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

Business Wire, Oct 11, 2002

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 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.