UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended June 30, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from to .
(Commission file number 001-15305)
BlackRock, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 51-0380803 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
40 East 52nd Street, New York, NY 10022
(Address of principal executive offices)
(Zip Code)
(212) 754-5300
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes x No ¨
As of July 31, 2004, there were 18,604,515 shares of the registrant’s class A common stock outstanding and 45,046,662 shares of the registrant’s class B common stock outstanding.
Index to Form 10-Q
FINANCIAL INFORMATION
| Page |
|||||
| Item 1. | Financial Statements | ||||
| [1 | ] | ||||
| [2 | ] | ||||
| [3 | ] | ||||
| [4 | ] | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | [18 | ] | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | [45 | ] | ||
| Item 4. | Controls and Procedures | [47 | ] | ||
| PART II | |||||
| OTHER INFORMATION | |||||
| Item 1. | Legal Proceedings | [48 | ] | ||
| Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | [49 | ] | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | [50 | ] | ||
| Item 6. | Exhibits and Reports on Form 8-K | [51 | ] | ||
PART I – FINANCIAL INFORMATION
Consolidated Statements of Financial Condition
(Dollar amounts in thousands)
| June 30, 2004 |
December 31, 2003 |
|||||||
| (unaudited) | ||||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ | 296,696 | $ | 315,941 | ||||
| Accounts receivable |
145,895 | 127,235 | ||||||
| Investments |
236,369 | 234,923 | ||||||
| Property and equipment, net |
88,098 | 87,006 | ||||||
| Intangible assets, net |
185,592 | 192,079 | ||||||
| Receivable from affiliates |
290 | 81 | ||||||
| Other assets |
13,512 | 9,958 | ||||||
| Total assets |
$ | 966,452 | $ | 967,223 | ||||
| Liabilities |
||||||||
| Accrued compensation |
$ | 135,577 | $ | 172,447 | ||||
| Accounts payable and accrued liabilities |
||||||||
| Affiliate |
28,288 | 40,668 | ||||||
| Other |
21,631 | 19,430 | ||||||
| Acquired management contract obligation |
4,810 | 5,736 | ||||||
| Other liabilities |
11,906 | 14,395 | ||||||
| Total liabilities |
202,212 | 252,676 | ||||||
| Minority interest |
8,987 | 1,239 | ||||||
| Stockholders’ equity |
||||||||
| Common stock, class A, 19,243,878 shares issued |
192 | 192 | ||||||
| Common stock, class B, 45,842,196 and 46,120,737 shares issued, respectively |
459 | 461 | ||||||
| Additional paid - in capital |
183,991 | 196,446 | ||||||
| Retained earnings |
641,981 | 570,535 | ||||||
| Unearned compensation |
(7,288 | ) | (10,270 | ) | ||||
| Accumulated other comprehensive income |
5,203 | 6,027 | ||||||
| Treasury stock, class A, at cost, 669,118 and 954,067 shares held, respectively |
(36,321 | ) | (45,054 | ) | ||||
| Treasury stock, class B, at cost, 795,261 and 313,626 shares held, respectively |
(32,964 | ) | (5,029 | ) | ||||
| Total stockholders’ equity |
755,253 | 713,308 | ||||||
| Total liabilities and stockholders’ equity |
$ | 966,452 | $ | 967,223 | ||||
See accompanying notes to consolidated financial statements.
- 1 -
PART I – FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)
Consolidated Statements of Income
(Dollar amounts in thousands, except share data)
(unaudited)
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenue |
||||||||||||||||
| Investment advisory and administration fees |
||||||||||||||||
| Mutual funds |
$ | 54,981 | $ | 48,496 | $ | 111,427 | $ | 97,236 | ||||||||
| Separate accounts |
107,032 | 79,517 | 210,904 | 157,142 | ||||||||||||
| Other income |
||||||||||||||||
| Affiliate |
1,378 | 1,250 | 2,636 | 2,500 | ||||||||||||
| Other |
20,421 | 14,643 | 40,668 | 29,779 | ||||||||||||
| Total revenue |
183,812 | 143,906 | 365,635 | 286,657 | ||||||||||||
| Expense |
||||||||||||||||
| Employee compensation and benefits |
81,618 | 55,819 | 147,687 | 111,205 | ||||||||||||
| Fund administration and servicing costs - affiliates |
||||||||||||||||
| Affiliate |
4,948 | 6,686 | 10,016 | 13,629 | ||||||||||||
| Other |
3,070 | 892 | 6,362 | 1,907 | ||||||||||||
| General and administration |
||||||||||||||||
| Affiliate |
1,411 | 1,984 | 5,336 | 4,045 | ||||||||||||
| Other |
29,952 | 23,492 | 57,326 | 46,540 | ||||||||||||
| Amortization of intangible assets |
232 | 231 | 463 | 463 | ||||||||||||
| Impairment of intangible assets |
— | — | 6,097 | — | ||||||||||||
| Total expense |
121,231 | 89,104 | 233,287 | 177,789 | ||||||||||||
| Operating income |
62,581 | 54,802 | 132,348 | 108,868 | ||||||||||||
| Non-operating income (expense) |
||||||||||||||||
| Investment income |
16,038 | 8,233 | 22,935 | 11,762 | ||||||||||||
| Interest expense |
(550 | ) | (151 | ) | (1,634 | ) | (315 | ) | ||||||||
| Total non-operating income |
15,488 | 8,082 | 21,301 | 11,447 | ||||||||||||
| Income before income taxes and minority interest |
78,069 | 62,884 | 153,649 | 120,315 | ||||||||||||
| Income taxes |
26,521 | 24,210 | 46,610 | 46,321 | ||||||||||||
| Income before minority interest |
51,548 | 38,674 | 107,039 | 73,994 | ||||||||||||
| Minority interest |
3,552 | — | 3,836 | — | ||||||||||||
| Net income |
$ | 47,996 | $ | 38,674 | $ | 103,203 | $ | 73,994 | ||||||||
| Earnings per share |
||||||||||||||||
| Basic |
$ | 0.75 | $ | 0.59 | $ | 1.62 | $ | 1.14 | ||||||||
| Diluted |
$ | 0.73 | $ | 0.58 | $ | 1.57 | $ | 1.12 | ||||||||
| Cash dividends declared per share |
$ | 0.25 | — | $ | 0.50 | — | ||||||||||
| Weighted-average shares outstanding |
||||||||||||||||
| Basic |
63,647,316 | 65,028,337 | 63,701,625 | 65,042,359 | ||||||||||||
| Diluted |
65,766,979 | 66,164,326 | 65,776,975 | 66,018,501 | ||||||||||||
See accompanying notes to consolidated financial statements.
- 2 -
PART I – FINANCIAL INFORMATION (continued)
Item 1. Financial Statements (continued)
Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
(unaudited)
| Six months ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities |
||||||||
| Net income |
$ | 103,203 | $ | 73,994 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
10,105 | 10,464 | ||||||
| Impairment of intangible assets |
6,097 | — | ||||||
| Minority interest |
3,836 | — | ||||||
| Stock-based compensation |
6,942 | 4,610 | ||||||
| Deferred income taxes |
7,210 | 2,278 | ||||||
| Tax benefit from stock-based compensation |
1,761 | 4,167 | ||||||
| Net gain on investments |
(11,889 | ) | — | |||||
| Changes in operating assets and liabilities: |
||||||||
| Increase in accounts receivable |
(19,783 | ) | (5,307 | ) | ||||
| Increase in investments, trading |
(9,156 | ) | (22,085 | ) | ||||
| Decrease (increase) in receivable from affiliates |
(209 | ) | 177 | |||||
| Increase in other assets |
(914 | ) | (3,756 | ) | ||||
| Decrease in accrued compensation |
(36,870 | ) | (49,452 | ) | ||||
| (Decrease) increase in accounts payable and accrued liabilities |
(18,069 | ) | 6,936 | |||||
| (Decrease) increase in other liabilities |
(2,489 | ) | 759 | |||||
| Cash provided by operating activities |
39,775 | 22,785 | ||||||