -       1,759       -       (100 )     N/M       1,759       -     N/M
                                                 
 
Pre-tax earnings excluding one-time compensation expenses(b)
     2,349       2,352       1,595       (0 )     47       4,701       3,264       44  
 
Pre-tax profit margin
     28.8 %     7.4 %     25.2 %                     18.3 %     26.0 %        
 
Pre-tax profit margin excluding one-time compensation expenses(b)/(a)
     28.8 %     29.5 %     25.2 %                     29.2 %     26.0 %        
 
N/M = Not Meaningful
(1)  A portion of Origination revenue is recorded in the Global Private Client segment.
(2)  Includes interest component of non-qualifying derivatives which are included in Other Revenues.