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EX-32.1 - SECTION 906 CERTIFICATON OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER - BlackRock Inc.blk-ex321_7.htm
EX-31.2 - SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER - BlackRock Inc.blk-ex312_9.htm
EX-31.1 - SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - BlackRock Inc.blk-ex311_8.htm
EX-12.1 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - BlackRock Inc.blk-ex121_6.htm
EX-10.1 - LEASE, BY AND BETWEEN BLACKROCK, INC. AND 50 HYMC OWNER LLC - BlackRock Inc.blk-ex101_1436.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2017

OR

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

EXCHANGE ACT OF 1934.

For the transition period from                                 to                                 .

Commission file number 001-33099

 

BlackRock, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

32-0174431

(State or Other Jurisdiction of

Incorporation or Organization)

 

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

55 East 52nd Street, New York, NY 10055

(Address of Principal Executive Offices)

(Zip Code)

(212) 810-5300

(Registrant’s Telephone Number, Including Area Code)

 

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

Yes

 

X

 

No

 

 

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

Yes

 

X

 

No

 

 

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

 

Large accelerated filer                Accelerated filer

       Non-accelerated filer (Do not check if a smaller reporting company)

            Smaller reporting company

            Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

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

Yes

 

 

 

No

 

X

As of July 31, 2017, there were 160,978,194 shares of the registrant’s common stock outstanding.

 

 

 


BlackRock, Inc.

Index to Form 10-Q

PART I

FINANCIAL INFORMATION

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

66

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

68

 

 

 

Item 6.

Exhibits

69

 

 

 

i


PART I – FINANCIAL INFORMATION

Item 1.     Financial Statements

BlackRock, Inc.

Condensed Consolidated Statements of Financial Condition

(unaudited)

 

 

 

June 30,

 

 

December 31,

 

(in millions, except shares and per share data)

 

2017

 

 

2016

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,508

 

 

$

6,091

 

Accounts receivable

 

 

2,984

 

 

 

2,350

 

Investments

 

 

1,942

 

 

 

1,595

 

Assets of consolidated variable interest entities:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

74

 

 

 

84

 

Investments

 

 

1,194

 

 

 

1,008

 

Other assets

 

 

50

 

 

 

63

 

Separate account assets

 

 

146,888

 

 

 

149,089

 

Separate account collateral held under securities lending agreements

 

 

26,269

 

 

 

27,792

 

Property and equipment (net of accumulated depreciation of $671 and $601 at June 30,

   2017 and December 31, 2016, respectively)

 

 

549

 

 

 

559

 

Intangible assets (net of accumulated amortization of $882 and $832 at June 30, 2017

   and December 31, 2016, respectively)

 

 

17,423

 

 

 

17,363

 

Goodwill

 

 

13,199

 

 

 

13,118

 

Other assets

 

 

1,408

 

 

 

1,065

 

Total assets

 

$

217,488

 

 

$

220,177

 

Liabilities

 

 

 

 

 

 

 

 

Accrued compensation and benefits

 

$

1,140

 

 

$

1,880

 

Accounts payable and accrued liabilities

 

 

1,520

 

 

 

1,094

 

Liabilities of consolidated variable interest entities

 

 

295

 

 

 

216

 

Borrowings

 

 

4,970

 

 

 

4,915

 

Separate account liabilities

 

 

146,888

 

 

 

149,089

 

Separate account collateral liabilities under securities lending agreements

 

 

26,269

 

 

 

27,792

 

Deferred income tax liabilities

 

 

4,981

 

 

 

4,840

 

Other liabilities

 

 

1,538

 

 

 

1,007

 

Total liabilities

 

 

187,601

 

 

 

190,833

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Temporary equity

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

271

 

 

 

194

 

Permanent Equity

 

 

 

 

 

 

 

 

BlackRock, Inc. stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, $0.01 par value;

 

 

2

 

 

 

2

 

Shares authorized: 500,000,000 at June 30, 2017 and December 31, 2016;

Shares issued: 171,252,185 at June 30, 2017 and December 31, 2016;

Shares outstanding: 161,137,506 and 161,534,443 at June 30, 2017 and

December 31, 2016, respectively

 

 

 

 

 

 

 

 

Preferred stock (Note 15)

 

 

 

 

 

 

Additional paid-in capital

 

 

19,038

 

 

 

19,337

 

Retained earnings

 

 

14,523

 

 

 

13,660

 

Accumulated other comprehensive loss

 

 

(575

)

 

 

(716

)

Treasury stock, common, at cost (10,114,679 and 9,717,742 shares held at June 30, 2017 and

   December 31, 2016, respectively)

 

 

(3,433

)

 

 

(3,185

)

Total BlackRock, Inc. stockholders’ equity

 

 

29,555

 

 

 

29,098

 

Nonredeemable noncontrolling interests

 

 

61

 

 

 

52

 

Total permanent equity

 

 

29,616

 

 

 

29,150

 

Total liabilities, temporary equity and permanent equity

 

$

217,488

 

 

$

220,177

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

1


BlackRock, Inc.

Condensed Consolidated Statements of Income

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

(in millions, except shares and per share data)

 

June 30,

 

 

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory, administration fees and

  securities lending revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related parties

 

$

1,888

 

 

$

1,713

 

 

$

3,667

 

 

$

3,330

 

Other third parties

 

 

787

 

 

 

776

 

 

 

1,538

 

 

 

1,518

 

Total investment advisory, administration fees and

   securities lending revenue

 

 

2,675

 

 

 

2,489

 

 

 

5,205

 

 

 

4,848

 

Investment advisory performance fees

 

 

48

 

 

 

74

 

 

 

118

 

 

 

108

 

Technology and risk management revenue

 

 

164

 

 

 

146

 

 

 

322

 

 

 

287

 

Distribution fees

 

 

5

 

 

 

11

 

 

 

12

 

 

 

22

 

Advisory and other revenue

 

 

73

 

 

 

84

 

 

 

132

 

 

 

163

 

Total revenue

 

 

2,965

 

 

 

2,804

 

 

 

5,789

 

 

 

5,428

 

Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

 

999

 

 

 

977

 

 

 

2,020

 

 

 

1,924

 

Distribution and servicing costs

 

 

121

 

 

 

109

 

 

 

238

 

 

 

206

 

Amortization of deferred sales commissions

 

 

4

 

 

 

9

 

 

 

9

 

 

 

19

 

Direct fund expense

 

 

224

 

 

 

195

 

 

 

432

 

 

 

383

 

General and administration

 

 

350

 

 

 

316

 

 

 

651

 

 

 

634

 

Restructuring charge

 

 

 

 

 

 

 

 

 

 

 

76

 

Amortization of intangible assets

 

 

25

 

 

 

25

 

 

 

50

 

 

 

50

 

Total expense

 

 

1,723

 

 

 

1,631

 

 

 

3,400

 

 

 

3,292

 

Operating income

 

 

1,242

 

 

 

1,173

 

 

 

2,389

 

 

 

2,136

 

Nonoperating income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) on investments

 

 

36

 

 

 

20

 

 

 

87

 

 

 

18

 

Interest and dividend income

 

 

13

 

 

 

6

 

 

 

20

 

 

 

11

 

Interest expense

 

 

(48

)

 

 

(51

)

 

 

(113

)

 

 

(102

)

Total nonoperating income (expense)

 

 

1

 

 

 

(25

)

 

 

(6

)

 

 

(73

)

Income before income taxes

 

 

1,243

 

 

 

1,148

 

 

 

2,383

 

 

 

2,063

 

Income tax expense

 

 

376

 

 

 

353

 

 

 

645

 

 

 

621

 

Net income

 

 

867

 

 

 

795

 

 

 

1,738

 

 

 

1,442

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling

   interests

 

 

10

 

 

 

6

 

 

 

19

 

 

 

(4

)

Net income attributable to BlackRock, Inc.

 

$

857

 

 

$

789

 

 

$

1,719

 

 

$

1,446

 

Earnings per share attributable to BlackRock, Inc.

   common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

5.27

 

 

$

4.79

 

 

$

10.56

 

 

$

8.76

 

Diluted

 

$

5.22

 

 

$

4.73

 

 

$

10.45

 

 

$

8.66

 

Cash dividends declared and paid per share

 

$

2.50

 

 

$

2.29

 

 

$

5.00

 

 

$

4.58

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

162,502,465

 

 

 

164,758,612

 

 

 

162,758,112

 

 

 

165,073,371

 

Diluted

 

 

164,149,861

 

 

 

166,639,290

 

 

 

164,544,760

 

 

 

167,023,559

 

See accompanying notes to condensed consolidated financial statements.

 

 

2


BlackRock, Inc.

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

(in millions)

 

June 30,

 

 

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net income

 

$

867

 

 

$

795

 

 

$

1,738

 

 

$

1,442

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments(1)

 

 

102

 

 

 

(87

)

 

 

142

 

 

 

(113

)

Other

 

 

 

 

 

1

 

 

 

(1

)

 

 

1

 

Other comprehensive income (loss)

 

 

102

 

 

 

(86

)

 

 

141

 

 

 

(112

)

Comprehensive income

 

 

969

 

 

 

709

 

 

 

1,879

 

 

 

1,330

 

Less: Comprehensive income (loss) attributable to

     noncontrolling interests

 

 

10

 

 

 

6

 

 

 

19

 

 

 

(4

)

Comprehensive income attributable to BlackRock, Inc.

 

$

959

 

 

$

703

 

 

$

1,860

 

 

$

1,334

 

 

 

(1) 

Amounts for the three months ended June 30, 2017 and 2016 include a loss from a net investment hedge of $31 million (net of a tax benefit of $18 million) and a gain of $12 million (net of tax of $8 million), respectively.  Amounts for the six months ended June 30, 2017 and 2016 include a loss from a net investment hedge of $38 million (net of a tax benefit of $22 million) and $11 million (net of a tax benefit of $6 million), respectively.

See accompanying notes to condensed consolidated financial statements.

 

 

 

3


BlackRock, Inc.

Condensed Consolidated Statements of Changes in Equity

(unaudited)

 

(in millions)

 

Additional

Paid-in

Capital(1)

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

Common

 

 

Total

BlackRock

Stockholders’

Equity

 

 

Nonredeemable

Noncontrolling

Interests

 

 

Total

Permanent

Equity

 

 

Redeemable

Noncontrolling

Interests /

Temporary

Equity

 

December 31, 2016

 

$

19,339

 

 

$

13,660

 

 

$

(716

)

 

$

(3,185

)

 

$

29,098

 

 

$

52

 

 

$

29,150

 

 

$

194

 

Net income

 

 

 

 

 

1,719

 

 

 

 

 

 

 

 

 

1,719

 

 

 

2

 

 

 

1,721

 

 

 

17

 

Dividends paid

 

 

 

 

 

(854

)

 

 

 

 

 

 

 

 

(854

)

 

 

 

 

 

(854

)

 

 

 

Stock-based compensation

 

 

290

 

 

 

 

 

 

 

 

 

 

 

 

290

 

 

 

 

 

 

290

 

 

 

 

PNC preferred stock capital

    contribution

 

 

193

 

 

 

 

 

 

 

 

 

 

 

 

193

 

 

 

 

 

 

193

 

 

 

 

Retirement of preferred stock

 

 

(193

)

 

 

 

 

 

 

 

 

 

 

 

(193

)

 

 

 

 

 

(193

)

 

 

 

Issuance of common shares

   related to employee stock

   transactions

 

 

(592

)

 

 

 

 

 

 

 

 

598

 

 

 

6

 

 

 

 

 

 

6

 

 

 

 

Employee tax withholdings

   related to employee stock

   transactions

 

 

 

 

 

 

 

 

 

 

 

(296

)

 

 

(296

)

 

 

 

 

 

(296

)

 

 

 

Shares repurchased

 

 

 

 

 

 

 

 

 

 

 

(550

)

 

 

(550

)

 

 

 

 

 

(550

)

 

 

 

Subscriptions (redemptions/

   distributions) —

   noncontrolling interest

   holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

(7

)

 

 

256

 

Net consolidations

  (deconsolidations) of

   sponsored

   investment funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

14

 

 

 

(196

)

Other comprehensive

   income (loss)

 

 

 

 

 

 

 

 

141

 

 

 

 

 

 

141

 

 

 

 

 

 

141

 

 

 

 

Adoption of new accounting

   pronouncement

 

 

3

 

 

 

(2

)

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

 

 

 

June 30, 2017

 

$

19,040

 

 

$

14,523

 

 

$

(575

)

 

$

(3,433

)

 

$

29,555

 

 

$

61

 

 

$

29,616

 

 

$

271

 

 

(1) 

Amounts include $2 million of common stock at both June 30, 2017 and December 31, 2016.

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

4


BlackRock, Inc.

Condensed Consolidated Statements of Changes in Equity

(unaudited)

 

(in millions)

 

Additional

Paid-in

Capital(1)

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

Common

 

 

Total

BlackRock

Stockholders’

Equity

 

 

Nonredeemable

Noncontrolling

Interests

 

 

Total

Permanent

Equity

 

 

Redeemable

Noncontrolling

Interests /

Temporary

Equity

 

December 31, 2015

 

$

19,407

 

 

$

12,033

 

 

$

(448

)

 

$

(2,489

)

 

$

28,503

 

 

$

77

 

 

$

28,580

 

 

$

464

 

Net income

 

 

 

 

 

1,446

 

 

 

 

 

 

 

 

 

1,446

 

 

 

(1

)

 

 

1,445

 

 

 

(3

)

Dividends paid

 

 

 

 

 

(795

)

 

 

 

 

 

 

 

 

(795

)

 

 

 

 

 

(795

)

 

 

 

Stock-based compensation

 

 

289

 

 

 

 

 

 

 

 

 

 

 

 

289

 

 

 

 

 

 

289

 

 

 

 

PNC preferred stock capital

    contribution

 

 

172

 

 

 

 

 

 

 

 

 

 

 

 

172

 

 

 

 

 

 

172

 

 

 

 

Retirement of preferred stock

 

 

(172

)

 

 

 

 

 

 

 

 

 

 

 

(172

)

 

 

 

 

 

(172

)

 

 

 

Issuance of common shares

    related to employee stock

    transactions

 

 

(630

)

 

 

 

 

 

 

 

 

640

 

 

 

10

 

 

 

 

 

 

10

 

 

 

 

Employee tax withholdings

    related to employee stock

    transactions

 

 

 

 

 

 

 

 

 

 

 

(266

)

 

 

(266

)

 

 

 

 

 

(266

)

 

 

 

Shares repurchased

 

 

 

 

 

 

 

 

 

 

 

(575

)

 

 

(575

)

 

 

 

 

 

(575

)

 

 

 

Net tax benefit (shortfall) from

   stock-based compensation

 

 

68

 

 

 

 

 

 

 

 

 

 

 

 

68

 

 

 

 

 

 

68

 

 

 

 

Subscriptions (redemptions/

    distributions) —

    noncontrolling interest

    holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9

)

 

 

(9

)

 

 

753

 

Net consolidations

    (deconsolidations) of

     sponsored

     investment funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(694

)

Other comprehensive

    income (loss)

 

 

 

 

 

 

 

 

(112

)

 

 

 

 

 

(112

)

 

 

 

 

 

(112

)

 

 

 

June 30, 2016

 

$

19,134

 

 

$

12,684

 

 

$

(560

)

 

$

(2,690

)

 

$

28,568

 

 

$

67

 

 

$

28,635

 

 

$

520

 

 

(1) 

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

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

5


BlackRock, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Six Months Ended

 

(in millions)

 

June 30,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

1,738

 

 

$

1,442

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

125

 

 

 

133

 

Stock-based compensation

 

 

290

 

 

 

289

 

Deferred income tax expense (benefit)

 

 

174

 

 

 

55

 

Net (gains) losses on nontrading investments

 

 

 

 

 

1

 

Assets and liabilities of consolidated VIEs:

 

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

 

(11

)

 

 

(125

)

Net (gains) losses within consolidated VIEs

 

 

(66

)

 

 

(15

)

Net (purchases) proceeds within consolidated VIEs

 

 

(122

)

 

 

(534

)

(Earnings) losses from equity method investees

 

 

(60

)

 

 

(36

)

Distributions of earnings from equity method investees

 

 

13

 

 

 

12

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(603

)

 

 

(624

)

Investments, trading

 

 

(128

)

 

 

(222

)

Other assets

 

 

(330

)

 

 

(157

)

Accrued compensation and benefits

 

 

(740

)

 

 

(903

)

Accounts payable and accrued liabilities

 

 

450

 

 

 

565

 

Other liabilities

 

 

409

 

 

 

21

 

Cash flows from operating activities

 

 

1,139

 

 

 

(98

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of investments

 

 

(308

)

 

 

(69

)

Proceeds from sales and maturities of investments

 

 

64

 

 

 

197

 

Distributions of capital from equity method investees

 

 

18

 

 

 

15

 

Net consolidations (deconsolidations) of sponsored investment funds

 

 

(7

)

 

 

(20