EX-99.1 3 dex991.htm PRESS RELEASE Press Release
 
Exhibit 99.1
BLACKROCK
 
Contact
Paul L. Audet:    (212) 409-3555
                            invrel@blackrock.com
 
 
BlackRock, Inc. Reports Third Quarter Earnings and Diluted EPS of $33.2 Million and $0.51,
Up 21% Year-Over-Year and Announces Terms of Proposed New Long-Term
Retention and Incentive Program
 
New York, October 11, 2002 – BlackRock, Inc. (NYSE:BLK) today reported net income of $33.2 million for the third quarter ended September 30, 2002, a 21% increase compared with $27.4 million earned in the third quarter of 2001 and a 5% decrease compared with $34.8 million earned in the second quarter of 2002. Diluted earnings per share for the third quarter of 2002 were $0.51 compared with $0.42 and $0.53 for the third quarter of 2001 and the second quarter of 2002, respectively. Operating income of $55.5 million increased 30% compared with $42.5 million earned in the third quarter of 2001 (See Table 1).
 
Net income for the nine months ended September 30, 2002 was $99.4 million, a 26% increase compared with $79.1 million earned in the nine months ended September 30, 2001. Diluted earnings per share for the nine months ended September 30, 2002 were $1.52, a 25% increase compared with $1.22 for the nine months ended September 30, 2001. Operating income for the nine months ended September 30, 2002 was $160.1 million, a 26% increase compared with $127.2 million earned during the nine months ended September 30, 2001.
 
Assets under management (“AUM”) at September 30, 2002 were $245.9 billion, a 9% increase compared with $225.6 billion at September 30, 2001 and a 2% decrease from the $249.8 billion reported at June 30, 2002. The $20.3 billion increase in AUM from September 30, 2001 reflects net new business of $22.3 billion in long-dated products and outflows of $7.7 billion in liquidity assets, including $2.4 billion in low-fee securities lending accounts. The $3.9 billion decrease in AUM from second quarter 2002 reflects net new business of $1.5 billion in long-dated products and outflows of $7.0 billion in liquidity assets.
 
“Our third quarter results demonstrate our ability to achieve strong earnings in the face of extraordinarily adverse business and market conditions,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “We remain confident in our ability to generate organic growth over time driven by sustained competitive performance in our traditional products, ongoing delivery of exceptional client service, continuing strong financial discipline and success in making highly selective investments that broaden our capabilities.”
 
Third Quarter Highlights
 
 
v
 
Adverse markets continued to dampen the effect of new business efforts, with over $3.4 billion, or 86%, of the net decrease in assets under management attributable to sharp declines in both domestic and international equity markets.
 
 
v
 
Net new business continued to be strong in several channels, including $2.8 billion from international clients and $830 million in net new closed-end fund assets.
 
 
v
 
We recorded net new business in fixed income of $1.2 billion, bringing the year-to-date total to $19.1 billion. In addition, we successfully completed the offering of a new high yield collateralized bond obligation, adding net new alternative investment assets of $312 million during the quarter.

 
BlackRock Earnings Release
October 11, 2002
Page 2
 
 
 
v
 
Equities continued to be a mixed story, with net new business of $476 million in international equities offset by $509 million outflows in domestic equities. Importantly, momentum is building in our emerging cap value effort, which we launched at the beginning of the year. In addition, we announced the acquisition of Cyllenius Capital Management, which largely completes the build-out of our fundamental emerging cap growth team and adds an all-cap growth equity hedge fund to our product offerings.
 
 
v
 
Liquidity flows remained exceptionally volatile, with assets down $7.0 billion from second quarter-end. As in previous quarters, however, assets rebounded immediately after quarter-end, recovering $3.5 billion in the first 7 business days of October. Given the historically low level of interest rates, we remain highly cautious on liquidity balances for the remainder of this year.
 
 
v
 
We closed the quarter with $6.3 billion of wins to be funded and a very active pipeline of searches in process for fixed income, international equity and domestic emerging cap equity. We expect to complete the Cyllenius acquisition during the fourth quarter; and we continue to consider a variety of strategic initiatives that can further enhance and expand our product and distribution capabilities over time.
 
Total revenue for the quarter ended September 30, 2002 increased $2.4 million or 2% to $137.1 million compared with the third quarter of 2001. The increase was primarily the result of a $10.2 million or 18% increase in separate account base fees and a $4.4 million increase in other income partially offset by an $11.5 million decrease in separate account performance fees and a $0.7 million decrease in mutual fund fees. The increase in separate account base fees was driven by a $27.5 billion or 23% increase in fixed income separate account assets. The decrease in separate account performance fees was attributable to investment performance on the firm’s fixed income hedge fund which, as noted in our second quarter earnings release and Form 10-Q filing, has resulted in a high water mark for the fund. BlackRock cannot generate additional performance fees on the fund until such time as positive investment performance exceeds the high water mark. The decrease in mutual fund revenue for the third quarter included an $11.4 million or 39% decline in revenue earned on the BlackRock Funds largely due to a $4.8 billion or 53% decline in equity mutual fund assets from September 30, 2001 resulting from redemptions by PNC affiliated entities and clients as well as a significant decline in the equity markets. The decrease in BlackRock Fund revenue was partially offset by strong growth in BlackRock Provident Institutional Fund, closed-end fund and short-term investment fund revenues, which increased $10.6 million or 46%. The increase in other income was primarily due to increased sales of BlackRock Solutions products and services.
 
Total revenue for the nine months ended September 30, 2002 increased $36.2 million or 9% from the prior year. The year-to-year increase was primarily the result of a $22.0 million or 10% increase in separate account revenue and a $14.7 million or 53% increase in other income primarily associated with increased sales of BlackRock Solutions products and services. The year-to-year increase in separate account revenue was driven by a 20% increase in separate account base fee revenue of $32.8 million due to strong organic growth in assets under management, which was partially offset by a decrease in performance fees of $10.8 million. Mutual fund revenue for the nine-month period decreased slightly compared to 2001 as increases in BPIF and closed-end fund revenue of $18.7 million and $8.1 million, respectively, were more than offset by a $27.4 million reduction in BlackRock Fund revenue. The increase in BPIF revenue was reflective of an increase in average assets under management of approximately $12 billion or 28% while the increase in closed-end fund revenue was due to a $3.4 billion

BlackRock Earnings Release
October 11, 2002
Page 3
 
 
increase in assets associated with new funds. The decrease in BlackRock Fund revenue was largely attributable to a $4.8 billion decline in equity mutual fund assets.
 
BlackRock’s operating margin for the third quarter of 2002 was 42.9% compared with 35.5% for the third quarter of 2001. The third quarter 2002 operating margin included a 1.5% benefit resulting from losses on employee investment elections in the Company’s deferred compensation plans, which equally reduce compensation and benefits and investment income. Total expense for the third quarter of 2002 decreased $10.6 million or 12% to $81.6 million compared with $92.3 million for the third quarter of 2001. The decrease was attributable to decreases in compensation and benefits, fund administration and servicing costs – affiliates and amortization of intangible assets of $3.8 million, $7.2 million and $2.4 million, respectively, partially offset by an increase in general and administration expense of $2.8 million. The decrease in compensation and benefits was primarily due to reductions in incentive compensation expense associated with the reduction in hedge fund performance fees and the previously noted employee investment losses in the Company’s voluntary and involuntary deferred compensation plans. The reduction in fund administration and servicing costs-affiliates reflects reductions of PNC client investments in the BlackRock Funds due to redemptions and market declines and the effect of a revised investment services agreement with PNC. The decline in amortization of intangible assets was due to the Company’s adoption of SFAS No. 142, “Goodwill and Other Intangible Assets.” The increase in general and administration expense was largely due to higher marketing and promotional expenses associated with closed-end fund launches and increased sales of other products and services. In addition occupancy and technology related expenses increased due to the completion of the new corporate headquarters at 40 East 52nd Street, New York, New York. Non-operating income for the third quarter 2002 decreased $2.5 million primarily due to investment losses on Rabbi Trust assets associated with the Company’s deferred compensation plans.
 
Total expense for the nine months ended September 30, 2002 increased $3.2 million or 1% compared with the nine months ended September 30, 2001. The increase was the result of higher compensation and benefits and general and administration expenses of $13.5 million and $11.5 million, respectively, offset by lower fund administration and servicing costs-affiliates and amortization of intangible assets of $14.5 million and $7.2 million, respectively. The increased level of compensation and benefit expense was primarily due to higher staffing levels to support business growth and increased incentive compensation expense based on the growth in operating income. General and administration expense increases were driven by occupancy and technology related expenses associated with the completion of the new corporate headquarters at 40 East 52nd Street, New York, New York and higher marketing and promotional expenses related to increased sales of existing products and the launch of new closed-end funds. Decreases in fund administration and servicing costs-affiliates primarily reflect reductions of PNC client investments in the BlackRock Funds. The decline in amortization of intangible assets was due to the Company’s adoption of SFAS No. 142.
 
Outlook. Based on current conditions, particularly the recent significant declines experienced in the domestic and international equity markets, management expects that fourth quarter diluted earnings per share will be in a range of $0.50-$0.52 with full year 2002 results increasing 22%-24% to $2.02-$2.04. If recent economic weakness and equity market deterioration persist, management would expect that 2003 diluted earnings per share would trend to the lower half of our previous guidance range of $2.28-$2.38.
 
New Retention and Incentive Program. In addition, BlackRock today announced the terms of a new long-term retention and incentive program for key employees that it has developed with The PNC Financial Services Group, Inc. (NYSE: PNC). The program, which consists of both stock options and deferred compensation, seeks to provide continuity of the management team, whose contracts expire at

BlackRock Earnings Release
October 11, 2002
Page 4
 
 
the end of this year, while promoting development of the firm’s future leaders. In addition, the program is designed to mitigate the dilution to BlackRock’s public shareholders, most significantly through the use of performance hurdles for deferred compensation vesting, and funding to be provided by PNC, as more fully described below.
 
“In investment management, our people are our most important assets,” commented Laurence D. Fink, Chairman and CEO of BlackRock. “Our greatest challenge is, and always will be, attracting and retaining highly talented professionals who can help us achieve our growth targets and create long-term shareholder value. The program announced today will be vital in helping us meet these challenges.”
 
The new program seeks to achieve these objectives through the use of both stock options and deferred compensation that will reward stock price appreciation over the next four years. Specifically, options on up to 3.5 million shares of BlackRock stock may be granted at market, subject to vesting at December 31, 2006. In addition, up to $240 million of deferred compensation may be awarded, with payment subject to the achievement of performance hurdles no later than March 2007. If the performance hurdles are achieved, up to $200 million of the deferred compensation plan will be funded with a contribution from PNC of up to 4 million shares of BlackRock common stock to be distributed to plan participants, less withholding, along with an option to put such distributed shares back to BlackRock at fair market value. BlackRock will fund the remainder with up to $40 million in cash.
 
“Over the past year, we have worked very closely with both BlackRock’s and PNC’s Boards of Directors to craft a program that balances the needs of the business with the interests of our public shareholders,” added Mr. Fink. “PNC’s willingness to fund a substantial portion of the deferred compensation plan out of its BlackRock holdings clearly demonstrates a desire to ensure that the strength and depth of BlackRock’s team is sustained for the benefit of all shareholders. We could not have developed a program of this nature without PNC’s support and participation.”
 
Initially, BlackRock expects to award approximately 3.36 million option shares and approximately $130 million of deferred compensation to over 100 senior professionals. The remainder of the program awards will be reserved for grants over the next two years to professionals who exhibit leadership qualities and demonstrate the potential to make significant contributions to the firm over time. “This program is being used to build the firm’s future, not reward past contributions. Both the initial allocations and the magnitude of the amount reserved for future grants are fully consistent with that philosophy,” noted Mr. Fink.
 
The initial grant of stock options is expected to have a value of approximately $50 million under the Black-Scholes option pricing model. If expensed, it is currently expected that the options would reduce reported quarterly diluted earnings per share over the period from October 1, 2002 through December 31, 2006 by approximately $0.03. The stock options will be granted under BlackRock’s Stock Award and Incentive Plan, which was previously approved by BlackRock’s shareholders.
 
The deferred compensation will vest at the end of any three-month period beginning in 2005 or 2006 during which the daily average closing price of BlackRock’s common stock is $65 per share. If that performance hurdle is not achieved, the Compensation Committee of BlackRock’s Board of Directors may, in its sole discretion, vest a portion of the program if the company realizes compound annual growth in diluted earnings per share of at least 10% from January 1, 2002 to December 31, 2006 and BlackRock’s publicly-traded stock performs in the top half of its peer group during that time. Awards under the plan may also fully vest upon certain change in control events. There will be no expense recognition associated with the deferred compensation unless vesting occurs or a partial vesting determination by the Compensation Committee of BlackRock’s Board is considered reasonable and

BlackRock Earnings Release
October 11, 2002
Page 5
 
 
probable. Notwithstanding the fact the deferred compensation awards will not be paid until early-2007, at such time as vesting occurs, BlackRock will record compensation expense, less any applicable taxes. In addition, at the time that the deferred compensation awards are distributed, BlackRock will record an increase in shareholder’s equity equal to the fair market value of the BlackRock common stock distributed to employees from shares surrendered by PNC. There will be no change in fully diluted shares upon vesting of the deferred compensation because the shares contributed by PNC to fund the awards are already issued and outstanding.
 
The terms of the program are subject to regulatory approval and to approval by BlackRock’s shareholders at the next annual meeting in May 2003.
 
About BlackRock. BlackRock is one of the largest publicly traded investment management firms in the United States with $246 billion of assets under management as of September 30, 2002. BlackRock manages assets on behalf of institutional and individual investors worldwide through a variety of equity, fixed income, liquidity and alternative investment products. In addition, BlackRock provides risk management and investment system services to a growing number of institutional investors under the BlackRock Solutions name. Clients are served from the Company’s headquarters in New York City, as well as offices in Boston, Edinburgh, Hong Kong, San Francisco, Tokyo and Wilmington. BlackRock is majority-owned by The PNC Financial Services Group (NYSE: PNC) and by BlackRock employees.
 
Forward Looking Statements. This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to BlackRock’s outlook for fourth quarter 2002 and full years 2002 and 2003 earnings, fixed income hedge fund investment performance, potential new business opportunities, liquidity asset levels and other future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “pipeline,” “believe,” “comfortable,” “expect,” “current,” “intention,” “estimate,” “position,” “assume,” “potential,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.
 
BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.
 
In addition to factors previously disclosed in BlackRock’s Securities and Exchange Commission (the “SEC”) reports and those identified elsewhere in this report, 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 in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in demand for products or services or in the value of assets under management; (3) the investment performance of BlackRock’s advised or sponsored investment products and separately managed accounts; (4) the impact of increased competition; (5) the impact of capital improvement projects; (6) the impact of future acquisitions; (7) the unfavorable resolution of legal proceedings; (8) the extent and timing of any share repurchases; (9) the impact, extent and timing of technological changes and the adequacy of intellectual property protection; (10) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government

BlackRock Earnings Release
October 11, 2002
Page 6
 
 
agencies relating to BlackRock or PNC; (11) terrorist activities, which may adversely affect the general economy, financial and capital markets, specific industries, and BlackRock; and (12) the ability to attract and retain highly talented professionals.
 
BlackRock’s Annual Report on Form 10-K for the year ended December 31, 2001 and BlackRock’s subsequent reports filed with the Securities and Exchange Commission, accessible on the SEC’s website at <http://www.sec.gov>, discuss these factors in more detail and identify additional factors that can affect forward-looking statements.
 
###

TABLE 1
 
BlackRock, Inc.
Financial Highlights
(Dollar amounts in thousands, except share data)
(unaudited)
 
 
    
Three months ended
     
Variance vs.
  
    
September 30,
     
June 30,
     
September 30, 2001
     
June 30, 2002
  
    
2002
     
2001
     
2002
     
Amount
     
%
     
Amount
     
%
  
                                                            
Total revenue
   
$
137,132
 
   
$
134,782
 
   
$
156,695
 
   
$
2,350
 
   
2
%
   
$
(19,563
)
   
-12
%
Total expense
   
$
81,636
 
   
$
92,250
 
   
$
101,990
 
   
$
(10,614
)
   
-12
%
   
$
(20,354
)
   
-20
%
Operating income
   
$
55,496
 
   
$
42,532
 
   
$
54,705
 
   
$
12,964
 
   
30
%
   
$
791
 
   
1
%
Net income
   
$
33,165
 
   
$
27,376
 
   
$
34,836
 
   
$
5,789
 
   
21
%
   
$
(1,671
)
   
-5
%
Diluted earnings per share
   
$
0.51
 
   
$
0.42
 
   
$
0.53
 
   
$
0.09
 
   
21
%
   
$
(0.02
)
   
-4
%
Average diluted shares outstanding
   
 
65,338,340
 
   
 
64,947,840
 
   
 
65,333,228
 
   
 
390,500
 
   
1
%
   
 
5,112
 
   
0
%
EBITDA (a)
   
$
61,160
 
   
$
52,190
 
   
$
63,684
 
   
$
8,970
 
   
17
%
   
$
(2,524
)
   
-4
%
Operating margin (b)
   
 
42.9
%
   
 
35.5
%
   
 
37.8
%
                                
                                                            
Assets under management ($ in millions)
   
$
245,863
 
   
$
225,596
 
   
$
249,778
 
   
$
20,267
 
   
9
%
   
$
(3,915
)
   
-2
%
 
 
 
    
Nine months ended
         
    
September 30,
     
Variance
  
    
2002
     
2001
     
Amount
   
%
  
                                 
Total revenue
   
$
439,940
 
   
$
403,753
 
   
$
36,187
   
9
%
Total expense
   
$
279,804
 
   
$
276,593
 
   
$
3,211
   
1
%
Operating income
   
$
160,136
 
   
$
127,160
 
   
$
32,976
   
26
%
Net income
   
$
99,401
 
   
$
79,102
 
   
$
20,299
   
26
%
Diluted earnings per share
   
$
1.52
 
   
$
1.22
 
   
$
0.30
   
25
%
Average diluted shares outstanding
   
 
65,303,080
 
   
 
64,897,087
 
   
 
405,993
   
1
%
EBITDA (a)
   
$
183,530
 
   
$
153,443
 
   
$
30,087
   
20
%
Operating margin (b)
   
 
39.3
%
   
 
35.7
%
              
                                 
Assets under management ($ in millions)
   
$
245,863
 
   
$
225,596
 
   
$
20,267
   
9
%
 
 
(a)  Earnings before interest expense, taxes, depreciation and amortization.
(b)  Operating income divided by total revenue less fund administration and servicing costs-affiliates.
 

7

TABLE 2
 
BlackRock, Inc.
Condensed Consolidated Statements of Income
(Dollar amounts in thousands, except share data)
(unaudited)
 
    
Three months ended
September 30,
     
Nine months ended
September 30,
  
    
2002
     
2001
     
% Change
     
2002
     
2001
     
% Change
  
Revenue
                                                  
Investment advisory and administration fees
                                                  
Mutual funds
   
$
52,009
 
   
$
52,751
 
   
(1.4
)%
   
$
162,004
 
   
$
162,458
 
   
(0.3
)%
Separate accounts
   
 
70,149
 
   
 
71,430
 
   
(1.8
)
   
 
235,420
 
   
 
213,439
 
   
10.3
 
    
  
  
  
  
  
Total investment advisory and administration fees
   
 
122,158
 
   
 
124,181
 
   
(1.6
)
   
 
397,424
 
   
 
375,897
 
   
5.7
 
Other income
   
 
14,974
 
   
 
10,601
 
   
41.3
 
   
 
42,516
 
   
 
27,856
 
   
52.6
 
    
  
  
  
  
  
Total revenue
   
 
137,132
 
   
 
134,782
 
   
1.7
 
   
 
439,940
 
   
 
403,753
 
   
9.0
 
    
  
  
  
  
  
Expense
                                                  
Employee compensation and benefits
   
 
50,156
 
   
 
53,932
 
   
(7.0
)
   
 
178,372
 
   
 
164,896
 
   
8.2
 
Fund administration and servicing costs—affiliates
   
 
7,831
 
   
 
15,016
 
   
(47.8
)
   
 
32,925
 
   
 
47,428
 
   
(30.6
)
General and administration
   
 
23,448
 
   
 
20,689
 
   
13.3
 
   
 
67,904
 
   
 
56,428
 
   
20.3
 
Amortization of intangible assets
   
 
201
 
   
 
2,613
 
   
(92.3
)
   
 
603
 
   
 
7,841
 
   
(92.3
)
    
  
  
  
  
  
Total expense
   
 
81,636
 
   
 
92,250
 
   
(11.5
)
   
 
279,804
 
   
 
276,593
 
   
1.2
 
    
  
  
  
  
  
Operating income
   
 
55,496
 
   
 
42,532
 
   
30.5
 
   
 
160,136
 
   
 
127,160
 
   
25.9
 
Non-operating income (expense)
                                                  
Investment income
   
 
408
 
   
 
2,890
 
   
(85.9
)
   
 
7,443
 
   
 
7,384
 
   
0.8
 
Interest expense
   
 
(164
)
   
 
(172
)
   
(4.7
)
   
 
(519
)
   
 
(574
)
   
(9.6
)
    
  
  
  
  
  
    
 
244
 
   
 
2,718
 
   
(91.0
)
   
 
6,924
 
   
 
6,810
 
   
1.7
 
    
  
  
  
  
  
Income before income taxes
   
 
55,740
 
   
 
45,250
 
   
23.2
 
   
 
167,060
 
   
 
133,970
 
   
24.7
 
Income taxes
   
 
22,575
 
   
 
17,874
 
   
26.3
 
   
 
67,659
 
   
 
54,868
 
   
23.3
 
    
  
  
  
  
  
Net income
   
$
33,165
 
   
$
27,376
 
   
21.1
 
   
$
99,401
 
   
$
79,102
 
   
25.7
 
    
  
  
  
  
  
Weighted-average shares outstanding
                                                  
Basic
   
 
64,798,908
 
   
 
64,284,768
 
   
0.8
%
   
 
64,725,309
 
   
 
64,231,342
 
   
0.8
%
Diluted
   
 
65,338,340
 
   
 
64,947,840
 
   
0.6
%
   
 
65,303,080
 
   
 
64,897,087
 
   
0.6
%
Earnings per share
                                                  
Basic
   
$
0.51
 
   
$
0.43
 
   
18.6
%
   
$
1.54
 
   
$
1.23
 
   
25.2
%
Diluted
   
$
0.51
 
   
$
0.42
 
   
21.4
%
   
$
1.52
 
   
$
1.22
 
   
24.6
%

8

TABLE 3
 
BlackRock, Inc.
Condensed Consolidated Statements of Financial Condition
(Dollar amounts in thousands)
(unaudited)
 
    
September 30, 2002
   
December 31, 2001
Assets
              
Cash and cash equivalents
   
$
213,675
   
$
186,451
Accounts receivable
   
 
111,844
   
 
96,659
Investments
   
 
180,462
   
 
139,126
Property and equipment, net
   
 
93,527
   
 
70,510
Intangible assets, net
   
 
181,082
   
 
181,688
Other assets
   
 
8,984
   
 
10,044
    
  
Total assets
   
$
789,574
   
$
684,478
    
  
Liabilities and stockholders’ equity
              
Accrued compensation
   
$
140,847
   
$
146,019
Accounts payable and accrued liabilities
   
 
35,195
   
 
35,047
Acquired management contract obligation
   
 
6,578
   
 
7,344
Other liabilities
   
 
11,030
   
 
9,951
    
  
Total liabilities
   
 
193,650
   
 
198,361
Stockholders’ equity
   
 
595,924
   
 
486,117
    
  
Total liabilities and stockholders’ equity
   
$
789,574
   
$
684,478
    
  

9

 
TABLE 4
 
BlackRock, Inc.
Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
(unaudited)
 
 
    
Nine months ended
  
    
September 30,
  
    
2002
     
2001
  
                   
Cash flows from operating activities
                  
Net income
   
$
99,401
 
   
$
79,102
 
Adjustments to reconcile net income to net cash provided by operating activities:
                  
Depreciation and amortization
   
 
15,951
 
   
 
18,899
 
Stock-based compensation
   
 
4,104
 
   
 
3,784
 
Deferred income taxes
   
 
12,039
 
   
 
2,619
 
Tax benefit from stock-based compensation
   
 
6,668
 
   
 
5,230
 
Purchase of investments, trading, net
   
 
(17,350
)
   
 
—  
 
Net loss on investments
   
 
621
 
   
 
—  
 
Changes in operating assets and liabilities:
                  
Increase in accounts receivable
   
 
(13,629
)
   
 
(13,184
)
Increase in receivable from affiliates
   
 
(13,595
)
   
 
(798
)
Decrease in other assets
   
 
1,060
 
   
 
2,552
 
Increase (decrease) in accrued compensation
   
 
378
 
   
 
(8,292
)
Increase in accounts payable and accrued liabilities
   
 
148
 
   
 
29,012
 
Increase in other liabilities
   
 
1,079
 
   
 
867
 
    
  
Cash provided by operating activities
   
 
96,875
 
   
 
119,791
 
    
  
Cash flows from investing activities
                  
Purchase of property and equipment
   
 
(38,365
)
   
 
(26,602
)
Purchase of investments
   
 
(25,816
)
   
 
(126,305
)
    
  
Cash used in investing activities
   
 
(64,181
)
   
 
(152,907
)
    
  
Cash flows from financing activities
                  
Issuance of class A common stock
   
 
2,212
 
   
 
281
 
Purchase of treasury stock
   
 
(9,826
)
   
 
(6,472
)
Reissuance of treasury stock
   
 
1,691
 
   
 
246
 
Acquired management contract obligation payment
   
 
(766
)
   
 
(696
)
Cash used in financing activities
   
 
(6,689
)
   
 
(6,641
)
    
  
Effect of exchange rate changes on cash and cash equivalents
   
 
1,219
 
   
 
(1
)
    
  
                   
Net increase (decrease) in cash and cash equivalents
   
 
27,224
 
   
 
(39,758
)
Cash and cash equivalents, beginning of period
   
 
186,451
 
   
 
192,590
 
    
  
Cash and cash equivalents, end of period
   
$
213,675
 
   
$
152,832
 
    
  
 

10

 
TABLE 5
 
BlackRock, Inc.
Assets Under Management
(Dollar amounts in millions)
(unaudited)
 
 
    
September 30,
   
December 31,
    
2002
   
2001
   
2001
                      
All Accounts
                     
Fixed income
   
$
164,310
   
$
132,321
   
$
135,242
Liquidity
   
 
63,557
   
 
71,277
   
 
79,753
Equity
   
 
12,506
   
 
17,119
   
 
18,280
Alternative investment products
   
 
5,490
   
 
4,879
   
 
5,309
    
  
  
Total
   
$
245,863
   
$
225,596
   
$
238,584
    
  
  
                      
Separate Accounts
                     
Fixed income
   
$
145,839
   
$
118,336
   
$
119,488
Liquidity
   
 
5,438
   
 
6,987
   
 
6,831
Liquidity-Securities lending
   
 
5,693
   
 
8,069
   
 
10,781
Equity
   
 
8,322
   
 
8,185
   
 
9,577
Alternative investment products
   
 
5,490
   
 
4,879
   
 
5,309
    
  
  
Subtotal
   
 
170,782
   
 
146,456
   
 
151,986
    
  
  
Mutual Funds
                     
Fixed income
   
 
18,471
   
 
13,985
   
 
15,754
Liquidity
   
 
52,426
   
 
56,221
   
 
62,141
Equity
   
 
4,184
   
 
8,934
   
 
8,703
    
  
  
Subtotal
   
 
75,081
   
 
79,140
   
 
86,598
    
  
  
Total
   
$
245,863
   
$
225,596
   
$
238,584
    
  
  
 
 
Component Changes in Assets Under Management
(Dollar amounts in millions)
(unaudited)
 
 
    
Three months ended
     
Nine months ended
  
    
September 30,
     
September 30,
  
    
2002
     
2001
     
2002
     
2001
  
All Accounts
                                    
Beginning assets under management
   
$
249,778
 
   
$
212,694
 
   
$
238,584
 
   
$
203,769
 
Net subscriptions (redemptions)
   
 
(5,546
)
   
 
11,006
 
   
 
2,352
 
   
 
19,080
 
Market appreciation
   
 
1,631
 
   
 
1,896
 
   
 
4,927
 
   
 
2,747
 
    
  
  
  
Ending assets under management
   
$
245,863
 
   
$
225,596
 
   
$
245,863
 
   
$
225,596
 
    
  
  
  
Separate Accounts
                                    
Beginning assets under management
   
$
168,176
 
   
$
140,005
 
   
$
151,986
 
   
$
133,743
 
Net subscriptions
   
 
357
 
   
 
2,775
 
   
 
12,435
 
   
 
6,672
 
Market appreciation
   
 
2,249
 
   
 
3,676
 
   
 
6,361
 
   
 
6,041
 
    
  
  
  
Ending assets under management
   
 
170,782
 
   
 
146,456
 
   
 
170,782
 
   
 
146,456
 
    
  
  
  
Mutual Funds
                                    
Beginning assets under management
   
 
81,602
 
   
 
72,689
 
   
 
86,598
 
   
 
70,026
 
Net subscriptions (redemptions)
   
 
(5,903
)
   
 
8,231
 
   
 
(10,083
)
   
 
12,408
 
Market depreciation
   
 
(618
)
   
 
(1,780
)
   
 
(1,434
)
   
 
(3,294
)
    
  
  
  
Ending assets under management
   
 
75,081
 
   
 
79,140
 
   
 
75,081
 
   
 
79,140
 
    
  
  
  
Total
   
$
245,863
 
   
$
225,596
 
   
$
245,863
 
   
$
225,596
 
    
  
  
  
 
 

11

BlackRock, Inc.
Assets Under Management
Quarterly Trend
(Dollar amounts in millions)
(unaudited)
 
    
2001
     
2002
     
Nine months ended
September 30, 2002
  
    
June 30
     
September 30
     
December 31
     
March 31
     
June 30
     
September 30
     
Separate Accounts
                                                               
Fixed Income
                                                               
Beginning assets under management
   
$
107,371
 
   
$
110,483
 
   
$
118,336
 
   
$
119,488
 
   
$
123,983
 
   
 
140,738
 
   
$
119,488
 
Net subscriptions
   
 
2,682
 
   
 
2,959
 
   
 
1,731
 
   
 
4,437
 
   
 
12,270
 
   
 
281
 
   
 
16,988
 
Market appreciation (depreciation)
   
 
430
 
   
 
4,894
 
   
 
(579
)
   
 
58
 
   
 
4,485
 
   
 
4,820
 
   
 
9,363
 
    
  
  
  
  
  
  
Ending assets under management
   
 
110,483
 
   
 
118,336
 
   
 
119,488
 
   
 
123,983
 
   
 
140,738
 
   
 
145,839
 
   
 
145,839
 
    
  
  
  
  
  
  
Liquidity
                                                               
Beginning assets under management
   
 
5,713
 
   
 
6,782
 
   
 
6,987
 
   
 
6,831
 
   
 
5,441
 
   
 
5,516
 
   
 
6,831
 
Net subscriptions (redemptions)
   
 
1,042
 
   
 
181
 
   
 
(171
)
   
 
(1,395
)
   
 
80
 
   
 
(92
)
   
 
(1,407
)
Market appreciation (depreciation)
   
 
27
 
   
 
24
 
   
 
15
 
   
 
5
 
   
 
(5
)
   
 
14
 
   
 
14
 
    
  
  
  
  
  
  
Ending assets under management
   
 
6,782
 
   
 
6,987
 
   
 
6,831
 
   
 
5,441
 
   
 
5,516
 
   
 
5,438
 
   
 
5,438
 
    
  
  
  
  
  
  
Liquidity-Securities lending
                                                               
Beginning assets under management
   
 
7,514
 
   
 
10,004
 
   
 
8,069
 
   
 
10,781
 
   
 
9,544
 
   
 
6,435
 
   
 
10,781
 
Net subscriptions (redemptions)
   
 
2,490
 
   
 
(1,935
)
   
 
2,712
 
   
 
(1,237
)
   
 
(3,109
)
   
 
(742
)
   
 
(5,088
)
    
  
  
  
  
  
  
Ending assets under management
   
 
10,004
 
   
 
8,069
 
   
 
10,781
 
   
 
9,544
 
   
 
6,435
 
   
 
5,693
 
   
 
5,693
 
    
  
  
  
  
  
  
Equity
                                                               
Beginning assets under management
   
 
7,796
 
   
 
8,257
 
   
 
8,185
 
   
 
9,577
 
   
 
9,445
 
   
 
10,119
 
   
 
9,577
 
Net subscriptions (redemptions)
   
 
488
 
   
 
1,144
 
   
 
675
 
   
 
(80
)
   
 
884
 
   
 
598
 
   
 
1,402
 
Market appreciation (depreciation)
   
 
(27
)
   
 
(1,216
)
   
 
717
 
   
 
(52
)
   
 
(210
)
   
 
(2,395
)
   
 
(2,657
)
    
  
  
  
  
  
  
Ending assets under management
   
 
8,257
 
   
 
8,185
 
   
 
9,577
 
   
 
9,445
 
   
 
10,119
 
   
 
8,322
 
   
 
8,322
 
    
  
  
  
  
  
  
Alternative investment products
                                                               
Beginning assets under management
   
 
4,317
 
   
 
4,479
 
   
 
4,879
 
   
 
5,309
 
   
 
5,541
 
   
 
5,368
 
   
 
5,309
 
Net subscriptions
   
 
169
 
   
 
426
 
   
 
411
 
   
 
164
 
   
 
64
 
   
 
312
 
   
 
540
 
Market appreciation (depreciation)
   
 
(7
)
   
 
(26
)
   
 
19
 
   
 
68
 
   
 
(237
)
   
 
(190
)
   
 
(359
)
    
  
  
  
  
  
  
Ending assets under management
   
 
4,479
 
   
 
4,879
 
   
 
5,309
 
   
 
5,541
 
   
 
5,368
 
   
 
5,490
 
   
 
5,490
 
    
  
  
  
  
  
  
Total Separate Accounts
                                                               
Beginning assets under management
   
 
132,711
 
   
 
140,005
 
   
 
146,456
 
   
 
151,986
 
   
 
153,954
 
   
 
168,176
 
   
 
151,986
 
Net subscriptions
   
 
6,871
 
   
 
2,775
 
   
 
5,358
 
   
 
1,889
 
   
 
10,189
 
   
 
357
 
   
 
12,435
 
Market appreciation
   
 
423
 
   
 
3,676
 
   
 
172
 
   
 
79
 
   
 
4,033
 
   
 
2,249
 
   
 
6,361
 
    
  
  
  
  
  
  
Ending assets under management
   
$
140,005
 
   
$
146,456
 
   
$
151,986
 
   
$
153,954
 
   
$
168,176
 
   
$
170,782
 
   
$
170,782
 
    
  
  
  
  
  
  
Mutual Funds
                                                               
Fixed Income
                                                               
Beginning assets under management
   
$
13,600
 
   
$
12,326
 
   
$
13,985
 
   
$
15,754
 
   
$
16,270
 
   
 
17,175
 
   
$
15,754
 
Net subscriptions (redemptions)
   
 
(1,207
)
   
 
1,397
 
   
 
2,000
 
   
 
644
 
   
 
565
 
   
 
950
 
   
 
2,159
 
Market appreciation (depreciation)
   
 
(67
)
   
 
262
 
   
 
(231
)
   
 
(128
)
   
 
340
 
   
 
346
 
   
 
558
 
    
  
  
  
  
  
  
Ending assets under management
   
 
12,326
 
   
 
13,985
 
   
 
15,754
 
   
 
16,270
 
   
 
17,175
 
   
 
18,471
 
   
 
18,471
 
    
  
  
  
  
  
  
Liquidity
                                                               
Beginning assets under management
   
 
44,252
 
   
 
48,829
 
   
 
56,221
 
   
 
62,141
 
   
 
59,994
 
   
 
58,648
 
   
 
62,141
 
Net subscriptions (redemptions)
   
 
4,577
 
   
 
7,392
 
   
 
5,920
 
   
 
(2,147
)
   
 
(1,347
)
   
 
(6,223
)
   
 
(9,717
)
Market appreciation
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
1
 
   
 
1
 
   
 
2
 
    
  
  
  
  
  
  
Ending assets under management
   
 
48,829
 
   
 
56,221
 
   
 
62,141
 
   
 
59,994
 
   
 
58,648
 
   
 
52,426
 
   
 
52,426
 
    
  
  
  
  
  
  
Equity
                                                               
Beginning assets under management
   
 
11,073
 
   
 
11,534
 
   
 
8,934
 
   
 
8,703
 
   
 
7,898
 
   
 
5,779
 
   
 
8,703
 
Net redemptions
   
 
(69
)
   
 
(558
)
   
 
(1,040
)
   
 
(697
)
   
 
(1,198
)
   
 
(630
)
   
 
(2,525
)
Market appreciation (depreciation)
   
 
530
 
   
 
(2,042
)
   
 
809
 
   
 
(108
)
   
 
(921
)
   
 
(965
)
   
 
(1,994
)
    
  
  
  
  
  
  
Ending assets under management
   
 
11,534
 
   
 
8,934
 
   
 
8,703
 
   
 
7,898
 
   
 
5,779
 
   
 
4,184
 
   
 
4,184
 
    
  
  
  
  
  
  
Total Mutual Funds
                                                               
Beginning assets under management
   
 
68,925
 
   
 
72,689
 
   
 
79,140
 
   
 
86,598
 
   
 
84,162
 
   
 
81,602
 
   
 
86,598
 
Net subscriptions (redemptions)
   
 
3,301
 
   
 
8,231
 
   
 
6,880
 
   
 
(2,200
)
   
 
(1,980
)
   
 
(5,903
)
   
 
(10,083
)
Market appreciation (depreciation)
   
 
463
 
   
 
(1,780
)
   
 
578
 
   
 
(236
)
   
 
(580
)
   
 
(618
)
   
 
(1,434
)
    
  
  
  
  
  
  
Ending assets under management
   
$
72,689
 
   
$
79,140
 
   
$
86,598
 
   
$
84,162
 
   
$
81,602
 
   
$
75,081
 
   
$
75,081
 
    
  
  
  
  
  
  
 
 

12

BlackRock, Inc.
Assets Under Management
Quarterly Trend
(Dollar amounts in millions)
(unaudited)
 
    
2001
     
2002
       
Nine months ended September 30, 2002
  
    
June 30
       
September 30
     
December 31
     
March 31
     
June 30
       
September 30
       
Mutual Funds
                                                                     
BlackRock Funds
                                                                     
Beginning assets under management
   
$
24,383
 
     
$
24,589
 
   
$
22,790
 
   
$
24,195
 
   
$
22,176
 
     
$
20,264
 
     
$
24,195
 
Net subscriptions (redemptions)
   
 
(253
)
     
 
49
 
   
 
755
 
   
 
(1,830
)
   
 
(1,123
)
     
 
(976
)
     
 
(3,929
)
Market appreciation (depreciation)
   
 
459
 
     
 
(1,848
)
   
 
650
 
   
 
(189
)
   
 
(789
)
     
 
(804
)
     
 
(1,782
)
    
    
  
  
  
    
    
Ending assets under management
   
 
24,589
 
     
 
22,790
 
   
 
24,195
 
   
 
22,176
 
   
 
20,264
 
     
 
18,484
 
     
 
18,484
 
    
    
  
  
  
    
    
BlackRock Global Series
                                                                     
Beginning assets under management
   
 
105
 
     
 
134
 
   
 
127
 
   
 
149
 
   
 
247
 
     
 
208
 
     
 
149
 
Net subscriptions (redemptions)
   
 
33
 
     
 
1
 
   
 
13
 
   
 
95
 
   
 
(52
)
     
 
(4
)
     
 
39
 
Market appreciation (depreciation)
   
 
(4
)
     
 
(8
)
   
 
9
 
   
 
3
 
   
 
13
 
     
 
(16
)
     
 
—  
 
    
    
  
  
  
    
    
Ending assets under management
   
 
134
 
     
 
127
 
   
 
149
 
   
 
247
 
   
 
208
 
     
 
188
 
     
 
188
 
    
    
  
  
  
    
    
BPIF
                                                                     
Beginning assets under management
   
 
37,047
 
     
 
41,954
 
   
 
48,889
 
   
 
53,167
 
   
 
52,534
 
     
 
51,127
 
     
 
53,167
 
Net subscriptions (redemptions)
   
 
4,907
 
     
 
6,935
 
   
 
4,278
 
   
 
(633
)
   
 
(1,407
)
     
 
(5,799
)
     
 
(7,839
)
    
    
  
  
  
    
    
Ending assets under management
   
 
41,954
 
     
 
48,889
 
   
 
53,167
 
   
 
52,534
 
   
 
51,127
 
     
 
45,328
 
     
 
45,328
 
    
    
  
  
  
    
    
Closed End
                                                                     
Beginning assets under management
   
 
6,841
 
     
 
5,440
 
   
 
6,728
 
   
 
8,512
 
   
 
8,611
 
     
 
9,393
 
     
 
8,512
 
Net subscriptions (redemptions)
   
 
(1,409
)
     
 
1,212
 
   
 
1,865
 
   
 
149
 
   
 
586
 
     
 
830
 
     
 
1,565
 
Market appreciation (depreciation)
   
 
8
 
     
 
76
 
   
 
(81
)
   
 
(50
)
   
 
196
 
     
 
202
 
     
 
348
 
    
    
  
  
  
    
    
Ending assets under management
   
 
5,440
 
     
 
6,728
 
   
 
8,512
 
   
 
8,611
 
   
 
9,393
 
     
 
10,425
 
     
 
10,425
 
    
    
  
  
  
    
    
Short Term Investment Funds (STIF)
                                                                     
Beginning assets under management
   
 
549
 
     
 
572
 
   
 
606
 
   
 
575
 
   
 
594
 
     
 
610
 
     
 
575
 
Net subscriptions (redemptions)
   
 
23
 
     
 
34
 
   
 
(31
)
   
 
19
 
   
 
16
 
     
 
46
 
     
 
81
 
    
    
  
  
  
    
    
Ending assets under management
   
 
572
 
     
 
606
 
   
 
575
 
   
 
594
 
   
 
610
 
     
 
656
 
     
 
656
 
    
    
  
  
  
    
    
Total Mutual Funds
                                                                     
Beginning assets under management
   
 
68,925
 
     
 
72,689
 
   
 
79,140
 
   
 
86,598
 
   
 
84,162
 
     
 
81,602
 
     
 
86,598
 
Net subscriptions (redemptions)
   
 
3,301
 
     
 
8,231
 
   
 
6,880
 
   
 
(2,200
)
   
 
(1,980
)
     
 
(5,903
)
     
 
(10,083
)
Market appreciation (depreciation)
   
 
463
 
     
 
(1,780
)
   
 
578
 
   
 
(236
)
   
 
(580
)
     
 
(618
)
     
 
(1,434
)
    
    
  
  
  
    
    
Ending assets under management
   
$
72,689
 
     
$
79,140
 
   
$
86,598
 
   
$
84,162
 
   
$
81,602
 
     
$
75,081
 
     
$
75,081
 
    
    
  
  
  
    
    

13