8-K: Current report filing

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, 2002
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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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(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 for the three
months ended March 29, 2002 and supplemental quarterly information for Merrill
Lynch & Co., Inc. ("Merrill Lynch"), as contained in a press release dated April
17, 2002. 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.

On April 17, Merrill Lynch reported first quarter net earnings of $647 million,
26% lower than the first quarter of 2001 and 32% higher than the 2001 fourth
quarter net operating earnings(1). Earnings per common share were $0.75 basic
and $0.67 diluted, compared with $1.04 basic and $0.92 diluted in the 2001 first
quarter and $0.57 basic and $0.51 diluted on a net operating basis in the fourth
quarter of 2001.

The pre-tax profit margin for the quarter was 19.9%, an increase of nearly five
percentage points from the 2001 fourth quarter operating results and only one
percentage point below the year-ago quarter in spite of a 21% decline in net
revenues over the same period. Non-interest expenses declined nearly $1 billion
from the 2001 first quarter. Non-compensation expenses were reduced by 18% from
the fourth quarter 2001 operating results, and by 21% from the year-ago quarter.
Annualized return on average common stockholders' equity in the first quarter of
2002 was 12.7%.

"Although the market environment did not improve meaningfully from the fourth
quarter, the targeted actions we took to re-size our businesses are having a
substantial positive impact on our financial performance," said Merrill Lynch
chairman and chief executive officer David H. Komansky and Stan O'Neal,
president and chief operating officer. "While we remain cautious about the
near-term market environment, we are confident in our positioning and are sized
appropriately. Merrill Lynch is pursuing organic growth opportunities in each of
its businesses, and is positioned to benefit from powerful operating leverage as
the market environment improves."




.......................
(1) Fourth quarter 2001 net operating earnings, a measure considered relevant by
management in comparing current and prior period results, excludes after-tax
restructuring and other charges of $1.7 billion and $30 million of September
11th-related expenses.



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BUSINESS SEGMENT REVIEW:
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GLOBAL MARKETS AND INVESTMENT BANKING (GMI)

GMI faced continued difficult market conditions in the first quarter. For the
industry as a whole, global announced merger and acquisition volumes were the
lowest since the second quarter of 1995, and global equity origination activity
remained subdued. Partially offsetting these negative factors was a modest
improvement in listed equity trading volumes over fourth quarter levels, and a
favorable fixed income environment as interest rates stayed low and credit
spreads narrowed.

Against this backdrop, GMI's revenues declined from the particularly strong 2001
first quarter, which included a gain related to the sale of certain
energy-trading assets. Disciplined expense management limited the decline in
margins from year-ago levels. Market share was maintained or increased in all
key markets.

o GMI's pre-tax earnings were $658 million, 38% lower than the year-ago
quarter, which included $84 million from the energy-trading business. Net
revenues for the first quarter were $2.4 billion, 27% below the first
quarter of 2001. Reductions in non-interest expenses of $495 million from
the year-ago quarter limited the impact of the revenue decline on
profitability, and resulted in a pre-tax margin of 27.1%.

o The 23% increase in GMI's net revenues from the fourth quarter was driven
by strong performance across all trading businesses. Results in debt
markets were particularly favorable, driven by increased net revenues in
the interest rate and credit trading businesses. Equity derivatives also
delivered higher revenues as a result of increased client activity.

o GMI's first quarter revenues included a $45 million pre-tax gain on the
sale of the Securities Pricing Services business, which was largely offset
by private equity write-downs.

o To better align functional and management responsibilities, the investment
portfolio of Merrill Lynch's U.S. banks was transferred from Private Client
to GMI during the first quarter. Accordingly, GMI's results now include
income generated from this investment portfolio. The Private Client
business continues to recognize net interest revenue for originating the
deposits, while revenues and expenses associated with the management of the
investment portfolio are recorded in GMI. Historical results of both
segments have been restated to reflect this change.

o Merrill Lynch's investment banking business continued to demonstrate
leadership during the quarter.



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- In global equity and equity-linked origination, Merrill Lynch
increased market share to 15.4%, ranking #2. This strength was driven
primarily by innovation and leadership in equity-linked products,
where Merrill Lynch ranked #1 globally with a 24.3% market share.

- In debt origination, Merrill Lynch ranked #2 globally with an 8.7%
market share.

- In global announced mergers and acquisitions, Merrill Lynch ranked #2
with a market share of 23.7%. More than half of Merrill Lynch's value
of announced transactions during the quarter came from Europe, where
Merrill Lynch ranked #1 with a 29.5% market share.



PRIVATE CLIENT
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The operating environment for the Private Client business was subdued worldwide,
as individual investor activity remained close to fourth quarter levels. The
current market environment continues to reinforce the value of the professional
investment advice provided by Merrill Lynch Financial Advisors. The significant
actions taken in the fourth quarter to re-position the Private Client business
outside the United States, combined with the global focus on expense savings and
operating efficiencies over the past year, has produced margin improvement from
the year-ago quarter despite reduced revenues.

o Private Client's pre-tax earnings were $255 million, 10% lower than the
2001 first quarter, on net revenues that were 14% lower, at $2.2 billion.
Private Client's first quarter 2002 pre-tax margin was 11.4%, compared to
10.8% in the year-ago quarter. First quarter revenues included a residual
pre-tax gain of $39 million related to the sale of the Canadian Private
Client business. This gain was more than offset by transitional expenses
associated with the refocusing of the Private Client business outside the
United States and the pending closure of the service center in Denver.
Results for all quarters of 2001 included the Canadian and other Private
Client businesses outside the United States that were sold or re-sized last
year.

o Private Client's first quarter net revenues were 5% lower than the fourth
quarter of 2001, primarily because the fourth quarter included the
operating revenues of the Canadian Private Client business. The decrease
also reflects a reduction in transactional and net interest revenues,
partially offset by an increase in fee-based revenues.

o Excluding the impact of the 2001 fourth quarter restructuring of the
Private Client business outside the United States, net new money into
Private Client accounts totaled $1 billion during the first quarter and
total assets in client accounts declined 5% from the 2001 first quarter to
$1.4 trillion. The decline in assets is due primarily to market
depreciation.


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o The fundamentals of Merrill Lynch's Private Client business remain strong.
Merrill Lynch's multi-channeled service strategy continues to attract a
favorable response from clients and Financial Advisors (FAs). Retention
levels for top producing FAs remain high, and the new compensation plan
introduced in the 2001 fourth quarter has been an effective FA recruiting
tool. Assets in asset-priced accounts continued to show solid growth and
represented 17% of total Private Client assets at the end of the first
quarter of 2002, up from 14% at the end of the 2001 first quarter.



MERRILL LYNCH INVESTMENT MANAGERS (MLIM)
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MLIM produced a significant improvement in profitability while continuing to
generate solid investment performance. Although assets under management remained
essentially unchanged from fourth quarter 2001 levels, MLIM's profitability
improved as a result of actions taken to integrate the investment platform,
rationalize product offerings and reduce expenses.

o For the one-year period ending February 2002, 65% of MLIM assets under
management were ahead of their benchmark or category median. In Barron's
annual fund family survey, MLIM was one of only three fund families ranked
with top quartile performance over the 1-, 5- and 10-year periods.

o MLIM's pre-tax earnings were $117 million, 24% higher than the 2001 first
quarter on net revenues of $480 million, 15% lower than the year-ago
quarter. The first quarter pre-tax margin was 24.4%, nearly 8 percentage
points higher than in the 2001 first quarter. In addition to strong
operating results, MLIM's first quarter revenues included a $17 million
pre-tax gain on the sale of the Canadian retail mutual fund business.

o MLIM's results now include a share of income generated from the assets
under management in money market funds sold through Private Client.
Previously, this income was recorded entirely in Private Client. The
Private Client business will continue to earn a spread for selling the
funds, while revenues and expenses associated with the management of the
funds are recorded in MLIM. The impact of this change is not material and
all prior periods have been restated.

o Assets under management totaled $518 billion at the end of the first
quarter, $7 billion, or 1%, less than the first quarter of 2001. The $11
billion decline since year-end was predominantly due to quarter-end
outflows in MLIM's institutional money market funds which were largely
recouped in early April.



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FIRST-QUARTER INCOME STATEMENT REVIEW:
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REVENUES

Net revenues were $5.1 billion, 21% lower than the 2001 first quarter.

Commission revenues were $1.2 billion, 18% below the 2001 first quarter. The
decrease was due primarily to a global decline in client transaction volumes,
particularly in listed equities and mutual funds. Commission revenues associated
with trading of Nasdaq stocks were higher as institutional clients traded these
stocks increasingly on an agency, rather than a principal, basis.

Principal transaction revenues declined 49% from the first quarter of 2001 to
$877 million, reflecting lower debt and debt derivatives trading revenues than
the particularly strong year-ago quarter which included the impact of the sale
of certain energy-trading assets. Equity and equity derivative trading revenues
were also lower than the 2001 first quarter. Principal transactions included
unrealized gains related to equity investments held by a Merrill Lynch
broker-dealer, principally offset by declines in the market value of selected
credit positions in the 2002 first quarter.

Underwriting revenues were $478 million, 27% lower than the 2001 first quarter
as a result of the decline in global origination activity. Strategic advisory
revenues declined 36% from the 2001 first quarter due to a reduced volume of
completed merger and acquisition transactions.

Asset management and portfolio service fees were $1.3 billion, down 6% from the
first quarter of 2001. This decrease reflects a market-driven decline in equity
assets under management.

Other revenues were $219 million, up $55 million from the 2001 first quarter.
This increase is due primarily to the pre-tax gains from the sales of the
Securities Pricing Services business and the Canadian Private Client and asset
management businesses recorded in the 2002 first quarter.



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Net interest profit was $811 million, 14% higher than the year-ago quarter, due
primarily to growth in deposits and the related investment portfolios at Merrill
Lynch's U.S. banks.


EXPENSES

Compensation and benefits expenses decreased 18% from the 2001 first quarter to
$2.6 billion as a result of lower staffing levels and reduced profitability.
Compensation and benefits expenses were 52.0% of net revenues for the first
quarter of 2002, up from 50.6% in the first quarter of 2001.

Non-compensation expenses decreased 21% from the 2001 first quarter, to
$1.4 billion. Details of significant changes in non-compensation expenses from
the first quarter of 2001 follow:

o communications and technology costs were $474 million, down 21% due to
reduced systems consulting costs, lower technology equipment depreciation
and lower communications costs;

o occupancy and related depreciation was $238 million, 12% lower due primarily
to lower rental expenses resulting from the fourth quarter 2001
restructuring initiatives;

o brokerage, clearing, and exchange fees were $198 million, down 16% resulting
from lower transaction volumes;

o advertising and market development expenses were $150 million, down 28% due
primarily to reduced spending on travel and advertising;

o professional fees decreased 8%, to $130 million, due largely to reduced
spending on consulting services;

o office supplies and postage decreased 28% to $69 million due to lower
levels of business activity; and

o other expenses were $173 million, down 19% due to a reduction in provisions
for various business matters.



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In accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," goodwill is no longer being amortized.
These assets will be tested for impairment in accordance with the provisions of
this Statement. The discontinuation of goodwill amortization is the primary
driver of reduced corporate segment expenses from the 2001 first quarter, which
included $52 million of goodwill amortization.

Merrill Lynch's effective tax rate was 31.2%.


STAFFING

Merrill Lynch's full-time employees totaled 56,400 at the end of the quarter.
The decline of 1,000 since year-end 2001 is due primarily to staffing reductions
associated with the re-focusing of the Private Client business outside the
United States, and the divestitures which occurred during the quarter in GMI and
MLIM.

* * * *

Merrill Lynch may make or publish forward-looking statements about management
expectations, strategic objectives, business prospects, anticipated expense
savings and financial results and other similar matters. A variety of factors,
many of which are beyond Merrill Lynch's control, could cause actual results and
experience to differ materially from the expectations expressed in these
statements.


These factors include, but are not limited to, financial market volatility,
actions and initiatives by current and potential competitors, the effect of
current and future legislation or regulation, and additional factors described
in Merrill Lynch's Annual Report on Form 10-K and subsequent reports on Form
8-K, which are available at the SEC's website, www.sec.gov. Merrill Lynch
undertakes no responsibility to update or revise any forward-looking statements.




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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 months ended March 29, 2002
and supplemental information.





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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, 2002


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EXHIBIT INDEX
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Exhibit No. Description Page
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(99) Additional Exhibits 12-16

(i) Preliminary Unaudited Earnings Summary for
the three months ended March 29, 2002 and
supplemental information.




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