Merrill Lynch & Co., Inc.
  Exhibit 99.1
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.
During the third quarter of 2006, Merrill Lynch completed the merger of its Merrill Lynch Investment Managers business with BlackRock, Inc. Merrill Lynch recognized a gain associated with this merger along with other non-recurring expenses, collectively “Impact of BlackRock Merger”.
Management believes that while the results excluding these one-time compensation expenses and the impact of the BlackRock merger are considered non-GAAP measures, they depict the operating performance of the company more clearly and enable more appropriate period-to-period comparisons.
Earnings Summary
                                 
    For the Year Ended December 29, 2006(1)  
    Excluding One-time                    
    Compensation     Impact of One-time              
    Expenses & Impact of     Compensation     Impact of        
(in millions, except per share amounts)   BlackRock Merger     Expenses     BlackRock Merger     GAAP Basis  
Net Revenues (a)
   $ 32,690     $ —     $ 1,969     $ 34,659  
 
                        
Non-Interest Expenses
                                
Compensation and benefits (b)
     15,100       1,759       144       17,003  
Non-compensation expenses (c)
     7,172       —       58       7,230  
 
                        
Total Non-Interest Expenses
     22,272       1,759       202       24,233  
 
                        
Earnings Before Income Taxes (d)
     10,418       (1,759 )     1,767       10,426  
Income Tax Expense (e)
     2,847       (582 )     662       2,927  
 
                        
Net Earnings
   $ 7,571     $ (1,177 )   $ 1,105     $ 7,499  
 
                        
Preferred Stock Dividends
   $ 188     $ —     $ —     $ 188  
 
                        
Net Earnings Applicable to Common Stockholders
   $ 7,383     $ (1,177 )   $ 1,105     $ 7,311  
 
                        
Earnings Per Common Share
                                
Basic
   $ 8.52     $ (1.37 )(2)   $ 1.27 (2)   $ 8.42  
Diluted
   $ 7.68     $ (1.23 )(2)   $ 1.14 (2)   $ 7.59  
Average Shares Used in Computing Earnings Per Common Share
                                
Basic
     866.7       1.4       —       868.1  
Diluted
     961.5       1.5       —       963.0  

 

 

Financial Ratios
                 
    For the Year Ended(1)  
    December 29, 2006  
    Excluding One-time        
    Compensation        
    Expenses & Impact of        
    BlackRock Merger   GAAP Basis  
Ratio of compensation and benefits to net revenues (b)/(a)
     46.2 %     49.1 %
Ratio of non-compensation expenses to net revenues (c)/(a)
     21.9 %     20.9 %
Effective Tax Rate (e)/(d)
     27.3 %     28.1 %
Pre-tax Profit Margin (d)/(a)
     31.9 %     30.1 %
 
Average Common Equity
   $ 34,354     $ 34,354  
Impact of one-time compensation expenses and the BlackRock merger
     (130 )     —  
 
      
Average Common Equity
     34,224       34,354  
Return on Average Common Equity
     21.6 %     21.3 %
 
(1)   For purposes of comparison with previously published results, data excluding the impact of the one-time compensation expenses and the BlackRock merger assumes the impact is limited to the first and third quarter of 2006, respectively.
 
(2)   EPS calculated using weighted average shares for the year.

 

 

     
Segment Data
    
                         
    For the Year Ended        
    Dec. 29,     Dec. 30,     Percent  
(dollars in millions)   2006     2005     Inc / (Dec)  
Global Markets & Investment Banking
                        
Global Markets
                        
FICC
   $ 8,133     $ 6,210       31 %
Equity Markets
     6,730       4,356       54  
 
                    
Total Global Markets net revenues
     14,863       10,566       41  
Investment Banking (1)
                        
Origination:
                        
Debt
     1,735       1,444       20  
Equity
     1,220       952       28  
Strategic Advisory Services
     1,099       882       25  
 
                    
Total Investment Banking net revenues
     4,054       3,278       24  
 
                    
Total net revenues (a)
     18,917       13,844       37  
 
                    
Pre-tax earnings
     5,751       4,990       15  
Impact of one-time compensation expenses
     1,369       —       N/M  
 
                    
Pre-tax earnings excluding one-time compensation expenses (b)
     7,120       4,990       43  
Pre-tax profit margin
     30.4 %     36.0 %        
Pre-tax profit margin excluding one-time compensation expenses (b)/(a)
     37.6 %     36.0 %        
 
Global Wealth Management
                        
Global Private Client
                        
Fee-based revenues
   $ 5,813     $ 5,062       15 %
Transactional and origination revenues
     3,301       3,207       3  
Net interest profit and related hedges(2)
     2,148       1,808       19  
Other revenues
     304       316       (4 )
 
                    
Total Global Private Client net revenues
     11,566       10,393       11  
 
                    
Global Investment Management net revenues
     541       409       32  
 
                    
Total net revenues (a)
     12,107       10,802       12  
 
                    
Pre-tax earnings
     2,447       2,215       10  
Impact of one-time compensation expenses
     281       —       N/M  
 
                    
Pre-tax earnings excluding one-time compensation expenses (b)
     2,728       2,215       23  
Pre-tax profit margin
     20.2 %     20.5 %        
Pre-tax profit margin excluding one-time compensation expenses (b)/(a)
     22.5 %     20.5 %        
 
Merrill Lynch Investment Managers
                        
Total net revenues (a)
   $ 1,900     $ 1,807       5 %
 
                    
Pre-tax earnings
     637       586       9  
Impact of one-time compensation expenses
     109       —       N/M  
 
                    
Pre-tax earnings excluding one-time compensation expenses (b)
     746       586       27  
Pre-tax profit margin
     33.5 %     32.4 %        
Pre-tax profit margin excluding one-time compensation expenses (b)/(a)
     39.3 %     32.4 %        
 
Corporate
                        
Total net revenues
   $ 1,735     $ (431 )     N/M %
Impact of BlackRock merger
     (1,969 )     —       N/M  
 
                    
Total net revenues excluding the BlackRock merger
     (234 )     (431 )     (46 )
Pre-tax earnings
     1,591       (560 )     N/M  
Impact of BlackRock merger
     (1,767 )     —       N/M  
 
                    
Pre-tax earnings excluding the BlackRock merger
     (176 )     (560 )     (69 )
 
Total
                        
Total net revenues
   $ 34,659     $ 26,022       33 %
Impact of BlackRock merger
     (1,969 )     —       N/M  
 
                    
Total net revenues excluding the BlackRock merger (a)
     32,690       26,022       26  
Pre-tax earnings
     10,426       7,231       44  
Impact of BlackRock merger
     (1,767 )     —       N/M  
Impact of one-time compensation expenses
     1,759       —       N/M  
 
                    
Pre-tax earnings excluding BlackRock merger and one-time compensation expenses (b)
     10,418       7,231       44  
Pre-tax profit margin
     30.1 %     27.8 %        
Pre-tax profit margin excluding BlackRock merger and one-time compensation expenses (b)/(a)
     31.9 %     27.8 %        
 
N/M = Not Meaningful
Note: Certain prior period amounts have been reclassified to conform to the current period presentation.
(1)   A portion of Origination revenue is recorded in the Global Wealth Management segment.
 
(2)   Includes interest component of non-qualifying derivatives which are included in Other Revenues.