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EX-32.1 - SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER - BlackRock Inc.blk-ex321_6.htm
EX-31.2 - SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER - BlackRock Inc.blk-ex312_9.htm
EX-31.1 - SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - BlackRock Inc.blk-ex311_8.htm
EX-12.1 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - BlackRock Inc.blk-ex121_7.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2016

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 001-33099

 

BlackRock, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

32-0174431

(State or Other Jurisdiction of

Incorporation or Organization)

 

    (I.R.S. Employer Identification No.)

55 East 52nd Street, New York, NY 10055

(Address of Principal Executive Offices)

(Zip Code)

(212) 810-5300

(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

 

Yes

 

X

 

No

 

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or, a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer           X      

Accelerated filer                      

Non-accelerated filer               

Smaller reporting company                  

(Do not check if a smaller

reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

 

Yes

 

 

 

No

 

X

 

As of October 31, 2016, there were 162,069,345 shares of the registrant’s common stock outstanding.

 

 


BlackRock, Inc.

Index to Form 10-Q

PART I

FINANCIAL INFORMATION

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

68

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

69

 

 

 

Item 6.

Exhibits

70

 

 

 

i


PART I – FINANCIAL INFORMATION

Item 1.     Financial Statements

BlackRock, Inc.

Condensed Consolidated Statements of Financial Condition

(unaudited)

 

 

 

September 30,

 

 

December 31,

 

(in millions, except shares and per share data)

 

2016

 

 

2015

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,454

 

 

$

6,083

 

Accounts receivable

 

 

2,601

 

 

 

2,237

 

Investments

 

 

1,731

 

 

 

1,578

 

Assets of consolidated variable interest entities:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

161

 

 

 

148

 

Investments

 

 

1,411

 

 

 

1,030

 

Other assets

 

 

183

 

 

 

67

 

Separate account assets

 

 

153,330

 

 

 

150,851

 

Separate account collateral held under securities lending agreements

 

 

29,839

 

 

 

31,336

 

Property and equipment (net of accumulated depreciation of $631 and $570 at September 30, 2016

   and December 31, 2015, respectively)

 

 

564

 

 

 

581

 

Intangible assets (net of accumulated amortization of $820 and $745 at September 30, 2016

   and December 31, 2015, respectively)

 

 

17,387

 

 

 

17,372

 

Goodwill

 

 

13,124

 

 

 

13,123

 

Other assets

 

 

954

 

 

 

855

 

Total assets

 

$

226,739

 

 

$

225,261

 

Liabilities

 

 

 

 

 

 

 

 

Accrued compensation and benefits

 

$

1,481

 

 

$

1,971

 

Accounts payable and accrued liabilities

 

 

1,354

 

 

 

1,068

 

Liabilities of consolidated variable interest entities

 

 

272

 

 

 

177

 

Borrowings

 

 

4,961

 

 

 

4,930

 

Separate account liabilities

 

 

153,330

 

 

 

150,851

 

Separate account collateral liabilities under securities lending agreements

 

 

29,839

 

 

 

31,336

 

Deferred income tax liabilities

 

 

4,832

 

 

 

4,851

 

Other liabilities

 

 

1,109

 

 

 

1,033

 

Total liabilities

 

 

197,178

 

 

 

196,217

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Temporary equity

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

600

 

 

 

464

 

Permanent Equity

 

 

 

 

 

 

 

 

BlackRock, Inc. stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, $0.01 par value;

 

 

2

 

 

 

2

 

Shares authorized: 500,000,000 at September 30, 2016 and December 31, 2015;

 

 

 

 

 

 

 

 

Shares issued: 171,252,185 at September 30, 2016 and December 31, 2015;

 

 

 

 

 

 

 

 

Shares outstanding: 162,271,222 and 163,461,064 at September 30, 2016 and

December 31, 2015, respectively

 

 

 

 

 

 

 

 

Preferred stock (Note 15)

 

 

 

 

 

 

Additional paid-in capital

 

 

19,236

 

 

 

19,405

 

Retained earnings

 

 

13,183

 

 

 

12,033

 

Accumulated other comprehensive loss

 

 

(598

)

 

 

(448

)

Treasury stock, common, at cost (8,980,963  and 7,791,121 shares held at September 30, 2016 and December 31, 2015, respectively)

 

 

(2,919

)

 

 

(2,489

)

Total BlackRock, Inc. stockholders’ equity

 

 

28,904

 

 

 

28,503

 

Nonredeemable noncontrolling interests

 

 

57

 

 

 

77

 

Total permanent equity

 

 

28,961

 

 

 

28,580

 

Total liabilities, temporary equity and permanent equity

 

$

226,739

 

 

$

225,261

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

1


BlackRock, Inc.

Condensed Consolidated Statements of Income

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in millions, except shares and per share data)

 

September 30,

 

 

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory, administration fees and securities lending revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related parties

 

$

1,768

 

 

$

1,719

 

 

$

5,098

 

 

$

5,166

 

Other third parties

 

 

778

 

 

 

737

 

 

 

2,296

 

 

 

2,214

 

Total investment advisory, administration fees and

   securities lending revenue

 

 

2,546

 

 

 

2,456

 

 

 

7,394

 

 

 

7,380

 

Investment advisory performance fees

 

 

58

 

 

 

208

 

 

 

166

 

 

 

452

 

BlackRock Solutions and advisory

 

 

174

 

 

 

167

 

 

 

517

 

 

 

475

 

Distribution fees

 

 

10

 

 

 

14

 

 

 

32

 

 

 

44

 

Other revenue

 

 

49

 

 

 

65

 

 

 

156

 

 

 

187

 

Total revenue

 

 

2,837

 

 

 

2,910

 

 

 

8,265

 

 

 

8,538

 

Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

 

969

 

 

 

1,023

 

 

 

2,893

 

 

 

3,016

 

Distribution and servicing costs

 

 

114

 

 

 

102

 

 

 

320

 

 

 

306

 

Amortization of deferred sales commissions

 

 

8

 

 

 

12

 

 

 

27

 

 

 

37

 

Direct fund expense

 

 

200

 

 

 

198

 

 

 

583

 

 

 

578

 

General and administration

 

 

312

 

 

 

319

 

 

 

946

 

 

 

970

 

Restructuring charge

 

 

 

 

 

 

 

 

76

 

 

 

 

Amortization of intangible assets

 

 

25

 

 

 

34

 

 

 

75

 

 

 

104

 

Total expense

 

 

1,628

 

 

 

1,688

 

 

 

4,920

 

 

 

5,011

 

Operating income

 

 

1,209

 

 

 

1,222

 

 

 

3,345

 

 

 

3,527

 

Nonoperating income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on investments

 

 

31

 

 

 

(10

)

 

 

49

 

 

 

59

 

Interest and dividend income

 

 

22

 

 

 

12

 

 

 

33

 

 

 

21

 

Interest expense

 

 

(52

)

 

 

(50

)

 

 

(154

)

 

 

(153

)

Total nonoperating income (expense)

 

 

1

 

 

 

(48

)

 

 

(72

)

 

 

(73

)

Income before income taxes

 

 

1,210

 

 

 

1,174

 

 

 

3,273

 

 

 

3,454

 

Income tax expense

 

 

333

 

 

 

342

 

 

 

954

 

 

 

971

 

Net income

 

 

877

 

 

 

832

 

 

 

2,319

 

 

 

2,483

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling

   interests

 

 

2

 

 

 

(11

)

 

 

(2

)

 

 

(1

)

Net income attributable to BlackRock, Inc.

 

$

875

 

 

$

843

 

 

$

2,321

 

 

$

2,484

 

Earnings per share attributable to BlackRock, Inc.

   common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

5.33

 

 

$

5.08

 

 

$

14.09

 

 

$

14.91

 

Diluted

 

$

5.26

 

 

$

5.00

 

 

$

13.92

 

 

$

14.68

 

Cash dividends declared and paid per share

 

$

2.29

 

 

$

2.18

 

 

$

6.87

 

 

$

6.54

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

164,129,214

 

 

 

166,045,291

 

 

 

164,756,355

 

 

 

166,579,805

 

Diluted

 

 

166,256,598

 

 

 

168,665,303

 

 

 

166,760,912

 

 

 

169,157,188

 

 

See accompanying notes to condensed consolidated financial statements.

 

2


BlackRock, Inc.

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in millions)

 

September 30,

 

 

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net income

 

$

877

 

 

$

832

 

 

$

2,319

 

 

$

2,483

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net unrealized gains (losses) from

   available-for-sale investments, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses)(1)

 

 

 

 

 

(2

)

 

 

 

 

 

(3

)

Less: reclassification adjustment

   included in net income(1)

 

 

 

 

 

 

 

 

(1

)

 

 

 

Net change from available-for-sale investments

 

 

 

 

 

(2

)

 

 

1

 

 

 

(3

)

Benefit plans

 

 

 

 

 

 

 

 

 

 

 

(1

)

Foreign currency translation adjustments(2)

 

 

(38

)

 

 

(67

)

 

 

(151

)

 

 

(131

)

Other comprehensive income (loss)

 

 

(38

)

 

 

(69

)

 

 

(150

)

 

 

(135

)

Comprehensive income

 

 

839

 

 

 

763

 

 

 

2,169

 

 

 

2,348

 

Less: Comprehensive income (loss) attributable to

   noncontrolling interests

 

 

2

 

 

 

(11

)

 

 

(2

)

 

 

(1

)

Comprehensive income attributable to BlackRock, Inc.

 

$

837

 

 

$

774

 

 

$

2,171

 

 

$

2,349

 

 

(1)

The tax benefit (expense) was not material for the three and nine months ended September 30, 2015 and the nine months ended September 30, 2016.

(2) 

Amounts for the three months ended September 30, 2016 and 2015 include losses from a net investment hedge of $5 million (net of a tax benefit of $4 million) and $2 million, respectively. Amounts for the nine months ended September 30, 2016 and 2015 include losses from a net investment hedge of $16 million (net of a tax benefit of $10 million) and gains of $5 million (net of tax of $4 million), respectively.

See accompanying notes to condensed consolidated financial statements.

 

 

 

3


BlackRock, Inc.

Condensed Consolidated Statements of Changes in Equity

(unaudited)

 

(in millions)

 

Additional

Paid-in

Capital(1)

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

Common

 

 

Total

BlackRock

Stockholders’

Equity

 

 

Nonredeemable

Noncontrolling

Interests

 

 

Total

Permanent

Equity

 

 

Redeemable

Noncontrolling

Interests /

Temporary

Equity

 

December 31, 2015

 

$

19,407

 

 

$

12,033

 

 

$

(448

)

 

$

(2,489

)

 

$

28,503

 

 

$

77

 

 

$

28,580

 

 

$

464

 

Net income

 

 

 

 

 

2,321

 

 

 

 

 

 

 

 

 

2,321

 

 

 

(2

)

 

 

2,319

 

 

 

 

Dividends paid

 

 

 

 

 

(1,171

)

 

 

 

 

 

 

 

 

(1,171

)

 

 

 

 

 

(1,171

)

 

 

 

Stock-based compensation

 

 

408

 

 

 

 

 

 

 

 

 

 

 

 

408

 

 

 

 

 

 

408

 

 

 

 

PNC preferred stock capital contribution

 

 

172

 

 

 

 

 

 

 

 

 

 

 

 

172

 

 

 

 

 

 

172

 

 

 

 

Retirement of preferred stock

 

 

(172

)

 

 

 

 

 

 

 

 

 

 

 

(172

)

 

 

 

 

 

(172

)

 

 

 

Issuance of common shares related to employee stock

   transactions

 

 

(654

)

 

 

 

 

 

 

 

 

688

 

 

 

34

 

 

 

 

 

 

34

 

 

 

 

Employee tax withholdings related to employee stock

   transactions

 

 

 

 

 

 

 

 

 

 

 

(268

)

 

 

(268

)

 

 

 

 

 

(268

)

 

 

 

Shares repurchased

 

 

 

 

 

 

 

 

 

 

 

(850

)

 

 

(850

)

 

 

 

 

 

(850

)

 

 

 

Net tax benefit (shortfall) from stock-based

   compensation

 

 

77

 

 

 

 

 

 

 

 

 

 

 

 

77

 

 

 

 

 

 

77

 

 

 

 

Subscriptions (redemptions/ distributions) —

   noncontrolling interest holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

(18

)

 

 

1,017

 

Net consolidations (deconsolidations) of sponsored

   investment funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(881

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

(150

)

 

 

 

 

 

(150

)

 

 

 

 

 

(150

)

 

 

 

September 30, 2016

 

$

19,238

 

 

$

13,183

 

 

$

(598

)

 

$

(2,919

)

 

$

28,904

 

 

$

57

 

 

$

28,961

 

 

$

600

 

 

(1) 

Amounts include $2 million of common stock at both September 30, 2016 and December 31, 2015.

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

4


BlackRock, Inc.

Condensed Consolidated Statements of Changes in Equity

(unaudited)

 

(in millions)

 

Additional

Paid-in

Capital(1)

 

 

Retained

Earnings

 

 

Appropriated

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

Common

 

 

Total

BlackRock

Stockholders’

Equity

 

 

Nonredeemable

Noncontrolling

Interests

 

 

Total

Permanent

Equity

 

 

Redeemable

Noncontrolling

Interests /

Temporary

Equity

 

December 31, 2014

 

$

19,388

 

 

$

10,164

 

 

$

(19

)

 

$

(273

)

 

$

(1,894

)

 

$

27,366

 

 

$

119

 

 

$

27,485

 

 

$

35

 

Net income

 

 

 

 

 

2,484

 

 

 

 

 

 

 

 

 

 

 

 

2,484

 

 

 

3

 

 

 

2,487

 

 

 

(4

)

Net consolidation (deconsolidation) of VIEs due to adoption

   of new accounting pronouncement

 

 

 

 

 

 

 

 

19

 

 

 

 

 

 

 

 

 

19

 

 

 

(8

)

 

 

11

 

 

 

194

 

Dividends paid

 

 

 

 

 

(1,115

)

 

 

 

 

 

 

 

 

 

 

 

(1,115

)

 

 

 

 

 

(1,115

)

 

 

 

Stock-based compensation

 

 

397

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

397

 

 

 

 

 

 

397

 

 

 

 

Issuance of common shares related

   to employee stock transactions

 

 

(542

)

 

 

 

 

 

 

 

 

 

 

 

629

 

 

 

87

 

 

 

 

 

 

87

 

 

 

 

Employee tax withholdings related to

   employee stock transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(228

)

 

 

(228

)

 

 

 

 

 

(228

)

 

 

 

Shares repurchased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(825

)

 

 

(825

)

 

 

 

 

 

(825

)

 

 

 

Net tax benefit (shortfall) from

   stock-based compensation

 

 

86

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

86

 

 

 

 

 

 

86

 

 

 

 

Subscriptions (redemptions/ distributions)-

   noncontrolling interest holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

(21

)

 

 

298

 

Net consolidations (deconsolidations)

   of sponsored investment funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

(6

)

 

 

(265

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

(135

)

 

 

 

 

 

(135

)

 

 

 

 

 

(135

)

 

 

 

September 30, 2015

 

$

19,329

 

 

$

11,533

 

 

$

 

 

$

(408

)

 

$

(2,318

)

 

$

28,136

 

 

$

87

 

 

$

28,223

 

 

$

258

 

 

(1) 

Amounts include $2 million of common stock at both September 30, 2015 and December 31, 2014.

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

5


are BlackRock, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Nine Months Ended

 

(in millions)

 

September 30,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

2,319

 

 

$

2,483

 

Adjustments to reconcile net income to cash flows from operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

171

 

 

 

196

 

Amortization of deferred sales commissions

 

 

27

 

 

 

37

 

Stock-based compensation

 

 

408

 

 

 

397

 

Deferred income tax expense (benefit)

 

 

(6

)

 

 

(73

)

Other gains

 

 

 

 

 

(40

)

Net (gains) losses on nontrading investments

 

 

 

 

 

10

 

Assets and liabilities of consolidated VIEs:

 

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

 

(127

)

 

 

(26

)

Net (gains) losses within consolidated VIEs

 

 

(34

)

 

 

(2

)

Net (purchases) proceeds within consolidated VIEs

 

 

(855

)

 

 

(169

)

(Earnings) losses from equity method investees

 

 

(71

)