News Column

BlackRock Reports Second Quarter 2014 Diluted EPS of $4.72, or $4.89 as adjusted

July 16, 2014

  • 19% AUM growth from the second quarter of 2013
  • $38.0 billion of long-term net inflows for the second quarter of 2014
  • 32% operating income growth (15% as adjusted) from the second quarter of 2013
  • 40.4% operating margin (42.4% as adjusted) for the second quarter of 2014
  • 13% diluted EPS growth (18% as adjusted) from the second quarter of 2013
  • Consistent capital management with $250 million of quarterly share repurchases

    NEW YORK--(BUSINESS WIRE)-- BlackRock, Inc. (NYSE:BLK):

    FINANCIAL RESULTS

                             
    (in millions, except per share data)Q2

    2014

      Q2

    2013

      ChangeQ1

    2014

      ChangeSix Months Ended June 30,   Change
            2014     2013    
    AUM $ 4,593,612 $ 3,857,007 19 % $ 4,400,925 4 % $ 4,593,612 $ 3,857,007 19 %
    GAAP basis:
    Revenue $ 2,778 $ 2,482 12 % $ 2,670 4 % $ 5,448 $ 4,931 10 %
    Operating income $ 1,122 $ 849 32 % $ 1,051 7 % $ 2,173 $ 1,758 24 %
    Operating margin 40.4 % 34.2 % 620 bps 39.4 % 100 bps 39.9 % 35.7 % 420 bps
    Net income(1) $ 808 $ 729 11 % $ 756 7 % $ 1,564 $ 1,361 15 %
    Diluted EPS $ 4.72 $ 4.19 13 % $ 4.40 7 % $ 9.12 $ 7.81 17 %
    Weighted average diluted shares 171.2 173.9 (2 %) 171.9 - % 171.5 174.3 (2 %)
    As Adjusted:
    Operating income(2) $ 1,133 $ 982 15 % $ 1,062 7 % $ 2,195 $ 1,903 15 %
    Operating margin(2) 42.4 % 41.3 % 110 bps 41.4 % 100 bps 41.9 % 40.6 % 130 bps
    Net income(1) (2) $ 837 $ 722 16 % $ 762 10 % $ 1,599 $ 1,359 18 %
    Diluted EPS(2) $ 4.89     $ 4.15     18 % $ 4.43     10 % $ 9.32   $ 7.80     19 %


    (1) Net income represents net income attributable to BlackRock, Inc.

    (2) See notes (1) through (5) to the Condensed Consolidated Statements of Income and Supplemental Information for more information on as adjusted items and the reconciliation to GAAP.

    BlackRock, Inc. (NYSE:BLK) today reported financial results for the three and six months ended June 30, 2014.

    “In the second quarter, we saw strong revenue growth driven by a combination of robust organic revenue gains and market tailwinds. Our results, with revenue up 12% and as adjusted EPS up 18% year-over-year, once again demonstrate the benefits of our diverse platform,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “During the quarter we generated 4% annualized organic growth or $38.0 billion in long-term net new business. We continue to execute on long-term growth strategies by focusing on key industry trends impacting our clients, including ETFs, alternatives, retirement, outcomes and solutions.

    “We saw $13.1 billion of long-term net inflows in Retail as we continued to raise our brand profile, evolve our product set and deepen our distribution relationships. Retail flows were driven by clients’ interest in efficient beta and our outcome-oriented strategies – including multi-asset, alternatives and unconstrained fixed income offerings. This included $3.0 billion in flows to our unconstrained Strategic Income Opportunities fund and $1.1 billion to our Multi-Asset Income fund.

    iShares flows of $30.4 billion led the industry in market share for the quarter. Liquidity-oriented investors increased their participation in rising developed and emerging markets, while buy-and-hold investors continued to access our Core Series product suite, which attracted $5.5 billion in the US alone this quarter.

    “Among institutional clients, we continued to see strong interest in our multi-asset class offerings, such as our LifePath target-date suite and fiduciary mandates, as well as illiquid alternatives, where we again raised more than $1 billion in commitments.

    “BlackRock remains committed to top quartile performance across all of our investment products. Our active fixed income product suite continues to excel, with 90% of taxable assets above benchmark or peer median for the three-year period. Similarly strong investment track records in our scientific active equity, alternatives and index businesses are delivering results for our clients and position us well for future growth. While performance in fundamental equities remains challenged, we continue to make substantial investments to restructure this business and remain confident in our new teams, their processes and the future outlook for growth over time.

    “Looking ahead to the second half of 2014, our commitment to alpha generation, product innovation and broad-based distribution positions us well to drive results for our clients and shareholders. The depth of our platform is built on the quality of our people and the strength of our culture, and I want to once again thank BlackRock employees for their commitment to helping our clients build better financial futures.”

    RESULTS BY CLIENT TYPE

     

                       
    (in millions), (unaudited)   Q2 2014

    Net flows

      June 30, 2014

    AUM

      Q2 2014

    Base Fees(1)

      June 30, 2014

    AUM

    % of Total

      Q2 2014

    Base Fees(1)

    % of Total

    Retail  

    $



    13,128

      $ 534,502   $

    823

      12 %   35 %
    iShares 30,445 993,832 817 23 % 35 %
    Institutional:
    Active 1,013 970,433

    470

    23 % 20 %
    Index   (6,562 )     1,795,938    

    251

      42 %   10 %
    Total institutional   (5,549 )     2,766,371    

    721

      65 %   30 %
    Total long-term   $ 38,024     $ 4,294,705   $ 2,361   100 %   100 %


    RESULTS BY PRODUCT

     

                       
    (in millions), (unaudited)   Q2 2014

    Net flows

      June 30, 2014

    AUM

      Q2 2014

    Base Fees(1)

      June 30, 2014

    AUM

    % of Total

      Q2 2014

    Base Fees(1)

    % of Total

    Equity   $ 9,707   $ 2,462,585   $ 1,338   57 %   56 %
    Fixed income 21,255 1,340,725 539 31 % 23 %
    Multi-asset 6,795 374,473 300 9 % 13 %
    Alternatives   267     116,922     184   3 %   8 %
    Total long-term   $ 38,024   $ 4,294,705   $ 2,361   100 %   100 %


    (1) Base fees include investment advisory, administration fees and securities lending revenue.

    Long-Term Business Highlights

    Long-term net inflows of $27.4 billion and $13.7 billion from clients in the Americas and EMEA, respectively, were partially offset by net outflows of $3.1 billion from Asia-Pacific clients. At June 30, 2014, BlackRock managed 60% of long-term AUM for investors in the Americas and 40% for clients in EMEA and Asia-Pacific.

    A discussion of the Company’s net flows by client type for the second quarter of 2014 is presented below.

  • Retail long-term net inflows of $13.1 billion included net inflows of $4.2 billion in the United States and $8.9 billion internationally. Flows were led by fixed income net inflows of $10.1 billion, which reflected strong interest in unconstrained fixed income offerings, including $3.0 billion of net inflows into our Strategic Income Opportunities fund. Equity net inflows of $1.5 billion were driven by strong flows into European index mutual funds. Multi-asset class net inflows were led by our Multi-Asset Income fund which raised over $1 billion of net new assets. Alternative U.S. mutual funds generated $0.7 billion in net inflows.
  • iShares® long-term net inflows of $30.4 billion included U.S. and European iShares net inflows of $23.1 billion and $8.2 billion, respectively. Equity net inflows totaled $20.6 billion, with strength in both developed and emerging markets. Fixed income net inflows of $9.5 billion represented the leading share of fixed income industry ETF flows for the quarter. The U.S. Core Series generated $5.5 billion of net inflows.
  • Institutional active long-term net inflows of $1.0 billion were led by multi-asset class net inflows of $5.3 billion, which reflected ongoing demand for our LifePath® target-date suite and fiduciary mandate wins. Equity net outflows of $4.5 billion included fundamental net outflows of $2.4 billion and scientific net outflows of $2.1 billion. Alternatives net outflows of $0.6 billion included $0.9 billion of capital successfully returned to investors.
  • Institutional index long-term net outflows of $6.6 billion were driven by equity net outflows of $7.9 billion related to client asset allocation decisions.

    Cash management AUM increased 2% to $268.4 billion.

    Advisory AUM decreased 4% to $30.5 billion due to disposition portfolio liquidations. The execution of these liquidations contributed to BlackRock Solutions® and advisory revenue in the quarter.

    INVESTMENT PERFORMANCE AT JUNE 30, 2014(1)

     

               

     

      One-year period   Three-year period   Five-year period
    Fixed Income:

    Actively managed products above benchmark or peer median

    Taxable 83 % 90 % 91 %
    Tax-exempt 69 % 70 % 72 %
    Index products within or above applicable tolerance   97 %   98 %   98 %
    Equity:

    Actively managed products above benchmark or peer median

    Fundamental 35 % 47 % 49 %
    Scientific 81 % 93 % 93 %
    Index products within or above applicable tolerance   95 %   97 %   97 %


    (1) Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to performance disclosure detail.

    Teleconference, Webcast and Presentation Information

    Chairman and Chief Executive Officer, Laurence D. Fink, and Chief Financial Officer, Gary S. Shedlin, will host a teleconference call for investors and analysts on Wednesday, July 16, 2014 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 68909181). 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, July 16, 2014 and ending at midnight on Wednesday, July 30, 2014. 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 68909181. 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 June 30, 2014, BlackRock’s AUM was $4.594 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 June 30, 2014, the firm had approximately 11,600 employees in more than 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 | Twitter: @blackrock_news | Blog: www.blackrockblog.com | LinkedIn: www.linkedin.com/company/blackrock

             

    CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

    (in millions, except per share data), (unaudited)

     
    Three Months
    Three Months EndedEnded
    June 30,   March 31,  
    20142013Change2014Change
    Revenue
    Investment advisory, administration fees and securities lending revenue $2,434$2,177$257$2,291$143
    Investment advisory performance fees 115 89 26 158 (43)
    BlackRock Solutions and advisory 146 138 8 154 (8)
    Distribution fees 18 18 - 19 (1)
    Other revenue 65 60 5 48 17
     
    Total revenue 2,778 2,482 296 2,670 108
     
    Expense
    Employee compensation and benefits 948 864 84 982 (34)
    Distribution and servicing costs 89 90 (1) 89 -
    Amortization of deferred sales commissions 14 12 2 15 (1)
    Direct fund expense 187 162 25 179 8
    General and administration 377 465 (88) 313 64
    Amortization of intangible assets 41 40 1 41 -
     

    Total expense

    1,656 1,633 23 1,619 37
     
    Operating income 1,122 849 273 1,051 71
     
    Nonoperating income (expense)
    Net gain (loss) on investments 45 141 (96) 76 (31)
    Net gain (loss) on consolidated variable interest entities 28 (23) 51 (16) 44
    Interest and dividend income 3 4 (1) 10 (7)
    Interest expense (60) (53) (7) (53) (7)
     
    Total nonoperating income (expense) 16 69 (53) 17 (1)
     
    Income before income taxes 1,138 918 220 1,068 70
    Income tax expense 297 212 85 324 (27)
     
    Net income 841 706 135 744 97
    Less:
    Net income (loss) attributable to noncontrolling interests 33 (23) 56 (12) 45
     
    Net income attributable to BlackRock, Inc.$808$729$79$756$52
     
    Weighted-average common shares outstanding
    Basic 168,712,221 170,648,731 (1,936,510) 169,081,421 (369,200)
    Diluted 171,150,153 173,873,583 (2,723,430) 171,933,803 (783,650)
    Earnings per share attributable to BlackRock, Inc. common stockholders (5)
    Basic $4.79$4.27$0.52$4.47$0.32
    Diluted $4.72$4.19$0.53$4.40$0.32
    Cash dividends declared and paid per share$1.93$1.68$0.25$1.93 $-
     

    Supplemental information:

     
    AUM (end of period) $4,593,612$3,857,007$736,605$4,400,925$192,687
    Shares outstanding (end of period) 168,363,315 170,285,093 (1,921,778) 169,138,109 (774,794)
    GAAP:
    Operating margin 40.4%

    34.2%

    620 bps 39.4% 100 bps
    Effective tax rate 26.8%

    22.5%

    430 bps 30.0% (320) bps
    As adjusted:
    Operating income (1) $1,133$982$151$1,062$71
    Operating margin (1) 42.4%

    41.3%

    110 bps 41.4% 100 bps
    Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2) ($20) $12 ($32) $26 ($46)
    Net income attributable to BlackRock, Inc. (3) (4) $837$722$115$762$75
    Diluted earnings attributable to BlackRock, Inc. common stockholders per share (3) (4) (5) $4.89$4.15$0.74$4.43$0.46
    Effective tax rate   24.8%  

    27.3%

      (250) bps   30.0%   (520) bps
     


    See the reconciliation to GAAP and notes (1) through (5) for more information on as adjusted items.

         
    CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

    (in millions, except per share data), (unaudited)

                 
    Six Months Ended

    June 30,

    20142013Change
    Revenue
    Investment advisory, administration fees and securities lending revenue $4,725$4,306$419
    Investment advisory performance fees 273 197 76
    BlackRock Solutions and advisory 300 264 36
    Distribution fees 37 35 2
    Other revenue 113 129 (16)
     
    Total revenue

    5,448

    4,931 517
     
    Expense
    Employee compensation and benefits 1,930 1,769 161
    Distribution and servicing costs 178 181

    (3)

    Amortization of deferred sales commissions 29 24 5
    Direct fund expense 366 323 43
    General and administration 690 796 (106)
    Amortization of intangible assets 82 80 2
     
    Total expense 3,275 3,173 102
     
     
    Operating income 2,173 1,758 415
     
    Nonoperating income (expense)
    Net gain (loss) on investments 121 203 (82)
    Net gain (loss) on consolidated variable interest entities 12 4 8
    Interest and dividend income 13 10 3
    Interest expense (113) (107) (6)
     
    Total nonoperating income (expense) 33 110 (77)
     
    Income before income taxes 2,206 1,868 338
    Income tax expense 621 496 125
     
    Net income 1,585 1,372 213
    Less:
    Net income (loss) attributable to noncontrolling interests 21 11 10
     
    Net income attributable to BlackRock, Inc.$1,564$1,361$203
     
    Weighted-average common shares outstanding
    Basic 168,895,801 170,973,462

    (2,077,661)

    Diluted 171,540,018 174,268,870

    (2,728,852)

    Earnings per share attributable to BlackRock, Inc. common stockholders (5)
    Basic $9.26$7.96$1.30
    Diluted $9.12$7.81$1.31
    Cash dividends declared and paid per share$3.86$3.36$0.50
     

    Supplemental information:

     
    AUM (end of period) $4,593,612$3,857,007$736,605
    Shares outstanding (end of period) 168,363,315 170,285,093

    (1,921,778)

    GAAP:
    Operating margin 39.9% 35.7% 420 bps
    Effective tax rate 28.4% 26.7% 170 bps
    As adjusted:
    Operating income (1) $2,195$1,903$292
    Operating margin (1) 41.9% 40.6 % 130 bps
    Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2) $6$15 ($9)
    Net income attributable to BlackRock, Inc. (3) (4) $1,599$1,359$240
    Diluted earnings attributable to BlackRock, Inc. common stockholders per share (3) (4) (5) $9.32$7.80$1.52
    Effective tax rate   27.4%   29.1%   (170) bps
     


    See reconciliation to GAAP and notes (1) through (5) for more information on as adjusted items.

               

    ASSETS UNDER MANAGEMENT

    (in millions), (unaudited)

     

    Current Quarter Component Changes by Client Type and Product

                             
    Net
    March 31,subscriptionsJune 30,
    2014(redemptions)Market changeFX impact (1)2014Average AUM (2)
    Retail:
    Equity $ 208,238$ 1,524$ 6,006$ 701$ 216,469

    $ 211,420

    Fixed income 160,448 10,132 2,027 65 172,672

    166,365

    Multi-asset 121,548 1,031 3,703 110 126,392

    123,650

    Alternatives 18,483 441 59 (14) 18,969

    18,891

     
    Retail subtotal 508,717 13,128 11,795 862 534,502

    520,326

    iShares:
    Equity 723,973 20,636 28,447 997 774,053 746,481
    Fixed income 188,022 9,474 2,678 345 200,519 195,811
    Multi-asset 1,437 133 48 6 1,624 1,529
    Alternatives 16,948 202 480 6 17,636 17,108
     
    iShares subtotal 930,380 30,445 31,653 1,354 993,832 960,929
    Institutional:
    Active:
    Equity 132,374 (4,515) 4,746 1,175 133,780

    132,447

    Fixed income 509,692 852 10,814 2,307 523,665

    516,970

    Multi-asset 223,865 5,257 9,285 800 239,207

    231,654

    Alternatives 73,723 (581) 409 230 73,781

    73,662

     
    Active subtotal 939,654 1,013 25,254 4,512 970,433

    954,733

    Index:
    Equity 1,283,349 (7,938) 56,886 5,986 1,338,283

    1,305,563

    Fixed income 430,852 797 6,101 6,119 443,869

    438,521

    Multi-asset 6,381 374 432 63 7,250 6,721
    Alternatives 6,273 205 (26) 84 6,536 6,406
     
    Index subtotal 1,726,855 (6,562) 63,393 12,252 1,795,938

    1,757,211

     
    Institutional subtotal 2,666,509 (5,549) 88,647 16,764 2,766,371

    2,711,944

     
    Long-term4,105,60638,024132,09518,9804,294,705$ 4,193,199
     
    Cash management 263,533 3,512 380 963 268,388
    Advisory (3) 31,786 (2,018) 171 580 30,519
     
    Total$ 4,400,925$ 39,518$ 132,646$ 20,523$ 4,593,612
                             
     

    Current Quarter Component Changes by Product

     
        Net        
    March 31,subscriptionsJune 30,
    2014(redemptions)Market changeFX impact (1)2014Average AUM (2)
    Equity:
    Active $ 314,850$ (5,342)$ 9,835$ 1,487$ 320,830$ 316,479
    iShares 723,973 20,636 28,447 997 774,053 746,481
    Fixed income:
    Active 665,151 9,566 12,749 2,258 689,724

    677,946

    iShares 188,022 9,474 2,678 345 200,519 195,811
    Multi-asset 353,231 6,795 13,468 979 374,473

    363,554

    Alternatives:
    Core 87,865 274 464 155 88,758 88,449
    Currency and commodities (4) 27,562 (7) 458 151 28,164 27,618
     
    Subtotal2,360,65441,39668,0996,3722,476,5212,416,338
    Non-ETF Index:
    Equity 1,309,111 (5,587) 57,803 6,375 1,367,702 1,332,951
    Fixed income 435,841 2,215 6,193 6,233 450,482 443,910
     
    Subtotal Non-ETF Index1,744,952(3,372)63,99612,6081,818,1841,776,861
     
    Long-term$ 4,105,606$ 38,024$ 132,095$ 18,980$ 4,294,705$ 4,193,199
                             
    (1)   Foreign exchange reflects the impact of converting non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
    (2) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing four months.
    (3) Advisory AUM represents long-term portfolio liquidation assignments.
    (4)

    Amounts include commodity iShares.

     
               
    ASSETS UNDER MANAGEMENT

    (in millions), (unaudited)

     
    Year-to-Date Component Changes by Client Type and Product
                             
    Net
    December 31,subscriptionsJune 30,
    2013(redemptions)Market changeFX impact (1)2014Average AUM (2)
    Retail:
    Equity $ 203,035$ 3,707$ 8,721$ 1,006$ 216,469$ 207,697
    Fixed income 151,475 16,190 4,881 126 172,672 161,335
    Multi-asset 117,054 4,668 4,467 203 126,392 121,232
    Alternatives 16,213 2,566 190 - 18,969 18,027
     
    Retail subtotal 487,777 27,131 18,259 1,335 534,502 508,291
    iShares:
    Equity 718,135 21,569 34,222 127 774,053 729,635
    Fixed income 178,835 16,098 5,539 47 200,519 190,868
    Multi-asset 1,310 244 68 2 1,624 1,454
    Alternatives 16,092 292 1,257 (5) 17,636 16,893
     
    iShares subtotal 914,372 38,203 41,086 171 993,832 938,850
    Institutional:
    Active:
    Equity 138,726 (12,548) 6,255 1,347 133,780 134,127
    Fixed income 505,109 (6,169) 21,580 3,145 523,665 512,957
    Multi-asset 215,276 8,106 14,949 876 239,207 226,396
    Alternatives 73,299 (987) 1,083 386 73,781 73,590
     
    Active subtotal 932,410 (11,598) 43,867 5,754 970,433 947,070
    Index:
    Equity 1,257,799 803 71,702 7,979 1,338,283 1,281,215
    Fixed income 406,767 10,778 18,749 7,575 443,869 427,788
    Multi-asset 7,574 (1,233) 776 133 7,250 6,736
    Alternatives 5,510 667 253 106 6,536 6,177
     
    Index subtotal 1,677,650 11,015 91,480 15,793 1,795,938 1,721,916
     
    Institutional subtotal 2,610,060 (583) 135,347 21,547 2,766,371 2,668,986
     
    Long-term4,012,20964,751194,69223,0534,294,705$ 4,116,127
     
    Cash management 275,554 (8,920) 505 1,249 268,388
    Advisory (3) 36,325 (5,791) 407 (422) 30,519
     
    Total$ 4,324,088$ 50,040$ 195,604$ 23,880$ 4,593,612
                             
               

    Year-to-Date Component Changes by Product

                             
    Net
    December 31,subscriptionsJune 30,
    2013(redemptions)Market changeFX impact (1)2014Average AUM (2)
    Equity:
    Active $ 317,262$ (12,257)$ 13,951$ 1,874$ 320,830$ 315,594
    iShares 718,135 21,569 34,222 127 774,053 729,635
    Fixed income:
    Active 652,209 8,108 26,279 3,128 689,724 669,229
    iShares 178,835 16,098 5,539 47 200,519 190,868
    Multi-asset 341,214 11,785 20,260 1,214 374,473 355,818
    Alternatives:
    Core 85,026 2,208 1,269 255 88,758 87,362
    Currency and commodities (4) 26,088 330 1,514 232 28,164 27,325
     
    Subtotal2,318,76947,841103,0346,8772,476,5212,375,831
    Non-ETF Index:
    Equity 1,282,298 4,219 72,727 8,458 1,367,702 1,307,445
    Fixed income 411,142 12,691 18,931 7,718 450,482 432,851
     
    Subtotal Non-ETF Index1,693,44016,91091,65816,1761,818,1841,740,296
     
    Long-term$ 4,012,209$ 64,751$ 194,692$ 23,053$ 4,294,705$ 4,116,127
                             
    (1)   Foreign exchange reflects the impact of converting non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.
    (2) Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing seven months.
    (3) Advisory AUM represents long-term portfolio liquidation assignments.
    (4)

    Amounts include commodity iShares.

     
                   
    ASSETS UNDER MANAGEMENT

    (in millions), (unaudited)

     
    Year-over-Year Component Changes by Client Type and Product
                                     
    Net
    June 30,subscriptionsJune 30,
    2013(redemptions)Adjustments (1)Acquisitions (2)Market changeFX impact (3)2014Average AUM (4)
    Retail:
    Equity $ 161,441$ 9,710$ 13,066 $ - $ 28,505$ 3,747$ 216,469$ 192,279
    Fixed income 141,541 22,315 3,897 - 4,214 705 172,672 153,028
    Multi-asset 99,105 14,111 2,663 - 9,994 519 126,392 114,171
    Alternatives 12,292 5,927 - 136 342 272 18,969 16,220
     
    Retail subtotal 414,379 52,063 19,626 136 43,055 5,243 534,502 475,698
    iShares:
    Equity 577,268 66,754 - 13,021 112,605 4,405 774,053 689,973
    Fixed income 180,943 11,112 - 1,294 4,945 2,225 200,519 186,723
    Multi-asset 1,107 370 - - 147 - 1,624 1,326
    Alternatives 15,079 (694) - 1,645 1,543 63 17,636 17,544
     
    iShares subtotal 774,397 77,542 - 15,960 119,240 6,693 993,832 895,566
    Institutional:
    Active:
    Equity 126,425 (20,470) - - 23,515 4,310 133,780 132,440
    Fixed income 490,490 (687) - - 25,642 8,220 523,665 506,559
    Multi-asset 180,310 22,454 3,335 - 26,578 6,530 239,207 209,548
    Alternatives 64,006 (4,841) - 10,836 3,010 770 73,781 70,829
     
    Active subtotal 861,231 (3,544) 3,335 10,836 78,745 19,830 970,433 919,376
    Index:
    Equity 1,107,981 (6,530) (18,238) - 233,464 21,606 1,338,283 1,235,124
    Fixed income 392,385 13,144 (4,723) - 19,947 23,116 443,869 415,862
    Multi-asset 8,783 (2,931) - - 1,145 253 7,250 7,547
    Alternatives 5,299 769 - - 122 346 6,536 5,855
     
    Index subtotal 1,514,448 4,452 (22,961) - 254,678 45,321 1,795,938 1,664,388
     
    Institutional subtotal 2,375,679 908 (19,626) 10,836 333,423 65,151 2,766,371 2,583,764
     
    Long-term3,564,455130,513-26,932495,71877,0874,294,705$ 3,955,028
     
    Cash management 252,562 9,799 - - 768 5,259 268,388
    Advisory (5) 39,990 (9,231) - - 44 (284) 30,519
     
    Total$ 3,857,007$ 131,081$ - $ 26,932$ 496,530$ 82,062$ 4,593,612
                                     
                   

    Year-over-Year Component Changes by Product

     
    Net
    June 30,subscriptionsJune 30,
    2013(redemptions)Adjustments (1)Acquisitions (2)Market changeFX impact (3)2014Average AUM (4)
    Equity:
    Active $ 280,332$ (16,428) $ - $ - $ 49,612$ 7,314$ 320,830$ 306,534
    iShares 577,268 66,754 - 13,021 112,605 4,405 774,053 689,973
    Fixed income:
    Active 631,808 19,563 - - 29,667 8,686 689,724 656,746
    iShares 180,943 11,112 - 1,294 4,945 2,225 200,519 186,723
    Multi-asset 289,305 34,004 5,998 - 37,864 7,302 374,473 332,592
    Alternatives:
    Core 70,227 2,994 - 10,972 3,428 1,137 88,758 82,177
    Currency and commodities (6) 26,449 (1,833) - 1,645 1,589 314 28,164 28,271
     
    Subtotal2,056,332116,1665,99826,932239,71031,3832,476,5212,283,016
    Non-ETF Index:
    Equity 1,115,515 (862)

    (5,172)

    - 235,872 22,349 1,367,702 1,253,309
    Fixed income 392,608 15,209

    (826)

    - 20,136 23,355 450,482 418,703
     
    Subtotal Non-ETF Index1,508,12314,347

    (5,998)

    -256,00845,7041,818,1841,672,012
     
    Long-term$ 3,564,455$ 130,513$ -$ 26,932$ 495,718$ 77,087$ 4,294,705$ 3,955,028
                                     
    (1)   Amounts include $19.6 billion of AUM related to fund ranges reclassed from institutional to retail and $6.0 billion of AUM reclassed from non-ETF index equity and fixed income to multi-asset.
    (2) Amounts represent $16.0 billion of AUM acquired in the Credit Suisse ETF franchise acquisition in July 2013 and $11.0 billion of AUM acquired in the MGPA acquisition in October 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.

     
                   

    SUMMARY OF REVENUE

    (in millions), (unaudited)

                                     

    Three Months Ended

    June 30,

    Three Months

    Ended

    Six Months Ended

    June 30,

    2014

    2013

    Change

    March 31, 2014

    Change

    2014

    2013

    Change

     
     
    Investment advisory, administration fees and securities lending revenue:
    Equity:
    Active $478$432$46$463$15$941$865$76
    iShares 677 584 93 634 43 1,311 1,155 156
    Fixed income:
    Active 346 322 24 324 22 670 634 36
    iShares 122 120 2 113 9 235 236 (1)
    Multi-asset 300 253 47 286 14 586 501 85
    Alternatives:
    Core 161 136 25 159 2 320 272 48
    Currency and commodities 23 25 (2) 22 1 45 55 (10)
     
    Subtotal 2,107 1,872 235 2,001 106 4,108 3,718 390
    Non-ETF Index:
    Equity 183 161 22 158 25 341 301 40
    Fixed income 71 61 10 58 13 129 118 11
     
    Subtotal Non-ETF Index 254 222 32 216 38 470 419 51
     
    Long-term 2,361 2,094 267 2,217 144 4,578 4,137 441
    Cash management 73 83 (10) 74 (1) 147 169 (22)
     
    Total base fees 2,434 2,177 257 2,291 143 4,725 4,306 419
     
    Investment advisory performance fees:
    Equity 31 17 14 22 9 53 34 19
    Fixed income 5 9 (4) 8 (3) 13 10 3
    Multi-asset 10 3 7 3 7 13 10 3
    Alternatives 69 60 9 125 (56) 194 143 51
     
    Total 115 89 26 158 (43) 273 197 76
     
    BlackRock Solutions and advisory 146 138 8 154 (8) 300 264 36
    Distribution fees 18 18 - 19 (1) 37 35 2
    Other revenue 65 60 5 48 17 113 129 (16)
     
    Total revenue $2,778$2,482$296$ 2,670$108$5,448$4,931$517
                                     
     


    Highlights

  • Investment advisory, administration fees and securities lending revenue increased $257 million from the second quarter of 2013 due to higher long-term average AUM. Securities lending fees of $140 million in the current quarter increased $4 million from the second quarter of 2013.



    Investment advisory, administration fees and securities lending revenue increased $143 million from the first quarter of 2014 due to higher long-term average AUM, the effect of one additional revenue day in the current quarter and seasonally higher securities lending fees. Securities lending fees increased $35 million from the first quarter of 2014 driven by higher seasonal demand.
  • Performance fees increased $26 million from the second quarter of 2013, primarily reflecting higher fees from equity and alternative products.



    Performance fees declined $43 million from the first quarter of 2014, primarily reflecting a large performance fee in the first quarter of 2014 associated with the planned final liquidation of a closed-end mortgage fund.
  • BlackRock Solutions and advisory revenue increased $8 million from the second quarter of 2013 due to higher revenue from Aladdin® mandates. BlackRock Solutions and advisory revenue included $109 million in Aladdin business revenue in the current quarter compared with $98 million in the second quarter of 2013.
  • Other revenue increased $17 million from the first quarter of 2014 primarily due to higher transition management service fees and higher earnings from certain strategic investments.
                   

    SUMMARY OF EXPENSE

    (in millions), (unaudited)

               

     

               

    Three

    Three

    Months Ended

    Months

    Six Months

    June 30,

    Ended

    Ended June 30,

     

    March 31,

     

    2014

    2013

    Change

    2014

    Change

    2014

    2013

    Change

     
     
    Operating Expense
    Employee compensation and benefits $948$864$84$982 ($34) $1,930$1,769$161
    Distribution and servicing costs 89 90 (1) 89 - 178 181 (3)
    Amortization of deferred sales commissions 14 12 2 15 (1) 29 24 5
    Direct fund expense 187 162 25 179 8 366 323 43
    General and administration 377 465 (88) 313 64 690 796 (106)
    Amortization of intangible assets 41 40 1 41 - 82 80 2
    Total Operating Expense$1,656$1,633$23$1,619$37$3,275$3,173$102
                                     


    Highlights

  • Employee compensation and benefits increased $84 million from the second quarter of 2013, reflecting higher headcount and higher incentive compensation driven by higher operating income.



    Employee compensation and benefits decreased $34 million from the first quarter of 2014, primarily reflecting lower seasonal employer payroll taxes, partially offset by higher incentive compensation.
  • General and administration expense decreased $88 million from the second quarter of 2013, largely driven by the $124 million expense related to the charitable contribution of approximately six million units of the Company’s equity method investment in PennyMac in the second quarter of 2013 (the “Charitable Contribution”), which has been excluded from as adjusted results. The second quarter of 2014 included higher other expense, including elevated legal and regulatory expense.



    General and administration expense increased $64 million from the first quarter of 2014, primarily reflecting the timing of marketing and promotional spend, increased occupancy expense, reflecting a one-time benefit from the reversal of a real estate-related retirement obligation in the first quarter of 2014, which is no longer required to be funded and higher other expense, including elevated legal and regulatory expense.
                     

    SUMMARY OF NONOPERATING INCOME (EXPENSE)

    (in millions), (unaudited)

     
                                         
    Three Months

    Ended

    June 30,
    Three Months

    Ended

    March 31,

    2014
    Six Months Ended

    June 30,
    20142013ChangeChange20142013Change
    Nonoperating income (expense), GAAP basis $16$69 ($53) $17 ($1) $33$110 ($77)
    Less: Net income (loss) attributable to NCI 33

    (23)

    56 (12) 45 21 11 10
     
    Nonoperating income (expense)(1) ($17) $92 ($109) $29 ($46) $12$99 ($87)
     

     

     

    Estimated

    economic

    investments at

    June 30, 2014(2)

     

    Three Months

    Ended

    June 30,

    Three Months

    Ended

    March 31,

    2014

    Six Months Ended

    June 30,

     
    20142013ChangeChange20142013Change
    Net gain (loss) on investments(1)
    Private equity 20-25% $12$4$8$44 ($32) $56$23$33
    Real estate 5-10% 8 7 1 2 6 10 10 -
    Distressed credit/mortgage funds/opportunistic funds 5-10% 6 4 2 10 (4) 16 23 (7)
    Hedge funds/funds of hedge funds 20-25% 8 5 3 11 (3) 19 8 11
    Other investments(3) 35-40% 3 2 1 2 1 5 9 (4)
     
    Subtotal 37 22 15 69 (32) 106 73 33
    Gain related to the PennyMac IPO - 39 (39) - - - 39 (39)
    Gain related to the Charitable Contribution - 80 (80) - - - 80 (80)
    Investments related to deferred compensation plans 3 - 3 3 - 6 4 2
     
    Total net gain (loss) on investments(1) 40 141 (101) 72 (32) 112 196 (84)
    Interest and dividend income 3 4

    (1)

    10 (7) 13 10 3
    Interest expense (60)

    (53)

    (7)

    (53)

    (7) (113) (107) (6)
     
    Net interest expense (57)

    (49)

    (8)

    (43)

    (14) (100) (97) (3)
     
    Total nonoperating income (expense)(1) (17) 92 (109) 29 (46) 12 99 (87)
    Gain related to the Charitable Contribution -

    (80)

    80 - - - (80) 80
    Compensation expense related to (appreciation) depreciation on deferred compensation plans (3) -

    (3)

    (3)

    -

    (6)

    (4) (2)
     
    Nonoperating income (expense), as adjusted(1) ($20) $12 ($32) $26 ($46) $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 June 30, 2014. Economic investment amounts at March 31, 2014 for private equity, real estate, distressed credit/mortgage funds/opportunistic funds, hedge funds/funds of hedge funds and other investments were $292 million, $127 million, $142 million, $327 million and $514 million, respectively. See the 2014 first quarter Form 10-Q for more information.
    (3) Amounts include net gains (losses) related to equity and fixed income investments, and BlackRock’s seed capital hedging program.


    Highlights

  • Net gains on investments for the current quarter decreased $101 million from the second quarter of 2013. The second quarter of 2013 included a noncash, nonoperating pre-tax gain of $80 million related to the Charitable Contribution, which has been excluded from as adjusted results, and a $39 million gain related to the Company’s interest in PennyMac subsequent to its initial public offering (the “PennyMac IPO”).



    Net gains on investments for the current quarter decreased $32 million from the first quarter of 2014 due to the positive impact of the monetization of a non-strategic, opportunistic private equity investment included in the prior quarter.
               
    INCOME TAX EXPENSE

    (in millions), (unaudited)

                             
    Three

    Months Ended

    June 30,

    Three

    Months

    Ended

    March 31,

    Six Months Ended

    June 30,

    2014   2013Change

    2014

    Change

    2014   2013Change
    Income tax expense   $297   $212   $85   $324   ($27)   $621   $496   $125
     


    Highlights

  • The second quarter 2014 GAAP effective income tax rate was 26.8% compared with 22.5% for the second quarter of 2013. The second quarter 2014 GAAP effective income tax rate, as adjusted was 24.8% compared with 27.3% for the second quarter of 2013.



    The second quarter 2014 GAAP tax rate included a $23 million net noncash expense, primarily associated with the revaluation of certain deferred tax liabilities arising from the state and local tax effect of changes in the Company’s organizational structure, which has been excluded from the as adjusted results. In addition, the second quarter 2014 GAAP tax rate benefited from an improvement in the geographic mix of earnings and included a $34 million net tax benefit related to several favorable nonrecurring items.



    The second quarter 2013 GAAP tax rate included a net tax benefit of approximately $57 million recognized in connection with the Charitable Contribution, which has been excluded from as adjusted results. In addition, the second quarter 2013 GAAP tax rate included a tax benefit of approximately $29 million, primarily due to the realization of loss carryforwards.

    ECONOMIC TANGIBLE ASSETS

    (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 noncontrolling 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.

    Economic tangible assets include cash, receivables, seed and co-investments, regulatory investments and other assets.

             
      June 30,   December 31,

    2014 (Est.)

    2013

    Total balance sheet assets

    $227

    $220
    Separate account assets and separate account collateral held under securities lending agreements

    (181)

    (177)
    Consolidated VIEs/sponsored investment funds

    (3)

    (3)

    Goodwill and intangible assets, net

    (30)

    (30)

    Economic tangible assets

    $13

    $10
             
           

    RECONCILIATION OF U.S. GAAP OPERATING INCOME AND OPERATING MARGIN TO OPERATING INCOME AND OPERATING MARGIN, AS ADJUSTED

    (in millions), (unaudited)

                     
    Three Months EndedSix Months Ended
    June 30,

    March 31,

    June 30,
    20142013

    2014

    2014   2013
    Operating income, GAAP basis$1,122$849$1,051$2,173$1,758
    Non-GAAP expense adjustments:
    PNC LTIP funding obligation 8 9 8 16 17
    Charitable Contribution - 124 - - 124
    Compensation expense related to appreciation (depreciation) on deferred compensation plans 3 - 3 6 4
     
    Operating income, as adjusted1,1339821,0622,1951,903
    Closed-end fund launch costs - - - - 16
    Closed-end fund launch commissions - - - - 2
     
    Operating income used for operating margin measurement $1,133$982$1,062$2,195$1,921
     
    Revenue, GAAP basis $2,778$2,482$2,670$5,448$4,931
    Non-GAAP adjustments:
    Distribution and servicing costs

    (89)

    (90)

    (89) (178) (181)
    Amortization of deferred sales commissions

    (14)

    (12)

    (15) (29) (24)
     
    Revenue used for operating margin measurement $2,675$2,380$2,566$5,241$4,726
     
    Operating margin, GAAP basis40.4%34.2%39.4%39.9%35.7%
     
    Operating margin, as adjusted42.4%41.3%41.4%41.9%40.6%
                         

    See note (1) to the Condensed Consolidated Statements of Income and Supplemental Information for more information on as adjusted items and the reconciliation to GAAP.

     
       

    RECONCILIATION OF U.S. GAAP NONOPERATING INCOME NET OF NCI TO NONOPERATING INCOME NET OF NCI, AS ADJUSTED

    (in millions), (unaudited)

             
    Three Months EndedSix Months Ended
    June 30,   March 31,June 30,
    2014   201320142014   2013
    Nonoperating income (expense), GAAP basis $16$69$17$33$110
    Less: Net income (loss) attributable to NCI 33

    (23)

    (12)

    21 11
     
    Nonoperating income (expense), net of NCI

    (17)

    92 29 12 99
    Gain related to Charitable Contribution - (80) - -

    (80)

    Compensation expense related to (appreciation) depreciation on deferred compensation plans

    (3)

    - (3)

    (6)

    (4)

     
    Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted ($20) $12$26$6$15
                         

    See note (2) to the Condensed Consolidated Statements of Income and Supplemental Information for more information on as adjusted items and the reconciliation to GAAP.

     
             

    RECONCILIATION OF U.S. GAAP NET INCOME ATTRIBUTABLE TO BLACKROCK TO NET INCOME ATTRIBUTABLE TO BLACKROCK, AS ADJUSTED

    (in millions, except per share data), (unaudited)

     

     

                       
    Three Months EndedSix Months Ended
    June 30,March 31,June 30,
    20142013201420142013
    Net income attributable to BlackRock, Inc., GAAP basis$808$729$756$1,564$1,361
    Non-GAAP adjustments, net of tax:(4)
    PNC LTIP funding obligation 6 6 6 12 11
    Income tax changes 23 - - 23 -
    Amount related to the Charitable Contribution -

    (13)

    - -

    (13)

     
    Net income attributable to BlackRock, Inc., as adjusted$837$722$762$1,599$1,359
     
    Diluted weighted-average common shares outstanding(5) 171.2 173.9 171.9 171.5 174.3
    Diluted earnings per common share, GAAP basis(5)$4.72$4.19$4.40$9.12$7.81
    Diluted earnings per common share, as adjusted(5)$4.89$4.15$4.43$9.32$7.80
                         

    See notes (3) through (5) to the Condensed Consolidated Statements of Income and Supplemental Information for more information on as adjusted items and the reconciliation to GAAP.



    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 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:

    (1) Operating income, as adjusted, and operating margin, as adjusted:

    Operating income, as adjusted, equals operating income, GAAP basis, excluding certain items management deems nonrecurring, recurring infrequently or transactions that ultimately will not impact BlackRock’s book value. 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, includes non-GAAP expense adjustments. 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 The PNC Financial Services Group, Inc. (“PNC”) has been excluded because it ultimately does not impact BlackRock’s book value. The second quarter of 2013 included a $124 million expense related to the Charitable Contribution that 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). 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 revenue and expense.



    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 revenue 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 revenue.

    (2) Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted:

    Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted, equals nonoperating income (expense), GAAP basis, less net income (loss) attributable to NCI, adjusted for compensation expense associated with (appreciation) depreciation on investments related to certain BlackRock deferred compensation plans. 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 of 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.

    (3) 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 (1) Operating income, as adjusted, and operating margin, as adjusted, for information on the PNC LTIP funding obligation and the Charitable Contribution.

    The three and six months ended June 30, 2014 included a $23 million net noncash tax expense primarily related to the revaluation of certain deferred tax liabilities. The resulting increase 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. The three and six months ended June 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.

    (4) For each period presented, the non-GAAP adjustments related to the PNC LTIP funding obligation was tax effected at the respective blended rates applicable to the adjustments. The three and six months ended June 30, 2014 included a $23 million net noncash tax expense primarily related to the revaluation of certain deferred tax liabilities. The three and six months ended June 30, 2013 included a tax benefit of approximately $57 million recognized in connection with the Charitable Contribution.

    (5) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations.

    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 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. Except as specified, the performance information shown is as of June 30, 2014 and is based on preliminary data available at that time. The performance data shown reflects information for all actively and passively managed equity and fixed income accounts, including U.S. registered investment companies, European-domiciled retail funds and separate accounts for which performance data is available, including performance data for high net worth accounts available as of May 31, 2014. The performance data does not include accounts terminated prior to June 30, 2014 and accounts for which data has not yet been verified. If such accounts had been included, the performance data provided may have substantially differed from that shown.

    Performance comparisons shown are gross-of-fees for U.S. retail, institutional and high net worth separate accounts as well as EMEA institutional separate accounts, and net-of-fee for European domiciled retail funds. The performance tracking shown for institutional index accounts is based on gross-of-fee performance and includes all institutional accounts and all iShares funds globally using an index strategy. AUM information is based on AUM available as of June 30, 2014 for each account or fund in the asset class shown without adjustment for overlapping management of the same account or fund. Fund performance reflects the reinvestment of dividends and distributions.

    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.



    BlackRock, Inc.

    Investor Relations

    Tom Wojcik, 212.810.8127

    or

    Media Relations

    Brian Beades, 212.810.5596

    Source: BlackRock, Inc.


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