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| EX-99.2 - THIRD QUARTER 2013 EARNINGS - EARNINGS RELEASE SUPPLEMENT - BlackRock Inc. | d611844dex992.htm |
| 8-K - FORM 8-K - BlackRock Inc. | d611844d8k.htm |
Exhibit 99.1
| Media Relations: Brian Beades 212-810-5596 |
Investor Relations: Tom Wojcik 212-810-8127 |
BlackRock Reports Quarterly Diluted EPS of $4.21, or $3.88 as adjusted
$4.096 Trillion in assets under management at September 30, 2013, up 12% year-over-year
| • | $25.3 billion of long-term net inflows driven by Retail and iShares® |
| • | 7% revenue growth from the third quarter 2012 |
| • | 22% growth in BlackRock Solutions® revenues |
| • | 10% operating income growth, or 12% as adjusted, with continued margin expansion |
| • | Consistent capital management with $250 million of quarterly share repurchases |
New York, October 16, 2013 — BlackRock, Inc. (NYSE:BLK) today reported third quarter 2013 diluted EPS of $4.21, up 15% from a year ago. Revenue increased 7% from the third quarter 2012, reflecting growth in markets, long-term net inflows and strength in BlackRock Solutions. Operating income for the third quarter 2013 was $966 million with an operating margin of 39.1%.
As adjusted results(1): Third quarter 2013 diluted EPS of $3.88 and operating income of $978 million both rose 12% compared with the third quarter 2012. Third quarter 2012 included $25 million of closed-end fund launch costs. Diluted EPS included operating income of $3.96 per diluted share and net nonoperating expense of $0.08 per diluted share. Operating margin of 41.2% in the third quarter 2013 rose 50 bps from the third quarter 2012. Compared with the second quarter 2013, operating margin and diluted EPS declined 10 bps and $0.27, respectively, reflecting seasonally lower securities lending fees, partially offset by strength in base fees and BlackRock Solutions revenue. The decline in diluted EPS compared with second quarter 2013 also reflected the $39 million noncash, pre-tax nonoperating gain related to the PennyMac IPO recorded in the second quarter 2013.
“Our solid third quarter 2013 results are continued evidence of the benefits of our broad, diversified investment platform and strong investment performance,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “Long-term net inflows of more than $25 billion reflected positive flows across all major asset classes and geographies, driven by demand for outcome-oriented solutions, unconstrained fixed income and retail alternative strategies. We are seeing the steps we have taken to further enhance performance and invest in our brand drive accelerating growth in retail flows. Our Global Retail business added $8.3 billion of long-term net inflows in the quarter and more than $22 billion thus far in 2013, driving 7% year-to-date annualized organic growth, up from 3% growth for full year 2012. Our iShares ETFs also saw strong net inflows as liquidity-oriented investors turned to iShares once again to increase exposure during the quarter, and as buy-and-hold investors continued to access our Core Series product suite, which has attracted $9 billion of inflows year to date.”
| AUM, GAAP and as adjusted results | ||||||||||||||||||||||||||
| Nine Months Ended September 30, |
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| (Amounts in millions, except per share data) | Q3 2013 |
Q3 2012 |
Change | Q2 2013 |
Change | 2013 | 2012 | Change | ||||||||||||||||||
| AUM |
$ | 4,096,356 | $ | 3,673,274 | 12% | $ | 3,857,007 | 6% | $ | 4,096,356 | $ | 3,673,274 | 12% | |||||||||||||
| GAAP basis: |
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| Revenue |
$ | 2,472 | $ | 2,320 | 7% | $ | 2,482 | — % | $ | 7,403 | $ | 6,798 | 9% | |||||||||||||
| Operating income |
$ | 966 | $ | 875 | 10% | $ | 849 | 14% | $ | 2,724 | $ | 2,519 | 8% | |||||||||||||
| Operating margin |
39.1 | % | 37.7 | % | 140 bps | 34.2 | % | 490 bps | 36.8 | % | 37.1 | % | (30 bps) | |||||||||||||
| Net income(2) |
$ | 730 | $ | 642 | 14% | $ | 729 | — % | $ | 2,091 | $ | 1,768 | 18% | |||||||||||||
| Diluted EPS |
$ | 4.21 | $ | 3.65 | 15% | $ | 4.19 | — % | $ | 12.02 | $ | 9.87 | 22% | |||||||||||||
| Weighted average diluted shares |
173.4 | 175.5 | (1%) | 173.9 | — % | 174.0 | 179.0 | (3%) | ||||||||||||||||||
| As Adjusted: |
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| Operating income(1) |
$ | 978 | $ | 876 | 12% | $ | 982 | — % | $ | 2,881 | $ | 2,533 | 14% | |||||||||||||
| Operating margin(1) |
41.2 | % | 40.7 | % | 50 bps | 41.3 | % | (10 bps) | 40.8 | % | 39.5 | % | 130 bps | |||||||||||||
| Net income(1) (2) |
$ | 672 | $ | 610 | 10% | $ | 722 | (7%) | $ | 2,031 | $ | 1,743 | 17% | |||||||||||||
| Diluted EPS(1) |
$ | 3.88 | $ | 3.47 | 12% | $ | 4.15 | (7%) | $ | 11.67 | $ | 9.73 | 20% | |||||||||||||
| (1) | See notes (a) through (f) to the Condensed Consolidated Statements of Income and Supplemental Information on pages 13 through 16 for more information on as adjusted items and the reconciliation to GAAP. |
| (2) | Net income represents net income attributable to BlackRock, Inc. |
“The current investment environment presents a wide range of challenges for our clients. Fundamentals continue to be outweighed by policy decisions and global growth is dictated more by central bankers and elected officials than business leaders. This uncertainty is keeping many investors on the sidelines, at exactly the time they need to be investing to plan for their futures, and in the face of these unknowns, clients are turning to BlackRock to provide solutions.
“Longevity and the ensuing need for sufficient retirement savings remains one of the most important investment challenges facing clients. Corporate pension plans are underfunded and individual investors are not prepared for retirement. We continue to partner with providers of defined contribution plans to provide advice and outcome-oriented solutions such as our LifePath® target-date portfolios, which gathered more than $3 billion of assets this quarter.
“In the current low, volatile rate environment, yield-starved investors are becoming more aware of the risk in their fixed income portfolios and pursuing solutions to shorten duration while continuing to earn income. While the industry continues to see sizable fixed income redemptions, BlackRock once again experienced net inflows, driven by strong performance across the platform and our best-in-class nontraditional fixed income offerings. We have spent the past several quarters advising our clients on the benefits of unconstrained fixed income, and our flagship fund, the Strategic Income Opportunities Fund, gathered more than $1 billion of assets for the third straight quarter.
“While crossing the $4 trillion asset threshold was another milestone in our growth story, it only encourages us to continue pursuing the many opportunities we have to grow in the future, as we deliver the full value of our diverse platform, solutions-oriented investment culture and leading risk management capabilities to our clients regardless of market conditions.”
Third Quarter Business Highlights
The following table presents long-term net inflows, AUM, base fees and business mix by client and product type:
| Long-term net inflows, AUM, base fees and business mix, by client type | ||||||||||||||||||||
| (Dollar amounts in millions) | Q3 2013 Long-term Net Inflows |
September 30, 2013 AUM |
Q3 2013 Base Fees(1) |
September 30, 2013 AUM % of Total |
Q3 2013 Base Fees(1) % of Total |
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| Retail |
$ | 8,344 | $ | 438,449 | $ | 708 | 12 | % | 34 | % | ||||||||||
| iShares |
20,249 | 856,909 | 721 | 23 | % | 35 | % | |||||||||||||
| Institutional: |
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| Active |
53 | 890,070 | 440 | 23 | % | 21 | % | |||||||||||||
| Index |
(3,361 | ) | 1,612,337 | 209 | 42 | % | 10 | % | ||||||||||||
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| Total institutional |
(3,308 | ) | 2,502,407 | 649 | 65 | % | 31 | % | ||||||||||||
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| Total long-term |
$ | 25,285 | $ | 3,797,765 | $ | 2,078 | 100 | % | 100 | % | ||||||||||
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| Long-term net inflows, AUM, base fees and business mix, by product type | ||||||||||||||||||||
| (Dollar amounts in millions) | Q3 2013 Long-term Net Inflows |
September 30, 2013 AUM |
Q3 2013 Base Fees(1) |
September 30, 2013 AUM % of Total |
Q3 2013 Base Fees(1) % of Total |
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| Equity |
$ | 11,256 | $ | 2,148,712 | $ | 1,159 | 56 | % | 56 | % | ||||||||||
| Fixed income |
7,491 | 1,237,559 | 488 | 33 | % | 23 | % | |||||||||||||
| Multi-asset |
4,863 | 308,117 | 262 | 8 | % | 13 | % | |||||||||||||
| Alternatives |
1,675 | 103,377 | 169 | 3 | % | 8 | % | |||||||||||||
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| Total long-term |
$ | 25,285 | $ | 3,797,765 | $ | 2,078 | 100 | % | 100 | % | ||||||||||
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| (1) | Base fees include investment advisory, administration fees and securities lending revenue. |
Long-term net inflows were positive across all regions, with net inflows of $23.1 billion, $1.8 billion and $0.4 billion from clients in the Americas (defined as the United States, Caribbean, Canada, Latin America and Iberia), EMEA and Asia-Pacific, respectively. At September 30, 2013, BlackRock managed 61% of long-term AUM for investors in the Americas and 39% for international clients.
-2-
| • | Retail global long-term net inflows of $8.3 billion included net inflows of $3.4 billion in the United States and $4.5 billion in EMEA. Long-term net inflows were diversified across all asset classes, led by multi-asset class net inflows of $2.9 billion with particular demand for the flagship Multi-asset Income and Global Allocation funds. Fixed income long-term net inflows of $2.3 billion reflected strong interest in unconstrained fixed income offerings and equity net inflows of $1.2 billion were driven by flows into the European equities suite. Alternative mutual funds generated over $1 billion in net inflows for the second straight quarter, paced by the Global Long/Short Credit fund. |
| • | iShares long-term net inflows of $20.2 billion included U.S. and European iShares net inflows of $16.4 billion and $5.0 billion, respectively. Renewed appetite for emerging markets and broad market European equity exposure in the latter part of the quarter drove equity net inflows of $21.1 billion, partially offset by fixed income net outflows of $1.5 billion. The Core Series generated $2.0 billion of net inflows, concentrated in U.S. equity. |
| • | Institutional active long-term net inflows of $0.1 billion reflected strong flows of $4.9 billion and $2.2 billion into fixed income and multi-asset class products, respectively, largely offset by equity and active currency net outflows of $6.1 billion and $0.4 billion, respectively. Multi-asset class flows were driven by continued demand for the LifePath target-date suite, which had net inflows of $3.0 billion. |
| • | Institutional index long-term net outflows of $3.4 billion were due to equity net outflows of $4.9 billion, primarily from U.S. equities. Equity net outflows were partially offset by fixed income net inflows of $1.8 billion, largely into global bond and short or intermediate duration mandates. |
Cash management AUM increased 3%, or $7.5 billion, to $260.1 billion.
Advisory AUM decreased 4% to $38.5 billion due to planned portfolio liquidations.
Investment performance at September 30, 2013 is presented in the following table:
| Investment performance | ||||||||||||
| One-year period | Three-year period | Five-year period | ||||||||||
| Fixed Income: |
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| Actively managed products above benchmark or peer median |
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| Taxable |
75 | % | 76 | % | 81 | % | ||||||
| Tax-exempt |
54 | % | 67 | % | 78 | % | ||||||
| Passively managed products within or above tolerance |
94 | % | 94 | % | 86 | % | ||||||
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| Equity: |
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| Actively managed products above benchmark or peer median |
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| Fundamental |
43 | % | 41 | % | 47 | % | ||||||
| Scientific |
77 | % | 85 | % | 87 | % | ||||||
| Passively managed products within or above tolerance |
97 | % | 98 | % | 96 | % | ||||||
Third Quarter Financial Highlights
Comparison of the Third Quarter 2013 with the Third Quarter 2012 GAAP Results
Operating income: Operating income was $966 million compared with $875 million in the prior year. Third quarter 2012 included closed-end fund launch costs of $25 million.
Revenue of $2.5 billion increased $152 million from $2.3 billion in the prior year, primarily due to the following:
| • | Investment advisory, administration fees and securities lending revenue of $2.2 billion increased $129 million from the prior year due to growth in long-term average AUM. Securities lending fees were $99 million in the current quarter and $129 million in the prior year quarter. The decrease in securities lending fees was driven primarily by lower spreads consistent with industry trends. |
| • | BlackRock Solutions and advisory revenue totaled $156 million in the current quarter compared with $128 million in the third quarter 2012. The current quarter reflected an $18 million increase in Aladdin® business revenues to $112 million and higher advisory assignments revenue. |
-3-
Total operating expenses of $1.5 billion increased $61 million from the prior year, primarily due to the following:
| • | Employee compensation and benefits increased $38 million, reflecting higher headcount and higher incentive compensation driven by higher operating income. |
| • | Direct fund expenses increased $23 million, reflecting higher average AUM where BlackRock pays certain nonadvisory expenses of the funds primarily linked to the use of certain index trademarks, reference data for certain indices, custodial services, fund administration and fund accounting. |
| • | General and administration expenses of $334 million reflected higher marketing and promotional costs than the prior year quarter. The third quarter 2012 included fund launch costs of $22 million (excluding $3 million included in employee compensation and benefits expense). |
Nonoperating income (expense): Nonoperating expense, net of noncontrolling interests, in the third quarter 2013 was $17 million, which reflected lower net positive marks compared with the prior year quarter.
Income tax expense: Income tax expense totaled $219 million for the third quarter 2013 and $250 million for the third quarter 2012. The GAAP effective income tax rate was 23.1% compared with 28.1% for the prior year quarter. The GAAP tax rate included a $64 million net noncash benefit for the third quarter 2013 and a $30 million net noncash benefit for the third quarter 2012. The net noncash benefits for both periods primarily related to the revaluation of certain deferred income tax liabilities, including tax legislation enacted in the United Kingdom and domestic state tax law changes. The as adjusted effective income tax rate was 29.9% for the third quarter 2013 and 31.4% for the third quarter 2012.
Comparison of the Third Quarter 2013 with the Second Quarter 2013 GAAP Results
Operating income: Operating income was $966 million compared with $849 million in the prior quarter. In the prior quarter, subsequent to an initial public offering of PennyMac Financial Services, Inc. (the “PennyMac IPO”), the Company made a charitable contribution of approximately six million units of its equity method investment with a fair value of $124 million to a new donor advised fund (the “Charitable Contribution”). In connection with the Charitable Contribution, the Company also recorded a noncash, nonoperating pre-tax gain of $80 million related to the contributed investment. For further information, see the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.
Revenue of $2.5 billion decreased $10 million from the prior quarter, primarily due to the following:
| • | Investment advisory, administration fees and securities lending revenue of $2.2 billion decreased $24 million from the prior quarter impacted by seasonally lower securities lending fees, product mix and the effect of one additional revenue day in the quarter. Securities lending fees were $99 million and $136 million in the third quarter and second quarter, respectively. Lower seasonal demand drove the decrease in securities lending fees. |
| • | BlackRock Solutions and advisory revenue totaled $156 million in the current quarter compared with $138 million in the second quarter. The current quarter reflected a $14 million increase in Aladdin business revenues to $112 million and higher advisory assignments revenue. |
| • | Other revenue of $48 million decreased $12 million, largely reflecting lower earnings from certain investments and lower transition management service fees. |
Total operating expenses of $1.5 billion decreased $127 million from the prior quarter, primarily due to the following:
| • | General and administration expenses decreased $131 million, primarily due to the $124 million expense related to the Charitable Contribution recorded in the prior quarter. The current quarter also included lower marketing and promotional costs. |
Nonoperating income (expense): Nonoperating expense, net of noncontrolling interests, was $17 million compared with $92 million of nonoperating income in the second quarter. The prior quarter included the $80 million gain related to the Charitable Contribution and a $39 million gain related to the PennyMac IPO.
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Income tax expense: Income tax expense totaled $219 million for the third quarter 2013 and $212 million for the second quarter 2013. The GAAP effective income tax rate was 23.1% compared with 22.5% for the second quarter. The third quarter 2013 GAAP tax rate includes a $64 million net noncash benefit primarily related to the revaluation of certain deferred income tax liabilities, including tax legislation enacted in the United Kingdom and domestic state tax law changes. The prior quarter included an approximately $57 million tax benefit recognized in connection with the Charitable Contribution and a tax benefit of approximately $29 million, primarily due to the realization of loss carryforwards.
Teleconference, Webcast and Presentation Information
Chairman and Chief Executive Officer, Laurence D. Fink, and Chief Financial Officer, Gary Shedlin, will host a teleconference call for investors and analysts on Wednesday, October 16, 2013, at 8:30 a.m. (Eastern Time). Members of the public who are interested in participating in the teleconference should dial, from the United States, (800) 374-0176, or from outside the United States, (706) 679-8281, shortly before 8:30 a.m. and reference the BlackRock Conference Call (ID Number 73242488). A live, listen-only webcast will also be available via the investor relations section of www.blackrock.com.
Both the teleconference and webcast will be available for replay by 12:30 p.m. (Eastern Time) on Wednesday, October 16, 2013 and ending at midnight on Thursday, October 31, 2013. To access the replay of the teleconference, callers from the United States should dial (800) 585-8367 and callers from outside the United States should dial (404) 537-3406 and enter the Conference ID Number 73242488. To access the webcast, please visit the investor relations section of www.blackrock.com.
About BlackRock
BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At September 30, 2013, BlackRock’s AUM was $4.096 trillion. BlackRock helps clients meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of September 30, 2013, the firm had approximately 11,200 employees in 30 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com.
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Condensed Consolidated Statements of Income and Supplemental Information
(Dollar amounts in millions, except per share data), (unaudited)
| Three Months | ||||||||||||||||||||
| Three Months Ended | Ended | |||||||||||||||||||
| September 30, | June 30, | |||||||||||||||||||
| 2013 | 2012 | Change | 2013 | Change | ||||||||||||||||
| Revenue |
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| Investment advisory, administration fees and securities lending revenue |
$ | 2,153 | $ | 2,024 | $ | 129 | $ | 2,177 | ($ | 24 | ) | |||||||||
| Investment advisory performance fees |
96 | 103 | (7 | ) | 89 | 7 | ||||||||||||||
| BlackRock Solutions and advisory |
156 | 128 | 28 | 138 | 18 | |||||||||||||||
| Distribution fees |
19 | 19 | — | 18 | 1 | |||||||||||||||
| Other revenue |
48 | 46 | 2 | 60 | (12 | ) | ||||||||||||||
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| Total revenue |
2,472 | 2,320 | 152 | 2,482 | (10 | ) | ||||||||||||||
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| Expenses |
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| Employee compensation and benefits |
866 | 828 | 38 | 864 | 2 | |||||||||||||||
| Distribution and servicing costs |
85 | 94 | (9 | ) | 90 | (5 | ) | |||||||||||||
| Amortization of deferred sales commissions |
14 | 13 | 1 | 12 | 2 | |||||||||||||||
| Direct fund expenses |
167 | 144 | 23 | 162 | 5 | |||||||||||||||
| General and administration |
334 | 327 | 7 | 465 | (131 | ) | ||||||||||||||
| Amortization of intangible assets |
40 | 39 | 1 | 40 | — | |||||||||||||||
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| Total expenses |
1,506 | 1,445 | 61 | 1,633 | (127 | ) | ||||||||||||||
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| Operating income |
966 | 875 | 91 | 849 | 117 | |||||||||||||||
| Nonoperating income (expense) |
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| Net gain (loss) on investments |
32 | 75 | (43 | ) | 141 | (109 | ) | |||||||||||||
| Net gain (loss) on consolidated variable interest entities |
(6 | ) | 2 | (8 | ) | (23 | ) | 17 | ||||||||||||
| Interest and dividend income |
8 | 10 | (2 | ) | 4 | 4 | ||||||||||||||
| Interest expense |
(52 | ) | (57 | ) | 5 | (53 | ) | 1 | ||||||||||||
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| Total nonoperating income (expense) |
(18 | ) | 30 | (48 | ) | 69 | (87 | ) | ||||||||||||
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| Income before income taxes |
948 | 905 | 43 | 918 | 30 | |||||||||||||||
| Income tax expense |
219 | 250 | (31 | ) | 212 | 7 | ||||||||||||||
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| Net income |
729 | 655 | 74 | 706 | 23 | |||||||||||||||
| Less: |
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| Net income (loss) attributable to noncontrolling interests |
(1 | ) | 13 | (14 | ) | (23 | ) | 22 | ||||||||||||
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| Net income attributable to BlackRock, Inc. |
$ | 730 | $ | 642 | $ | 88 | $ | 729 | $ | 1 | ||||||||||
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| Weighted-average common shares outstanding (f) |
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| Basic |
169,811,633 | 172,359,141 | (2,547,508 | ) | 170,648,731 | (837,098 | ) | |||||||||||||
| Diluted |
173,371,508 | 175,450,532 | (2,079,024 | ) | 173,873,583 | (502,075 | ) | |||||||||||||
| Earnings per share attributable to BlackRock, Inc. common stockholders (e) (f) |
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| Basic |
$ | 4.30 | $ | 3.72 | $ | 0.58 | $ | 4.27 | $ | 0.03 | ||||||||||
| Diluted |
$ | 4.21 | $ | 3.65 | $ | 0.56 | $ | 4.19 | $ | 0.02 | ||||||||||
| Cash dividends declared and paid per share |
$ | 1.68 | $ | 1.50 | $ | 0.18 | $ | 1.68 | $ | 0.00 | ||||||||||
| Supplemental information: |
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| AUM (end of period) |
$ | 4,096,356 | $ | 3,673,274 | $ | 423,082 | $ | 3,857,007 | $ | 239,349 | ||||||||||
| Shares outstanding (end of period) |
169,412,929 | 172,037,373 | (2,624,444 | ) | 170,285,093 | (872,164 | ) | |||||||||||||
| GAAP: |
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| Operating margin |
39.1 | % | 37.7 | % | 140 bps | 34.2 | % | 490 bps | ||||||||||||
| Effective tax rate |
23.1 | % | 28.1 | % | (500) bps | 22.5 | % | 60 bps | ||||||||||||
| As adjusted: |
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| Operating income (a) |
$ | 978 | $ | 876 | $ | 102 | $ | 982 | ($ | 4 | ) | |||||||||
| Operating margin (a) |
41.2 | % | 40.7 | % | 50 bps | 41.3 | % | (10) bps | ||||||||||||
| Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (b) |
($ | 21 | ) | $ | 13 | ($ | 34 | ) | $ | 12 | ($ | 33 | ) | |||||||
| Net income attributable to BlackRock, Inc. (c) (d) |
$ | 672 | $ | 610 | $ | 62 | $ | 722 | ($ | 50 | ) | |||||||||
| Diluted earnings attributable to BlackRock, Inc. common stockholders per share (c) (d) (e) (f) |
$ | 3.88 | $ | 3.47 | $ | 0.41 | $ | 4.15 | ($ | 0.27 | ) | |||||||||
| Effective tax rate |
29.9 | % | 31.4 | % | (150) bps | 27.3 | % | 260 bps | ||||||||||||
See notes (a) through (f) on pages 13-16 for more information on as adjusted items and the reconciliation to GAAP.
-6-
Condensed Consolidated Statements of Income and Supplemental Information
(Dollar amounts in millions, except per share data), (unaudited)
| Nine Months Ended | ||||||||||||
| September 30, | ||||||||||||
| 2013 | 2012 | Change | ||||||||||
| Revenue |
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| Investment advisory, administration fees and securities lending revenue |
$ | 6,459 | $ | 5,991 | $ | 468 | ||||||
| Investment advisory performance fees |
293 | 224 | 69 | |||||||||
| BlackRock Solutions and advisory |
420 | 382 | 38 | |||||||||
| Distribution fees |
54 | 58 | (4 | ) | ||||||||
| Other revenue |
177 | 143 | 34 | |||||||||
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| Total revenue |
7,403 | 6,798 | 605 | |||||||||
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| Expenses |
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| Employee compensation and benefits |
2,635 | 2,439 | 196 | |||||||||
| Distribution and servicing costs |
266 | 282 | (16 | ) | ||||||||
| Amortization of deferred sales commissions |
38 | 43 | (5 | ) | ||||||||
| Direct fund expenses |
490 | 440 | 50 | |||||||||
| General and administration |
1,130 | 958 | 172 | |||||||||
| Amortization of intangible assets |
120 | 117 | 3 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total expenses |
4,679 | 4,279 | 400 | |||||||||
|
|
|
|
|
|
|
|||||||
| Operating income |
2,724 | 2,519 | 205 | |||||||||
| Nonoperating income (expense) |
||||||||||||
| Net gain (loss) on investments |
235 | 143 | 92 | |||||||||
| Net gain (loss) on consolidated variable interest entities |
(2 | ) | 1 | (3 | ) | |||||||
| Interest and dividend income |
18 | 27 | (9 | ) | ||||||||
| Interest expense |
(159 | ) | (158 | ) | (1 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Total nonoperating income (expense) |
92 | 13 | 79 | |||||||||
|
|
|
|
|
|
|
|||||||
| Income before income taxes |
2,816 | 2,532 | 284 | |||||||||
| Income tax expense |
715 | 742 | (27 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net income |
2,101 | 1,790 | 311 | |||||||||
| Less: |
||||||||||||
| Net income (loss) attributable to noncontrolling interests |
10 | 22 | (12 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net income attributable to BlackRock, Inc. |
$ | 2,091 | $ | 1,768 | $ | 323 | ||||||
|
|
|
|
|
|
|
|||||||
| Weighted-average common shares outstanding (f) |
||||||||||||
| Basic |
170,581,930 | 176,116,975 | (5,535,045 | ) | ||||||||
| Diluted |
174,012,876 | 178,956,699 | (4,943,823 | ) | ||||||||
| Earnings per share attributable to BlackRock, Inc. common stockholders (e) (f) |
||||||||||||
| Basic |
$ | 12.26 | $ | 10.02 | $ | 2.24 | ||||||
| Diluted |
$ | 12.02 | $ | 9.87 | $ | 2.15 | ||||||
| Cash dividends declared and paid per share |
$ | 5.04 | $ | 4.50 | $ | 0.54 | ||||||
| Supplemental information: |
||||||||||||
| AUM (end of period) |
$ | 4,096,356 | $ | 3,673,274 | $ | 423,082 | ||||||
| Shares outstanding (end of period) |
169,412,929 | 172,037,373 | (2,624,444 | ) | ||||||||
| GAAP: |
||||||||||||
| Operating margin |
36.8 | % | 37.1 | % | (30) bps | |||||||
| Effective tax rate |
25.5 | % | 29.6 | % | (410) bps | |||||||
| As adjusted: |
||||||||||||
| Operating income (a) |
$ | 2,881 | $ | 2,533 | $ | 348 | ||||||
| Operating margin (a) |
40.8 | % | 39.5 | % | 130 bps | |||||||
| Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (b) |
($ | 6 | ) | ($ | 15 | ) | $ | 9 | ||||
| Net income attributable to BlackRock, Inc. (c) (d) |
$ | 2,031 | $ | 1,743 | $ | 288 | ||||||
| Diluted earnings attributable to BlackRock, Inc. common stockholders per share (c) (d) (e) (f) |
$ | 11.67 | $ | 9.73 | $ | 1.94 | ||||||
| Effective tax rate |
29.4 | % | 30.8 | % | (140) bps | |||||||
See notes (a) through (f) on pages 13-16 for more information on as adjusted items and the reconciliation to GAAP.
-7-
Assets Under Management
(Dollar amounts in millions), (unaudited)
Current Quarter Component Changes by Client Type and Product
| Net | Market | |||||||||||||||||||||||||||
| June 30, | subscriptions | appreciation | Foreign | September 30, | Q3 2013 | |||||||||||||||||||||||
| 2013 | (redemptions) (1) | Acquisition (2) | (depreciation) | exchange (3) | 2013 | Average AUM (4) | ||||||||||||||||||||||
| Retail: |
||||||||||||||||||||||||||||
| Equity |
$ | 161,441 | $ | 1,166 | $ | — | $ | 10,261 | $ | 1,864 | $ | 174,732 | $ | 168,628 | ||||||||||||||
| Fixed income |
141,541 | 2,256 | — | (970 | ) | 359 | 143,186 | 141,771 | ||||||||||||||||||||
| Multi-asset |
99,105 | 2,899 | — | 3,742 | 271 | 106,017 | 102,546 | |||||||||||||||||||||
| Alternatives |
12,292 | 2,023 | — | (2 | ) | 201 | 14,514 | 13,468 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Retail subtotal |
414,379 | 8,344 | — | 13,031 | 2,695 | 438,449 | 426,413 | |||||||||||||||||||||
| iShares: |
||||||||||||||||||||||||||||
| Equity |
577,268 | 21,069 | 13,021 | 38,444 | 3,726 | 653,528 | 616,293 | |||||||||||||||||||||
| Fixed income |
180,943 | (1,452 | ) | 1,294 | 222 | 1,834 | 182,841 | 181,809 | ||||||||||||||||||||
| Multi-asset |
1,107 | 33 | — | 35 | 4 | 1,179 | 1,145 | |||||||||||||||||||||
| Alternatives |
15,079 | 599 | 1,645 | 1,975 | 63 | 19,361 | 18,328 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| iShares subtotal |
774,397 | 20,249 | 15,960 | 40,676 | 5,627 | 856,909 | 817,575 | |||||||||||||||||||||
| Institutional: |
||||||||||||||||||||||||||||
| Active: |
||||||||||||||||||||||||||||
| Equity |
126,425 | (6,098 | ) | — | 7,585 | 2,952 | 130,864 | 127,270 | ||||||||||||||||||||
| Fixed income |
490,490 | 4,922 | — | 2,393 | 5,438 | 503,243 | 495,136 | |||||||||||||||||||||
| Multi-asset |
180,310 | 2,232 | — | 5,012 | 4,435 | 191,989 | 186,058 | |||||||||||||||||||||
| Alternatives |
64,006 | (1,003 | ) | — | 347 | 624 | 63,974 | 63,802 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Active subtotal |
861,231 | 53 | — | 15,337 | 13,449 | 890,070 | 872,266 | |||||||||||||||||||||
| Index: |
||||||||||||||||||||||||||||
| Equity |
1,107,981 | (4,881 | ) | — | 71,638 | 14,850 | 1,189,588 | 1,150,966 | ||||||||||||||||||||
| Fixed income |
392,385 | 1,765 | — | 913 | 13,226 | 408,289 | 395,663 | |||||||||||||||||||||
| Multi-asset |
8,783 | (301 | ) | — | 175 | 275 | 8,932 | 8,767 | ||||||||||||||||||||
| Alternatives |
5,299 | 56 | — | (4 | ) | 177 | 5,528 | 5,439 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Index subtotal |
1,514,448 | (3,361 | ) | — | 72,722 | 28,528 | 1,612,337 | 1,560,835 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Institutional subtotal |
2,375,679 | (3,308 | ) | — | 88,059 | 41,977 | 2,502,407 | 2,433,101 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Long-term |
3,564,455 | 25,285 | 15,960 | 141,766 | 50,299 | 3,797,765 | $ | 3,677,089 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Cash management |
252,562 | 4,469 | — | 104 | 2,942 | 260,077 | ||||||||||||||||||||||
| Advisory (5) |
39,990 | (2,033 | ) | — | (195 | ) | 752 | 38,514 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 3,857,007 | $ | 27,721 | $ | 15,960 | $ | 141,675 | $ | 53,993 | $ | 4,096,356 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Current Quarter Component Changes by Product
|
||||||||||||||||||||||||||||
| Net | Market | |||||||||||||||||||||||||||
| June 30, | subscriptions | appreciation | Foreign | September 30, | Q3 2013 | |||||||||||||||||||||||
| 2013 | (redemptions) (1) | Acquisition (2) | (depreciation) | exchange (3) | 2013 | Average AUM (4) | ||||||||||||||||||||||
| Equity: |
||||||||||||||||||||||||||||
| Active |
$ | 280,332 | $ | (5,062 | ) | $ | — | $ | 17,409 | $ | 4,805 | $ | 297,484 | $ | 288,072 | |||||||||||||
| iShares |
577,268 | 21,069 | 13,021 | 38,444 | 3,726 | 653,528 | 616,293 | |||||||||||||||||||||
| Fixed income: |
||||||||||||||||||||||||||||
| Active |
631,808 | 7,167 | — | 1,423 | 5,795 | 646,193 | 636,674 | |||||||||||||||||||||
| iShares |
180,943 | (1,452 | ) | 1,294 | 222 | 1,834 | 182,841 | 181,809 | ||||||||||||||||||||
| Multi-asset |
289,305 | 4,863 | — | 8,964 | 4,985 | 308,117 | 298,516 | |||||||||||||||||||||
| Alternatives: |
||||||||||||||||||||||||||||
| Core |
70,227 | 1,388 | — | 390 | 753 | 72,758 | 71,469 | |||||||||||||||||||||
| Currency and commodities (6) |
26,449 | 287 | 1,645 | 1,926 | 312 | 30,619 | 29,568 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Subtotal |
2,056,332 | 28,260 | 15,960 | 68,778 | 22,210 | 2,191,540 | 2,122,401 | |||||||||||||||||||||
| Non-ETF Index: |
||||||||||||||||||||||||||||
| Equity |
1,115,515 | (4,751 | ) | — | 72,075 | 14,861 | 1,197,700 | 1,158,792 | ||||||||||||||||||||
| Fixed income |
392,608 | 1,776 | — | 913 | 13,228 | 408,525 | 395,896 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Subtotal Non-ETF Index |
1,508,123 | (2,975 | ) | — | 72,988 | 28,089 | 1,606,225 | 1,554,688 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Long-term |
$ | 3,564,455 | $ | 25,285 | $ | 15,960 | $ | 141,766 | $ | 50,299 | $ | 3,797,765 | $ | 3,677,089 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (1) | Amounts include distributions representing return of capital and return on investment to investors. |
| (2) | Amounts represent $16.0 billion of AUM acquired in the Credit Suisse ETF acquisition in July 2013. |
| (3) | Foreign exchange reflects the impact of converting non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. |
| (4) | Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months. |
| (5) | Advisory AUM represents long-term portfolio liquidation assignments. |
| (6) | Amounts include commodity iShares. |
NOTE: Certain prior period information has been reclassified to conform to current period presentation.
-8-
Assets Under Management
(Dollar amounts in millions), (unaudited)
Year-to-Date Component Changes by Client Type and Product
| Net | Market | |||||||||||||||||||||||||||
| December 31, | subscriptions | appreciation | Foreign | September 30, | Year-to-Date | |||||||||||||||||||||||
| 2012 | (redemptions) (1) | Acquisition (2) | (depreciation) | exchange (3) | 2013 | Average AUM (4) | ||||||||||||||||||||||
| Retail: |
||||||||||||||||||||||||||||
| Equity |
$ | 164,748 | $ | (1,198 | ) | $ | — | $ | 11,221 | $ | (39 | ) | $ | 174,732 | $ | 168,625 | ||||||||||||
| Fixed income |
138,425 | 10,327 | — | (5,640 | ) | 74 | 143,186 | 142,663 | ||||||||||||||||||||
| Multi-asset |
90,626 | 8,278 | — | 7,253 | (140 | ) | 106,017 | 98,712 | ||||||||||||||||||||
| Alternatives |
9,685 | 4,806 | — | (18 | ) | 41 | 14,514 | 11,661 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Retail subtotal |
403,484 | 22,213 | — | 12,816 | (64 | ) | 438,449 | 421,661 | ||||||||||||||||||||
| iShares: |
||||||||||||||||||||||||||||
| Equity |
534,648 | 50,004 | 13,021 | 55,395 | 460 | 653,528 | 594,630 | |||||||||||||||||||||
| Fixed income |
192,852 | (3,917 | ) | 1,294 | (7,661 | ) | 273 | 182,841 | 187,851 | |||||||||||||||||||
| Multi-asset |
869 | 261 | — | 53 | (4 | ) | 1,179 | 1,070 | ||||||||||||||||||||
| Alternatives |
24,337 | (1,466 | ) | 1,645 | (5,174 | ) | 19 | 19,361 | 20,849 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| iShares subtotal |
752,706 | 44,882 | 15,960 | 42,613 | 748 | 856,909 | 804,400 | |||||||||||||||||||||
| Institutional: |
||||||||||||||||||||||||||||
| Active: |
||||||||||||||||||||||||||||
| Equity |
129,024 | (14,680 | ) | — | 18,255 | (1,735 | ) | 130,864 | 129,383 | |||||||||||||||||||
| Fixed income |
518,102 | (4,121 | ) | — | (7,915 | ) | (2,823 | ) | 503,243 | 504,288 | ||||||||||||||||||
| Multi-asset |
166,708 | 16,840 | — | 7,575 | 866 | 191,989 | 179,406 | |||||||||||||||||||||
| Alternatives |
70,861 | (6,968 | ) | — | 1,014 | (933 | ) | 63,974 | 66,499 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Active subtotal |
884,695 | (8,929 | ) | — | 18,929 | (4,625 | ) | 890,070 | 879,576 | |||||||||||||||||||
| Index: |
||||||||||||||||||||||||||||
| Equity |
1,017,081 | 10,455 | — | 170,209 | (8,157 | ) | 1,189,588 | 1,114,944 | ||||||||||||||||||||
| Fixed income |
409,943 | 7,722 | — | (5,126 | ) | (4,250 | ) | 408,289 | 403,573 | |||||||||||||||||||
| Multi-asset |
9,545 | (436 | ) | — | 283 | (460 | ) | 8,932 | 9,241 | |||||||||||||||||||
| Alternatives |
4,912 | 731 | — | (132 | ) | 17 | 5,528 | 5,409 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Index subtotal |
1,441,481 | 18,472 | — | 165,234 | (12,850 | ) | 1,612,337 | 1,533,167 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Institutional subtotal |
2,326,176 | 9,543 | — | 184,163 | (17,475 | ) | 2,502,407 | 2,412,743 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Long-term |
3,482,366 | 76,638 | 15,960 | 239,592 | (16,791 | ) | 3,797,765 | $ | 3,638,804 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Cash management |
263,743 | (4,195 | ) | — | 236 | 293 | 260,077 | |||||||||||||||||||||
| Advisory (5) |
45,479 | (6,036 | ) | — | (370 | ) | (559 | ) | 38,514 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 3,791,588 | $ | 66,407 | $ | 15,960 | $ | 239,458 | $ | (17,057 | ) | $ | 4,096,356 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Year-to-Date Component Changes by Product
|
||||||||||||||||||||||||||||
| Net | Market | |||||||||||||||||||||||||||
| December 31, | subscriptions | appreciation | Foreign | September 30, | Year-to-Date | |||||||||||||||||||||||
| 2012 | (redemptions) (1) | Acquisition (2) | (depreciation) | exchange (3) | 2013 | Average AUM (4) | ||||||||||||||||||||||
| Equity: |
||||||||||||||||||||||||||||
| Active |
$ | 287,215 | $ | (16,269 | ) | $ | — | $ | 28,279 | $ | (1,741 | ) | $ | 297,484 | $ | 290,432 | ||||||||||||
| iShares |
534,648 | 50,004 | 13,021 | 55,395 | 460 | 653,528 | 594,630 | |||||||||||||||||||||
| Fixed income: |
||||||||||||||||||||||||||||
| Active |
656,331 | 6,154 | — | (13,549 | ) | (2,743 | ) | 646,193 | 646,725 | |||||||||||||||||||
| iShares |
192,852 | (3,917 | ) | 1,294 | (7,661 | ) | 273 | 182,841 | 187,851 | |||||||||||||||||||
| Multi-asset |
267,748 | 24,943 | — | 15,164 | 262 | 308,117 | 288,429 | |||||||||||||||||||||
| Alternatives: |
||||||||||||||||||||||||||||
| Core |
68,367 | 3,305 | — | 1,243 | (157 | ) | 72,758 | 70,385 | ||||||||||||||||||||
| Currency and commodities (6) |
41,428 | (6,202 | ) | 1,645 | (5,553 | ) | (699 | ) | 30,619 | 34,033 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Subtotal |
2,048,589 | 58,018 | 15,960 | 73,318 | (4,345 | ) | 2,191,540 | 2,112,485 | ||||||||||||||||||||
| Non-ETF Index: |
||||||||||||||||||||||||||||
| Equity |
1,023,638 | 10,846 | — | 171,406 | (8,190 | ) | 1,197,700 | 1,122,520 | ||||||||||||||||||||
| Fixed income |
410,139 | 7,774 | — | (5,132 | ) | (4,256 | ) | 408,525 | 403,799 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Subtotal Non-ETF Index |
1,433,777 | 18,620 | — | 166,274 | (12,446 | ) | 1,606,225 | 1,526,319 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Long-term |
$ | 3,482,366 | $ | 76,638 | $ | 15,960 | $ | 239,592 | $ | (16,791 | ) | $ | 3,797,765 | $ | 3,638,804 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (1) | Amounts include distributions representing return of capital and return on investment to investors. |
| (2) | Amounts represent $16.0 billion of AUM acquired in the Credit Suisse ETF acquisition in July 2013. |
| (3) | Foreign exchange reflects the impact of converting non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. |
| (4) | Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing ten months. |
| (5) | Advisory AUM represents long-term portfolio liquidation assignments. |
| (6) | Amounts include commodity iShares. |
NOTE: Certain prior period information has been reclassified to conform to current period presentation.
-9-
Assets Under Management
(Dollar amounts in millions), (unaudited)
Year-over-Year Component Changes by Client Type and Product
| Net | Market | |||||||||||||||||||||||||||
| September 30, | subscriptions | appreciation | Foreign | September 30, | Thirteen Month | |||||||||||||||||||||||
| 2012 | (redemptions) (1) | Acquisition (2) | (depreciation) | exchange (3) | 2013 | Average AUM (4) | ||||||||||||||||||||||
| Retail: |
||||||||||||||||||||||||||||
| Equity |
$ | 164,759 | $ | (1,565 | ) | $ | — | $ | 11,291 | $ | 247 | $ | 174,732 | $ | 167,598 | |||||||||||||
| Fixed income |
133,737 | 14,629 | — | (5,318 | ) | 138 | 143,186 | 141,100 | ||||||||||||||||||||
| Multi-asset |
90,034 | 8,177 | — | 7,936 | (130 | ) | 106,017 | 96,620 | ||||||||||||||||||||
| Alternatives |
9,424 | 5,081 | — | (55 | ) | 64 | 14,514 | 11,124 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Retail subtotal |
397,954 | 26,322 | — | 13,854 | 319 | 438,449 | 416,442 | |||||||||||||||||||||
| iShares: |
||||||||||||||||||||||||||||
| Equity |
491,534 | 80,079 | 13,021 | 67,727 | 1,167 | 653,528 | 572,164 | |||||||||||||||||||||
| Fixed income |
187,771 | 544 | 1,294 | (7,510 | ) | 742 | 182,841 | 188,580 | ||||||||||||||||||||
| Multi-asset |
817 | 310 | — | 58 | (6 | ) | 1,179 | 1,015 | ||||||||||||||||||||
| Alternatives |
25,643 | (337 | ) | 1,645 | (7,618 | ) | 28 | 19,361 | 21,910 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| iShares subtotal |
705,765 | 80,596 | 15,960 | 52,657 | 1,931 | 856,909 | 783,669 | |||||||||||||||||||||
| Institutional: |
||||||||||||||||||||||||||||
| Active: |
||||||||||||||||||||||||||||
| Equity |
130,013 | (19,133 | ) | — | 22,403 | (2,419 | ) | 130,864 | 129,081 | |||||||||||||||||||
| Fixed income |
519,260 | (8,815 | ) | — | (2,643 | ) | (4,559 | ) | 503,243 | 508,399 | ||||||||||||||||||
| Multi-asset |
158,190 | 20,055 | — | 11,754 | 1,990 | 191,989 | 174,724 | |||||||||||||||||||||
| Alternatives |
73,263 | (9,091 | ) | — | 1,458 | (1,656 | ) | 63,974 | 67,878 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Active subtotal |
880,726 | (16,984 | ) | — | 32,972 | (6,644 | ) | 890,070 | 880,082 | |||||||||||||||||||
| Index: |
||||||||||||||||||||||||||||
| Equity |
987,224 | 16,392 | — | 198,328 | (12,356 | ) | 1,189,588 | 1,085,325 | ||||||||||||||||||||
| Fixed income |
393,043 | 16,053 | — | 3,702 | (4,509 | ) | 408,289 | 402,766 | ||||||||||||||||||||
| Multi-asset |
8,566 | 487 | — | 706 | (827 | ) | 8,932 | 9,256 | ||||||||||||||||||||
| Alternatives |
5,095 | 755 | — | (351 | ) | 29 | 5,528 | 5,321 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Index subtotal |
1,393,928 | 33,687 | — | 202,385 | (17,663 | ) | 1,612,337 | 1,502,668 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Institutional subtotal |
2,274,654 | 16,703 | — | 235,357 | (24,307 | ) | 2,502,407 | 2,382,750 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Long-term |
3,378,373 | 123,621 | 15,960 | 301,868 | (22,057 | ) | 3,797,765 | $ | 3,582,861 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Cash management |
248,331 | 10,221 | — | 519 | 1,006 | 260,077 | ||||||||||||||||||||||
| Advisory (5) |
46,570 | (6,681 | ) | — | (618 | ) | (757 | ) | 38,514 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 3,673,274 | $ | 127,161 | $ | 15,960 | $ | 301,769 | $ | (21,808 | ) | $ | 4,096,356 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Year-over-Year Component Changes by Product
|
||||||||||||||||||||||||||||
| Net | Market | |||||||||||||||||||||||||||
| September 30, | subscriptions | appreciation | Foreign | September 30, | Thirteen Month | |||||||||||||||||||||||
| 2012 | (redemptions) (1) | Acquisition (2) | (depreciation) | exchange (3) | 2013 | Average AUM (4) | ||||||||||||||||||||||
| Equity: |
||||||||||||||||||||||||||||
| Active |
$ | 288,799 | $ | (21,712 | ) | $ | — | $ | 32,533 | $ | (2,136 | ) | $ | 297,484 | $ | 289,403 | ||||||||||||
| iShares |
491,534 | 80,079 | 13,021 | 67,727 | 1,167 | 653,528 | 572,164 | |||||||||||||||||||||
| Fixed income: |
||||||||||||||||||||||||||||
| Active |
652,780 | 5,780 | — | (7,952 | ) | (4,415 | ) | 646,193 | 649,276 | |||||||||||||||||||
| iShares |
187,771 | 544 | 1,294 | (7,510 | ) | 742 | 182,841 | 188,580 | ||||||||||||||||||||
| Multi-asset |
257,607 | 29,029 | — | 20,454 | 1,027 | 308,117 | 281,615 | |||||||||||||||||||||
| Alternatives: |
||||||||||||||||||||||||||||
| Core |
68,931 | 2,335 | — | 1,714 | (222 | ) | 72,758 | 70,002 | ||||||||||||||||||||
| Currency and commodities (6) |
44,494 | (5,927 | ) | 1,645 | (8,280 | ) | (1,313 | ) | 30,619 | 36,231 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Subtotal |
1,991,916 | 90,128 | 15,960 | 98,686 | (5,150 | ) | 2,191,540 | 2,087,271 | ||||||||||||||||||||
| Non-ETF Index: |
||||||||||||||||||||||||||||
| Equity |
993,197 | 17,406 | — | 199,489 | (12,392 | ) | 1,197,700 | 1,092,601 | ||||||||||||||||||||
| Fixed income |
393,260 | 16,087 | — | 3,693 | (4,515 | ) | 408,525 | 402,989 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Subtotal Non-ETF Index |
1,386,457 | 33,493 | — | 203,182 | (16,907 | ) | 1,606,225 | 1,495,590 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Long-term |
$ | 3,378,373 | $ | 123,621 | $ | 15,960 | $ | 301,868 | $ | (22,057 | ) | $ | 3,797,765 | $ | 3,582,861 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (1) | Amounts include distributions representing return of capital and return on investment to investors. |
| (2) | Amounts represent $16.0 billion of AUM acquired in the Credit Suisse ETF acquisition in July 2013. |
| (3) | Foreign exchange reflects the impact of converting non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. |
| (4) | Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months. |
| (5) | Advisory AUM represents long-term portfolio liquidation assignments. |
| (6) | Amounts include commodity iShares. |
NOTE: Certain prior period information has been reclassified to conform to current period presentation.
-10-
Summary of Revenues
(Dollar amounts in millions), (unaudited)
| Three Months | ||||||||||||||||||||||||||||||||
| Three Months Ended | Ended | Nine Months Ended | ||||||||||||||||||||||||||||||
| September 30, | June 30, | September 30, | ||||||||||||||||||||||||||||||
| 2013 | 2012 | $ Change | 2013 | $ Change | 2013 | 2012 | $ Change | |||||||||||||||||||||||||
| Investment advisory, administration fees and securities lending revenue: |
||||||||||||||||||||||||||||||||
| Equity: |
||||||||||||||||||||||||||||||||
| Active |
$ | 425 | $ | 431 | ($ | 6 | ) | $ | 432 | ($ | 7 | ) | $ | 1,290 | $ | 1,313 | ($ | 23 | ) | |||||||||||||
| iShares |
589 | 486 | 103 | 584 | 5 | 1,744 | 1,426 | 318 | ||||||||||||||||||||||||
| Fixed income: |
||||||||||||||||||||||||||||||||
| Active |
314 | 301 | 13 | 322 | (8 | ) | 948 | 865 | 83 | |||||||||||||||||||||||
| iShares |
113 | 116 | (3 | ) | 120 | (7 | ) | 349 | 321 | 28 | ||||||||||||||||||||||
| Multi-asset |
262 | 239 | 23 | 253 | 9 | 763 | 718 | 45 | ||||||||||||||||||||||||
| Alternatives: |
||||||||||||||||||||||||||||||||
| Core |
142 | 130 | 12 | 136 | 6 | 414 | 395 | 19 | ||||||||||||||||||||||||
| Currency and commodities |
27 | 31 | (4 | ) | 25 | 2 | 82 | 97 | (15 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Subtotal |
1,872 | 1,734 | 138 | 1,872 | — | 5,590 | 5,135 | 455 | ||||||||||||||||||||||||
| Non-ETF Index: |
||||||||||||||||||||||||||||||||
| Equity |
145 | 139 | 6 | 161 | (16 | ) | 446 | 418 | 28 | |||||||||||||||||||||||
| Fixed income |
61 | 61 | — | 61 | — | 179 | 171 | 8 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Subtotal Non-ETF Index |
206 | 200 | 6 | 222 | (16 | ) | 625 | 589 | 36 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Long-term |
2,078 | 1,934 | 144 | 2,094 | (16 | ) | 6,215 | 5,724 | 491 | |||||||||||||||||||||||
| Cash management |
75 | 90 | (15 | ) | 83 | (8 | ) | 244 | 267 | (23 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total base fees |
2,153 | 2,024 | 129 | 2,177 | (24 | ) | 6,459 | 5,991 | 468 | |||||||||||||||||||||||
| Investment advisory performance fees: |
||||||||||||||||||||||||||||||||
| Equity |
11 | 17 | (6 | ) | 17 | (6 | ) | 45 | 39 | 6 | ||||||||||||||||||||||
| Fixed income |
2 | 13 | (11 | ) | 9 | (7 | ) | 12 | 29 | (17 | ) | |||||||||||||||||||||
| Multi-asset |
4 | 2 | 2 | 3 | 1 | 14 | 6 | 8 | ||||||||||||||||||||||||
| Alternatives |
79 | 71 | 8 | 60 | 19 | 222 | 150 | 72 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
96 | 103 | (7 | ) | 89 | 7 | 293 | 224 | 69 | |||||||||||||||||||||||
| BlackRock Solutions and advisory |
156 | 128 | 28 | 138 | 18 | 420 | 382 | 38 | ||||||||||||||||||||||||
| Distribution fees |
19 | 19 | — | 18 | 1 | 54 | 58 | (4 | ) | |||||||||||||||||||||||
| Other revenue |
48 | 46 | 2 | 60 | (12 | ) | 177 | 143 | 34 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total revenue |
$ | 2,472 | $ | 2,320 | $ | 152 | $ | 2,482 | ($ | 10 | ) | $ | 7,403 | $ | 6,798 | $ | 605 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
NOTE: Certain prior period information has been reclassified to conform to current period presentation.
-11-
Summary of Nonoperating Income (Expense)
(Dollar amounts in millions), (unaudited)
| Three Months | ||||||||||||||||||||||||||||||||
| Three Months Ended | Ended | Nine Months Ended | ||||||||||||||||||||||||||||||
| September 30, | June 30, | September 30, | ||||||||||||||||||||||||||||||
| 2013 | 2012 | $ Change | 2013 | $ Change | 2013 | 2012 | $ Change | |||||||||||||||||||||||||
| Nonoperating income (expense), GAAP basis |
($ | 18 | ) | $ | 30 | ($ | 48 | ) | $ | 69 | ($ | 87 | ) | $ | 92 | $ | 13 | $ | 79 | |||||||||||||
| Less: Net income (loss) attributable to NCI |
(1 | ) | 13 | (14 | ) | (23 | ) | 22 | 10 | 22 | (12 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Nonoperating income (expense)(1) |
($ | 17 | ) | $ | 17 | ($ | 34 | ) | $ | 92 | ($ | 109 | ) | $ | 82 | ($ | 9 | ) | $ | 91 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Estimated | ||||||||||||||||||||||||||||||||||
| economic | Three Months | |||||||||||||||||||||||||||||||||
| investments at | Three Months Ended | Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | June 30, | September 30, | |||||||||||||||||||||||||||||||
| 2013(2) | 2013 | 2012 | $ Change | 2013 | $ Change | 2013 | 2012 | $ Change | ||||||||||||||||||||||||||
| Net gain (loss) on |
||||||||||||||||||||||||||||||||||
| Private equity |
20-25% | $ | 12 | $ | 20 | ($ | 8 | ) | $ | 4 | $ | 8 | $ | 35 | $ | 37 | ($ | 2 | ) | |||||||||||||||
| Real estate |
5-10% | 7 | 5 | 2 | 7 | — | 17 | 9 | 8 | |||||||||||||||||||||||||
| Distressed credit/mortgage funds |
10-15% | 5 | 26 | (21 | ) | 4 | 1 | 28 | 54 | (26 | ) | |||||||||||||||||||||||
| Hedge funds/funds of hedge funds |
10-15% | (3 | ) | 7 | (10 | ) | 5 | (8 | ) | 5 | 17 | (12 | ) | |||||||||||||||||||||
| Other investments(3) |
40-45% | 2 | 2 | — | 2 | — | 11 | (1 | ) | 12 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Subtotal |
23 | 60 | (37 | ) | 22 | 1 | 96 | 116 | (20 | ) | ||||||||||||||||||||||||
| Gain related to PennyMac IPO |
— | — | — | 39 | (39 | ) | 39 | — | 39 | |||||||||||||||||||||||||
| Gain related to the Charitable Contribution |
— | — | — | 80 | (80 | ) | 80 | — | 80 | |||||||||||||||||||||||||
| Investments related to deferred compensation plans |
4 | 4 | — | — | 4 | 8 | 6 | 2 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total net gain (loss) on investments(1) |
27 | 64 | (37 | ) | 141 | (114 | ) | 223 | 122 | 101 | ||||||||||||||||||||||||
| Interest and dividend income |
8 | 10 | (2 | ) | 4 | 4 | 18 | 27 | (9 | ) | ||||||||||||||||||||||||
| Interest expense |
(52 | ) | (57 | ) | 5 | (53 | ) | 1 | (159 | ) | (158 | ) | (1 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net interest expense |
(44 | ) | (47 | ) | 3 | (49 | ) | 5 | (141 | ) | (131 | ) | (10 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total nonoperating income (expense)(1) |
(17 | ) | 17 | (34 | ) | 92 | (109 | ) | 82 | (9 | ) | 91 | ||||||||||||||||||||||
| Gain related to the Charitable Contribution |
— | — | — | (80 | ) | 80 | (80 | ) | — | (80 | ) | |||||||||||||||||||||||
| Compensation expense related to (appreciation) depreciation on deferred compensation plans |
(4 | ) | (4 | ) | — | — | (4 | ) | (8 | ) | (6 | ) | (2 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Nonoperating income (expense), as adjusted(1) |
($ | 21 | ) | $ | 13 | ($ | 34 | ) | $ | 12 | ($ | 33 | ) | ($ | 6 | ) | ($ | 15 | ) | $ | 9 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| (1) | Net of net income (loss) attributable to noncontrolling interests (“NCI”). |
| (2) | Percentages represent estimated percentages of BlackRock’s corporate economic investment portfolio at September 30, 2013. Economic investment amounts at June 30, 2013 for private equity, real estate, distressed credit/mortgage funds, hedge funds/funds of hedge funds and other investments were $304 million, $123 million, $194 million, $170 million and $493 million, respectively. See the 2013 second quarter Form 10-Q for more information. |
| (3) | Amounts include net gains (losses) related to equity, fixed income and commodity investments, and BlackRock’s seed capital hedging program. |
Economic Tangible Assets
(Dollar amounts in billions), (unaudited)
The Company presents economic tangible assets as additional information to enable investors to eliminate gross presentation of certain assets that have equal and offsetting liabilities or non-controlling interests that ultimately do not have an impact on stockholders’ equity (excluding appropriated retained earnings related to consolidated collateralized loan obligations) or cash flows. In addition, goodwill and intangible assets are excluded from economic tangible assets.
| September 30, | December 31, | |||||||
| 2013 (Est.) | 2012 | |||||||
| Total balance sheet assets |
$ | 213 | $ | 200 | ||||
| Separate account assets and separate account collateral held under securities lending agreements |
(169 | ) | (158 | ) | ||||
| Consolidated VIEs/sponsored investment funds |
(2 | ) | (2 | ) | ||||
| Goodwill and intangible assets, net |
(30 | ) | (30 | ) | ||||
|
|
|
|
|
|||||
| Economic tangible assets |
$ | 12 | $ | 10 | ||||
|
|
|
|
|
|||||
Economic tangible assets include cash, receivables, seed and co-investments, regulatory investments and other assets.
-12-
Notes to Condensed Consolidated Statements of Income and Supplemental Information (unaudited)
BlackRock reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”); however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP basis financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and, for the reasons described below, considers them to be effective indicators, for both management and investors, of BlackRock’s financial performance over time. BlackRock’s management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Computations for all periods are derived from the condensed consolidated statements of income as follows:
(a) Operating income, as adjusted, and operating margin, as adjusted:
Operating income, as adjusted, equals operating income, GAAP basis, excluding certain items management deems nonrecurring or transactions that ultimately will not impact BlackRock’s book value, as indicated in the table below. Management believes operating income, as adjusted, and operating margin, as adjusted, are effective indicators of BlackRock’s financial performance over time and, therefore, provide useful disclosure to investors.
Operating income, as adjusted and operating margin, as adjusted
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | ||||||||||||||||||
| (Dollar amounts in millions) | 2013 | 2012 | 2013 | 2013 | 2012 | |||||||||||||||
| Operating income, GAAP basis |
$ | 966 | $ | 875 | $ | 849 | $ | 2,724 | $ | 2,519 | ||||||||||
| Non-GAAP expense adjustments: |
||||||||||||||||||||
| PNC LTIP funding obligation |
8 | 5 | 9 | 25 | 16 | |||||||||||||||
| Charitable Contribution |
— | — | 124 | 124 | — | |||||||||||||||
| U.K. lease exit costs |
— | (8 | ) | — | — | (8 | ) | |||||||||||||
| Compensation expense related to appreciation (depreciation) on deferred compensation plans |
4 | 4 | — | 8 | 6 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income, as adjusted |
978 | 876 | 982 | 2,881 | 2,533 | |||||||||||||||
| Closed-end fund launch costs |
— | 22 | — | 16 | 22 | |||||||||||||||
| Closed-end fund launch commissions |
— | 3 | — | 2 | 3 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income used for operating margin measurement |
$ | 978 | $ | 901 | $ | 982 | $ | 2,899 | $ | 2,558 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Revenue, GAAP basis |
$ | 2,472 | $ | 2,320 | $ | 2,482 | $ | 7,403 | $ | 6,798 | ||||||||||
| Non-GAAP adjustments: |
||||||||||||||||||||
| Distribution and servicing costs |
(85 | ) | (94 | ) | (90 | ) | (266 | ) | (282 | ) | ||||||||||
| Amortization of deferred sales commissions |
(14 | ) | (13 | ) | (12 | ) | (38 | ) | (43 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Revenue used for operating margin measurement |
$ | 2,373 | $ | 2,213 | $ | 2,380 | $ | 7,099 | $ | 6,473 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating margin, GAAP basis |
39.1 | % | 37.7 | % | 34.2 | % | 36.8 | % | 37.1 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating margin, as adjusted |
41.2 | % | 40.7 | % | 41.3 | % | 40.8 | % | 39.5 | % | ||||||||||
|
|
|
|
|
|
|
|
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Notes to Condensed Consolidated Statements of Income and Supplemental Information (unaudited)
(a) (continued)
| • | Operating income, as adjusted, includes non-GAAP expense adjustments. In third quarter 2012, non-GAAP adjustments included U.K. lease exit costs incurred in third quarter 2012 that represent an adjustment related to the costs initially recorded in third quarter 2011 related to costs to exit two locations in London. During the second quarter 2013 and nine months ended September 30, 2013, the $124 million expense related to the Charitable Contribution has been excluded from operating income, as adjusted, due to its nonrecurring nature and because the noncash, nonoperating pre-tax gain of $80 million related to the contributed PennyMac investment is reported in nonoperating income (expense). The portion of compensation expense associated with certain long-term incentive plans (“LTIP”) funded, or to be funded, through share distributions to participants of BlackRock stock held by PNC has been excluded because it ultimately does not impact BlackRock’s book value. Compensation expense associated with appreciation (depreciation) on investments related to certain BlackRock deferred compensation plans has been excluded as returns on investments set aside for these plans, which substantially offset this expense, are reported in nonoperating income (expense). |
Management believes operating income exclusive of these items is a useful measure in evaluating BlackRock’s operating performance and helps enhance the comparability of this information for the reporting periods presented.
| • | Operating margin, as adjusted, allows BlackRock to compare performance from period to period by adjusting for items that may not recur, recur infrequently or may have an economic offset in nonoperating income (expense). BlackRock also uses operating margin, as adjusted, to monitor corporate performance and efficiency and as a benchmark to compare its performance with other companies. Management uses both GAAP and non-GAAP financial measures in evaluating BlackRock’s financial performance. The non-GAAP measure by itself may pose limitations because it does not include all of BlackRock’s revenues and expenses. |
Operating income used for measuring operating margin, as adjusted, is equal to operating income, as adjusted, excluding the impact of closed-end fund launch costs and related commissions. Management believes the exclusion of such costs and related commissions is useful because these costs can fluctuate considerably and revenues associated with the expenditure of these costs will not fully impact BlackRock’s results until future periods.
Revenue used for operating margin, as adjusted, excludes distribution and servicing costs paid to related parties and other third parties. Management believes the exclusion of such costs is useful because it creates consistency in the treatment for certain contracts for similar services, which due to the terms of the contracts, are accounted for under GAAP on a net basis within investment advisory, administration fees and securities lending revenue. Amortization of deferred sales commissions is excluded from revenue used for operating margin measurement, as adjusted, because such costs, over time, substantially offset distribution fee revenue the Company earns. For each of these items, BlackRock excludes from revenue used for operating margin, as adjusted, the costs related to each of these items as a proxy for such offsetting revenues.
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Notes to Condensed Consolidated Statements of Income and Supplemental Information (unaudited)
(b) Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests, as adjusted, is presented below. The compensation expense offset is recorded in operating income. This compensation expense has been included in nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, to offset returns on investments set aside for these plans, which are reported in nonoperating income (expense), GAAP basis.
Management believes nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, provides comparability of information among reporting periods and is an effective measure for reviewing BlackRock’s nonoperating contribution to results. As compensation expense associated with (appreciation) depreciation on investments related to certain deferred compensation plans, which is included in operating income, substantially offsets the gain (loss) on the investments set aside for these plans, management believes nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, provides a useful measure, for both management and investors, of BlackRock’s nonoperating results that impact book value. During the second quarter and nine months ended September 30, 2013, the noncash, nonoperating pre-tax gain of $80 million related to the contributed PennyMac investment has been excluded from nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted due to its nonrecurring nature and because the more than offsetting associated Charitable Contribution expense of $124 million is reported in operating income.
Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | ||||||||||||||||||
| 2013 | 2012 | 2013 | 2013 | 2012 | ||||||||||||||||
| (Dollar amounts in millions) | ||||||||||||||||||||
| Nonoperating income (expense), GAAP basis |
($ | 18 | ) | $ | 30 | $ | 69 | $ | 92 | $ | 13 | |||||||||
| Less: Net income (loss) attributable to NCI |
(1 | ) | 13 | (23 | ) | 10 | 22 | |||||||||||||
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| Nonoperating income (expense), net of NCI |
(17 | ) | 17 | 92 | 82 | (9 | ) | |||||||||||||
| Gain related to Charitable Contribution |
— | — | (80 | ) | (80 | ) | — | |||||||||||||
| Compensation expense related to (appreciation) depreciation on deferred compensation plans |
(4 | ) | (4 | ) | — | (8 | ) | (6 | ) | |||||||||||
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| Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted |
($ | 21 | ) | $ | 13 | $ | 12 | ($ | 6 | ) | ($ | 15 | ) | |||||||
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(c) Net income attributable to BlackRock, Inc., as adjusted: Management believes net income attributable to BlackRock, Inc., as adjusted, and diluted earnings per common share, as adjusted, are useful measures of BlackRock’s profitability and financial performance. Net income attributable to BlackRock, Inc., as adjusted, equals net income attributable to BlackRock, Inc., GAAP basis, adjusted for significant nonrecurring items, charges that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.
See note (a) Operating income, as adjusted, and operating margin, as adjusted, for information on the PNC LTIP funding obligation, Charitable Contribution and the U.K. lease exit costs.
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Notes to Condensed Consolidated Statements of Income and Supplemental Information (unaudited)
The quarter ended June 30, 2013 and nine months ended September 30, 2013 included a tax benefit of approximately $57 million recognized in connection with the Charitable Contribution. The tax benefit has been excluded from net income attributable to BlackRock, Inc., as adjusted due to the nonrecurring nature of the Charitable Contribution. The three and nine months ended September 30, 2013 and 2012 reflected adjustments related to the revaluation of certain deferred income tax liabilities, including tax legislation enacted in the United Kingdom and domestic state tax law changes. The resulting decrease in income taxes has been excluded from net income attributable to BlackRock, Inc., as adjusted, as these items will not have a cash flow impact and to ensure comparability among periods presented.
Net income attributable to BlackRock, Inc., as adjusted
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| (Amounts in millions, except per share data) | September 30, | June 30, | September 30, | |||||||||||||||||
| 2013 | 2012 | 2013 | 2013 | 2012 | ||||||||||||||||
| Net income attributable to BlackRock, Inc., GAAP basis |
$ | 730 | $ | 642 | $ | 729 | $ | 2,091 | $ | 1,768 | ||||||||||
| Non-GAAP adjustments, net of tax:(d) |
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| PNC LTIP funding obligation |
6 | 3 | 6 | 17 | 10 | |||||||||||||||
| Amount related to the Charitable Contribution |
— | — | (13 | ) | (13 | ) | — | |||||||||||||
| U.K. lease exit costs |
— | (5 | ) | — | — | (5 | ) | |||||||||||||
| Income tax changes |
(64 | ) | (30 | ) | — | (64 | ) | (30 | ) | |||||||||||
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| Net income attributable to BlackRock, Inc., as adjusted |
$ | 672 | $ | 610 | $ | 722 | $ | 2,031 | $ | 1,743 | ||||||||||
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| Allocation of net income, as adjusted, to common shares(e) |
$ | 672 | $ | 609 | $ | 722 | $ | 2,031 | $ | 1,741 | ||||||||||
| Diluted weighted-average common shares outstanding(f) |
173.4 | 175.5 | 173.9 | 174.0 | 179.0 | |||||||||||||||
| Diluted earnings per common share, GAAP basis(f) |
$ | 4.21 | $ | 3.65 | $ | 4.19 | $ | 12.02 | $ | 9.87 | ||||||||||
| Diluted earnings per common share, as adjusted(f) |
$ | 3.88 | $ | 3.47 | $ | 4.15 | $ | 11.67 | $ | 9.73 | ||||||||||
(d) For each period presented, the non-GAAP adjustments, including the PNC LTIP funding obligation and U.K. lease exit costs were tax effected at the respective blended rates applicable to the adjustments. The quarter ended June 30, 2013 and nine months ended September 30, 2013 also included a tax benefit of approximately $57 million related to the Charitable Contribution.
(e) For the three and nine months ended September 30, 2012, amounts exclude net income attributable to participating securities.
(f) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations.
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Forward-looking Statements
This earnings release, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” and similar expressions.
BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.
In addition to risk factors previously disclosed in BlackRock’s Securities and Exchange Commission (“SEC”) reports and those identified elsewhere in this earnings release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management; (3) the relative and absolute investment performance of BlackRock’s investment products; (4) the impact of increased competition; (5) the impact of future acquisitions or divestitures; (6) the unfavorable resolution of legal proceedings; (7) the extent and timing of any share repurchases; (8) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (9) the impact of legislative and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or The PNC Financial Services Group, Inc. (“PNC”); (10) terrorist activities, international hostilities and natural disasters, which may adversely affect the general economy, domestic and local financial and capital markets, specific industries or BlackRock; (11) the ability to attract and retain highly talented professionals; (12) fluctuations in the carrying value of BlackRock’s economic investments; (13) the impact of changes to tax legislation, including income, payroll and transaction taxes, and taxation on products or transactions, which could affect the value proposition to clients and, generally, the tax position of the Company; (14) BlackRock’s success in maintaining the distribution of its products; (15) the impact of BlackRock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations; and (16) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions.
BlackRock’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and BlackRock’s subsequent filings with the SEC, accessible on the SEC’s website at www.sec.gov and on BlackRock’s website at www.blackrock.com, discuss these factors in more detail and identify additional factors that can affect forward-looking statements. The information contained on the Company’s website is not a part of this earnings release.
Performance Notes
Past performance is not indicative of future results. The performance information shown is based on preliminarily available data. The performance information for actively managed accounts shown reflects U.S. open-end and closed-end mutual funds and similar EMEA-based products with respect to peer median comparisons, and actively managed institutional and high net worth separate accounts and funds located globally with respect to benchmark comparisons, as determined using objectively based internal parameters, using the most current verified information available as of September 30, 2013 (August 31, 2013 for high net worth accounts).
Accounts terminated prior to September 30, 2013 are not included. In addition, accounts that have not been verified as of October 11, 2013 have not been included. If such terminated and other accounts had been included, the performance information may have substantially differed from that shown. The performance information does not include funds or accounts that are not measured against a benchmark, any benchmark-based alternatives product, private equity products, CDOs, or accounts managed by BlackRock’s Financial Markets Advisory Group. Comparisons are based on gross-of-fee performance for U.S. retail, institutional and high net worth separate accounts and EMEA institutional separate accounts and net-of-fee performance for EMEA based retail products. The performance tracking information for institutional index accounts is based on gross-of-fee performance as of September 30, 2013, and includes all institutional accounts and all iShares funds globally using an index strategy. AUM information is based on AUM for each account or fund in the asset class shown without adjustment for overlapping management of the same account or fund as of September 30, 2013.
Source of performance information and peer medians is BlackRock, Inc. and is based in part on data from Lipper Inc. for U.S. funds and Morningstar, Inc. for non-U.S. funds. Fund performance reflects the reinvestment of dividends and distributions, but does not reflect sales charges.
-17-