Exhibit 99.1
Contact | ||
Paul L. Audet: | (212) 409-3555 | |
| invrel@blackrock.com |
BlackRock, Inc. Reports 11% Increase in Net Income for Second Quarter;
Assets Under Management Increase 15% to $286 Billion
New York, July 15, 2003 – BlackRock, Inc. (NYSE:BLK) today reported net income of $38.7 million for the second quarter and $74.0 million for the six months ended June 30, 2003, an 11% increase compared with $34.8 million earned in the second quarter of 2002 and 12% increase versus the $66.2 million earned in the first half of 2002. Diluted earnings per share for the second quarter of 2003 were $0.58 compared with $0.53 and $0.54 for the second quarter of 2002 and the first quarter of 2003, respectively. Diluted earnings per share for the six months ended June 30, 2003 were $1.12, an 11% increase compared with $1.01 for the six months ended June 30, 2002. Operating income of $54.8 million for the second quarter and $108.9 million for the six months ended June 30, 2003 increased $.1 million and $4.2 million, respectively, versus $54.7 million and $104.6 million for the comparable periods ended June 30, 2002. The increase in operating income was particularly notable given the $21.7 million and $32.6 million reductions in separate account performance fees relative to the second quarter of 2002 and the first half of 2002, respectively.
Assets under management (“AUM”) at June 30, 2003 were $286.3 billion, a 15% increase compared with $249.8 billion at June 30, 2002 and a 5% increase from the $273.6 billion reported at March 31, 2003. New business efforts continue to contribute substantially to AUM growth, including $5.1 billion of net new fundings during the second quarter and $21.8 billion of net new business during the twelve months ended June 30, 2003. Significantly, we have achieved growth among both domestic and international clients, in both separate accounts and funds, and across a broad array of products.
“Going into the year, we knew we faced significant headwinds given the decline in liquidity assets and the expected fall-off in performance fees,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “Our strong second quarter results reflect the growing balance in our business, including ongoing strength in our core fixed income business with pension and insurance clients, continuing expansion of BlackRock Solutions, and growing momentum in our small cap value and international small cap equity products.”
Second Quarter Highlights
| v | New business efforts were well balanced across a number of channels, resulting in net inflows of $2.4 billion in separate accounts and $2.7 billion in mutual funds. In addition, our business continued to expand globally, both in terms of our client base and our product base. Specifically, net new business from international clients year-to-date totaled $1.2 billion, increasing our international client AUM to $47.4 billion at quarter-end. Similarly, year-to-date net inflows of $.8 billion brought total assets in portfolios managed against international or global market benchmarks to $16.7 billion. |
| v | Fixed income AUM increased $7.9 billion to $196.0 billion, aided by net inflows of $1.7 billion in separate accounts and $.8 billion in open-end and closed-end mutual funds. Though still a drain on assets, rebalancing activity abated as the equity markets improved. For the quarter, net rebalancing outflows totaled only approximately $1.1 billion, the lowest level in 5 quarters. |
| v | Liquidity AUM increased $3.6 billion to $71.6 billion at quarter-end. The rate environment favorably impacted liquidity flows, resulting in $2.7 billion of net subscriptions in our domestic and offshore institutional money market funds. At the same time, improved equity markets contributed to a $2.0 billion increase in security lending assets, which was partially offset by $1.1 billion of outflows in retail money market funds and other liquidity accounts. |
| v | The $.2 billion increase in equity AUM during the quarter reflected $2.1 billion of market appreciation, which was almost fully offset by the $1.9 billion of net outflows, half of which resulted from an investment strategy change by a single international equity client. Importantly, our US-based equity teams continue to gain momentum. Since quarter-end, a large and influential institutional consultant awarded its highest rating to our small cap value product and we have won several new mandates in both small cap value and international small cap portfolios. |
| v | Assets managed in alternative investments increased 18% to $6.4 billion, driven by $.7 billion in net new business in hedge funds and real estate products. In addition, BlackRock completed its acquisition of HPB Management in April, adding $.2 billion of assets in a fund of hedge funds. |
| v | We continued to receive inquiry on our BlackRock Solutions capabilities, commencing one new system implementation and adding two new risk management assignments during the quarter. Continuing high market volatility has fostered strong interest in our BlackRock Solutions offerings, and we are actively engaged in discussions with a number of prospects for system outsourcing, risk management and investment accounting services. |
BlackRock Earnings Release
July 15, 2003
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| v | Our investment performance remained competitive in all products other than international equities. Specifically, over three-quarters of our taxable fixed income and domestic equity fund assets and all of our liquidity funds were ranked in the top two Lipper quartiles for the year-to-date and 1-year periods ended June 30, 2003. We closed the quarter with $6.6 billion of wins to be funded and a strong pipeline of new business opportunities in process. |
Total revenue for the quarter ended June 30, 2003 decreased $12.8 million or 8% to $143.9 million compared with $156.7 million for the second quarter of 2002. Strong growth in separate account base fees of $12.5 million or 19% and other income of $2.7 million or 20% was more than offset by a $21.7 million decrease in separate account performance fees and a $6.2 million decrease in mutual fund revenue. The decline in separate account performance fees was attributable to a previously disclosed high water mark condition in the firm’s fixed income hedge fund, which precludes recognition of additional performance fee revenue until investment performance exceeds the high water mark. While the fund has generated positive performance year-to-date, the Company continues to expect limited performance fees for this fund in 2003. Separate account base fees increased primarily due to a $35.5 billion or 21% increase in separate account assets under management, which was driven by the strong growth in fixed income separate accounts. The decrease in mutual fund revenue was due to lower fees earned on theBlackRock Funds and BPIF of $5.8 million and $2.9 million, respectively, as a result of a decline in assets under management. Average assets in BPIF declined in the second quarter ended June 30, 2003 by $7.1 billion or 13% compared with the second quarter ended June 30, 2002 due to stable short-term rates at low absolute levels while theBlackRock Funds experienced a decline in average assets under management of $3.2 billion or 15% compared with the second quarter of 2002 due to $2.9 billion of net redemptions and $.9 billion of market depreciation occurring since March 31, 2002. During this period PNC related assets experienced net redemptions and market depreciation of $4.3 billion and $.6 billion, respectively. Closed-end fund revenue increased $2.4 million or 25% driven by new fund launches in 2002 and 2003, which generated $2.5 billion in additional assets under management. Other income increased primarily due to strong sales ofBlackRock Solutions products and services and growth in our joint venture, Nomura BlackRock Asset Management.
Three months ended June 30, | Variance | ||||||||||||||
| 2003 | 2002 | Amount | % | ||||||||||||
| Dollar amounts in thousands | (unaudited) | ||||||||||||||
Mutual funds revenue | |||||||||||||||
BlackRock Funds | $ | 17,056 | $ | 22,892 | ($ | 5,836 | ) | (25.5 | %) | ||||||
Closed End Funds | 12,301 | 9,873 | 2,428 | 24.6 | |||||||||||
BPIF | 18,854 | 21,763 | (2,909 | ) | (13.4 | ) | |||||||||
STIF | 285 | 208 | 77 | 37.0 | |||||||||||
Total mutual funds revenue | 48,496 | 54,736 | (6,240 | ) | (11.4 | ) | |||||||||
Separate accounts revenue | |||||||||||||||
Separate account base fees | 77,957 | 65,451 | 12,506 | 19.1 | |||||||||||
Separate account performance fees | 1,560 | 23,304 | (21,744 | ) | (93.3 | ) | |||||||||
Total separate accounts revenue | 79,517 | 88,755 | (9,238 | ) | (10.4 | ) | |||||||||
Total investment advisory and administration fees | 128,013 | 143,491 | (15,478 | ) | (10.8 | ) | |||||||||
Other income | 15,893 | 13,204 | 2,689 | 20.4 | |||||||||||
Total revenue | $ | 143,906 | $ | 156,695 | ($ | 12,789 | ) | (8.2 | %) | ||||||
BlackRock Earnings Release
July 15, 2003
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Total revenue for the six months ended June 30, 2003 of $286.7 million decreased $16.2 million or 5% compared with $302.8 million for the six months ended June 30, 2002. Increases in separate account base fees of $24.5 million or 19% and other income of $4.7 million or 17% were more than offset by a $32.6 million decrease in separate account performance fees and a $12.8 million decrease in mutual fund revenue. The decline in separate account performance fees was attributable to a decline in performance fees on the Company’s fixed income hedge fund, which cannot earn additional performance fees until investment performance exceeds the high water mark. The $24.5 million or a 19% increase in separate account base fees was the result of strong growth in fixed income separate account assets, while the decrease in mutual fund revenue was driven by a decline inBlackRock Funds revenue and BPIF revenue of $15.3 million and $1.8 million, respectively, partially offset by an increase in closed-end fund revenue of $4.3 million. The decline inBlackRock Funds revenue was largely attributable to $4.3 billion of net redemptions in PNC related assets since March 31, 2002. Other income increased largely due to strong sales ofBlackRock Solutions products and services and growth in our joint venture, Nomura BlackRock Asset Management.
Six months ended June 30, | Variance | ||||||||||||
| 2003 | 2002 | Amount | % | ||||||||||
| Dollar amounts in thousands | (unaudited) | ||||||||||||
Mutual funds revenue | |||||||||||||
BlackRock Funds | $ | 33,242 | $ | 48,587 | ($ | 15,345 | ) | (31.6 | %) | ||||
Closed End Funds | 23,614 | 19,361 | 4,253 | 22.0 | |||||||||
BPIF | 39,853 | 41,637 | (1,784 | ) | (4.3 | ) | |||||||
STIF | 527 | 410 | 117 | 28.5 | |||||||||
Total mutual funds revenue | 97,236 | 109,995 | (12,759 | ) | (11.6 | ) | |||||||
Separate accounts revenue | |||||||||||||
Separate account base fees | 152,470 | 127,950 | 24,520 | 19.2 | |||||||||
Separate account performance fees | 4,672 | 37,321 | (32,649 | ) | (87.5 | ) | |||||||
Total separate accounts revenue | 157,142 | 165,271 | (8,129 | ) | (4.9 | ) | |||||||
Total investment advisory and administration fees | 254,378 | 275,266 | (20,888 | ) | (7.6 | ) | |||||||
Other income | 32,279 | 27,542 | 4,737 | 17.2 | |||||||||
Total revenue | $ | 286,657 | $ | 302,808 | ($ | 16,151 | ) | (5.3 | %) | ||||
BlackRock’s operating margin for the second quarter and the six months ended June 30, 2003 was 40.2% compared with 37.9% and 37.7% for the same periods in 2002.
BlackRock Earnings Release
July 15, 2003
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Total expense for the second quarter of 2003 decreased $12.9 million or 13% to $89.1 million compared with $102.0 million for the second quarter of 2002. The decrease was attributable to decreases in compensation and benefits and fund administration and servicing costs of $12.0 million and $4.8 million, respectively, partially offset by an increase in general and administration expenses of $3.9 million. The decrease in compensation and benefits was primarily due to lower incentive compensation expense directly associated with the decline in performance fees on the Company’s fixed income hedge fund partially offset by increased salaries and benefits due to additional headcount and higher investment income on Rabbi Trust assets of $1.1 million associated with the Company’s deferred compensation plans. The decrease in fund administration servicing costs reflects a decline in affiliated costs associated with reductions in PNC related assets in theBlackRock Funds due to redemptions and market decline and the effect of a revised investment management services agreement with PNC, partially offset by an increase of $.4 million in servicing provided by third parties on newly issued closed-end funds.
General and administration expense increased primarily due to increases of $1.8 million associated with foreign currency translation adjustments, $.7 million in marketing and promotional expense associated with new products and sales efforts of existing products, $.4 million in portfolio and data services, $.4 million in occupancy expense and $.3 million in higher insurance costs. General and administration expense rose 9% exclusive of foreign currency translation effects which increased expense by $.4 million for the second quarter of 2003 and reduced expense by $1.4 million for the second quarter of 2002.
Three months ended June 30, | Variance | ||||||||||||||
| 2003 | 2002 | Amount | % | ||||||||||||
| Dollar amounts in thousands | (unaudited) | ||||||||||||||
General and administration expense: | |||||||||||||||
Marketing and promotional | $ | 6,797 | $ | 6,103 | $ | 694 | 11.4 | % | |||||||
Occupancy expense | 5,400 | 5,020 | 380 | 7.6 | |||||||||||
Technology | 4,388 | 4,535 | (147 | ) | (3.2 | ) | |||||||||
Other general and administration | 8,891 | 5,907 | 2,984 | 50.5 | |||||||||||
Total general and administration expense | $ | 25,476 | $ | 21,565 | $ | 3,911 | 18.1 | % | |||||||
Total expenses for the six months ended June 30, 2003 decreased $20.4 million or 10% to $177.8 million compared with $198.2 million for the six months ended June 30, 2002. The decrease was due to lower compensation and benefits and fund administration and servicing costs of $17.0 million and $10.0 million, respectively, partially offset by an increase in general and administration expense of $6.6 million. The decrease in compensation and benefits was largely due to lower incentive compensation primarily related to the decline in performance fees on the Company’s fixed income hedge fund, partially offset by higher salaries and benefits associated with business growth and a $1.4 million increase due to higher investment returns on Rabbi Trust assets associated with the Company’s deferred compensation plans. The decrease in fund administration and servicing costs was the result of a decline in PNC related assets in theBlackRock Funds and a revised investment management services agreement with PNC, partially offset by increased servicing costs on the closed-end funds by third parties.
General and administration expense increased primarily due to increases of $1.7 million associated with
BlackRock Earnings Release
July 15, 2003
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foreign currency translation adjustments, $1.4 million in marketing and promotional expense associated with new and existing products, $1.3 million in occupancy costs related to the completion of the Company’s new headquarters facility in 2002, $1.1 million in portfolio and data services and $.5 million in higher insurance costs. General and administration expense rose 11% exclusive of foreign currency translation effects which increased expense by $.3 million for the first six months of 2003 while reducing expense by $1.4 million for the comparable period in 2002.
Six months ended June 30, | Variance | ||||||||||||||
| 2003 | 2002 | Amount | % | ||||||||||||
| Dollar amounts in thousands | (unaudited) | ||||||||||||||
General and administration expense: | |||||||||||||||
Marketing and promotional | $ | 13,464 | $ | 12,019 | $ | 1,445 | 12.0 | % | |||||||
Occupancy expense | 11,012 | 9,742 | 1,270 | 13.0 | |||||||||||
Technology | 8,490 | 8,932 | (442 | ) | (4.9 | ) | |||||||||
Other general and administration | 17,619 | 13,284 | 4,335 | 32.6 | |||||||||||
Total general and administration expense | $ | 50,585 | $ | 43,977 | $ | 6,608 | 15.0 | % | |||||||
Non-operating income for the quarter ended June 30, 2003 increased $4.2 million or 110% to $8.1 million compared with $3.8 million for the quarter ended June 30, 2002. The increase was the result of higher interest and dividend income of $.9 million as a result of increased investments of corporate funds, increased investment income on Rabbi Trust assets associated with the Company’s deferred compensation plan of $1.4 million, increases in gains realized on the sale of investments of $1.1 million, and gains on equity trading investments of $.8 million associated with seed investments for the new quantitative equity products.
Pursuant to a one million share repurchase program approved by the Board of Directors, the Company acquired 130,000 shares in open market purchases at a total cost of $5.8 million during the three month period ended June 30, 2003. Share repurchases through June 30, 2003 totaled 423,700 shares at a total cost of $17.8 million.
Outlook. Based on current conditions, management expects full year 2003 and third quarter diluted earnings per share to be in a range of $2.30—$2.36 and $0.58—$0.60, respectively.
About BlackRock. BlackRock is one of the largest publicly traded investment management firms in the United States with $286 billion of assets under management as of June 30, 2003. BlackRock manages assets on behalf of institutional and individual investors worldwide through a variety of equity, fixed income, liquidity and alternative investment products. In addition, BlackRock provides risk management and investment system services to a growing number of institutional investors under theBlackRock Solutions name. Clients are served from the Company’s headquarters in New York City, as well as offices in Boston, Edinburgh, Hong Kong, San Francisco, Tokyo and Wilmington. BlackRock is majority-owned by The PNC Financial Services Group, Inc. (NYSE: PNC) and by BlackRock employees.
Mutual Funds Performance Notes: Past performance is no guarantee of future results. Performance data assumes the reinvestment of dividends and capital gains distributions and reflects the performance of the
BlackRock Earnings Release
July 15, 2003
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Institutional Class, except that Investor B Class performance of the Government Income Portfolio ofBlackRock Funds is used. BlackRock waives fees, without which performance would be lower. Lipper rankings are based on total returns with dividends and distributions reinvested and do not reflect sales charges. Funds with returns among the top 25% of a peer group of funds with comparable objectives are in the first quartile and funds with returns in the next 25% of a peer group are in the second quartile. Some funds have less than ten years of performance.
TheBlackRock Provident Institutional Funds TempFund and TempCash are in the Institutional Money Market Lipper peer group, and Federal Trust Fund and FedFund are in the Institutional U.S. Government Money Market Lipper peer group. T-Fund and Treasury Trust Fund are in the Institutional U.S. Treasury Lipper peer group. MuniCash and MuniFund are in the Institutional Tax-Exempt Money Market Lipper peer group. California Money Fund and New York Money Fund are in the California Tax-Exempt and New York Tax-Exempt Money Market Lipper peer groups, respectively. TheBlackRock Funds Money Market, U.S. Treasury Money Market, Municipal Money Market, New Jersey Municipal Money Market, North Carolina Municipal Money Market, Ohio Municipal Money Market, Pennsylvania Municipal Money Market and Virginia Money Market Portfolios are in the Money Market Lipper peer group.
TheBlackRock Funds High Yield Bond, Intermediate Bond, Intermediate Government Bond, GNMA and Government Income Portfolios are in the High Current Yield, Short-Intermediate Investment Grade Debt, Intermediate U.S. Government, GNMA and General U.S. Government Lipper peer groups, respectively. TheBlackRock Funds Core Bond Total Return, Core PLUS Total Return and Managed Income Portfolios are in the Intermediate Investment Grade Debt Lipper peer group.
TheBlackRock Funds Select Equity, Small Cap Growth, Mid-Cap Growth and Balanced Portfolios are in the Large Cap Core, Small Cap Growth, Mid Cap Growth and Balanced Lipper peer groups, respectively.
Investments in money market funds are neither insured nor guaranteed by the U.S. government and there is no assurance that a fund will maintain a stable net asset value of $1.00 per share.
Forward Looking Statements. This press 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 outlook for full year and third quarter 2003 earnings, fixed income hedge fund investment performance, potential new business opportunities, liquidity asset levels and other 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,” “current,” “intention,” “estimate,” “position,” “assume,” “potential,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or 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 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 factors previously disclosed in BlackRock’s Securities and Exchange Commission (the “SEC”) reports and those identified elsewhere in this press release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:
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July 15, 2003
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(1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes in political, economic or industry conditions, the interest rate environment 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 investment performance of BlackRock’s advised or sponsored investment products and separately managed accounts; (4) the impact of increased competition; (5) the impact of capital improvement projects; (6) the impact of future acquisitions; (7) the unfavorable resolution of legal proceedings; (8) the extent and timing of any share repurchases; (9) the impact, extent and timing of technological changes and the adequacy of intellectual property protection; (10) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or PNC; (11) terrorist activities and international hostilities, which may adversely affect the general economy, financial and capital markets, specific industries, and BlackRock; and (12) the ability to attract and retain highly talented professionals.
BlackRock’s Annual Report on Form 10-K for the year ended December 31, 2002 and BlackRock’s subsequent reports filed with the Securities and Exchange Commission, accessible on the SEC’s website athttp://www.sec.gov and on BlackRock’s website at http://www.blackrock.com, discuss these factors in more detail and identify additional factors that can affect forward-looking statements.
# # #
TABLE 1
BlackRock, Inc.
Financial Highlights
(Dollar amounts in thousands, except share data)
(unaudited)
| Three months ended | Variance vs. | ||||||||||||||||||||||||
| June 30, | March 31, | June 30, 2002 | March 31, 2003 | ||||||||||||||||||||||
| 2003 | 2002 | 2003 | Amount | % | Amount | % | |||||||||||||||||||
Total revenue | $ | 143,906 | $ | 156,695 | $ | 142,751 | ($ | 12,789 | ) | -8 | % | $ | 1,155 | 1 | % | ||||||||||
Total expense | $ | 89,104 | $ | 101,990 | $ | 88,685 | ($ | 12,886 | ) | -13 | % | $ | 419 | 0 | % | ||||||||||
Operating income | $ | 54,802 | $ | 54,705 | $ | 54,066 | $ | 97 | 0 | % | $ | 736 | 1 | % | |||||||||||
Net income | $ | 38,674 | $ | 34,836 | $ | 35,320 | $ | 3,838 | 11 | % | $ | 3,354 | 9 | % | |||||||||||
Diluted earnings per share | $ | 0.58 | $ | 0.53 | $ | 0.54 | $ | 0.05 | 9 | % | $ | 0.04 | 7 | % | |||||||||||
Average diluted shares outstanding | 66,164,326 | 65,333,228 | 65,867,032 | 831,098 | 1 | % | 297,294 | 0 | % | ||||||||||||||||
Operating margin (a) | 40.2 | % | 37.9 | % | 40.1 | % | |||||||||||||||||||
Assets under management ($ in millions) | $ | 286,309 | $ | 249,778 | $ | 273,599 | $ | 36,531 | 15 | % | $ | 12,710 | 5 | % | |||||||||||
| Six months ended | Variance | ||||||||||||||
| June 30, | |||||||||||||||
| 2003 | 2002 | Amount | % | ||||||||||||
Total revenue | $ | 286,657 | $ | 302,808 | ($ | 16,151 | ) | -5 | % | ||||||
Total expense | $ | 177,789 | $ | 198,168 | ($ | 20,379 | ) | -10 | % | ||||||
Operating income | $ | 108,868 | $ | 104,640 | $ | 4,228 | 4 | % | |||||||
Net income | $ | 73,994 | $ | 66,235 | $ | 7,759 | 12 | % | |||||||
Diluted earnings per share | $ | 1.12 | $ | 1.01 | $ | 0.11 | 11 | % | |||||||
Average diluted shares outstanding | 66,018,501 | 65,261,868 | 756,633 | 1 | % | ||||||||||
Operating margin (a) | 40.2 | % | 37.7 | % | |||||||||||
Assets under management ($ in millions) | $ | 286,309 | $ | 249,778 | $ | 36,531 | 15 | % | |||||||
| (a) | Operating income divided by total revenue less fund administration and servicing costs. Computations for all periods presented include affiliated and non-affilated fund administration and servicing expense reported as a separate income statement line item and are derived from the Company’s consolidated financial statements, as follows: |
| Three months ended | Six months ended June 30, | |||||||||||||||||||
| June 30, | March 31, 2003 | |||||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||||
Operating income, as reported | $ | 54,802 | $ | 54,705 | $ | 54,066 | $ | 108,868 | $ | 104,640 | ||||||||||
Revenue, as reported | 143,906 | 156,695 | 142,751 | $ | 286,657 | $ | 302,808 | |||||||||||||
Less: fund administration and servicing costs | (7,578 | ) | (12,394 | ) | (7,958 | ) | (15,536 | ) | (25,572 | ) | ||||||||||
Revenue used for operating margin measurement | 136,328 | 144,301 | 134,793 | 271,121 | 277,236 | |||||||||||||||
Operating margin | 38.1 | % | 34.9 | % | 37.9 | % | 38.0 | % | 34.6 | % | ||||||||||
Add back: Impact of excluding fund administration and servicing costs | 2.1 | 3.0 | 2.2 | 2.2 | 3.1 | |||||||||||||||
Operating margin, as reported | 40.2 | % | 37.9 | % | 40.1 | % | 40.2 | % | 37.7 | % | ||||||||||
We believe that operating margin, as reported, is an effective indicator of management’s ability to effectively employ the Company’s resources. Fund administration and servicing costs have been excluded from operating margin because these costs are a fixed, asset-based expense which can fluctuate based on the discretion of a third party.
8
TABLE 2
BlackRock, Inc.
Condensed Consolidated Statements of Income
(Dollar amounts in thousands, except share data)
(unaudited)
| Three months ended | % Change | Six months ended | % Change | |||||||||||||||||||
| June 30, 2003 | June 30, 2002 | June 30, 2003 | June 30, 2002 | |||||||||||||||||||
Revenue | ||||||||||||||||||||||
Investment advisory and administration fees | ||||||||||||||||||||||
Mutual funds | $ | 48,496 | $ | 54,736 | (11.4 | %) | $ | 97,236 | $ | 109,995 | (11.6 | %) | ||||||||||
Separate accounts | 79,517 | 88,755 | (10.4 | ) | 157,142 | 165,271 | (4.9 | ) | ||||||||||||||
Total investment advisory and administration fees | 128,013 | 143,491 | (10.8 | ) | 254,378 | 275,266 | (7.6 | ) | ||||||||||||||
Other income | 15,893 | 13,204 | 20.4 | 32,279 | 27,542 | 17.2 | ||||||||||||||||
Total revenue | 143,906 | 156,695 | (8.2 | ) | 286,657 | 302,808 | (5.3 | ) | ||||||||||||||
Expense | ||||||||||||||||||||||
Employee compensation and benefits | 55,819 | 67,830 | (17.7 | ) | 111,205 | 128,217 | (13.3 | ) | ||||||||||||||
Fund administration and servicing costs | ||||||||||||||||||||||
Affilates | 6,686 | 11,916 | (43.9 | ) | 13,629 | 25,094 | (45.7 | ) | ||||||||||||||
Other | 892 | 478 | 86.6 | 1,907 | 478 | 299.0 | ||||||||||||||||
General and administration | 25,476 | 21,565 | 18.1 | 50,585 | 43,977 | 15.0 | ||||||||||||||||
Amortization of intangible assets | 231 | 201 | 14.9 | 463 | 402 | 15.2 | ||||||||||||||||
Total expense | 89,104 | 101,990 | (12.6 | ) | 177,789 | 198,168 | (10.3 | ) | ||||||||||||||
Operating income | 54,802 | 54,705 | 0.2 | 108,868 | 104,640 | 4.0 | ||||||||||||||||
Non-operating income (expense) | ||||||||||||||||||||||
Investment income | 8,233 | 4,014 | 105.1 | 11,762 | 7,034 | 67.2 | ||||||||||||||||
Interest expense | (151 | ) | (171 | ) | (11.7 | ) | (315 | ) | (354 | ) | (11.0 | ) | ||||||||||
| 8,082 | 3,843 | 110.3 | 11,447 | 6,680 | 71.4 | |||||||||||||||||
Income before income taxes | 62,884 | 58,548 | 7.4 | 120,315 | 111,320 | 8.1 | ||||||||||||||||
Income taxes | 24,210 | 23,712 | 2.1 | 46,321 | 45,085 | 2.7 | ||||||||||||||||
Net income | $ | 38,674 | $ | 34,836 | 11.0 | $ | 73,994 | $ | 66,235 | 11.7 | ||||||||||||
Weighted-average shares outstanding | ||||||||||||||||||||||
Basic | 65,028,337 | 64,726,856 | 0.5 | % | 65,042,359 | 64,687,900 | 0.5 | % | ||||||||||||||
Diluted | 66,164,326 | 65,333,228 | 1.3 | % | 66,018,501 | 65,261,868 | 1.2 | % | ||||||||||||||
Earnings per share | ||||||||||||||||||||||
Basic | $ | 0.59 | $ | 0.54 | 9.3 | % | $ | 1.14 | $ | 1.02 | 11.8 | % | ||||||||||
Diluted | $ | 0.58 | $ | 0.53 | 9.4 | % | $ | 1.12 | $ | 1.01 | 10.9 | % | ||||||||||
9
TABLE 3
BlackRock, Inc.
Condensed Consolidated Statements of Financial Condition
(Dollar amounts in thousands)
(unaudited)
| June 30, 2003 | December 31, 2002 | |||||
Assets | ||||||
Cash and cash equivalents | $ | 180,833 | $ | 255,234 | ||
Accounts receivable | 119,448 | 114,070 | ||||
Investments | 304,717 | 208,743 | ||||
Property and equipment, net | 90,292 | 93,923 | ||||
Intangible assets, net | 192,204 | 182,827 | ||||
Other assets | 13,174 | 9,391 | ||||
Total assets | $ | 900,668 | $ | 864,188 | ||
Liabilities | ||||||
Accrued compensation | $ | 118,200 | $ | 173,047 | ||
Accounts payable and accrued liabilities | 49,494 | 37,963 | ||||
Acquired management contract obligation | 5,736 | 6,578 | ||||
Other liabilities | 18,251 | 11,946 | ||||
Total liabilities | 191,681 | 229,534 | ||||
Stockholders’ equity | 708,987 | 634,654 | ||||
Total liabilities and stockholders’ equity | $ | 900,668 | $ | 864,188 | ||
10
TABLE 4
BlackRock, Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
(unaudited)
| Six months ended June 30, | ||||||||
| 2003 | 2002 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 73,994 | $ | 66,235 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 10,464 | 9,966 | ||||||
Stock-based compensation | 4,610 | 3,105 | ||||||
Deferred income taxes | 2,278 | 8,066 | ||||||
Tax benefit from stock-based compensation | 4,167 | 6,304 | ||||||
Purchase of investments, trading, net | (17,385 | ) | (17,350 | ) | ||||
Net gain on investments | (4,700 | ) | (1,423 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Increase in accounts receivable | (5,307 | ) | (15,812 | ) | ||||
Decrease (increase) in receivable from affiliates | 177 | (14,306 | ) | |||||
Decrease (increase) in other assets | (3,756 | ) | 1,055 | |||||
Decrease in accrued compensation | (49,452 | ) | (20,434 | ) | ||||
Increase in accounts payable and accrued liabilities | 6,936 | 2,705 | ||||||
Increase (decrease) in other liabilities | 759 | (1,240 | ) | |||||
Cash provided by operating activities | 22,785 | 26,871 | ||||||
Cash flows from investing activities | ||||||||
Purchase of property and equipment | (6,299 | ) | (31,826 | ) | ||||
Purchase of investments | (67,481 | ) | (5,118 | ) | ||||
Acquisitions, net of cash acquired | (4,584 | ) | — | |||||
Cash used in investing activities | (78,364 | ) | (36,944 | ) | ||||
Cash flows from financing activities | ||||||||
Issuance of class A common stock | 623 | 760 | ||||||
Purchase of treasury stock | (22,333 | ) | (9,174 | ) | ||||
Reissuance of treasury stock | 2,661 | 1,691 | ||||||
Acquired management contract obligation payment | (842 | ) | (766 | ) | ||||
Cash used in financing activities | (19,891 | ) | (7,489 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 1,069 | 644 | ||||||
Net decrease in cash and cash equivalents | (74,401 | ) | (16,918 | ) | ||||
Cash and cash equivalents, beginning of period | 255,234 | 186,451 | ||||||
Cash and cash equivalents, end of period | $ | 180,833 | $ | 169,533 | ||||
11
TABLE 5
BlackRock, Inc.
Assets Under Management
(Dollar amounts in millions)
(unaudited)
| June 30, | December 31, 2002 | ||||||||
| 2003 | 2002 | ||||||||
All Accounts | |||||||||
Fixed income | $ | 195,960 | $ | 157,913 | $ | 175,586 | |||
Liquidity | 71,585 | 70,599 | 78,512 | ||||||
Equity | 12,412 | 15,898 | 13,464 | ||||||
Alternative investment products | 6,352 | 5,368 | 5,279 | ||||||
Total | $ | 286,309 | $ | 249,778 | $ | 272,841 | |||
Separate Accounts | |||||||||
Fixed income | $ | 174,480 | $ | 140,738 | $ | 156,574 | |||
Liquidity | 5,366 | 5,516 | 5,491 | ||||||
Liquidity-Securities lending | 8,374 | 6,435 | 6,433 | ||||||
Equity | 9,105 | 10,119 | 9,736 | ||||||
Alternative investment products | 6,352 | 5,368 | 5,279 | ||||||
Subtotal | 203,677 | 168,176 | 183,513 | ||||||
Mutual Funds | |||||||||
Fixed income | 21,480 | 17,175 | 19,012 | ||||||
Liquidity | 57,845 | 58,648 | 66,588 | ||||||
Equity | 3,307 | 5,779 | 3,728 | ||||||
Subtotal | 82,632 | 81,602 | 89,328 | ||||||
Total | $ | 286,309 | $ | 249,778 | $ | 272,841 | |||
Component Changes in Assets Under Management
(Dollar amounts in millions)
(unaudited)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||
All Accounts | |||||||||||||||
Beginning assets under management | $ | 273,599 | $ | 238,116 | $ | 272,841 | $ | 238,584 | |||||||
Net subscriptions | 5,098 | 8,209 | 4,310 | 7,898 | |||||||||||
Market appreciation | 7,612 | 3,453 | 9,158 | 3,296 | |||||||||||
Ending assets under management | $ | 286,309 | $ | 249,778 | $ | 286,309 | $ | 249,778 | |||||||
Separate Accounts | |||||||||||||||
Beginning assets under management | $ | 194,555 | $ | 153,954 | $ | 183,513 | $ | 151,986 | |||||||
Net subscriptions | 2,409 | 10,189 | 11,930 | 12,078 | |||||||||||
Market appreciation | 6,713 | 4,033 | 8,234 | 4,112 | |||||||||||
Ending assets under management | 203,677 | 168,176 | 203,677 | 168,176 | |||||||||||
Mutual Funds | |||||||||||||||
Beginning assets under management | 79,044 | 84,162 | 89,328 | 86,598 | |||||||||||
Net subscriptions (redemptions) | 2,689 | (1,980 | ) | (7,620 | ) | (4,180 | ) | ||||||||
Market appreciation (depreciation) | 899 | (580 | ) | 924 | (816 | ) | |||||||||
Ending assets under management | 82,632 | 81,602 | 82,632 | 81,602 | |||||||||||
Total | $ | 286,309 | $ | 249,778 | $ | 286,309 | $ | 249,778 | |||||||
12
BlackRock, Inc.
Assets Under Management
Quarterly Trend
(Dollar amounts in millions)
(unaudited)
| Quarter Ended | ||||||||||||||||||||||||
| 2002 | 2003 | Six months ended June 30, 2003 | ||||||||||||||||||||||
| June 30 | September 30 | December 31 | March 31 | June 30 | ||||||||||||||||||||
Separate Accounts | ||||||||||||||||||||||||
Fixed Income | ||||||||||||||||||||||||
Beginning assets under management | $ | 123,983 | $ | 140,738 | $ | 145,839 | $ | 156,574 | $ | 167,778 | $ | 156,574 | ||||||||||||
Net subscriptions | 12,270 | 281 | 7,455 | 8,889 | 1,682 | 10,571 | ||||||||||||||||||
Market appreciation | 4,485 | 4,820 | 3,280 | 2,315 | 5,020 | 7,335 | ||||||||||||||||||
Ending assets under management | 140,738 | 145,839 | 156,574 | 167,778 | 174,480 | 174,480 | ||||||||||||||||||
Liquidity | ||||||||||||||||||||||||
Beginning assets under management | 5,441 | 5,516 | 5,438 | 5,491 | 6,040 | 5,491 | ||||||||||||||||||
Net subscriptions (redemptions) | 80 | (92 | ) | 42 | 541 | (677 | ) | (136 | ) | |||||||||||||||
Market appreciation (depreciation) | (5 | ) | 14 | 11 | 8 | 3 | 11 | |||||||||||||||||
Ending assets under management | 5,516 | 5,438 | 5,491 | 6,040 | 5,366 | 5,366 | ||||||||||||||||||
Liquidity-Securities lending | ||||||||||||||||||||||||
Beginning assets under management | 9,544 | 6,435 | 5,693 | 6,433 | 6,344 | 6,433 | ||||||||||||||||||
Net subscriptions (redemptions) | (3,109 | ) | (742 | ) | 740 | (89 | ) | 2,030 | 1,941 | |||||||||||||||
Ending assets under management | 6,435 | 5,693 | 6,433 | 6,344 | 8,374 | 8,374 | ||||||||||||||||||
Equity | ||||||||||||||||||||||||
Beginning assets under management | 9,445 | 10,119 | 8,322 | 9,736 | 8,995 | 9,736 | ||||||||||||||||||
Net subscriptions (redemptions) | 884 | 598 | 867 | 174 | (1,526 | ) | (1,352 | ) | ||||||||||||||||
Market appreciation (depreciation) | (210 | ) | (2,395 | ) | 547 | (915 | ) | 1,636 | 721 | |||||||||||||||
Ending assets under management | 10,119 | 8,322 | 9,736 | 8,995 | 9,105 | 9,105 | ||||||||||||||||||
Alternative investment products | ||||||||||||||||||||||||
Beginning assets under management | 5,541 | 5,368 | 5,490 | 5,279 | 5,398 | 5,279 | ||||||||||||||||||
Net subscriptions (redemptions) | 64 | 312 | (217 | ) | 6 | 900 | 906 | |||||||||||||||||
Market appreciation (depreciation) | (237 | ) | (190 | ) | 6 | 113 | 54 | 167 | ||||||||||||||||
Ending assets under management | 5,368 | 5,490 | 5,279 | 5,398 | 6,352 | 6,352 | ||||||||||||||||||
Total Separate Accounts | ||||||||||||||||||||||||
Beginning assets under management | 153,954 | 168,176 | 170,782 | 183,513 | 194,555 | 183,513 | ||||||||||||||||||
Net subscriptions | 10,189 | 357 | 8,887 | 9,521 | 2,409 | 11,930 | ||||||||||||||||||
Market appreciation | 4,033 | 2,249 | 3,844 | 1,521 | 6,713 | 8,234 | ||||||||||||||||||
Ending assets under management | $ | 168,176 | $ | 170,782 | $ | 183,513 | $ | 194,555 | $ | 203,677 | $ | 203,677 | ||||||||||||
Mutual Funds | ||||||||||||||||||||||||
Fixed Income | ||||||||||||||||||||||||
Beginning assets under management | $ | 16,270 | $ | 17,175 | $ | 18,471 | $ | 19,012 | $ | 20,280 | $ | 19,012 | ||||||||||||
Net subscriptions | 565 | 950 | 677 | 1,104 | 788 | 1,892 | ||||||||||||||||||
Market appreciation (depreciation) | 340 | 346 | (136 | ) | 164 | 412 | 576 | |||||||||||||||||
Ending assets under management | 17,175 | 18,471 | 19,012 | 20,280 | 21,480 | 21,480 | ||||||||||||||||||
Liquidity | ||||||||||||||||||||||||
Beginning assets under management | 59,994 | 58,648 | 52,426 | 66,588 | 55,594 | 66,588 | ||||||||||||||||||
Net subscriptions (redemptions) | (1,347 | ) | (6,223 | ) | 14,160 | (10,995 | ) | 2,247 | (8,748 | ) | ||||||||||||||
Market appreciation | 1 | 1 | 2 | 1 | 4 | 5 | ||||||||||||||||||
Ending assets under management | 58,648 | 52,426 | 66,588 | 55,594 | 57,845 | 57,845 | ||||||||||||||||||
Equity | ||||||||||||||||||||||||
Beginning assets under management | 7,898 | 5,779 | 4,184 | 3,728 | 3,170 | 3,728 | ||||||||||||||||||
Net redemptions | (1,198 | ) | (630 | ) | (698 | ) | (418 | ) | (346 | ) | (764 | ) | ||||||||||||
Market appreciation (depreciation) | (921 | ) | (965 | ) | 242 | (140 | ) | 483 | 343 | |||||||||||||||
Ending assets under management | 5,779 | 4,184 | 3,728 | 3,170 | 3,307 | 3,307 | ||||||||||||||||||
Total Mutual Funds | ||||||||||||||||||||||||
Beginning assets under management | 84,162 | 81,602 | 75,081 | 89,328 | 79,044 | 89,328 | ||||||||||||||||||
Net subscriptions (redemptions) | (1,980 | ) | (5,903 | ) | 14,139 | (10,309 | ) | 2,689 | (7,620 | ) | ||||||||||||||
Market appreciation (depreciation) | (580 | ) | (618 | ) | 108 | 25 | 899 | 924 | ||||||||||||||||
Ending assets under management | $ | 81,602 | $ | 75,081 | $ | 89,328 | $ | 79,044 | $ | 82,632 | $ | 82,632 | ||||||||||||
13
BlackRock, Inc.
Assets Under Management
Quarterly Trend
(Dollar amounts in millions)
(unaudited)
| Quarter Ended | Six months ended June 30, 2003 | |||||||||||||||||||||||
| 2002 | 2003 | |||||||||||||||||||||||
| June 30 | September 30 | December 31 | March 31 | June 30 | ||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||
BlackRock Funds | ||||||||||||||||||||||||
Beginning assets under management | $ | 22,176 | $ | 20,264 | $ | 18,484 | $ | 18,115 | $ | 18,013 | $ | 18,115 | ||||||||||||
Net subscriptions (redemptions) | (1,123 | ) | (976 | ) | (604 | ) | 18 | (213 | ) | (195 | ) | |||||||||||||
Market appreciation (depreciation) | (789 | ) | (804 | ) | 235 | (120 | ) | 610 | 490 | |||||||||||||||
Ending assets under management | 20,264 | 18,484 | 18,115 | 18,013 | 18,410 | 18,410 | ||||||||||||||||||
BlackRock Global Series | ||||||||||||||||||||||||
Beginning assets under management | 247 | 208 | 188 | 211 | 500 | 211 | ||||||||||||||||||
Net subscriptions (redemptions) | (52 | ) | (4 | ) | 9 | 287 | 44 | 331 | ||||||||||||||||
Market appreciation (depreciation) | 13 | (16 | ) | 14 | 2 | 45 | 47 | |||||||||||||||||
Ending assets under management | 208 | 188 | 211 | 500 | 589 | 589 | ||||||||||||||||||
BPIF | ||||||||||||||||||||||||
Beginning assets under management | 52,534 | 51,127 | 45,328 | 59,576 | 48,489 | 59,576 | ||||||||||||||||||
Net subscriptions (redemptions) | (1,407 | ) | (5,799 | ) | 14,248 | (11,087 | ) | 2,674 | (8,413 | ) | ||||||||||||||
Ending assets under management | 51,127 | 45,328 | 59,576 | 48,489 | 51,163 | 51,163 | ||||||||||||||||||
Closed End | ||||||||||||||||||||||||
Beginning assets under management | 8,611 | 9,393 | 10,425 | 10,771 | 11,294 | 10,771 | ||||||||||||||||||
Net subscriptions | 586 | 830 | 487 | 380 | 185 | 565 | ||||||||||||||||||
Market appreciation (depreciation) | 196 | 202 | (141 | ) | 143 | 244 | 387 | |||||||||||||||||
Ending assets under management | 9,393 | 10,425 | 10,771 | 11,294 | 11,723 | 11,723 | ||||||||||||||||||
Short Term Investment Funds (STIF) | ||||||||||||||||||||||||
Beginning assets under management | 594 | 610 | 656 | 655 | 748 | 655 | ||||||||||||||||||
Net subscriptions (redemptions) | 16 | 46 | (1 | ) | 93 | (1 | ) | 92 | ||||||||||||||||
Ending assets under management | 610 | 656 | 655 | 748 | 747 | 747 | ||||||||||||||||||
Total Mutual Funds | ||||||||||||||||||||||||
Beginning assets under management | 84,162 | 81,602 | 75,081 | 89,328 | 79,044 | 89,328 | ||||||||||||||||||
Net subscriptions (redemptions) | (1,980 | ) | (5,903 | ) | 14,139 | (10,309 | ) | 2,689 | (7,620 | ) | ||||||||||||||
Market appreciation (depreciation) | (580 | ) | (618 | ) | 108 | 25 | 899 | 924 | ||||||||||||||||
Ending assets under management | $ | 81,602 | $ | 75,081 | $ | 89,328 | $ | 79,044 | $ | 82,632 | $ | 82,632 | ||||||||||||
14