Exhibit 99.1

 

 

Tom Wojcik, Investor Relations				Brian Beades, Media Relations
212.810.8127				212.810.5596

 

BlackRock Reports Full Year 2014 Diluted EPS of $19.25, or $19.34 as adjusted

Fourth Quarter 2014 Diluted EPS of $4.77, or $4.82 as adjusted

Record Long-term Net Inflows for Full Year and Fourth Quarter of 2014

BlackRock Board of Directors Approves 13% Increase in Quarterly Dividend Per Share to $2.18 and

Authorizes Repurchase of an Additional 6 Million Shares under Existing Share Repurchase Program

 

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8% AUM growth from the fourth quarter of 2013

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$181.3 billion of long-term net inflows for 2014 and $87.8 billion for the fourth quarter of 2014

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16% (13% as adjusted) operating income growth for 2014 and 1% growth from the fourth quarter of 2013

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40.4% (42.9% as adjusted) operating margin for 2014 and 41.1% (43.6% as adjusted) for the fourth quarter of 2014

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Consistent capital management with $250 million of quarterly share repurchases, aggregating $1 billion for the year

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13% increase in quarterly cash dividend to $2.18 per share of common stock, payable March 24, 2015 to shareholders of record at the close of business on March 6, 2015

FINANCIAL RESULTS

 

		Q4 2014				Q4 2013						Q3 2014						Full Year
(in millions, except per share data)										Change						Change		2014				2013				Change
AUM		$	4,651,895			$	4,324,088			8%		$	4,524,575			3%		$	4,651,895			$	4,324,088			8%
GAAP basis:
Revenue		$	2,784			$	2,777			-%		$	2,849			(2%)		$	11,081			$	10,180			9%
Operating income		$	1,144			$	1,133			1%		$	1,157			(1%)		$	4,474			$	3,857			16%
Operating margin			41.1%				40.8%			30 bps			40.6%			50 bps			40.4%				37.9%			250 bps
Net income(1)		$	813			$	841			(3%)		$	917			(11%)		$	3,294			$	2,932			12%
Diluted EPS		$	4.77			$	4.86			(2%)		$	5.37			(11%)		$	19.25			$	16.87			14%
Weighted average diluted shares			170.4				173.0			(2%)			170.8			-%			171.1				173.8			(2%)
As Adjusted:
Operating income(2)		$	1,154			$	1,143			1%		$	1,214			(5%)		$	4,563			$	4,024			13%
Operating margin(2)			43.6%				42.7%			90 bps			44.2%			(60 bps)			42.9%				41.4%			150 bps
Net income(1) (2)		$	821			$	851			(4%)		$	890			(8%)		$	3,310			$	2,882			15%
Diluted EPS(2)		$	4.82			$	4.92			(2%)		$	5.21			(7%)		$	19.34			$	16.58			17%

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

⁽²⁾ See notes (1) through (4) to the Condensed Consolidated Statements of Income and Supplemental Information on pages 12 through 15 for more information on as adjusted items and the reconciliation to GAAP.

New York, January 15, 2015 — BlackRock, Inc. (NYSE:BLK) today reported financial results for the three months and year ended December 31, 2014.

“BlackRock’s full year 2014 results demonstrate the significant investments we have made in recent years to build the depth and breadth of our global platform,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “In an environment of heightened market uncertainty, our clients’ investment challenges are increasingly complex. Our ability to leverage active and index strategies to deliver global solutions to clients, backed by our unifying Aladdin technology platform, creates a distinct competitive advantage, and resulted in strong organic growth and consistent financial results.

“Our long-term net inflows of $181 billion in 2014, up 55% from the prior year, are the strongest annual net inflows in BlackRock’s history. In addition, our cash management business had more than $25 billion of net inflows in 2014. These results demonstrate the power of the business model that we deliberately built to perform in all market environments.

 

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“Strong institutional results in 2014 were driven by creating and expanding partnerships with leading global institutions seeking solutions across index, active, multi-asset and alternative strategies. The breadth of our global platform enables BlackRock to design and deliver these client-centric investment solutions and to enhance our relationship with institutional clients by also offering investment advice, Aladdin analytics, and risk management and advisory capabilities.

“In Retail and iShares, we reached significant milestones in 2014, crossing $500 billion in Retail and $1 trillion in iShares assets under management. We did this by strengthening global distribution partnerships and expanding our global market share. We had 56 distinct Retail and iShares products that each generated more than $1 billion in net inflows, up from 43 such products in 2013. We captured the number one share of industry ETF flows in the US, in Europe and globally. Further highlighting our global reach, there were 13 countries where we had net inflows in excess of $1 billion in 2014, and we now manage assets in excess of $1 billion for clients domiciled in each of 41 countries.

“Investment performance is the core driver of our ability to meet clients’ needs. In fixed income, BlackRock is generating consistent alpha in strategies that span geography, duration and exposure, with 91% of our active fixed income assets above benchmark or peer median for the three-year period. We also continue to make progress on the reinvigoration and globalization of our fundamental active equity business.

“I would like to thank all of our employees for their hard work and incredible dedication in 2014. Together, we remain focused on reaffirming our principles and values that drive our fiduciary duty to clients and commitment to value creation for shareholders.”

RESULTS BY CLIENT TYPE

 

(in millions), (unaudited)		Q4 2014     Net flows				December 31, 2014     AUM				Q4 2014   Base Fees(1)				December 31, 2014 AUM % of Total				Q4 2014 Base Fees(1)     % of Total
Retail			$22,954				$534,329				$813				12%				35%
iShares			44,189				1,024,228				829				24%				36%
Institutional:
Active			1,043				959,160				453				22%				19%
Index			19,629				1,816,124				228				42%				10%
Total institutional			20,672				2,775,284				681				64%				29%
Total long-term			$87,815				$4,333,841				$2,323				100%				100%
RESULTS BY PRODUCT
(in millions), (unaudited)		Q4 2014     Net flows				December 31, 2014     AUM				Q4 2014   Base Fees(1)				December 31, 2014 AUM % of Total				Q4 2014 Base Fees(1)     % of Total
Equity			$28,656				$2,451,111				$1,282				56%				55%
Fixed income			48,398				1,393,653				558				32%				24%
Multi-asset			9,696				377,837				303				9%				13%
Alternatives			1,065				111,240				180				3%				8%
Total long-term			$87,815				$4,333,841				$2,323				100%				100%

 

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

Long-Term Business Highlights

Long-term net inflows were positive across all regions, with net inflows of $61.7 billion, $14.8 billion and $11.3 billion from clients in the Americas, EMEA and Asia-Pacific, respectively. At December 31, 2014, BlackRock managed 61% of its long-term AUM for investors in the Americas and 39% for clients in EMEA and Asia-Pacific.

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

 

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Retail long-term net inflows of $23.0 billion included net inflows of $20.5 billion in the United States and $2.5 billion internationally. Net inflows were led by fixed income net inflows of $15.4 billion, which were diversified across exposures, with $4.6 billion of net inflows into the unconstrained Strategic Income Opportunities fund, $2.0 billion into the Total Return fund and $1.9 billion into the High Yield suite. The Multi-Asset Income fund family raised an additional $1.8 billion of net new assets.

 

¡

iShares® long-term net inflows of $44.2 billion included equity net inflows of $24.2 billion, driven by flows into the Core Series, as well as demand for broad U.S. equity exposures. Fixed income net inflows of $20.2 billion were diversified across exposures.

 

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Institutional active long-term net inflows of $1.0 billion were led by fixed income net inflows of $2.7 billion, primarily driven by official institutions. Multi-asset net inflows of $2.5 billion reflected ongoing demand for solutions offerings and the LifePath® target-date suite. Alternatives net inflows of $1.3 billion were led by flows into hedge fund solutions, and included the impact of $0.6 billion of capital returned to investors. Results were partially offset by equity net outflows of $5.5 billion, primarily from products with historical performance challenges.

 

¡

Institutional index long-term net inflows of $19.6 billion were driven by fixed income and equity net inflows of $10.1 billion and $8.6 billion, respectively.

Cash management AUM increased 5% to $296.4 billion.

Advisory AUM decreased 6% to $21.7 billion.

INVESTMENT PERFORMANCE AT DECEMBER 31, 2014⁽¹⁾

 

		One-year period		Three-year period		Five-year period
Fixed Income:
Actively managed products above benchmark or peer median
Taxable		72%		91%		87%
Tax-exempt		57%		70%		74%
Index products within or above applicable tolerance		98%		98%		98%
Equity:
Actively managed products above benchmark or peer median
Fundamental		37%		48%		41%
Scientific		85%		86%		97%
Index products within or above applicable tolerance		94%		98%		97%

⁽¹⁾ Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to page 16 for 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 Thursday, January 15, 2015 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 60891548). 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 Thursday, January 15, 2015 and ending at midnight on Thursday, January 29, 2015. To access the replay of the teleconference, callers from the United States should dial (855) 859-2056 and callers from outside the United States should dial (404) 537-3406 and enter the Conference ID Number 60891548. To access the webcast, please visit the investor relations section of www.blackrock.com.

 

 

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

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

 

														Three Months
		Three Months Ended												Ended
		December 31,												September 30,
		2014				2013				Change				2014				Change
Revenue
Investment advisory, administration fees and securities lending revenue			$2,396				$2,280				$116				$2,468			($72)
Investment advisory performance fees			144				268				(124)				133			11
BlackRock Solutions and advisory			170				157				13				165			5
Distribution fees			16				19				(3)				17			(1)
Other revenue			58				53				5				66			(8)
Total revenue			2,784				2,777				7				2,849			(65)
Expense
Employee compensation and benefits			926				925				1				973			(47)
Distribution and servicing costs			96				87				9				90			6
Amortization of deferred sales commissions			13				14				(1)				14			(1)
Direct fund expense			183				167				16				199			(16)
General and administration			387				410				(23)				376			11
Amortization of intangible assets			35				41				(6)				40			(5)
Total expense			1,640				1,644				(4)				1,692			(52)
Operating income			1,144				1,133				11				1,157			(13)
Nonoperating income (expense)
Net gain (loss) on investments			(2)				70				(72)				46			(48)
Net gain (loss) on consolidated variable interest entities			(6)				2				(8)				(47)			41
Interest and dividend income			6				4				2				10			(4)
Interest expense			(58)				(52)				(6)				(61)			3
Total nonoperating income (expense)			(60)				24				(84)				(52)			(8)
Income before income taxes			1,084				1,157				(73)				1,105			(21)
Income tax expense			278				307				(29)				232			46
Net income			806				850				(44)				873			(67)
Less:
Net income (loss) attributable to noncontrolling interests			(7)				9				(16)				(44)			37
Net income attributable to BlackRock, Inc.			$813				$841				($28)				$917			($104)
Weighted-average common shares outstanding
Basic			167,197,844				169,010,606				(1,812,762)				167,933,040			(735,196)
Diluted			170,367,445				172,999,529				(2,632,084)				170,778,766			(411,321)
Earnings per share attributable to BlackRock, Inc. common stockholders (4)
Basic			$4.86				$4.98				($0.12)				$5.46			($0.60)
Diluted			$4.77				$4.86				($0.09)				$5.37			($0.60)
Cash dividends declared and paid per share			$1.93				$1.68				$0.25				$1.93			$-
Supplemental information:
AUM (end of period)			$4,651,895				$4,324,088				$327,807				$4,524,575			$127,320
Shares outstanding (end of period)			166,921,863				168,724,763				(1,802,900)				167,610,257			(688,394)
GAAP:
Operating margin			41.1%				40.8%				30 bps				40.6%			50 bps
Effective tax rate			25.5%				26.7%				(120 bps)				20.2%			530 bps
As adjusted:
Operating income (1)			$1,154				$1,143				$11				$1,214			($60)
Operating margin (1)			43.6%				42.7%				90 bps				44.2%			(60 bps)
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2)			($54)				$13				($67)				($8)			($46)
Net income attributable to BlackRock, Inc. (3)			$821				$851				($30)				$890			($69)
Diluted earnings attributable to BlackRock, Inc. common stockholders per share (3) (4)			$4.82				$4.92				($0.10)				$5.21			($0.39)
Effective tax rate			25.4%				26.5%				(110 bps)				26.2%			(80 bps)

See pages 12-15 for the reconciliation to GAAP and notes (1) through (4) for more information on as adjusted items.

 

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

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

 

		Year Ended
		December 31,
		2014				2013				Change
Revenue
Investment advisory, administration fees and securities lending revenue			$9,589				$8,739			$850
Investment advisory performance fees			550				561			(11)
BlackRock Solutions and advisory			635				577			58
Distribution fees			70				73			(3)
Other revenue			237				230			7
Total revenue			11,081				10,180			901
Expense
Employee compensation and benefits			3,829				3,560			269
Distribution and servicing costs			364				353			11
Amortization of deferred sales commissions			56				52			4
Direct fund expense			748				657			91
General and administration			1,453				1,540			(87)
Amortization of intangible assets			157				161			(4)
Total expense			6,607				6,323			284
Operating income			4,474				3,857			617
Nonoperating income (expense)
Net gain (loss) on investments			165				305			(140)
Net gain (loss) on consolidated variable interest entities			(41)				-			(41)
Interest and dividend income			29				22			7
Interest expense			(232)				(211)			(21)
Total nonoperating income (expense)			(79)				116			(195)
Income before income taxes			4,395				3,973			422
Income tax expense			1,131				1,022			109
Net income			3,264				2,951			313
Less:
Net income (loss) attributable to noncontrolling interests			(30)				19			(49)
Net income attributable to BlackRock, Inc.			$3,294				$2,932			$362
Weighted-average common shares outstanding
Basic			168,225,154				170,185,870			(1,960,716)
Diluted			171,112,261				173,828,902			(2,716,641)
Earnings per share attributable to BlackRock, Inc. common stockholders (4)
Basic			$19.58				$17.23			$2.35
Diluted			$19.25				$16.87			$2.38
Cash dividends declared and paid per share			$7.72				$6.72			$1.00
Supplemental information:
AUM (end of period)			$4,651,895				$4,324,088			$327,807
Shares outstanding (end of period)			166,921,863				168,724,763			(1,802,900)
GAAP:
Operating margin			40.4%				37.9%			250 bps
Effective tax rate			25.6%				25.8%			(20 bps)
As adjusted:
Operating income (1)			$4,563				$4,024			$539
Operating margin (1)			42.9%				41.4%			150 bps
Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests (2)			($56)				$7			($63)
Net income attributable to BlackRock, Inc. (3)			$3,310				$2,882			$428
Diluted earnings attributable to BlackRock, Inc. common stockholders per share (3) (4)			$19.34				$16.58			$2.76
Effective tax rate			26.6%				28.5%			(190 bps)

See pages 12-15 for the reconciliation to GAAP and notes (1) through (4) for more information on as adjusted items.

 

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ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Current Quarter Component Changes by Client Type and Product

 

		September 30,     2014				Net inflows     (outflows)				Market change				FX impact (1)				December 31,     2014				Average AUM (2)
Retail:
Equity			$ 204,371				$1,287				($2,623)				($2,590)				$200,445			$203,351
Fixed income			176,248				15,409				(880)				(957)				189,820			184,534
Multi-asset			125,899				6,164				(6,224)				(498)				125,341			126,193
Alternatives			18,961				94				(95)				(237)				18,723			18,997
Retail subtotal			525,479				22,954				(9,822)				(4,282)				534,329			533,075
iShares:
Equity			757,272				24,216				13,880				(5,301)				790,067			778,411
Fixed income			199,137				20,163				658				(2,287)				217,671			212,391
Multi-asset			1,667				103				9				(6)				1,773			1,608
Alternatives			16,094				(293)				(1,025)				(59)				14,717			15,252
iShares subtotal			974,170				44,189				13,522				(7,653)				1,024,228			1,007,662
Institutional:
Active:
Equity			130,073				(5,454)				3,102				(2,578)				125,143			127,063
Fixed income			513,340				2,723				9,885				(7,358)				518,590			516,994
Multi-asset			238,765				2,496				6,348				(4,696)				242,913			242,333
Alternatives			72,711				1,278				(615)				(860)				72,514			72,086
Active subtotal			954,889				1,043				18,720				(15,492)				959,160			958,476
Index:
Equity			1,308,389				8,607				37,254				(18,794)				1,335,456			1,332,615
Fixed income			444,803				10,103				25,103				(12,437)				467,572			456,490
Multi-asset			6,723				933				516				(362)				7,810			7,051
Alternatives			5,960				(14)				(541)				(119)				5,286			5,702
Index subtotal			1,765,875				19,629				62,332				(31,712)				1,816,124			1,801,858
Institutional subtotal			2,720,764				20,672				81,052				(47,204)				2,775,284			2,760,334
Long-term			4,220,413				87,815				84,752				(59,139)				4,333,841			$4,301,071
Cash management			280,980				17,808				198				(2,633)				296,353
Advisory (3)			23,182				(916)				241				(806)				21,701
Total			$4,524,575				$104,707				$85,191				($62,578)				$4,651,895

Current Quarter Component Changes by Product

 

		September 30, 2014				Net inflows (outflows)				Market change				FX impact (1)				December 31, 2014				Average AUM (2)
Equity:
Active			$304,872				($7,188)				($524)				($4,358)				$292,802			$299,128
iShares			757,272				24,216				13,880				(5,301)				790,067			778,411
Fixed income:
Active			683,170				17,681				8,536				(8,063)				701,324			694,761
iShares			199,137				20,163				658				(2,287)				217,671			212,391
Multi-asset			373,054				9,696				649				(5,562)				377,837			377,185
Alternatives:
Core			88,280				1,181				(609)				(846)				88,006			87,783
Currency and commodities (4)			25,446				(116)				(1,667)				(429)				23,234			24,254
Subtotal			2,431,231				65,633				20,923				(26,846)				2,490,941			2,473,913
Non-ETF Index:
Equity			1,337,961				11,628				38,257				(19,604)				1,368,242			1,363,901
Fixed income			451,221				10,554				25,572				(12,689)				474,658			463,257
Subtotal Non-ETF Index			1,789,182				22,182				63,829				(32,293)				1,842,900			1,827,158
Long-term			$4,220,413				$87,815				$84,752				($59,139)				$4,333,841			$4,301,071

(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.

 

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ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Year-over-Year Component Changes by Client Type and Product

 

		December 31, 2013				Net inflows     (outflows)				Market change				FX impact (1)				December 31,   2014				Average AUM (2)
Retail:
Equity			$203,035				$1,582				$1,831				($6,003)				$200,445			$207,280
Fixed income			151,475				36,995				3,698				(2,348)				189,820			170,490
Multi-asset			117,054				13,366				(4,080)				(999)				125,341			123,619
Alternatives			16,213				3,001				152				(643)				18,723			18,487
Retail subtotal			487,777				54,944				1,601				(9,993)				534,329			519,876
iShares:
Equity			718,135				59,626				26,517				(14,211)				790,067			751,830
Fixed income			178,835				40,007				4,905				(6,076)				217,671			199,410
Multi-asset			1,310				439				37				(13)				1,773			1,535
Alternatives			16,092				529				(1,722)				(182)				14,717			16,453
iShares subtotal			914,372				100,601				29,737				(20,482)				1,024,228			969,228
Institutional:
Active:
Equity			138,726				(18,648)				9,935				(4,870)				125,143			131,779
Fixed income			505,109				(6,943)				34,062				(13,638)				518,590			515,411
Multi-asset			215,276				15,835				23,435				(11,633)				242,913			233,729
Alternatives			73,299				(664)				1,494				(1,615)				72,514			73,075
Active subtotal			932,410				(10,420)				68,926				(31,756)				959,160			953,994
Index:
Equity			1,257,799				9,860				102,549				(34,752)				1,335,456			1,305,930
Fixed income			406,767				26,347				56,086				(21,628)				467,572			440,047
Multi-asset			7,574				(735)				1,652				(681)				7,810			7,001
Alternatives			5,510				656				(693)				(187)				5,286			6,061
Index subtotal			1,677,650				36,128				159,594				(57,248)				1,816,124			1,759,039
Institutional subtotal			2,610,060				25,708				228,520				(89,004)				2,775,284			2,713,033
Long-term			4,012,209				181,253				259,858				(119,479)				4,333,841			$4,202,137
Cash management			275,554				25,696				715				(5,612)				296,353
Advisory (3)			36,325				(13,173)				1,109				(2,560)				21,701
Total			$4,324,088				$193,776				$261,682				($127,651)				$4,651,895

Year-over-Year Component Changes by Product 

 

		December 31, 2013				Net inflows (outflows)				Market change				FX impact (1)				December 31,   2014				Average AUM (2)
Equity:
Active			$317,262				($24,882)				$9,867				($9,445)				$292,802			$310,551
iShares			718,135				59,626				26,517				(14,211)				790,067			751,830
Fixed income:
Active			652,209				27,694				36,942				(15,521)				701,324			680,078
iShares			178,835				40,007				4,905				(6,076)				217,671			199,410
Multi-asset			341,214				28,905				21,044				(13,326)				377,837			365,884
Alternatives:
Core			85,026				3,061				1,808				(1,889)				88,006			87,689
Currency and commodities (4)			26,088				461				(2,577)				(738)				23,234			26,387
Subtotal			2,318,769				134,872				98,506				(61,206)				2,490,941			2,421,829
Non-ETF Index:
Equity			1,282,298				17,676				104,448				(36,180)				1,368,242			1,334,438
Fixed income			411,142				28,705				56,904				(22,093)				474,658			445,870
Subtotal Non-ETF Index			1,693,440				46,381				161,352				(58,273)				1,842,900			1,780,308
Long-term			$4,012,209				$181,253				$259,858				($119,479)				$4,333,841			$4,202,137

⁽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 thirteen months.

⁽³⁾ Advisory AUM represents long-term portfolio liquidation assignments.

⁽⁴⁾ Amounts include commodity iShares.

 

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    SUMMARY OF REVENUE

    (in millions), (unaudited)

 

		Three Months Ended December 31,								Change				Three Months  Ended September 30, 2014				Change				Year Ended December 31,								Change
		2014				2013																2014				2013
Investment advisory, administration fees and securities lending revenue:
Equity:
Active			$428				$451				($23)				$475				($47)				$1,844				$1,741			$103
iShares			686				646				40				708				(22)				2,705				2,390			315
Fixed income:
Active			367				321				46				359				8				1,396				1,269			127
iShares			126				115				11				123				3				484				464			20
Multi-asset			303				276				27				315				(12)				1,204				1,039			165
Alternatives:
Core			159				162				(3)				159				-				638				576			62
Currency and commodities			21				25				(4)				23				(2)				89				107			(18)
Subtotal			2,090				1,996				94				2,162				(72)				8,360				7,586			774
Non-ETF Index:
Equity			168				148				20				168				-				677				594			83
Fixed income			65				59				6				66				(1)				260				238			22
Subtotal Non-ETF Index			233				207				26				234				(1)				937				832			105
Long-term			2,323				2,203				120				2,396				(73)				9,297				8,418			879
Cash management			73				77				(4)				72				1				292				321			(29)
Total base fees			2,396				2,280				116				2,468				(72)				9,589				8,739			850
Investment advisory performance fees:
Equity			50				46				4				8				42				111				91			20
Fixed income			12				13				(1)				6				6				31				25			6
Multi-asset			11				10				1				8				3				32				24			8
Alternatives			71				199				(128)				111				(40)				376				421			(45)
Total			144				268				(124)				133				11				550				561			(11)
BlackRock Solutions and advisory			170				157				13				165				5				635				577			58
Distribution fees			16				19				(3)				17				(1)				70				73			(3)
Other revenue			58				53				5				66				(8)				237				230			7
Total revenue			$2,784				$2,777				$7				$2,849				($65)				$11,081				$10,180			$901

Highlights

 

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Investment advisory, administration fees and securities lending revenue increased $116 million from the fourth quarter of 2013 due to higher long-term average AUM. Securities lending fees of $117 million in the current quarter increased $17 million from the fourth quarter of 2013.

Investment advisory, administration fees and securities lending revenue decreased $72 million from the third quarter of 2014, primarily due to the impact of beta and foreign exchange movements.

 

¡

Performance fees decreased $124 million from the fourth quarter of 2013, which included a large fee associated with the partial liquidation of a closed-end opportunistic fund, due to lower fees from alternative products.

 

¡

BlackRock Solutions® and advisory revenue increased $13 million from the fourth quarter of 2013 due to higher revenue from Aladdin® mandates and advisory assignments. BlackRock Solutions and advisory revenue included $127 million in Aladdin business revenue in the current quarter compared with $116 million in the fourth quarter of 2013.

 

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    SUMMARY OF EXPENSE

    (in millions), (unaudited)

 

		Three Months Ended December 31,								Change				Three Months Ended September 30, 2014								Year Ended December 31,								Change
		2014				2013												Change				2014				2013
Operating Expense
Employee compensation and benefits			$926				$925				$1				$973				($47)				$3,829				$3,560			$269
Distribution and servicing costs			96				87				9				90				6				364				353			11
Amortization of deferred sales commissions			13				14				(1)				14				(1)				56				52			4
Direct fund expense			183				167				16				199				(16)				748				657			91
General and administration			387				410				(23)				376				11				1,453				1,540			(87)
Amortization of intangible assets			35				41				(6)				40				(5)				157				161			(4)
Total Operating Expense			$1,640				$1,644				($4)				$1,692				($52)				$6,607				$6,323			$284

Highlights

 

¡

Employee compensation and benefits decreased $47 million from the third quarter of 2014, reflecting lower incentive compensation.

 

¡

General and administration expense decreased $23 million from the fourth quarter of 2013, reflecting lower professional services, other general and administration expense, and various lease exit costs included in the fourth quarter of 2013.

General and administration expense increased $11 million from the third quarter of 2014, reflecting foreign currency remeasurement, and higher marketing and promotional expense. The third quarter of 2014 reflected a $50 million expense related to the reduction of an indemnification asset (offset by a $50 million tax benefit – see Income Tax Expense highlights on page 11). Amounts related to the reduction of the indemnification asset have been excluded from as adjusted results.

 

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SUMMARY OF NONOPERATING INCOME (EXPENSE)

(in millions), (unaudited)

 

				Three Months Ended   December 31,												Three Months Ended   September 30,   2014								Year Ended   December 31,
				2014				2013				Change								Change				2014				2013				Change
Nonoperating income (expense), GAAP basis					($60)				$24				($84)				($52)				($8)				($79)				$116			($195)
Less: Net income (loss) attributable to NCI					(7)				9				(16)				(44)				37				(30)				19			(49)
Nonoperating income (expense)(1)					($53)				$15				($68)				($8)				($45)				($49)				$97			($146)
		Estimated economic   investments at   December 31, 2014(2)		Three Months Ended   December 31,												Three Months Ended   September 30,   2014								Year Ended   December 31,
				2014				2013				Change								Change				2014				2013				Change
Net gain (loss) on investments(1)
Private equity		20-25%			$3				$17				($14)				$10				($7)				$69				$52			$17
Real estate		5-10%			3				7				(4)				3				-				16				24			(8)
Distressed credit/mortgage funds/opportunistic funds		< 5%			1				12				(11)				17				(16)				34				40			(6)
Hedge funds/funds of hedge funds		10-15%			(6)				20				(26)				8				(14)				21				25			(4)
Other investments(3)		45-50%			(3)				5				(8)				5				(8)				7				16			(9)
Subtotal					(2)				61				(63)				43				(45)				147				157			(10)
Gain related to the PennyMac IPO					-				-				-				-				-				-				39			(39)
Gain related to the Charitable Contribution					-				-				-				-				-				-				80			(80)
Investments related to deferred compensation plans					1				2				(1)				-				1				7				10			(3)
Total net gain (loss) on investments(1)					(1)				63				(64)				43				(44)				154				286			(132)
Interest and dividend income					6				4				2				10				(4)				29				22			7
Interest expense					(58)				(52)				(6)				(61)				3				(232)				(211)			(21)
Net interest expense					(52)				(48)				(4)				(51)				(1)				(203)				(189)			(14)
Total nonoperating income (expense)(1)					(53)				15				(68)				(8)				(45)				(49)				97			(146)
Gain related to the Charitable Contribution					-				-				-				-				-				-				(80)			80
Compensation expense related to (appreciation) depreciation on deferred compensation plans					(1)				(2)				1				-				(1)				(7)				(10)			3
Nonoperating income (expense), as adjusted(1)					($54)				$13				($67)				($8)				($46)				($56)				$7			($63)

⁽¹⁾ Net of net income (loss) attributable to noncontrolling interests (“NCI”).

⁽²⁾ Percentages represent estimated percentages of BlackRock’s corporate economic investment portfolio at December 31, 2014. Economic investment amounts at September 30, 2014 for private equity, real estate, distressed credit/mortgage funds/opportunistic funds, hedge funds/funds of hedge funds and other investments were $323 million, $121 million, $66 million, $266 million and $590 million, respectively. See the 2014 third 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 gain (loss) on investments decreased from the fourth quarter of 2013 and third quarter of 2014 due to lower returns on the co-investment and seed portfolio.

 

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INCOME TAX EXPENSE

(in millions), (unaudited)

 

		Three         Months Ended     December 31,												Three Months Ended   September 30,   2014								Year Ended         December 31,
		2014				2013				Change								Change				2014				2013				Change
Income tax expense			$278				$307				($29	)			$232				$46				$1,131				$1,022				$109

Highlights

 

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The fourth quarter 2014 GAAP effective tax rate of 25.5% benefited from $39 million of nonrecurring items.

The fourth quarter 2013 GAAP effective tax rate of 26.7% benefited from certain nonrecurring items.

The third quarter 2014 GAAP effective tax rate of 20.2% included a $32 million noncash benefit, primarily associated with the revaluation of certain deferred income tax liabilities related to intangible assets and goodwill as a result of domestic state and local tax changes, which has been excluded from the as adjusted results. In addition, the third quarter of 2014 included a $94 million tax benefit, primarily due to the resolution of certain outstanding tax matters related to the acquisition of Barclays Global Investors. In connection with the acquisition, BlackRock recorded a $50 million indemnification asset for unrecognized tax benefits. Due to the resolution of such tax matters, BlackRock recorded $50 million of general and administration expense to reflect the reduction of the indemnification asset and an offsetting $50 million tax benefit. The $50 million general and administrative expense and $50 million tax benefit have been excluded from as adjusted results as there is no impact on BlackRock’s book value.

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.

 

		December 31,		December 31,
		2014 (Est.)		2013
Total balance sheet assets		$240		$220
Separate account assets and separate account collateral held under securities lending agreements		(195)		(177)
Consolidated VIEs/sponsored investment funds		(4)		(3)
Goodwill and intangible assets, net		(30)		(30)
Economic tangible assets		$11		$10

SHARE REPURCHASE APPROVAL

In January 2015, the Board of Directors has authorized the Company to repurchase an additional 6.0 million shares under its existing share repurchase program for a total up to 9.4 million shares of BlackRock common stock.

 

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

(in millions), (unaudited)

 

		Three Months Ended
		December 31,								September 30,				Year Ended December 31,
		2014				2013				2014				2014				2013
Operating income, GAAP basis			$1,144				$1,133				$1,157				$4,474			$3,857
Non-GAAP expense adjustments:
PNC LTIP funding obligation			9				8				7				32			33
Reduction of indemnification asset			-				-				50				50			-
Charitable Contribution			-				-				-				-			124
Compensation expense related to appreciation (depreciation) on deferred compensation plans			1				2				-				7			10
Operating income, as adjusted			1,154				1,143				1,214				4,563			4,024
Closed-end fund launch costs			10				-				-				10			16
Closed-end fund launch commissions			1				-				-				1			2
Operating income used for operating margin measurement			$1,165				$1,143				$1,214				$4,574			$4,042
Revenue, GAAP basis			$2,784				$2,777				$2,849				$11,081			$10,180
Non-GAAP adjustments:
Distribution and servicing costs			(96)				(87)				(90)				(364)			(353)
Amortization of deferred sales commissions			(13)				(14)				(14)				(56)			(52)
Revenue used for operating margin measurement			$2,675				$2,676				$2,745				$10,661			$9,775
Operating margin, GAAP basis			41.1%				40.8%				40.6%				40.4%			37.9%
Operating margin, as adjusted			43.6%				42.7%				44.2%				42.9%			41.4%

See note (1) to the Condensed Consolidated Statements of Income and Supplemental Information on page 14 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 Ended
		December 31,								September 30,				Year Ended December 31,
		2014				2013				2014				2014				2013
Nonoperating income (expense), GAAP basis			($60)				$24				($52)				($79)			$116
Less: Net income (loss) attributable to NCI			(7)				9				(44)				(30)			19
Nonoperating income (expense), net of NCI			(53)				15				(8)				(49)			97
Gain related to Charitable Contribution			-				-				-				-			(80)
Compensation expense related to (appreciation) depreciation on deferred compensation plans			(1)				(2)				-				(7)			(10)
Nonoperating income (expense), less net income (loss) attributable to NCI, as adjusted			($54)				$13				($8)				($56)			$7

See note (2) to the Condensed Consolidated Statements of Income and Supplemental Information on page 15 for more information on as adjusted items and the reconciliation to GAAP.

 

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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 Ended												Year Ended
		December 31,								September 30,				December 31,
		2014				2013				2014				2014				2013
Net income attributable to BlackRock, Inc., GAAP basis			$813				$841				$917				$3,294			$2,932
Non-GAAP adjustments, net of tax:
PNC LTIP funding obligation			8				6				5				25			23
Income tax matters			-				(5)				(32)				(9)			(69)
Amount related to the Charitable Contribution			-				9				-				-			(4)
Net income attributable to BlackRock, Inc., as adjusted			$821				$851				$890				$3,310			$2,882
Diluted weighted-average common shares outstanding(4)			170.4				173.0				170.8				171.1			173.8
Diluted earnings per common share, GAAP basis(4)			$4.77				$4.86				$5.37				$19.25			$16.87
Diluted earnings per common share, as adjusted(4)			$4.82				$4.92				$5.21				$19.34			$16.58

See notes (3) and (4) to the Condensed Consolidated Statements of Income and Supplemental Information on page 15 for more information on as adjusted items and the reconciliation to GAAP.

 

-13-

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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. 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). General and administration expenses relating to the reduction of an indemnification asset has been excluded since it is directly offset by a tax benefit of the same amount and, consequently, does not impact BlackRock’s book value.

The third quarter and year ended 2013 included a $124 million expense related to the Company’s charitable contribution of 6.1 million units of its PennyMac equity method investment with a fair value of $124 million to a donor advised fund (the “Charitable Contribution”). The Charitable Contribution has been excluded from operating income, as adjusted due to its nonrecurring nature and because the noncash, nonoperating pre-tax gain of $80 million related to the contributed PennyMac investment is reported in nonoperating income (expense).

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.

 

-14-

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(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 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.

The year ended December 31, 2014 and 2013 reflected the revaluation of deferred income tax liabilities related to intangible assets and goodwill. The year ended December 31, 2014 included a $32 million noncash tax benefit and a $23 million noncash tax expense both arising primarily from state and local income tax changes. The year ended December 31, 2013 included a $69 million noncash tax benefit, primarily related to legislation enacted in the United Kingdom and state and local income tax changes. Such amounts for 2014 and 2013 have been excluded from the as adjusted results as they will not have a cash flow impact and to ensure comparability among periods presented.

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

For each period presented, the non-GAAP adjustment related to the PNC LTIP funding obligation was tax effected at the respective blended rates applicable to the adjustments. The 2013 amount included a tax benefit of approximately $48 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) Nonvoting participating preferred stock is considered to be a common stock equivalent for purposes of determining basic and diluted earnings per share calculations.

 

-15-

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Forward-looking Statements

This earnings release, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” and similar expressions.

BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

In addition to risk factors previously disclosed in BlackRock’s Securities and Exchange Commission (“SEC”) reports and those identified elsewhere in this earnings release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) the introduction, withdrawal, success and timing of business initiatives and strategies; (2) changes and volatility in political, economic or industry conditions, the interest rate environment, foreign exchange rates or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management; (3) the relative and absolute investment performance of BlackRock’s investment products; (4) the impact of increased competition; (5) the impact of future acquisitions or divestitures; (6) the unfavorable resolution of legal proceedings; (7) the extent and timing of any share repurchases; (8) the impact, extent and timing of technological changes and the adequacy of intellectual property, information and cyber security protection; (9) the impact of legislative and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or 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 December 31, 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 November 30, 2014. The performance data does not include accounts terminated prior to December 31, 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 December 31, 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.

 

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