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BlackRock Reports Third Quarter Diluted EPS Of $3.65, Or $3.47 As Adjusted

Comparison to the Second Quarter 2012

Operating income: Third quarter 2012 operating income was $875 million compared with $829 million in second quarter 2012. Operating income, as adjusted, was $876 million compared with $832 million in second quarter 2012.

Third quarter 2012 revenue increased $91 million from second quarter 2012, primarily due to the following:

  • Investment advisory, administration fees and securities lending revenue in third quarter 2012 increased $34 million from second quarter 2012, driven by market effects on average AUM, the benefit of one additional revenue day in the current quarter and revenue associated with net inflows, partially offset by seasonally lower securities lending fees. Securities lending fees were $129 million in third quarter 2012 compared with $157 million in second quarter 2012.
  • Performance fees increased $62 million to $103 million in third quarter 2012 from $41 million in second quarter 2012. The current quarter reflected higher performance fees from alternative products primarily due to the greater number of products with performance measurement periods that end on September 30 th as compared with June 30 th.
  • BlackRock Solutions and advisory revenue of $128 million in third quarter 2012 decreased from $131 million in second quarter 2012.

Third quarter 2012 total operating expenses of $1.4 billion increased $45 million from second quarter 2012. Results were driven by the following:

  • Employee compensation and benefits increased $42 million, primarily reflecting higher incentive compensation driven by higher operating income.
  • General and administration expenses increased $3 million, primarily related to the previously mentioned closed-end fund launch costs and an increase in foreign currency remeasurement costs, partially offset by lower marketing and promotional expenses, which were seasonally lower in the third quarter.

Non-operating income (expense): Third quarter 2012 non-operating income, net of non-controlling interests, was $17 million compared with $46 million non-operating expense in second quarter 2012. Third quarter 2012 included $64 million of net positive marks primarily on distressed credit/mortgage funds and private equity fund co-investments and $47 million of net interest expense. Net interest expense increased $3 million from second quarter 2012, primarily due to the $1.5 billion long-term debt issued in May 2012.

Income tax expense: Income tax expense of $250 million for third quarter 2012 increased $21 million from second quarter 2012. The GAAP effective income tax rate for the third quarter 2012 was 28.1% compared with 29.3% for second quarter 2012. The third quarter 2012 GAAP tax rate included a $30 million net non-cash benefit, related to revaluation of certain deferred income tax liabilities, including tax legislation enacted in the United Kingdom. The as adjusted effective income tax rate was 31.4% and 29.3% for third quarter 2012 and second quarter 2012, respectively.

See notes (a) through (f) in Attachment I for more information on as adjusted items and the reconciliation to GAAP.

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