Exhibit 99.1
Merrill Lynch & Co., Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Pro Forma Condensed Consolidated Financial Statements
The accompanying unaudited pro forma condensed consolidated financial statements have been prepared to reflect Merrill Lynch & Co., Inc.’s (“Merrill Lynch”) sale of two of its U.S. bank subsidiaries, Merrill Lynch Bank USA and its consolidated subsidiaries (“MLBUSA”) and Merrill Lynch Bank & Trust Co., FSB and its consolidated subsidiaries (“MLBT-FSB” and together with MLBUSA, the “ML U.S. Banks”), to Bank of America Corporation (“Bank of America”). The ML U.S. Banks were both wholly-owned subsidiaries of Merrill Lynch. Merrill Lynch is a wholly-owned subsidiary of Bank of America.
Both transactions were executed by the sale of shares of the respective entities by Merrill Lynch to Bank of America. The sale price of each entity was equal to its net book value as of the date of transfer. Consideration for the sale of MLBUSA was in the form of a floating rate demand note payable from Bank of America to Merrill Lynch, while MLBT-FSB was sold for cash. The demand note received by Merrill Lynch in connection with the MLBUSA sale had a stated interest rate that was a market rate at the time of sale. The sale of MLBUSA was completed on July 1, 2009. The sale of MLBT-FSB was completed on November 2, 2009.
The unaudited pro forma condensed consolidated statements of operations for the fiscal year ended December 26, 2008 and for the six months ended June 30, 2009 give effect to the sales as if they had occurred on December 29, 2007, the first day of Merrill Lynch’s 2008 fiscal year. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2009 gives effect to the sales as if they had occurred as of that date. The unaudited pro forma condensed consolidated financial statements are subject to the assumptions and adjustments set forth in the accompanying notes. Merrill Lynch management believes that the assumptions used and adjustments made are reasonable. The unaudited pro forma condensed consolidated financial statements are for illustrative and informational purposes only and are not intended to represent, or be indicative of, what Merrill Lynch’s results of operations or financial position would have been had the transactions occurred on the dates indicated. Further, the unaudited pro forma condensed consolidated financial statements should not be considered representative of Merrill Lynch’s future financial position or results of operations.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with:
| • | the accompanying notes to the unaudited pro forma condensed consolidated financial statements; | |
| • | Merrill Lynch’s Annual Report on Form 10-K for the fiscal year ended December 26, 2008; and | |
| • | Merrill Lynch’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2009 and June 30, 2009. |
Merrill Lynch & Co., Inc. and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
(dollars in millions)
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
(dollars in millions)
| June 30, 2009 | ||||||||||||||||
| Merrill Lynch | Sale of ML | Pro forma | Merrill Lynch | |||||||||||||
| Historical (a) | U.S. Banks (b) | Adjustments | Pro forma | |||||||||||||
ASSETS | ||||||||||||||||
| Cash and cash equivalents | $ | 60,500 | $ | (41,377 | ) | $ | 4,152 | (c) | $ | 23,275 | ||||||
| Cash and securities segregated for regulatory purposes or deposited with clearing organizations | 27,026 | — | — | 27,026 | ||||||||||||
| Securities financing transactions | ||||||||||||||||
| Receivables under resale agreements | 71,350 | (30 | ) | — | 71,320 | |||||||||||
| Receivables under securities borrowed transactions | 42,398 | — | — | 42,398 | ||||||||||||
| 113,748 | (30 | ) | — | 113,718 | ||||||||||||
| Trading assets, at fair value | ||||||||||||||||
| Derivative contracts | 63,727 | (9 | ) | — | 63,718 | |||||||||||
| Corporate debt and preferred stock | 22,286 | — | — | 22,286 | ||||||||||||
| Equities and convertible debentures | 23,678 | — | — | 23,678 | ||||||||||||
| Non-U.S. governments and agencies | 15,876 | — | — | 15,876 | ||||||||||||
| Mortgages, mortgage-backed, and asset-backed | 8,291 | — | — | 8,291 | ||||||||||||
| U.S. Government and agencies | 3,721 | — | — | 3,721 | ||||||||||||
| Municipals, money markets and physical commodities | 6,044 | — | — | 6,044 | ||||||||||||
| 143,623 | (9 | ) | — | 143,614 | ||||||||||||
| Investment securities | 44,552 | (5,797 | ) | — | 38,755 | |||||||||||
| Securities received as collateral, at fair value | 11,358 | — | — | 11,358 | ||||||||||||
| Receivables from Bank of America | 3,015 | — | 8,922 | (c) | 11,937 | |||||||||||
| Other receivables | ||||||||||||||||
| Customers | 26,424 | (43 | ) | — | 26,381 | |||||||||||
| Brokers and dealers | 4,833 | (61 | ) | — | 4,772 | |||||||||||
| Interest and other | 15,712 | (1,198 | ) | — | 14,514 | |||||||||||
| 46,969 | (1,302 | ) | — | 45,667 | ||||||||||||
| Loans, notes, and mortgages | 88,279 | (49,060 | ) | — | 39,219 | |||||||||||
| Equipment and facilities, net | 2,654 | (148 | ) | — | 2,506 | |||||||||||
| Goodwill and other intangible assets | 10,519 | (1,090 | ) | — | 9,429 | |||||||||||
| Other assets | 23,985 | (4,358 | ) | — | 19,627 | |||||||||||
Total Assets | $ | 576,228 | $ | (103,171 | ) | $ | 13,074 | $ | 486,131 | |||||||
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Merrill Lynch & Co., Inc. and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
(dollars in millions)
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
(dollars in millions)
| June 30, 2009 | ||||||||||||||||
| Merrill Lynch | Sale of ML | Proforma | Merrill Lynch | |||||||||||||
| Historical (a) | U.S. Banks (b) | Adjustments | Pro forma | |||||||||||||
LIABILITIES | ||||||||||||||||
| Securities financing transactions | ||||||||||||||||
| Payables under repurchase agreements | $ | 63,748 | $ | — | $ | — | $ | 63,748 | ||||||||
| Payables under securities loaned transactions | 20,065 | — | — | 20,065 | ||||||||||||
| 83,813 | — | — | 83,813 | |||||||||||||
| Short-term borrowings | 1,934 | (411 | ) | — | 1,523 | |||||||||||
| Deposits | 101,727 | (86,757 | ) | — | 14,970 | |||||||||||
| Trading liabilities, at fair value | ||||||||||||||||
| Derivative contracts | 39,758 | (11 | ) | — | 39,747 | |||||||||||
| Equities and convertible debentures | 12,265 | — | — | 12,265 | ||||||||||||
| Non-U.S. governments and agencies | 11,411 | — | — | 11,411 | ||||||||||||
| Corporate debt and preferred stock | 1,078 | — | — | 1,078 | ||||||||||||
| U.S. Government and agencies | 923 | — | — | 923 | ||||||||||||
| Municipals, money markets and other | 899 | (10 | ) | — | 889 | |||||||||||
| 66,334 | (21 | ) | — | 66,313 | ||||||||||||
| Obligation to return securities received as collateral, at fair value | 11,358 | — | — | 11,358 | ||||||||||||
| Payables to Bank of America | 31,756 | — | — | 31,756 | ||||||||||||
| Other payables | ||||||||||||||||
| Customers | 39,812 | — | — | 39,812 | ||||||||||||
| Brokers and dealers | 9,447 | — | — | 9,447 | ||||||||||||
| Interest and other | 24,915 | (1,811 | ) | — | 23,104 | |||||||||||
| 74,174 | (1,811 | ) | — | 72,363 | ||||||||||||
| Long-term borrowings | 162,965 | (1,097 | ) | — | 161,868 | |||||||||||
| Junior subordinated notes (related to trust preferred securities) | 3,540 | — | — | 3,540 | ||||||||||||
Total Liabilities | 537,601 | (90,097 | ) | — | 447,504 | |||||||||||
Total Stockholders’ Equity | 38,627 | (13,074 | ) | 13,074 | (c) | 38,627 | ||||||||||
Total Liabilities and Stockholders’ Equity | $ | 576,228 | $ | (103,171 | ) | $ | 13,074 | $ | 486,131 | |||||||
| See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet. | ||
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MERRILL LYNCH & CO., INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
| (a) | Reflects Merrill Lynch’s historical condensed consolidated balance sheet. | ||
| (b) | Reflects Merrill Lynch’s transfer of the ML U.S. Banks’ assets and liabilities in connection with the sale of the ML U.S. Banks’ common stock to Bank of America. | ||
| (c) | Reflects the receipt of a note receivable from Bank of America equal to the net book value of MLBUSA and the receipt of cash from Bank of America equal to the net book value of MLBT-FSB as of the balance sheet date. |
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Merrill Lynch & Co., Inc. and Subsidiaries
Pro Forma Consolidated Statement of Operations (Unaudited)
(dollars in millions, except per share amounts)
Pro Forma Consolidated Statement of Operations (Unaudited)
(dollars in millions, except per share amounts)
| Fiscal Year Ended December 26, 2008 | ||||||||||||||||
| Merrill Lynch | ML U.S. Banks | Merrill Lynch | ||||||||||||||
| Historical | Historical | Pro forma | Pro forma | |||||||||||||
| Operating Results (a) | Operating Results (b) | Adjustments | Operating Results | |||||||||||||
Revenues | ||||||||||||||||
| Principal transactions | $ | (27,225 | ) | $ | 399 | $ | — | $ | (26,826 | ) | ||||||
| Commissions | 6,895 | (19 | ) | — | 6,876 | |||||||||||
| Managed accounts and other fee-based revenues | 5,544 | (673 | ) | — | 4,871 | |||||||||||
| Investment banking | 3,733 | (61 | ) | — | 3,672 | |||||||||||
| Earnings from equity method investments | 4,491 | (16 | ) | — | 4,475 | |||||||||||
| Other | (10,065 | ) | 8,019 | (4,307 | )(c) | (6,353 | ) | |||||||||
| Subtotal | (16,627 | ) | 7,649 | (4,307 | ) | (13,285 | ) | |||||||||
| Interest and dividend revenues | 33,383 | (3,872 | ) | 239 | (d) | 29,750 | ||||||||||
| Less interest expense | 29,349 | (1,680 | ) | — | 27,669 | |||||||||||
| Net interest profit | 4,034 | (2,192 | ) | 239 | 2,081 | |||||||||||
Revenues, net of interest expense | (12,593 | ) | 5,457 | (4,068 | ) | (11,204 | ) | |||||||||
Non-interest expenses | ||||||||||||||||
| Compensation and benefits | 14,763 | (469 | ) | — | 14,294 | |||||||||||
| Communications and technology | 2,201 | (62 | ) | 24 | (e) | 2,163 | ||||||||||
| Brokerage, clearing, and exchange fees | 1,394 | (34 | ) | — | 1,360 | |||||||||||
| Occupancy and related depreciation | 1,267 | (86 | ) | 10 | (e) | 1,191 | ||||||||||
| Professional fees | 1,058 | (47 | ) | — | 1,011 | |||||||||||
| Advertising and market development | 652 | (33 | ) | — | 619 | |||||||||||
| Office supplies and postage | 215 | (15 | ) | — | 200 | |||||||||||
| Other | 2,402 | (278 | ) | — | 2,124 | |||||||||||
| Payment related to price reset on common stock offering | 2,500 | — | — | 2,500 | ||||||||||||
| Goodwill impairment charge | 2,300 | — | — | 2,300 | ||||||||||||
| Restructuring charge | 486 | (22 | ) | — | 464 | |||||||||||
Total non-interest expenses | 29,238 | (1,046 | ) | 34 | 28,226 | |||||||||||
Pre-tax (loss) from continuing operations | (41,831 | ) | 6,503 | (4,102 | ) | (39,430 | ) | |||||||||
| Income tax (benefit) | (14,280 | ) | 2,575 | (1,682 | ) | (13,387 | ) | |||||||||
Net (loss) from continuing operations | $ | (27,551 | ) | $ | 3,928 | $ | (2,420 | ) | $ | (26,043 | ) | |||||
| Basic (loss) per common share from continuing operations (f) | $ | (24.82 | ) | $ | (23.59 | ) | ||||||||||
| Diluted (loss) per common share from continuing operations (f) | $ | (24.82 | ) | $ | (23.59 | ) | ||||||||||
Average shares used in computing (losses) per common share | ||||||||||||||||
| Basic | 1,225.6 | 1,225.6 | ||||||||||||||
| Diluted | 1,225.6 | 1,225.6 | ||||||||||||||
| See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations. | ||||
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Merrill Lynch & Co., Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
(dollars in millions)
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
(dollars in millions)
| Six Months Ended June 30, 2009 | ||||||||||||||||
| Merrill Lynch | ML U.S. Banks | Merrill Lynch | ||||||||||||||
| Historical | Historical | Pro forma | Pro forma | |||||||||||||
| Operating Results (a) | Operating Results (b) | Adjustments | Operating Results | |||||||||||||
Revenues | ||||||||||||||||
| Principal transactions | $ | 4,263 | $ | 6 | $ | — | $ | 4,269 | ||||||||
| Commissions | 2,733 | (9 | ) | — | 2,724 | |||||||||||
| Managed accounts and other fee-based revenues | 2,121 | (325 | ) | — | 1,796 | |||||||||||
| Investment banking | 1,468 | (14 | ) | — | 1,454 | |||||||||||
| Earnings from equity method investments | 94 | (21 | ) | — | 73 | |||||||||||
| Other | 1,043 | (271 | ) | — | 772 | |||||||||||
| Subtotal | 11,722 | (634 | ) | — | 11,088 | |||||||||||
| Interest and dividend revenues | 6,819 | (1,583 | ) | 61 | (d) | 5,297 | ||||||||||
| Less interest expense | 6,424 | (337 | ) | — | 6,087 | |||||||||||
| Net interest profit | 395 | (1,246 | ) | 61 | (790 | ) | ||||||||||
Revenues, net of interest expense | 12,117 | (1,880 | ) | 61 | 10,298 | |||||||||||
Non-interest expenses | ||||||||||||||||
| Compensation and benefits | 6,436 | (218 | ) | — | 6,218 | |||||||||||
| Communications and technology | 894 | (29 | ) | 11 | (e) | 876 | ||||||||||
| Occupancy and related depreciation | 553 | (42 | ) | 3 | (e) | 514 | ||||||||||
| Brokerage, clearing, and exchange fees | 492 | (16 | ) | — | 476 | |||||||||||
| Advertising and market development | 159 | (13 | ) | — | 146 | |||||||||||
| Professional fees | 248 | (15 | ) | — | 233 | |||||||||||
| Office supplies and postage | 77 | (5 | ) | — | 72 | |||||||||||
| Other | 902 | (251 | ) | — | 651 | |||||||||||
Total non-interest expenses | 9,761 | (589 | ) | 14 | 9,186 | |||||||||||
Pre-tax earnings from continuing operations | 2,356 | (1,291 | ) | 47 | 1,112 | |||||||||||
| Income tax expense | 516 | (466 | ) | 19 | 69 | |||||||||||
Net earnings from continuing operations | $ | 1,840 | $ | (825 | ) | $ | 28 | $ | 1,043 | |||||||
| Basic earnings per common share from continuing operations (g) | N/A | N/A | ||||||||||||||
| Diluted earnings per common share from continuing operations (g) | N/A | N/A | ||||||||||||||
| See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations. | ||
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MERRILL LYNCH & CO., INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
OPERATIONS
| (a) | Reflects Merrill Lynch’s historical condensed consolidated statements of operations. | |
| (b) | Reflects the elimination of the historical revenues and expenses of the ML U.S. Banks from Merrill Lynch’s historical operating results. | |
| (c) | Reflects an adjustment for losses on intercompany sales to other Merrill Lynch entities of MLBUSA’s available-for-sale securities that were reported within MLBUSA’s stand alone financial statements for fiscal year 2008. The intercompany losses were eliminated in consolidation within Merrill Lynch’s historical operating results. | |
| (d) | Represents interest imputed on the note receivable from Bank of America in connection with the sale of MLBUSA. Interest was imputed as if the sale had occurred on December 29, 2007, the first day of Merrill Lynch’s 2008 fiscal year. | |
| (e) | Reflects adjustments associated with certain allocated costs related to the ML U.S. Banks. Such allocated costs will be retained by Merrill Lynch as they represent certain corporate expenses that will not be transferred with the ML U.S. Banks in connection with the sale to Bank of America. | |
| (f) | Includes the impact of preferred stock dividends of $2,869 million for the fiscal year ended December 26, 2008. | |
| (g) | Earnings per share data is not provided for the six months ended June 30, 2009 as Merrill Lynch was a wholly-owned subsidiary of Bank of America during that period. |
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