8-K: Current report filing
Published on October 12, 1999
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 12, 1999
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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)
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)
Item 5. Other Events
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Filed herewith is the Preliminary Unaudited Earnings Summary, as contained in a
press release dated October 12, 1999, for Merrill Lynch & Co., Inc. ("Merrill
Lynch") for the three- and nine-month periods ended September 24, 1999. 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.
Preferred stockholders' equity, common stockholders' equity, long-term
borrowings, preferred securities issued by subsidiaries, and book value per
common share as of September 24, 1999 were approximately $425 million, $11.7
billion, $55.4 billion, $2.7 billion, and $31.47, respectively.
On October 12, 1999, Merrill Lynch reported quarterly earnings of $572 million,
its highest third quarter ever, up $447 million from the 1998 third quarter -
excluding the $288 million after-tax ($430 million pre-tax) special provision in
the year ago quarter for costs related to staff reductions. Basic and diluted
earnings per common share were $1.52 and $1.34, respectively, versus $0.32 and
$0.28 in the 1998 third quarter, excluding the special provision.
Annualized return on average common equity was approximately 20.2% for the
1999 third quarter, compared with 4.8% in the 1998 third quarter (excluding
the special provision) and 25.4% in the 1999 second quarter.
On a cash basis, which excludes goodwill amortization, net earnings for the 1999
third quarter were $629 million. On the same basis, diluted earnings per common
share were $1.48 and return on average common equity was approximately 21.3%.
Net earnings for the first nine months were a record $1.9 billion, 56% above the
corresponding 1998 period, excluding the special provision. On a comparable
basis, nine-month 1999 earnings per common share were $4.97 basic and $4.36
diluted, versus $3.27 basic and $2.85 diluted in the corresponding 1998 period.
Annualized return on average common equity was approximately 23.3%.
Cash basis net earnings for the first nine months of 1999 were $2.0 billion. On
the same basis, diluted earnings per common share were $4.77 and return on
average common equity was approximately 24.4%.
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Net revenues rose 37% from the 1998 third quarter to $5.3 billion as principal
transactions revenues and net interest were sharply higher and investment
banking revenues and asset management and portfolio service fees reached record
levels.
Commissions revenues were down 1% from the 1998 third quarter to $1.4 billion.
Principal transactions revenues were $1.1 billion, up $780 million from the 1998
third quarter, when global market conditions negatively impacted debt trading
revenues. Equity trading revenues increased from the 1998 third quarter as
higher revenues from equity derivatives and US equities more than offset a
decline in non-US equity trading activity. Principal transactions revenues were
virtually unchanged from the 1999 second quarter.
Investment banking revenues increased 33% from the 1998 third quarter to $948
million, led by higher underwriting revenues and record strategic services fees.
Both equity and debt underwriting revenues were up compared with the year ago
period, benefiting from improved market share and more favorable market
conditions. Strategic services revenues increased significantly from both the
1998 third quarter and 1999 second quarter due to higher levels of merger and
acquisition activity, particularly in Europe.
Asset management and portfolio service fees rose 13% from the 1998 third quarter
to a record $1.2 billion. Higher portfolio service fees resulted in part from an
increase in the number of fee-based accounts during the quarter, including those
related to Merrill Lynch Consults (Registered Trademark) and Unlimited Advantage
(Service Mark), Merrill Lynch's new fee-based financial service. Total assets in
fee-based accounts totaled $117 billion at quarter end. Asset management fees
were also up 9%, as assets under management grew 10% to $514 billion at the end
of the third quarter from $467 billion a year ago.
Other revenues declined 23% to $117 million, due in part to lower net realized
investment gains and the 1998 third quarter gain on the sale of a residential
real estate subsidiary.
Net interest profit was $521 million, up sharply from the 1998 third quarter,
primarily as a result of lower funding costs, changes in asset composition, and
a steepening yield curve.
Non-interest expenses, excluding compensation costs, were up 1% from the 1998
third quarter (excluding the special provision) and were down 3% from the 1999
second quarter.
Compensation and benefits, the largest expense category, rose $737 million from
the 1998 third quarter, or 37%, to $2.7 billion as increased profitability led
to significantly higher incentive compensation. Increased headcount also
contributed to the increase. Compensation and benefits as a percentage of net
revenues was 52.1% for the 1999
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third quarter and 51.6% for the 1999 nine months, in line with the ratios for
each of the last three years.
Communications and technology costs and occupancy and related depreciation
expense were $481 million and $230 million, respectively - both virtually
unchanged from a year ago.
Advertising and market development expense was $190 million, down 6% from the
1998 third quarter, principally due to reductions in sales promotion and global
travel and entertainment expenses. Brokerage, clearing, and exchange fees
decreased 9% to $170 million due in part to lower global trading volume.
Professional fees were $144 million, down 13% from the 1998 third quarter.
Goodwill amortization was $57 million in the 1999 third quarter. Other expenses
were $359 million, up 23% from a year ago, due in part to higher provisions
related to various business matters.
For the third quarter of 1999, the effective tax rate was 30.4%, comparable to
the 30.0% in the second quarter of 1999. The year-to-date effective tax rate was
31.5%.
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- and nine-month periods ended
September 24, 1999.
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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/ E. Stanley O'Neal
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E. Stanley O'Neal
Executive Vice President and
Chief Financial Officer
Date: October 12, 1999
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EXHIBIT INDEX
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Exhibit No. Description Page
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(99) Additional Exhibits
(i) Preliminary Unaudited Earnings Summary for the 7-8
three- and nine-month periods ended
September 24, 1999.
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