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Section 1: 8-K (8-K)

8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 17, 2019 (April 16, 2019)

 

 

BLACKROCK, INC.

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE   001-33099   32-0174431

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

55 East 52nd Street, New York, New York   10055
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (212) 810-5300

 

 

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.  ☐

 

 

 


Item 8.01 Other Events.

First Quarter 2019 Results

On April 16, 2019, BlackRock, Inc. (the “Company”) reported results of operations for the three months ended March 31, 2019.

FINANCIAL RESULTS

 

     Q1     Q1  

(in millions, except per share data)

   2019     2018  

AUM

   $ 6,515,345     $ 6,316,984  

% change

     3  

Total net flows

   $ 64,666     $ 56,946  

GAAP basis:

    

Revenue

   $ 3,346     $ 3,583  

% change

     (7 )%   

Operating income

   $ 1,233     $ 1,375  

% change

     (10 )%   

Operating margin

     36.8     38.4

Net income(1)

   $ 1,053     $ 1,089  

% change

     (3 )%   

Diluted EPS

   $ 6.61     $ 6.68  

% change

     (1 )%   

Weighted average diluted shares

     159.3       162.9  

% change

     (2 )%   

As Adjusted:

    

Operating income(2)

   $ 1,233     $ 1,378  

% change

     (11 )%   

Operating margin(2)

     41.9     44.1

Net income(1) (2)

   $ 1,053     $ 1,092  

% change

     (4 )%   

Diluted EPS(2)

   $ 6.61     $ 6.70  

% change

     (1 )%   

 

(1)

Net income represents net income attributable to BlackRock, Inc.

(2)

See notes (1) through (3) to the condensed consolidated statements of income and supplemental information on pages 10-11 for more information on as adjusted items and the reconciliation to GAAP.

NET FLOW HIGHLIGHTS

 

     Q1     LTM(1)  

(in billions)

   2019     2019  

Long-term net flows:

   $ 59.0     $ 127.7  

By region:

 

Americas

   $ 40.0     $ 140.8  

EMEA

     21.9       3.3  

APAC

     (2.9     (16.4

By client type:

 

Retail:

   $ (0.8   $ 1.6  

US

     3.2       18.8  

International

     (4.0     (17.2

iShares®:

   $ 30.7     $ 163.6  

Core

     19.5       93.4  

Non-Core

     11.2       70.2  

Institutional:

   $ 29.1     $ (37.5

Active

     15.4       12.9  

Index

     13.7       (50.4

Cash management net flows:

   $ 5.7     $ 3.0  

 

(1) 

Amounts represent rolling last twelve months long-term net flows as of March 31, 2019.

 

2


BUSINESS RESULTS

 

                         March 31, 2019     Q1 2019  
     Q1 2019     March 31, 2019      Q1 2019      AUM     Base fees(1)  

(in millions), (unaudited)

   Net flows     AUM      Base fees(1)      % of Total     % of Total  

RESULTS BY CLIENT TYPE

 

Retail

   $ (813   $ 646,355      $ 826        10     29

iShares ETFs

     30,688       1,924,710        1,091        30     39

Institutional:

            

Active

     15,367       1,160,150        500        17     18

Index

     13,757       2,327,080        247        36     9
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total institutional

     29,124       3,487,230        747        53     27
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Long-term

     58,999       6,058,295        2,664        93     95

Cash management

     5,666       455,271        141        7     5

Advisory

     1       1,779        —          —         —    
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 64,666     $ 6,515,345      $ 2,805        100     100
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

RESULTS BY INVESTMENT STYLE

 

Active

   $ 13,603     $ 1,724,875      $ 1,307        26     47

Index and iShares ETFs

     45,396       4,333,420        1,357        67     48
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Long-term

     58,999       6,058,295        2,664        93     95

Cash management

     5,666       455,271        141        7     5

Advisory

     1       1,779        —          —         —    
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 64,666     $ 6,515,345      $ 2,805        100     100
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

RESULTS BY PRODUCT TYPE

 

Equity

   $ (26,077   $ 3,375,885      $ 1,386        52     49

Fixed income

     79,923       2,029,966        774        31     28

Multi-asset

     (1,655     499,520        276        8     10

Alternatives

     6,808       152,924        228        2     8
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Long-term

     58,999       6,058,295        2,664        93     95

Cash management

     5,666       455,271        141        7     5

Advisory

     1       1,779        —          —         —    
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 64,666     $ 6,515,345      $ 2,805        100     100
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

(1)

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

INVESTMENT PERFORMANCE AT MARCH 31, 2019(1)

 

     One-year period     Three-year period     Five-year period  

Fixed income:

      

Actively managed AUM above benchmark or peer median

      

Taxable

     61     83     85

Tax-exempt

     28     78     76

Index AUM within or above applicable tolerance

     98     99     98

Equity:

      

Actively managed AUM above benchmark or peer median

      

Fundamental

     63     73     83

Systematic

     27     87     87

Index AUM within or above applicable tolerance

     97     99     98

 

(1)

Past performance is not indicative of future results. The performance information shown is based on preliminary available data. Please refer to page 12 for performance disclosure detail.

 

3


CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION

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

 

                       Three Months        
     Three Months Ended           Ended        
     March 31,           December 31,        
     2019     2018     Change     2018     Change  

Revenue

          

Investment advisory, administration fees and securities lending revenue

   $ 2,805     $ 2,947     $ (142   $ 2,779     $ 26  

Investment advisory performance fees

     26       70       (44     100       (74

Technology services revenue

     204       184       20       203       1  

Distribution fees

     262       311       (49     271       (9

Advisory and other revenue

     49       71       (22     81       (32
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     3,346       3,583       (237     3,434       (88
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expense

          

Employee compensation and benefits

     1,064       1,121       (57     1,020       44  

Distribution and servicing costs

     404       432       (28     420       (16

Direct fund expense

     242       261       (19     224       18  

General and administration

     388       383       5       449       (61

Restructuring charge

     —         —         —         60       (60

Amortization of intangible assets

     15       11       4       15       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expense

     2,113       2,208       (95     2,188       (75
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     1,233       1,375       (142     1,246       (13

Nonoperating income (expense)

          

Net gain (loss) on investments

     142       15       127       (67     209  

Interest and dividend income

     29       15       14       41       (12

Interest expense

     (46     (46     —         (46     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonoperating income (expense)

     125       (16     141       (72     197  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     1,358       1,359       (1     1,174       184  

Income tax expense

     298       265       33       247       51  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     1,060       1,094       (34     927       133  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less:

          

Net income (loss) attributable to noncontrolling interests

     7       5       2       —         7  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to BlackRock, Inc.

   $ 1,053     $ 1,089     $ (36   $ 927     $ 126  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares outstanding

          

Basic

     158,268,034       161,250,018       (2,981,984     158,859,998       (591,964

Diluted

     159,348,431       162,918,961       (3,570,530     160,450,266       (1,101,835

Earnings per share attributable to BlackRock, Inc. common stockholders (3)

          

Basic

   $ 6.65     $ 6.75     $ (0.10   $ 5.84     $ 0.81  

Diluted

   $ 6.61     $ 6.68     $ (0.07   $ 5.78     $ 0.83  

Cash dividends declared and paid per share

   $ 3.30     $ 2.88     $ 0.42     $ 3.13     $ 0.17  

Supplemental information:

          

AUM (end of period)

   $ 6,515,345     $ 6,316,984     $ 198,361     $ 5,975,818     $ 539,527  

Shares outstanding (end of period)

     155,323,503       161,275,008       (5,951,505     158,520,147       (3,196,644

GAAP:

          

Operating margin

     36.8     38.4     (160 ) bps      36.3     50  bps 

Effective tax rate

     22.1     19.6     250  bps      21.0     110  bps 

As adjusted:

          

Operating income (1)

   $ 1,233     $ 1,378     $ (145   $ 1,310     $ (77

Operating margin (1)

     41.9     44.1     (220 ) bps      43.5     (160 ) bps 

Nonoperating income (expense), less net income (loss) attributable to noncontrolling interests

   $ 118     $ (21   $ 139     $ (72   $ 190  

Net income attributable to BlackRock, Inc. (2)

   $ 1,053     $ 1,092     $ (39   $ 975     $ 78  

Diluted earnings attributable to BlackRock, Inc. common stockholders per share (2) (3)

   $ 6.61     $ 6.70     $ (0.09   $ 6.08     $ 0.53  

Effective tax rate

     22.1     19.6     250  bps      21.2     90  bps 

See pages 10-11 for the reconciliation to GAAP and notes (1) through (3) for more information on as adjusted items.

 

4


ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

Current Quarter Component Changes by Client Type and Product Type

 

            Net                            
     December 31,      inflows     Market            March 31,         
     2018      (outflows)     change      FX impact (1)     2019      Average AUM (2)  

Retail:

               

Equity

   $ 205,714      $ (3,613   $ 23,370      $ 521     $ 225,992      $ 219,245  

Fixed income

     271,588        5,929       4,099        (50     281,566        277,587  

Multi-asset

     113,417        (3,692     8,086        87       117,898        116,924  

Alternatives

     20,131        563       226        (21     20,899        20,495  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Retail subtotal

     610,850        (813     35,781        537       646,355        634,251  

iShares ETFs:

               

Equity

     1,274,262        (1,622     151,100        (536     1,423,204        1,369,626  

Fixed income

     427,596        32,203       12,010        (648     471,161        451,119  

Multi-asset

     4,485        (636     320        2       4,171        4,204  

Alternatives

     25,082        743       354        (5     26,174        26,119  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

iShares ETFs subtotal

     1,731,425        30,688       163,784        (1,187     1,924,710        1,851,068  

Institutional:

               

Active:

               

Equity

     110,976        (5,536     12,941        272       118,653        117,018  

Fixed income

     538,961        12,992       18,942        418       571,313        551,584  

Multi-asset

     336,237        2,591       30,680        (462     369,046        355,060  

Alternatives

     93,805        5,320       1,905        108       101,138        98,044  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Active subtotal

     1,079,979        15,367       64,468        336       1,160,150        1,121,706  

Index:

               

Equity

     1,444,873        (15,306     177,919        550       1,608,036        1,558,876  

Fixed income

     646,272        28,799       25,821        5,034       705,926        676,391  

Multi-asset

     7,745        82       600        (22     8,405        8,182  

Alternatives

     4,340        182       157        34       4,713        4,511  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Index subtotal

     2,103,230        13,757       204,497        5,596       2,327,080        2,247,960  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Institutional subtotal

     3,183,209        29,124       268,965        5,932       3,487,230        3,369,666  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Long-term

     5,525,484        58,999       468,530        5,282       6,058,295        5,854,985  

Cash management

     448,565        5,666       676        364       455,271        450,140  

Advisory (3)

     1,769        1       3        6       1,779        1,778  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 5,975,818      $ 64,666     $ 469,209      $ 5,652     $ 6,515,345      $ 6,306,903  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
Current Quarter Component Changes by Investment Style and Product Type (Long-term)

 

            Net                            
     December 31,      inflows     Market            March 31,         
     2018      (outflows)     change      FX impact (1)     2019      Average AUM (2)  

Active:

               

Equity

   $ 258,205      $ (9,464   $ 29,893      $ 310     $ 278,944      $ 273,333  

Fixed income

     795,985        18,285       22,525        155       836,950        813,821  

Multi-asset

     449,654        (1,101     38,766        (375     486,944        471,984  

Alternatives

     113,936        5,883       2,131        87       122,037        118,539  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Active subtotal

     1,617,780        13,603       93,315        177       1,724,875        1,677,677  

Index and iShares ETFs:

               

iShares ETFs:

               

Equity

     1,274,262        (1,622     151,100        (536     1,423,204        1,369,626  

Fixed income

     427,596        32,203       12,010        (648     471,161        451,119  

Multi-asset

     4,485        (636     320        2       4,171        4,204  

Alternatives

     25,082        743       354        (5     26,174        26,119  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

iShares ETFs subtotal

     1,731,425        30,688       163,784        (1,187     1,924,710        1,851,068  

Non-ETF Index:

               

Equity

     1,503,358        (14,991     184,337        1,033       1,673,737        1,621,806  

Fixed income

     660,836        29,435       26,337        5,247       721,855        691,741  

Multi-asset

     7,745        82       600        (22     8,405        8,182  

Alternatives

     4,340        182       157        34       4,713        4,511  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Non-ETF Index subtotal

     2,176,279        14,708       211,431        6,292       2,408,710        2,326,240  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Index & iShares ETFs subtotal

     3,907,704        45,396       375,215        5,105       4,333,420        4,177,308  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Long-term

   $ 5,525,484      $ 58,999     $ 468,530      $ 5,282     $ 6,058,295      $ 5,854,985  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
Current Quarter Component Changes by Product Type (Long-term)

 

            Net                            
     December 31,      inflows     Market            March 31,         
     2018      (outflows)     change      FX impact (1)     2019      Average AUM (2)  

Equity

   $ 3,035,825      $ (26,077   $ 365,330      $ 807     $ 3,375,885      $ 3,264,765  

Fixed income

     1,884,417        79,923       60,872        4,754       2,029,966        1,956,681  

Multi-asset

     461,884        (1,655     39,686        (395     499,520        484,370  

Alternatives:

               

Illiquid alternatives

     59,827        5,938       600        97       66,462        63,757  

Liquid alternatives

     51,718        (99     1,494        5       53,118        52,362  

Currency and commodities(4)

     31,813        969       548        14       33,344        33,050  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Alternatives subtotal

     143,358        6,808       2,642        116       152,924        149,169  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Long-term

   $ 5,525,484      $ 58,999     $ 468,530      $ 5,282     $ 6,058,295      $ 5,854,985  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US 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 ETFs.

 

5


ASSETS UNDER MANAGEMENT

(in millions), (unaudited)

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

 

            Net     Acquisitions                           
     March 31,      inflows     and     Market           March 31,         
     2018      (outflows)     dispositions(1)     change     FX impact (2)     2019      Average AUM (3)  

Retail:

                

Equity

   $ 232,955      $ (5,771   $ 2,137     $ 2,077     $ (5,406   $ 225,992      $ 228,018  

Fixed income

     266,571        7,411       14,070       (2,343     (4,143     281,566        273,072  

Multi-asset

     121,601        (2,813     2,519       (2,465     (944     117,898        119,768  

Alternatives

     17,236        2,753       1,628       (427     (291     20,899        19,305  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Retail subtotal

     638,363        1,580       20,354       (3,158     (10,784     646,355        640,163  

iShares ETFs:

                

Equity

     1,344,564        81,482       —         9,013       (11,855     1,423,204        1,367,394  

Fixed income

     394,191        79,923       —         3,410       (6,363     471,161        418,978  

Multi-asset

     3,766        366       —         43       (4     4,171        3,908  

Alternatives

     25,404        1,804       —         (933     (101     26,174        25,078  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

iShares ETFs subtotal

     1,767,925        163,575       —         11,533       (18,323     1,924,710        1,815,358  

Institutional:

                

Active:

                

Equity

     136,470        (13,136     (4,296     3,196       (3,581     118,653        126,525  

Fixed income

     563,572        (3,640     2,417       18,775       (9,811     571,313        551,214  

Multi-asset

     343,344        18,645       (1,593     19,190       (10,540     369,046        351,477  

Alternatives

     87,060        11,004       3,374       1,674       (1,974     101,138        91,929  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Active subtotal

     1,130,446        12,873       (98     42,835       (25,906     1,160,150        1,121,145  

Index:

                

Equity

     1,649,248        (100,000     4,749       84,973       (30,934     1,608,036        1,624,596  

Fixed income

     662,189        48,657       2,051       23,973       (30,944     705,926        651,967  

Multi-asset

     7,986        1,047       (243     (167     (218     8,405        7,965  

Alternatives

     4,904        (30     1       (27     (135     4,713        4,610  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Index subtotal

     2,324,327        (50,326     6,558       108,752       (62,231     2,327,080        2,289,138  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Institutional subtotal

     3,454,773        (37,453     6,460       151,587       (88,137     3,487,230        3,410,283  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Long-term

     5,861,061        127,702       26,814       159,962       (117,244     6,058,295        5,865,804  

Cash management

     454,784        2,971       686       2,184       (5,354     455,271        453,287  

Advisory (4)

     1,139        676       —         22       (58     1,779        1,473  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total

   $ 6,316,984      $ 131,349     $ 27,500     $ 162,168     $ (122,656   $ 6,515,345      $ 6,320,564  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
Year-over-Year Component Changes by Investment Style and Product Type (Long-term)

 

            Net     Acquisitions                           
     March 31,      inflows     and     Market           March 31,         
     2018      (outflows)     dispositions(1)     change     FX impact (2)     2019      Average AUM (3)  

Active:

                

Equity

   $ 308,367      $ (22,909   $ (2,160   $ 2,532     $ (6,886   $ 278,944      $ 291,305  

Fixed income

     816,274        1,419       16,487       15,878       (13,108     836,950        809,653  

Multi-asset

     464,945        15,832       926       16,725       (11,484     486,944        471,245  

Alternatives

     104,297        13,756       5,002       1,247       (2,265     122,037        111,234  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Active subtotal

     1,693,883        8,098       20,255       36,382       (33,743     1,724,875        1,683,437  

Index and iShares ETFs:

                

iShares ETFs

                

Equity

     1,344,564        81,482       —         9,013       (11,855     1,423,204        1,367,394  

Fixed income

     394,191        79,923       —         3,410       (6,363     471,161        418,978  

Multi-asset

     3,766        366       —         43       (4     4,171        3,908  

Alternatives

     25,404        1,804       —         (933     (101     26,174        25,078  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

iShares ETFs subtotal

     1,767,925        163,575       —         11,533       (18,323     1,924,710        1,815,358  

Non-ETF Index

                

Equity

     1,710,306        (95,998     4,750       87,714       (33,035     1,673,737        1,687,834  

Fixed income

     676,058        51,009       2,051       24,527       (31,790     721,855        666,600  

Multi-asset

     7,986        1,047       (243     (167     (218     8,405        7,965  

Alternatives

     4,903        (29     1       (27     (135     4,713        4,610  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Non-ETF Index subtotal

     2,399,253        (43,971     6,559       112,047       (65,178     2,408,710        2,367,009  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Index & iShares ETFs subtotal

     4,167,178        119,604       6,559       123,580       (83,501     4,333,420        4,182,367  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Long-term

   $ 5,861,061      $ 127,702     $ 26,814     $ 159,962     $ (117,244   $ 6,058,295      $ 5,865,804  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
Year-over-Year Component Changes by Product Type (Long-term)

 

            Net     Acquisitions                           
     March 31,      inflows     and     Market           March 31,         
     2018      (outflows)     dispositions(1)     change     FX impact (2)     2019      Average AUM (3)  

Equity

   $ 3,363,237      $ (37,425   $ 2,590     $ 99,259     $ (51,776   $ 3,375,885      $ 3,346,533  

Fixed income

     1,886,523        132,351       18,538       43,815       (51,261     2,029,966        1,895,231  

Multi-asset

     476,697        17,245       683       16,601       (11,706     499,520        483,118  

Alternatives:

                

Illiquid alternatives

     49,472        11,965       4,968       1,238       (1,181     66,462        56,670  

Liquid alternatives

     52,091        1,932       28       77       (1,010     53,118        52,039  

Currency and commodities(5)

     33,041        1,634       7       (1,028     (310     33,344        32,213  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Alternatives subtotal

     134,604        15,531       5,003       287       (2,501     152,924        140,922  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Long-term

   $ 5,861,061      $ 127,702     $ 26,814     $ 159,962     $ (117,244   $ 6,058,295      $ 5,865,804  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

(1)

Amounts include net AUM from the acquisitions of Tennenbaum Capital Partners in August 2018 and the asset management business of Citibanamex in September 2018, AUM reclassifications and net dispositions related to the transfer of BlackRock’s UK Defined Contribution Administration and Platform business to Aegon N.V. in July 2018, and net AUM dispositions related to the sale of BlackRock’s minority interest in DSP BlackRock Investment Managers Pvt. Ltd. to The DSP Group in August 2018.

(2)

Foreign exchange reflects the impact of translating non-US dollar denominated AUM into US dollars for reporting purposes.

(3)

Average AUM is calculated as the average of the month-end spot AUM amounts for the trailing thirteen months.

(4)

Advisory AUM represents long-term portfolio liquidation assignments.

(5)

Amounts include commodity iShares ETFs.

 

6


SUMMARY OF REVENUE

     Three Months            Three Months         
     Ended            Ended         
     March 31,            December 31,         

(in millions), (unaudited)

   2019      2018      Change     2018      Change  

Investment advisory, administration fees and securities lending revenue:

             

Equity:

             

Active

   $ 375      $ 438      $ (63   $ 385      $ (10

iShares ETFs

     847        926        (79     827        20  

Non-ETF Index

     164        176        (12     153        11  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Equity subtotal

     1,386        1,540        (154     1,365        21  

Fixed income:

             

Active

     457        456        1       466        (9

iShares ETFs

     220        208        12       205        15  

Non-ETF Index

     97        93        4       95        2  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Fixed income subtotal

     774        757        17       766        8  

Multi-asset

     276        296        (20     287        (11

Alternatives:

             

Illiquid alternatives

     110        77        33       99        11  

Liquid alternatives

     94        101        (7     94        —    

Currency and commodities

     24        25        (1     23        1  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Alternatives subtotal

     228        203        25       216        12  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Long-term

     2,664        2,796        (132     2,634        30  

Cash management

     141        151        (10     145        (4
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total base fees

     2,805        2,947        (142     2,779        26  

Investment advisory performance fees:

             

Equity

     —          18        (18     23        (23

Fixed income

     2        3        (1     6        (4

Multi-asset

     —          5        (5     4        (4

Alternatives:

             

Illiquid alternatives

     20        —          20       48        (28

Liquid alternatives

     4        44        (40     19        (15
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Alternatives subtotal

     24        44        (20     67        (43
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total performance fees

     26        70        (44     100        (74

Technology services revenue

     204        184        20       203        1  

Distribution fees:

             

Retrocessions

     161        192        (31     168        (7

12b-1 fees (US mutual funds distribution fees)

     89        108        (19     93        (4

Other

     12        11        1       10        2  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total distribution fees

     262        311        (49     271        (9

Advisory and other revenue:

             

Advisory

     19        21        (2     33        (14

Other

     30        50        (20     48        (18
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total advisory and other revenue

     49        71        (22     81        (32
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total revenue

   $ 3,346      $ 3,583      $ (237   $ 3,434      $ (88
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Highlights

 

   

Investment advisory, administration fees and securities lending revenue decreased $142 million from the first quarter of 2018, primarily driven by the negative impact of markets and foreign exchange on average AUM and the impact of strategic pricing investments, partially offset by the positive impact of acquisitions and organic growth. Securities lending revenue of $148 million in the current quarter compared with $155 million in first quarter of 2018.

Investment advisory, administration fees and securities lending revenue increased $26 million from the fourth quarter of 2018, driven by the impact of higher average AUM and higher securities lending revenue, partially offset by the effect of two less days in the quarter. Securities lending revenue of $148 million in the current quarter compared with $129 million in the fourth quarter of 2018.

 

   

Performance fees decreased $44 million from the first quarter of 2018, primarily reflecting lower revenue from liquid alternatives and long-only products, partially offset by higher revenue from illiquid alternatives.

Performance fees decreased $74 million from the fourth quarter of 2018, primarily due to a seasonally higher number of funds with a performance measurement period that ended in the fourth quarter of 2018.

 

   

Technology services revenue increased $20 million from the first quarter of 2018, primarily reflecting higher revenue from Aladdin.

 

   

Advisory and other revenue decreased $22 million from the first quarter of 2018, primarily reflecting lower earnings from an equity method investment.

Advisory and other revenue decreased $32 million from the fourth quarter of 2018, primarily reflecting lower fees from advisory and transition management assignments.

 

7


SUMMARY OF OPERATING EXPENSE

     Three            Three         
     Months Ended            Months Ended         
     March 31,            December 31,         

(in millions), (unaudited)

   2019      2018      Change     2018      Change  

Operating expense

             

Employee compensation and benefits

   $ 1,064      $ 1,121      $ (57   $ 1,020      $ 44  

Distribution and servicing costs:

             

Retrocessions

     161        192        (31     168        (7

12b-1 costs

     88        106        (18     92        (4

Other

     155        134        21       160        (5
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total distribution and servicing costs

     404        432        (28     420        (16

Direct fund expense

     242        261        (19     224        18  

General and administration:

             

Marketing and promotional

     81        85        (4     108        (27

Occupancy and office related

     74        74        —         73        1  

Portfolio services

     62        70        (8     68        (6

Technology

     69        53        16       62        7  

Professional services

     33        32        1       47        (14

Communications

     9        10        (1     9        —    

Foreign exchange remeasurement

     8        1        7       4        4  

Contingent consideration fair value adjustments

     6        6        —         31        (25

Product launch costs

     —          11        (11     —          —    

Other general and administration

     46        41        5       47        (1
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total general and administration expense

     388        383        5       449        (61

Restructuring charge

     —          —          —         60        (60

Amortization of intangible assets

     15        11        4       15        —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total operating expense

   $ 2,113      $ 2,208      $ (95   $ 2,188      $ (75
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Highlights

 

   

Employee compensation and benefits expense decreased $57 million from the first quarter of 2018, primarily reflecting lower incentive compensation, driven in part by lower operating income.

Employee compensation and benefits expense increased $44 million from the fourth quarter of 2018, primarily reflecting higher seasonal payroll taxes and an increase in stock-based compensation expense related to the effect of additional grants at the end of January 2019, partially offset by lower incentive compensation, driven in part by lower performance fees and operating income.

 

   

General and administration expense increased $5 million from the first quarter of 2018, primarily due to higher technology expense, partially offset by the impact of product launch costs recorded in the first quarter of 2018.

General and administration expense decreased $61 million from the fourth quarter of 2018, primarily due to seasonally lower marketing and promotional expense, lower professional services expense, and the impact of contingent consideration fair value adjustments related to prior acquisitions recorded in the fourth quarter of 2018.

 

   

In the fourth quarter of 2018, a restructuring charge of $60 million, primarily comprised of severance and accelerated amortization expense of previously granted deferred compensation awards, was recorded in connection with an initiative to modify the size and shape of the workforce.

 

8


INCOME TAX EXPENSE

     Three           Three        
     Months Ended           Months Ended        
     March 31,           December 31,        

(in millions), (unaudited)

   2019     2018     Change     2018     Change  

Income tax expense

   $ 298     $ 265     $ 33     $ 247     $ 51  

Effective tax rate

     22.1     19.6     250  bps      21.0     110  bps 

Highlights

 

   

First quarter 2019 and 2018 income tax expense included $22 million and $56 million, respectively, of discrete tax benefits related to stock-based compensation awards that vested in the first quarter of each respective year.

SUMMARY AND RECONCILIATION OF US GAAP NONOPERATING INCOME (EXPENSE) TO NONOPERATING INCOME (EXPENSE), AS ADJUSTED

     Three Months           Three Months        
     Ended           Ended        
     March 31,           December 31,        

(in millions), (unaudited)

   2019     2018     Change     2018     Change  

Nonoperating income (expense), GAAP basis

   $ 125     $ (16   $ 141     $ (72   $ 197  

Less: Net income (loss) attributable to noncontrolling interests (“NCI”)

     7       5       2       —         7  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nonoperating income (expense), as adjusted(1)(2)

   $ 118     $ (21   $ 139     $ (72   $ 190  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months           Three Months        
     Ended           Ended        
     March 31,           December 31,        

(in millions), (unaudited)

   2019     2018     Change     2018     Change  

Net gain (loss) on investments(1)(2)

          

Private equity

   $ —       $ 1     $ (1   $ (15   $ 15  

Real assets

     6       5       1       2       4  

Other alternatives(3)

     8       3       5       (3     11  

Other investments(4)

     73       1       72       (50     123  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

     87       10       77       (66     153  

Other gains(5)

     48       —         48       (1     49  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net gain (loss) on investments(1)(2)

     135       10       125       (67     202  

Interest and dividend income

     29       15       14       41       (12

Interest expense

     (46     (46     —         (46     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest expense

     (17     (31     14       (5     (12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nonoperating income (expense), as adjusted(1)(2)

   $ 118     $ (21   $ 139     $ (72   $ 190  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Net of net income (loss) attributable to NCI. 

(2) 

Management believes nonoperating income (expense), as adjusted, is an effective measure for reviewing BlackRock’s nonoperating contribution to results. For more information on other as adjusted items and the reconciliation to GAAP see notes (1) through (3) to the condensed consolidated statements of income and supplemental information on pages 10-11.

(3)

Amounts primarily include net gains (losses) related to direct hedge fund strategies and hedge fund solutions.

(4)

Amounts primarily include net gains (losses) related to equity and fixed income investments.

(5)

Amounts primarily include noncash pre-tax gains related to the revaluation of certain minority strategic investments.

 

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RECONCILIATION OF US GAAP OPERATING INCOME AND OPERATING MARGIN TO OPERATING INCOME AND OPERATING MARGIN, AS ADJUSTED

     Three Months Ended  
     March 31,     December 31,  

(in millions), (unaudited)

   2019     2018     2018  

Operating income, GAAP basis

   $ 1,233     $ 1,375     $ 1,246  

Non-GAAP expense adjustments:

      

Restructuring charge

     —         —         60  

PNC LTIP funding obligation

     —         3       4  
  

 

 

   

 

 

   

 

 

 

Operating income, as adjusted (1)

     1,233       1,378       1,310  

Product launch costs and commissions

     —         12       —    
  

 

 

   

 

 

   

 

 

 

Operating income used for operating margin measurement

   $ 1,233     $ 1,390     $ 1,310  
  

 

 

   

 

 

   

 

 

 

Revenue, GAAP basis

   $ 3,346     $ 3,583     $ 3,434  

Non-GAAP adjustment:

      

Distribution and servicing costs

     (404     (432     (420
  

 

 

   

 

 

   

 

 

 

Revenue used for operating margin measurement

   $ 2,942     $ 3,151     $ 3,014  
  

 

 

   

 

 

   

 

 

 

Operating margin, GAAP basis

     36.8     38.4     36.3
  

 

 

   

 

 

   

 

 

 

Operating margin, as adjusted (1)

     41.9     44.1     43.5
  

 

 

   

 

 

   

 

 

 

See note (1) to the condensed consolidated statements of income and supplemental information on page 11 for more information on as adjusted items and the reconciliation to GAAP.

RECONCILIATION OF US GAAP NET INCOME ATTRIBUTABLE TO BLACKROCK TO NET INCOME ATTRIBUTABLE TO BLACKROCK, AS ADJUSTED

     Three Months Ended  
     March 31,      December 31,  

(in millions), (unaudited)

   2019      2018      2018  

Net income attributable to BlackRock, Inc., GAAP basis

   $ 1,053      $ 1,089      $ 927  

Non-GAAP adjustments:

        

Restructuring charge, net of tax

     —          —          47  

PNC LTIP funding obligation, net of tax

     —          3        3  

Income tax matters

     —          —          (2
  

 

 

    

 

 

    

 

 

 

Net income attributable to BlackRock, Inc., as adjusted (2)

   $ 1,053      $ 1,092      $ 975  
  

 

 

    

 

 

    

 

 

 

Diluted weighted-average common shares outstanding (3)

     159.3        162.9        160.5  

Diluted earnings per common share, GAAP basis (3)

   $ 6.61      $ 6.68      $ 5.78  

Diluted earnings per common share, as adjusted (2) (3)

   $ 6.61      $ 6.70      $ 6.08  

See notes (2) and (3) to the condensed consolidated statements of income and supplemental information on page 11 for more information on as adjusted items and the reconciliation to GAAP.

NOTES TO CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL INFORMATION (unaudited)

BlackRock reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”); however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and considers them to be helpful, for both management and investors, in evaluating BlackRock’s financial performance over time. Management also uses non-GAAP financial measures as a benchmark to compare its performance with other companies and to enhance the comparability of this information for the reporting periods presented. Non-GAAP measures may pose limitations because they do not include all of BlackRock’s revenue and expense. 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. Non-GAAP measures may not be comparable to other similarly titled measures of other companies.

Management uses both GAAP and non-GAAP financial measures in evaluating BlackRock’s financial performance. Adjustments to GAAP financial measures (“non-GAAP adjustments”) include certain items management deems nonrecurring or that occur infrequently, transactions that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.

 

10


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: 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. A restructuring charge, primarily comprised of severance and accelerated amortization expense of previously granted deferred compensation awards, has been excluded to provide more meaningful analysis of BlackRock’s ongoing operations and to ensure comparability among periods presented. 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.

 

   

Operating income used for measuring operating margin, as adjusted, is equal to operating income, as adjusted, excluding the impact of product launch costs (e.g. 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 third parties. Management believes such costs represent a benchmark for the amount of revenue passed through to external parties who distribute the Company’s products. BlackRock excludes from revenue used for operating margin, as adjusted, the costs related to distribution and servicing costs as a proxy for such offsetting revenue.

(2) Net income attributable to BlackRock, Inc., as adjusted: Management believes net income attributable to BlackRock, Inc., as adjusted, and diluted earnings per common share, as adjusted, are useful measures of BlackRock’s profitability and financial performance. Net income attributable to BlackRock, Inc., as adjusted, equals net income attributable to BlackRock, Inc., GAAP basis, adjusted for significant nonrecurring items, charges that ultimately will not impact BlackRock’s book value or certain tax items that do not impact cash flow.

See aforementioned discussion regarding operating income, as adjusted, and operating margin, as adjusted, for information on the PNC LTIP funding obligation and restructuring charge.

For each period presented, the non-GAAP adjustment related to the restructuring charge and PNC LTIP funding obligation was tax effected at the respective blended rates applicable to the adjustments. Amounts for income tax matters represent net noncash (benefits) expense primarily associated with the revaluation of certain deferred tax liabilities related to intangible assets and goodwill. Amounts have been excluded from the as adjusted results as these items will not have a cash flow impact and to ensure comparability among periods presented.

Per share amounts reflect net income attributable to BlackRock, Inc., as adjusted divided by diluted weighted average common shares outstanding.

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

 

11


FORWARD-LOOKING STATEMENTS

This filing, 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.

BlackRock has previously disclosed risk factors in its Securities and Exchange Commission (“SEC”) reports. These risk factors and those identified elsewhere in this filing, among others, could cause actual results to differ materially from forward-looking statements or historical performance and include: (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 potential for human error in connection with BlackRock’s operational systems; (10) the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to BlackRock or PNC; (11) changes in law and policy and uncertainty pending any such changes; (12) 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; (13) the ability to attract and retain highly talented professionals; (14) fluctuations in the carrying value of BlackRock’s economic investments; (15) 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; (16) BlackRock’s success in negotiating distribution arrangements and maintaining distribution channels for its products; (17) the failure by a key vendor of BlackRock to fulfill its obligations to the Company; (18) any disruption to the operations of third parties whose functions are integral to BlackRock’s exchange-traded funds platform; (19) 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 (20) 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 filing.

PERFORMANCE NOTES

Past performance is not indicative of future results. Except as specified, the performance information shown is as of March 31, 2019 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 US 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 February 28, 2019. The performance data does not include accounts terminated prior to March 31, 2019 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 institutional and high net worth separate accounts, and net-of-fees for retail funds. The performance tracking shown for index accounts is based on gross-of-fees performance and includes all institutional accounts and all iShares funds globally using an index strategy. AUM information is based on AUM available as of March 31, 2019 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.

Performance shown is derived from applicable benchmarks or peer median information, as selected by BlackRock, Inc. Peer medians are based in part on data either from Lipper, Inc. or Morningstar, Inc. for each included product.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    BlackRock, Inc.
    (Registrant)
    By:  

/s/ Gary S. Shedlin

Date: April 17, 2019    

Gary S. Shedlin

   

Chief Financial Officer and

   

Senior Managing Director

 

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