EX-99.1: RECONCILIATION OF "NON-GAAP" MEASURES
Published on November 3, 2006
Exhibit 99.1
Merrill
Lynch & Co., Inc.
Reconciliation
of Non-GAAP Measures
For the
Three Months Ended September 29, 2006
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 the impact
of the BlackRock merger are considered non-GAAP measures, they
depict the 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 September 29, 2006 | ||||||||||||
|
Excluding Impact of |
Impact of |
|||||||||||
| BlackRock Merger | BlackRock Merger | GAAP Basis | ||||||||||
|
Net Revenues(a) |
$ | 7,927 | $ | 1,969 | $ | 9,896 | ||||||
|
Non-Interest Expenses
|
||||||||||||
|
Compensation and benefits(b)
|
3,806 | 144 | 3,950 | |||||||||
|
Non-compensation expenses(c)
|
1,760 | 58 | 1,818 | |||||||||
|
Total Non-Interest
Expenses
|
5,566 | 202 | 5,768 | |||||||||
|
Earnings Before Income
Taxes(d)
|
2,361 | 1,767 | 4,128 | |||||||||
|
Income Tax Expense(e)
|
421 | 662 | 1,083 | |||||||||
|
Net Earnings
|
$ | 1,940 | $ | 1,105 | $ | 3,045 | ||||||
|
Preferred Stock
Dividends
|
$ | 50 | $ | - | $ | 50 | ||||||
|
Net Earnings Applicable to
Common Stockholders
|
$ | 1,890 | $ | 1,105 | $ | 2,995 | ||||||
|
Earnings Per Common
Share
|
||||||||||||
|
Basic
|
$ | 2.21 | $ | 1.29 | $ | 3.50 | ||||||
|
Diluted
|
$ | 2.00 | $ | 1.17 | $ | 3.17 | ||||||
|
Average Shares Used in
Computing Earnings Per Common Share
|
||||||||||||
|
Basic
|
855.8 | - | 855.8 | |||||||||
|
Diluted
|
945.3 | - | 945.3 | |||||||||
93
Financial
Ratios
|
For the Three Months Ended |
||||||||
| September 29, 2006 | ||||||||
|
Excluding Impact of |
||||||||
| BlackRock Merger | GAAP Basis | |||||||
|
Ratio of compensation and benefits
to net revenues(b)/(a)
|
48.0 | % | 39.9 | % | ||||
|
Ratio of non-compensation and
benefits to net revenues(c)/(a)
|
22.2 | % | 18.4 | % | ||||
|
Effective Tax Rate(e)/(d)
|
17.8 | % | 26.2 | % | ||||
|
Pre-tax Profit Margin(d)/(a)
|
29.8 | % | 41.7 | % | ||||
|
Average Common Equity
|
$ | 33,862 | $ | 33,862 | ||||
|
Impact of the BlackRock merger
|
(276 | ) | - | |||||
|
Average Common Equity
|
33,586 | 33,862 | ||||||
|
Annualized Return on Average Common
Equity
|
22.5 | % | 35.4 | % | ||||
94
Exhibit 99.1
Merrill
Lynch & Co., Inc.
Reconciliation
of Non-GAAP Measures
For the
Nine Months Ended September 29, 2006
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
performance of the company more clearly and enable more
appropriate
period-to-period
comparisons.
95
Unaudited Earnings Summary
| (in millions, except per share amounts) | ||||||||||||||||
| For the Nine Months Ended September 29, 2006(1) | ||||||||||||||||
|
Excluding One-time |
Impact of |
|||||||||||||||
|
Compensation |
One-time |
Impact of |
||||||||||||||
|
Expenses & Impact |
Compensation |
BlackRock |
||||||||||||||
| of BlackRock Merger | Expenses | Merger | GAAP Basis | |||||||||||||
|
Net Revenues(a)
|
$ | 24,047 | $ | - | $ | 1,969 | $ | 26,016 | ||||||||
|
Non-Interest Expenses
|
||||||||||||||||
|
Compensation and benefits(b)
|
11,777 | 1,759 | 144 | 13,680 | ||||||||||||
|
Non-compensation expenses(c)
|
5,208 | - | 58 | 5,266 | ||||||||||||
|
Total Non-Interest
Expenses
|
16,985 | 1,759 | 202 | 18,946 | ||||||||||||
|
Earnings Before Income
Taxes(d)
|
7,062 | (1,759 | ) | 1,767 | 7,070 | |||||||||||
|
Income Tax Expense(e)
|
1,837 | (582 | ) | 662 | 1,917 | |||||||||||
|
Net Earnings
|
$ | 5,225 | $ | (1,177 | ) | $ | 1,105 | $ | 5,153 | |||||||
|
Preferred Stock
Dividends
|
$ | 138 | $ | - | $ | - | $ | 138 | ||||||||
|
Net Earnings Applicable to
Common Stockholders
|
$ | 5,087 | $ | (1,177 | ) | $ | 1,105 | $ | 5,015 | |||||||
|
Earnings Per Common
Share
|
||||||||||||||||
|
Basic
|
$ | 5.83 | $ | (1.35 | ) | $ | 1.25 | $ | 5.73 | |||||||
|
Diluted
|
$ | 5.27 | $ | (1.22 | ) | $ | 1.14 | $ | 5.19 | |||||||
|
Average Shares Used in Computing
Earnings Per Common Share
|
||||||||||||||||
|
Basic
|
873.1 | 1.9 | - | 875.0 | ||||||||||||
|
Diluted
|
964.7 | 1.9 | - | 966.6 | ||||||||||||
Financial
Ratios
|
For the Nine Months
Ended(1) |
||||||||
| September 29, 2006 | ||||||||
|
Excluding One-time |
||||||||
|
Compensation |
||||||||
|
Expenses & Impact |
||||||||
| of BlackRock Merger | GAAP Basis | |||||||
|
Ratio of compensation and benefits
to net revenues(b)/(a)
|
49.0 | % | 52.6 | % | ||||
|
Ratio of non-compensation and
benefits to net revenues(c)/(a)
|
21.7 | % | 20.2 | % | ||||
|
Effective Tax Rate(e)/(d)
|
26.0 | % | 27.1 | % | ||||
|
Pre-tax Profit Margin(d)/(a)
|
29.4 | % | 27.2 | % | ||||
|
Average Common Equity
|
$ | 33,887 | $ | 33,887 | ||||
|
Impact of one-time compensation
expenses and the BlackRock merger
|
(256 | ) | - | |||||
|
Average Common Equity
|
33,631 | 33,887 | ||||||
|
Annualized Return on Average Common
Equity
|
20.2 | % | 19.7 | % | ||||
| (1) | For purposes of comparison with previously published results, data excluding the impact of the one-time compensation expenses for the first nine months of 2006 assumes the impact of the one-time compensation expenses is limited to the first quarter of 2006. |
96
Exhibit 99.1
Merrill
Lynch & Co., Inc.
Reconciliation
of Non-GAAP Measures Segment Data
(unaudited)
| (dollars in millions) | ||||||||||||||||||||||||||||||||
| For the Three Months Ended | Percent Inc / (Dec) | For the Nine Months Ended | ||||||||||||||||||||||||||||||
|
Sept. 29, |
June 30, |
Sept. 30, |
3Q06 vs. |
3Q06 vs. |
Sept. 29, |
Sept. 30, |
Percent |
|||||||||||||||||||||||||
| 2006 | 2006 | 2005 | 2Q06 | 3Q05 | 2006 | 2005 | Inc/(Dec) | |||||||||||||||||||||||||
|
Global Markets &
Investment Banking
|
||||||||||||||||||||||||||||||||
|
Total net revenues(a)
|
$ | 4,396 | $ | 4,580 | $ | 3,645 | (4 | )% | 21 | % | $ | 13,529 | $ | 10,401 | 30 | % | ||||||||||||||||
|
Pre-tax earnings
|
1,459 | 1,493 | 1,289 | (2 | ) | 13 | 3,164 | 3,511 | (10 | ) | ||||||||||||||||||||||
|
Impact of one-time compensation
expenses
|
- | - | - | N/M | N/M | 1,369 | - | N/M | ||||||||||||||||||||||||
|
Pre-tax earnings excluding one-time
compensation expenses(b)
|
1,459 | 1,493 | 1,289 | (2 | ) | 13 | 4,533 | 3,511 | 29 | |||||||||||||||||||||||
|
Pre-tax profit margin
|
33.2 | % | 32.6 | % | 35.4 | % | 23.4 | % | 33.8 | % | ||||||||||||||||||||||
|
Pre-tax profit margin excluding
one-time compensation expenses(b)/(a)
|
33.2 | % | 32.6 | % | 35.4 | % | 33.5 | % | 33.8 | % | ||||||||||||||||||||||
|
Global Private Client
|
||||||||||||||||||||||||||||||||
|
Total net revenues(a)
|
2,825 | 3,045 | 2,691 | (7 | ) | 5 | 8,809 | 7,862 | 12 | |||||||||||||||||||||||
|
Pre-tax earnings
|
611 | 701 | 590 | (13 | ) | 4 | 1,677 | 1,557 | 8 | |||||||||||||||||||||||
|
Impact of one-time compensation
expenses
|
- | - | - | N/M | N/M | 281 | - | N/M | ||||||||||||||||||||||||
|
Pre-tax earnings excluding one-time
compensation expenses(b)
|
611 | 701 | 590 | (13 | ) | 4 | 1,958 | 1,557 | 26 | |||||||||||||||||||||||
|
Pre-tax profit margin
|
21.6 | % | 23.0 | % | 21.9 | % | 19.0 | % | 19.8 | % | ||||||||||||||||||||||
|
Pre-tax profit margin excluding
one-time compensation expenses(b)/(a)
|
21.6 | % | 23.0 | % | 21.9 | % | 22.2 | % | 19.8 | % | ||||||||||||||||||||||
|
Merrill Lynch Investment
Managers
|
||||||||||||||||||||||||||||||||
|
Total net revenues(a)
|
$ | 700 | $ | 630 | $ | 456 | 11 | 54 | $ | 1,900 | $ | 1,274 | 49 | |||||||||||||||||||
|
Pre-tax earnings
|
284 | 240 | 162 | 18 | 75 | 637 | 410 | 55 | ||||||||||||||||||||||||
|
Impact of one-time compensation
expenses
|
- | - | - | N/M | N/M | 109 | - | N/M | ||||||||||||||||||||||||
|
Pre-tax earnings excluding one-time
compensation expenses(b)
|
284 | 240 | 162 | 18 | 75 | 746 | 410 | 82 | ||||||||||||||||||||||||
|
Pre-tax profit margin
|
40.6 | % | 38.1 | % | 35.5 | % | 33.5 | % | 32.2 | % | ||||||||||||||||||||||
|
Pre-tax profit margin excluding
one-time compensation expenses(b)/(a)
|
40.6 | % | 38.1 | % | 35.5 | % | 39.3 | % | 32.2 | % | ||||||||||||||||||||||
|
Corporate
|
||||||||||||||||||||||||||||||||
|
Total net revenues
|
$ | 1,975 | $ | (97 | ) | $ | (114 | ) | N/M | N/M | $ | 1,778 | $ | (308 | ) | N/M | ||||||||||||||||
|
Impact of BlackRock merger
|
1,969 | - | - | N/M | N/M | 1,969 | - | N/M | ||||||||||||||||||||||||
|
Total net revenues excluding the
BlackRock merger
|
6 | (97 | ) | (114 | ) | 106 | 105 | (191 | ) | (308 | ) | 38 | ||||||||||||||||||||
|
Pre-tax earnings
|
1,774 | (85 | ) | (105 | ) | N/M | N/M | 1,592 | (278 | ) | N/M | |||||||||||||||||||||
|
Impact of BlackRock merger
|
(1,767 | ) | - | - | N/M | N/M | (1,767 | ) | - | N/M | ||||||||||||||||||||||
|
Pre-tax earnings excluding the
BlackRock merger
|
7 | (85 | ) | (105 | ) | 108 | 107 | (175 | ) | (278 | ) | 37 | ||||||||||||||||||||
|
Total
|
||||||||||||||||||||||||||||||||
|
Total net revenues(a)
|
$ | 9,896 | $ | 8,158 | $ | 6,678 | 21 | 48 | $ | 26,016 | $ | 19,229 | 35 | |||||||||||||||||||
|
Impact of BlackRock merger
|
1,969 | - | - | N/M | N/M | 1,969 | - | N/M | ||||||||||||||||||||||||
|
Total net revenues excluding the
BlackRock merger
|
7,927 | 8,158 | 6,678 | (3 | ) | 19 | 24,047 | 19,229 | 25 | |||||||||||||||||||||||
|
Pre-tax earnings
|
4,128 | 2,349 | 1,936 | 76 | 113 | 7,070 | 5,200 | 36 | ||||||||||||||||||||||||
|
Impact of BlackRock merger
|
(1,767 | ) | - | - | N/M | N/M | (1,767 | ) | - | N/M | ||||||||||||||||||||||
|
Impact of one-time compensation
expenses
|
- | - | - | N/M | N/M | 1,759 | - | N/M | ||||||||||||||||||||||||
|
Pre-tax earnings excluding
BlackRock merger and one-time compensation expenses(b)
|
2,361 | 2,349 | 1,936 | 1 | 22 | 7,062 | 5,200 | 36 | ||||||||||||||||||||||||
|
Pre-tax profit margin
|
41.7 | % | 28.8 | % | 29.0 | % | 27.2 | % | 27.0 | % | ||||||||||||||||||||||
|
Pre-tax profit margin excluding
BlackRock merger and one-time compensation expenses(b)/(a)
|
29.8 | % | 28.8 | % | 29.0 | % | 29.4 | % | 27.0 | % | ||||||||||||||||||||||
N/M = Not Meaningful
| Note: | Certain prior period amounts have been reclassified to conform to the current period presentation. |
97