x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 13-2670991 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
One Franklin Parkway, San Mateo, California | 94403 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of each exchange on which registered | |
Common Stock, par value $.10 per share | New York Stock Exchange |
Large accelerated filer x | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Emerging growth company o |
FORM 10-K ITEM | PAGE NUMBER | ||
ITEM 1. | 3 | ||
ITEM 1A. | 19 | ||
ITEM 1B. | 27 | ||
ITEM 2. | 27 | ||
ITEM 3. | 28 | ||
ITEM 4. | 28 | ||
28 | |||
ITEM 5. | 30 | ||
ITEM 6. | 31 | ||
ITEM 7. | 32 | ||
ITEM 7A. | 55 | ||
ITEM 8. | 57 | ||
ITEM 9. | 94 | ||
ITEM 9A. | 94 | ||
ITEM 9B. | 94 | ||
ITEM 10. | 94 | ||
ITEM 11. | 94 | ||
ITEM 12. | 95 | ||
ITEM 13. | 95 | ||
ITEM 14. | 95 | ||
ITEM 15. | 96 | ||
ITEM 16. | 96 | ||
96 | |||
98 |
Item 1. | Business. |
Investment Objective | Value in Billions | Percentage of Total AUM | |||||
Equity | |||||||
Growth potential, income potential, value or various combinations thereof | $ | 317.0 | 42 | % | |||
Multi-Asset/Balanced | |||||||
Asset allocation, balanced, flexible, alternative and income-mixed funds | 143.3 | 19 | % | ||||
Fixed Income | |||||||
Global/international, U.S. tax-free and U.S. taxable | 286.6 | 38 | % | ||||
Cash Management | |||||||
Short-term liquid assets | 6.3 | 1 | % | ||||
Total | $ | 753.2 | 100 | % |
• | U.S. Funds - Our U.S. Funds (including open-end and closed-end funds and our insurance products trust) accounted for $421.4 billion of AUM. Our five largest U.S. Funds and their AUM were: FCF-Franklin Income Fund ($83.4 billion), TIT-Templeton Global Bond Fund ($39.9 billion), FMSF-Franklin Mutual Global Discovery Fund ($22.3 billion), FMT-Franklin Rising Dividends Fund ($18.6 billion) and Franklin California Tax-Free Fixed Income Fund ($15.8 billion). These five funds represented, in the aggregate, 24% of total AUM. |
• | Cross-Border Funds - Our cross-border products, which are comprised of a variety of investment funds principally domiciled in Luxembourg and registered for sale to non-U.S. investors in 41 countries, accounted for $118.7 billion of AUM. Our five largest cross-border funds and their AUM were: FTIF-Templeton Global Total Return Fund ($21.1 billion), FTIF-Templeton Global Bond Fund ($18.2 billion), FTIF-Templeton Growth (Euro) Fund ($8.9 billion), FTIF-Templeton Emerging Markets Bond Fund ($8.2 billion) and FTIF-Templeton Asian Growth Fund ($5.0 billion). These five funds represented, in the aggregate, 8% of total AUM. |
• | Local/Regional Funds - In addition to our cross-border products, in some countries we offer products for the particular local market. These local/regional funds accounted for $47.6 billion of AUM. |
• | Other Managed Accounts, Alternative Investment Products and Trusts - Our other managed accounts, alternative investment products and trusts accounted for $165.5 billion of AUM. |
(in billions) Investment Objective | U.S. Funds | Cross-Border Funds | Local/Regional Funds | Other Managed Accounts, Alternative Investment Products and Trusts | Total | |||||||||||||||
Equity | ||||||||||||||||||||
Asia-Pacific | $ | 1.0 | $ | 11.9 | $ | 8.0 | $ | 17.0 | $ | 37.9 | ||||||||||
Canada | — | — | 4.4 | 6.1 | 10.5 | |||||||||||||||
Europe, the Middle East and Africa | 2.6 | 4.5 | 6.1 | 0.2 | 13.4 | |||||||||||||||
U.S. | 93.0 | 8.6 | 1.6 | 4.0 | 107.2 | |||||||||||||||
Emerging markets 1 | 3.7 | 5.4 | 3.6 | 4.6 | 17.3 | |||||||||||||||
Global/international 2 | 64.7 | 13.5 | 4.5 | 48.0 | 130.7 | |||||||||||||||
Total equity | 165.0 | 43.9 | 28.2 | 79.9 | 317.0 | |||||||||||||||
Multi-Asset/Balanced | ||||||||||||||||||||
Asia-Pacific | — | — | 0.6 | 3.9 | 4.5 | |||||||||||||||
Canada | — | — | 0.7 | 0.8 | 1.5 | |||||||||||||||
Europe, the Middle East and Africa | — | 2.8 | — | 0.3 | 3.1 | |||||||||||||||
U.S. | 98.9 | 2.2 | 0.2 | 22.2 | 123.5 | |||||||||||||||
Global/international 2 | 3.1 | 4.5 | 1.2 | 1.9 | 10.7 | |||||||||||||||
Total multi-asset/balanced | 102.0 | 9.5 | 2.7 | 29.1 | 143.3 | |||||||||||||||
Fixed Income | ||||||||||||||||||||
Asia-Pacific | — | 0.7 | 6.2 | 0.4 | 7.3 | |||||||||||||||
Canada | — | — | 2.9 | 2.2 | 5.1 | |||||||||||||||
Europe, the Middle East and Africa | — | 2.0 | 0.2 | 1.1 | 3.3 | |||||||||||||||
U.S. tax-free | 66.6 | — | 0.1 | 4.3 | 71.0 | |||||||||||||||
U.S. taxable | 31.0 | 9.9 | 3.2 | 6.5 | 50.6 | |||||||||||||||
Emerging markets 1 | 1.2 | 9.6 | 0.2 | 11.8 | 22.8 | |||||||||||||||
Global/international 2 | 50.3 | 42.7 | 3.3 | 30.2 | 126.5 | |||||||||||||||
Total fixed income | 149.1 | 64.9 | 16.1 | 56.5 | 286.6 | |||||||||||||||
Cash Management | 5.3 | 0.4 | 0.6 | — | 6.3 | |||||||||||||||
Total | $ | 421.4 | $ | 118.7 | $ | 47.6 | $ | 165.5 | $ | 753.2 |
1 | Emerging markets include developing countries worldwide. |
2 | Global/international includes entities doing business either worldwide or only outside of the U.S. |
Item 1A. | Risk Factors. |
Item 1B. | Unresolved Staff Comments. |
Item 2. | Properties. |
Item 3. | Legal Proceedings. |
Item 4. | Mine Safety Disclosures. |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Quarter | Fiscal Year 2017 | Fiscal Year 2016 | ||||||||||||||
High | Low | High | Low | |||||||||||||
October-December | $ | 42.18 | $ | 33.02 | $ | 42.23 | $ | 34.62 | ||||||||
January-March | $ | 44.35 | $ | 39.38 | $ | 39.94 | $ | 31.00 | ||||||||
April-June | $ | 45.60 | $ | 40.48 | $ | 41.24 | $ | 30.56 | ||||||||
July-September | $ | 47.65 | $ | 40.95 | $ | 36.99 | $ | 31.59 |
Month | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||
July 2017 | 510,690 | $ | 45.75 | 510,690 | 34,999,604 | ||||||||
August 2017 | 1,970,328 | $ | 43.15 | 1,970,328 | 33,029,276 | ||||||||
September 2017 | 1,405,795 | $ | 42.67 | 1,405,795 | 31,623,481 | ||||||||
Total | 3,886,813 | 3,886,813 |
Item 6. | Selected Financial Data. |
as of and for the fiscal years ended September 30, | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
Summary of Operations (in millions) | ||||||||||||||||||||
Operating revenues | $ | 6,392.2 | $ | 6,618.0 | $ | 7,948.7 | $ | 8,491.4 | $ | 7,985.0 | ||||||||||
Operating income | 2,264.3 | 2,365.7 | 3,027.6 | 3,221.2 | 2,921.3 | |||||||||||||||
Operating margin | 35.4 | % | 35.7 | % | 38.1 | % | 37.9 | % | 36.6 | % | ||||||||||
Net income attributable to Franklin Resources, Inc. | 1,696.7 | 1,726.7 | 2,035.3 | 2,384.3 | 2,150.2 | |||||||||||||||
Financial Data (in millions) | ||||||||||||||||||||
Total assets | $ | 17,534.0 | $ | 16,098.8 | $ | 16,335.7 | $ | 16,357.1 | $ | 15,390.3 | ||||||||||
Debt | 1,044.2 | 1,401.2 | 1,348.0 | 1,198.2 | 1,197.7 | |||||||||||||||
Debt of consolidated sponsored investment products | 53.4 | 682.2 | 807.3 | 950.8 | 1,097.4 | |||||||||||||||
Franklin Resources, Inc. stockholders’ equity | 12,620.0 | 11,935.8 | 11,841.0 | 11,584.1 | 10,073.1 | |||||||||||||||
Operating cash flows | 1,135.4 | 1,727.7 | 2,252.0 | 2,138.0 | 2,035.7 | |||||||||||||||
Investing cash flows | 52.0 | 192.2 | 248.9 | 390.6 | 232.9 | |||||||||||||||
Financing cash flows | (956.0 | ) | (1,800.7 | ) | (1,612.2 | ) | (1,195.3 | ) | (2,018.1 | ) | ||||||||||
Assets Under Management (in billions) | ||||||||||||||||||||
Ending | $ | 753.2 | $ | 733.3 | $ | 770.9 | $ | 898.0 | $ | 844.7 | ||||||||||
Average 1 | 736.9 | 749.3 | 869.5 | 887.9 | 808.2 | |||||||||||||||
Per Common Share | ||||||||||||||||||||
Earnings | ||||||||||||||||||||
Basic | $ | 3.01 | $ | 2.94 | $ | 3.29 | $ | 3.79 | $ | 3.37 | ||||||||||
Diluted | 3.01 | 2.94 | 3.29 | 3.79 | 3.37 | |||||||||||||||
Cash dividends declared | 0.80 | 0.72 | 1.10 | 0.48 | 1.39 | |||||||||||||||
Book value | 22.74 | 20.93 | 19.62 | 18.60 | 15.97 | |||||||||||||||
Employee Headcount | 9,386 | 9,059 | 9,489 | 9,266 | 9,002 |
1 | Represents simple monthly average AUM. |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
(in millions, except per share data) | 2017 vs. 2016 | 2016 vs. 2015 | ||||||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||||||||
Operating revenues | $ | 6,392.2 | $ | 6,618.0 | $ | 7,948.7 | (3 | %) | (17 | %) | ||||||||
Operating income | 2,264.3 | 2,365.7 | 3,027.6 | (4 | %) | (22 | %) | |||||||||||
Net income attributable to Franklin Resources, Inc. | 1,696.7 | 1,726.7 | 2,035.3 | (2 | %) | (15 | %) | |||||||||||
Diluted earnings per share | $ | 3.01 | $ | 2.94 | $ | 3.29 | 2 | % | (11 | %) | ||||||||
Operating margin 1 | 35.4 | % | 35.7 | % | 38.1 | % |
(in billions) | 2017 vs. 2016 | 2016 vs. 2015 | ||||||||||||||||
as of September 30, | 2017 | 2016 | 2015 | |||||||||||||||
Equity | ||||||||||||||||||
Global/international | $ | 209.8 | $ | 200.4 | $ | 212.1 | 5 | % | (6 | %) | ||||||||
United States | 107.2 | 103.3 | 100.8 | 4 | % | 2 | % | |||||||||||
Total equity | 317.0 | 303.7 | 312.9 | 4 | % | (3 | %) | |||||||||||
Multi-Asset/Balanced | 143.3 | 137.4 | 138.3 | 4 | % | (1 | %) | |||||||||||
Fixed Income | ||||||||||||||||||
Tax-free | 71.0 | 76.5 | 71.7 | (7 | %) | 7 | % | |||||||||||
Taxable | ||||||||||||||||||
Global/international | 165.0 | 156.2 | 182.7 | 6 | % | (15 | %) | |||||||||||
United States | 50.6 | 53.4 | 58.5 | (5 | %) | (9 | %) | |||||||||||
Total fixed income | 286.6 | 286.1 | 312.9 | 0 | % | (9 | %) | |||||||||||
Cash Management | 6.3 | 6.1 | 6.8 | 3 | % | (10 | %) | |||||||||||
Total | $ | 753.2 | $ | 733.3 | $ | 770.9 | 3 | % | (5 | %) | ||||||||
Average for the Year | $ | 736.9 | $ | 749.3 | $ | 869.5 | (2 | %) | (14 | %) |
(in billions) | Average AUM | 2017 vs. 2016 | 2016 vs. 2015 | |||||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||||||||
Equity | ||||||||||||||||||
Global/international | $ | 203.7 | $ | 205.1 | $ | 247.5 | (1 | %) | (17 | %) | ||||||||
United States | 104.4 | 101.1 | 112.4 | 3 | % | (10 | %) | |||||||||||
Total equity | 308.1 | 306.2 | 359.9 | 1 | % | (15 | %) | |||||||||||
Multi-Asset/Balanced | 140.2 | 135.5 | 155.3 | 3 | % | (13 | %) | |||||||||||
Fixed Income | ||||||||||||||||||
Tax-free | 72.3 | 74.0 | 73.1 | (2 | %) | 1 | % | |||||||||||
Taxable | ||||||||||||||||||
Global/international | 157.8 | 172.6 | 211.7 | (9 | %) | (18 | %) | |||||||||||
United States | 52.3 | 54.5 | 62.4 | (4 | %) | (13 | %) | |||||||||||
Total fixed income | 282.4 | 301.1 | 347.2 | (6 | %) | (13 | %) | |||||||||||
Cash Management | 6.2 | 6.5 | 7.1 | (5 | %) | (8 | %) | |||||||||||
Total | $ | 736.9 | $ | 749.3 | $ | 869.5 | (2 | %) | (14 | %) |
Mix of Average AUM | |||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | ||||||
Equity | |||||||||
Global/international | 28 | % | 27 | % | 28 | % | |||
United States | 14 | % | 14 | % | 13 | % | |||
Total equity | 42 | % | 41 | % | 41 | % | |||
Multi-Asset/Balanced | 19 | % | 18 | % | 18 | % | |||
Fixed Income | |||||||||
Tax-free | 10 | % | 10 | % | 9 | % | |||
Taxable | |||||||||
Global/international | 21 | % | 23 | % | 24 | % | |||
United States | 7 | % | 7 | % | 7 | % | |||
Total fixed income | 38 | % | 40 | % | 40 | % | |||
Cash Management | 1 | % | 1 | % | 1 | % | |||
Total | 100 | % | 100 | % | 100 | % |
(in billions) | 2017 vs. 2016 | 2016 vs. 2015 | ||||||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||||||||
Beginning AUM | $ | 733.3 | $ | 770.9 | $ | 898.0 | (5 | %) | (14 | %) | ||||||||
Long-term sales | 112.3 | 101.7 | 161.4 | 10 | % | (37 | %) | |||||||||||
Long-term redemptions | (169.7 | ) | (186.9 | ) | (209.0 | ) | (9 | %) | (11 | %) | ||||||||
Long-term net exchanges | (0.1 | ) | (0.5 | ) | (0.9 | ) | (80 | %) | (44 | %) | ||||||||
Long-term reinvested distributions | 18.9 | 23.3 | 28.5 | (19 | %) | (18 | %) | |||||||||||
Net flows | (38.6 | ) | (62.4 | ) | (20.0 | ) | (38 | %) | 212 | % | ||||||||
Net market change and other | 58.5 | 24.8 | (107.1 | ) | 136 | % | NM | |||||||||||
Ending AUM | $ | 753.2 | $ | 733.3 | $ | 770.9 | 3 | % | (5 | %) |
(in billions) | Equity | Fixed Income | ||||||||||||||||||||||||||||||
for the fiscal year ended September 30, 2017 | Global/International | United States | Multi-Asset/Balanced | Tax-Free | Taxable Global/International | Taxable United States | Cash Management | Total | ||||||||||||||||||||||||
AUM at October 1, 2016 | $ | 200.4 | $ | 103.3 | $ | 137.4 | $ | 76.5 | $ | 156.2 | $ | 53.4 | $ | 6.1 | $ | 733.3 | ||||||||||||||||
Long-term sales | 24.7 | 14.7 | 16.8 | 7.4 | 38.2 | 10.5 | — | 112.3 | ||||||||||||||||||||||||
Long-term redemptions | (48.4 | ) | (25.4 | ) | (25.7 | ) | (11.6 | ) | (44.3 | ) | (14.3 | ) | — | (169.7 | ) | |||||||||||||||||
Long-term net exchanges | (0.1 | ) | 0.3 | 0.4 | (0.5 | ) | (0.4 | ) | 0.2 | — | (0.1 | ) | ||||||||||||||||||||
Long-term reinvested distributions | 3.0 | 4.3 | 5.1 | 2.0 | 3.4 | 1.1 | — | 18.9 | ||||||||||||||||||||||||
Net flows | (20.8 | ) | (6.1 | ) | (3.4 | ) | (2.7 | ) | (3.1 | ) | (2.5 | ) | — | (38.6 | ) | |||||||||||||||||
Net market change and other | 30.2 | 10.0 | 9.3 | (2.8 | ) | 11.9 | (0.3 | ) | 0.2 | 58.5 | ||||||||||||||||||||||
AUM at September 30, 2017 | $ | 209.8 | $ | 107.2 | $ | 143.3 | $ | 71.0 | $ | 165.0 | $ | 50.6 | $ | 6.3 | $ | 753.2 |
(in billions) | Equity | Fixed Income | ||||||||||||||||||||||||||||||
for the fiscal year ended September 30, 2016 | Global/International | United States | Multi-Asset/Balanced | Tax-Free | Taxable Global/International | Taxable United States | Cash Management | Total | ||||||||||||||||||||||||
AUM at October 1, 2015 | $ | 212.1 | $ | 100.8 | $ | 138.3 | $ | 71.7 | $ | 182.7 | $ | 58.5 | $ | 6.8 | $ | 770.9 | ||||||||||||||||
Long-term sales | 21.9 | 13.7 | 14.3 | 8.9 | 34.2 | 8.7 | — | 101.7 | ||||||||||||||||||||||||
Long-term redemptions | (48.9 | ) | (24.1 | ) | (26.8 | ) | (8.8 | ) | (62.5 | ) | (15.8 | ) | — | (186.9 | ) | |||||||||||||||||
Long-term net exchanges | (1.1 | ) | 0.6 | (0.4 | ) | 0.8 | (0.5 | ) | 0.1 | — | (0.5 | ) | ||||||||||||||||||||
Long-term reinvested distributions | 4.3 | 5.8 | 5.8 | 2.0 | 4.2 | 1.2 | — | 23.3 | ||||||||||||||||||||||||
Net flows | (23.8 | ) | (4.0 | ) | (7.1 | ) | 2.9 | (24.6 | ) | (5.8 | ) | — | (62.4 | ) | ||||||||||||||||||
Net market change and other | 12.1 | 6.5 | 6.2 | 1.9 | (1.9 | ) | 0.7 | (0.7 | ) | 24.8 | ||||||||||||||||||||||
AUM at September 30, 2016 | $ | 200.4 | $ | 103.3 | $ | 137.4 | $ | 76.5 | $ | 156.2 | $ | 53.4 | $ | 6.1 | $ | 733.3 |
(in billions) | Equity | Fixed Income | ||||||||||||||||||||||||||||||
for the fiscal year ended September 30, 2015 | Global/International | United States | Multi-Asset/Balanced | Tax-Free | Taxable Global/International | Taxable United States | Cash Management | Total | ||||||||||||||||||||||||
AUM at October 1, 2014 | $ | 261.5 | $ | 109.5 | $ | 159.0 | $ | 72.1 | $ | 225.1 | $ | 63.8 | $ | 7.0 | $ | 898.0 | ||||||||||||||||
Long-term sales | 40.3 | 19.2 | 24.1 | 8.2 | 56.1 | 13.5 | — | 161.4 | ||||||||||||||||||||||||
Long-term redemptions | (55.3 | ) | (26.3 | ) | (28.4 | ) | (10.3 | ) | (72.8 | ) | (15.9 | ) | — | (209.0 | ) | |||||||||||||||||
Long-term net exchanges | 0.2 | 1.1 | (0.5 | ) | — | (1.6 | ) | (0.1 | ) | — | (0.9 | ) | ||||||||||||||||||||
Long-term reinvested distributions | 5.6 | 5.7 | 6.0 | 2.0 | 7.5 | 1.7 | — | 28.5 | ||||||||||||||||||||||||
Net flows | (9.2 | ) | (0.3 | ) | 1.2 | (0.1 | ) | (10.8 | ) | (0.8 | ) | — | (20.0 | ) | ||||||||||||||||||
Net market change and other | (40.2 | ) | (8.4 | ) | (21.9 | ) | (0.3 | ) | (31.6 | ) | (4.5 | ) | (0.2 | ) | (107.1 | ) | ||||||||||||||||
AUM at September 30, 2015 | $ | 212.1 | $ | 100.8 | $ | 138.3 | $ | 71.7 | $ | 182.7 | $ | 58.5 | $ | 6.8 | $ | 770.9 |
(in billions) | 2017 vs. 2016 | 2016 vs. 2015 | ||||||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||||||||
United States | $ | 497.1 | $ | 507.4 | $ | 577.9 | (2 | %) | (12 | %) | ||||||||
International | ||||||||||||||||||
Europe, the Middle East and Africa | 104.1 | 108.9 | 137.9 | (4 | %) | (21 | %) | |||||||||||
Asia-Pacific | 87.0 | 82.7 | 90.0 | 5 | % | (8 | %) | |||||||||||
Canada | 31.1 | 31.3 | 36.2 | (1 | %) | (14 | %) | |||||||||||
Latin America1 | 17.6 | 19.0 | 27.5 | (7 | %) | (31 | %) | |||||||||||
Total international | $ | 239.8 | $ | 241.9 | $ | 291.6 | (1 | %) | (17 | %) | ||||||||
Total | $ | 736.9 | $ | 749.3 | $ | 869.5 | (2 | %) | (14 | %) |
Benchmark Comparison 1, 2 | Peer Group Comparison 1, 3 | |||||||||||||||||||||||
% of AUM Exceeding Benchmark | % of AUM in Top Two Peer Group Quartiles | |||||||||||||||||||||||
as of September 30, 2017 | 1-Year | 3-Year | 5-Year | 10-Year | 1-Year | 3-Year | 5-Year | 10-Year | ||||||||||||||||
Equity | ||||||||||||||||||||||||
Global/international | 50 | % | 16 | % | 23 | % | 48 | % | 67 | % | 33 | % | 55 | % | 50 | % | ||||||||
United States | 38 | % | 37 | % | 21 | % | 32 | % | 24 | % | 56 | % | 42 | % | 67 | % | ||||||||
Total equity | 45 | % | 24 | % | 22 | % | 42 | % | 50 | % | 42 | % | 50 | % | 57 | % | ||||||||
Multi-Asset/Balanced | 85 | % | 11 | % | 9 | % | 8 | % | 93 | % | 7 | % | 14 | % | 96 | % | ||||||||
Fixed Income | ||||||||||||||||||||||||
Tax-free | 0 | % | 42 | % | 40 | % | 28 | % | 5 | % | 41 | % | 40 | % | 87 | % | ||||||||
Taxable | ||||||||||||||||||||||||
Global/international | 93 | % | 44 | % | 82 | % | 82 | % | 99 | % | 67 | % | 88 | % | 97 | % | ||||||||
United States | 72 | % | 10 | % | 31 | % | 53 | % | 64 | % | 9 | % | 30 | % | 36 | % | ||||||||
Total fixed income | 63 | % | 37 | % | 61 | % | 60 | % | 63 | % | 48 | % | 62 | % | 82 | % |
1 | AUM measured in the benchmark and peer group rankings represents 89% and 80% of our total AUM as of September 30, 2017. |
2 | The benchmark comparisons are based on each fund’s return as compared to a market index that has been selected to be generally consistent with the investment objectives of the fund. |
3 | The peer group rankings are sourced from either Lipper, a Thomson Reuters Company, Morningstar or eVestment in each fund’s market and were based on an absolute ranking of returns. © 2017 Morningstar, Inc. All rights reserved. The information herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. |
(in millions) | 2017 vs. 2016 | 2016 vs. 2015 | ||||||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||||||||
Investment management fees | $ | 4,359.2 | $ | 4,471.7 | $ | 5,327.8 | (3 | %) | (16 | %) | ||||||||
Sales and distribution fees | 1,705.6 | 1,806.4 | 2,252.4 | (6 | %) | (20 | %) | |||||||||||
Shareholder servicing fees | 225.7 | 243.6 | 262.8 | (7 | %) | (7 | %) | |||||||||||
Other | 101.7 | 96.3 | 105.7 | 6 | % | (9 | %) | |||||||||||
Total Operating Revenues | $ | 6,392.2 | $ | 6,618.0 | $ | 7,948.7 | (3 | %) | (17 | %) |
(in basis points) | Industry Average 1 | |||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||
Equity | ||||||
Global/international 2 | 50 | 53 | 55 | |||
United States | 35 | 37 | 39 | |||
Multi-Asset/Balanced | 49 | 50 | 52 | |||
Fixed Income | ||||||
Tax-free | 33 | 35 | 35 | |||
Taxable | ||||||
Global/international 3 | 39 | 43 | 46 | |||
United States | 31 | 33 | 35 | |||
Cash Management | 15 | 10 | 9 |
1 | U.S. industry asset-weighted average management fee rates were calculated using information available from Lipper, a Thomson Reuters Company, as of September 30, 2017, 2016 and 2015 and include all U.S.-registered open-end funds that reported expense data to Lipper as of the funds’ most recent annual report date, and for which expenses were equal to or greater than zero. As defined by Lipper, management fees include fees from providing advisory and fund administration services. The averages combine retail and institutional funds data and include all share classes and distribution channels, without exception. Variable annuity and fund of fund products are not included. |
2 | The decreases in the average rate in fiscal years 2017 and 2016 reflect higher weightings of two large low fee funds. |
3 | The decreases in the average rate in fiscal years 2017 and 2016 reflect higher weightings of a large low fee fund and lower weightings of two large higher fee funds. |
(in millions) | 2017 vs. 2016 | 2016 vs. 2015 | ||||||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||||||||
Asset-based fees | $ | 1,345.1 | $ | 1,410.6 | $ | 1,698.9 | (5 | %) | (17 | %) | ||||||||
Sales-based fees | 350.8 | 386.4 | 542.8 | (9 | %) | (29 | %) | |||||||||||
Contingent sales charges | 9.7 | 9.4 | 10.7 | 3 | % | (12 | %) | |||||||||||
Sales and Distribution Fees | $ | 1,705.6 | $ | 1,806.4 | $ | 2,252.4 | (6 | %) | (20 | %) |
(in millions) | 2017 | 2016 | 2015 | 2017 vs. 2016 | 2016 vs. 2015 | |||||||||||||
for the fiscal years ended September 30, | ||||||||||||||||||
Sales, distribution and marketing | $ | 2,130.9 | $ | 2,209.9 | $ | 2,762.3 | (4 | %) | (20 | %) | ||||||||
Compensation and benefits | 1,333.7 | 1,360.9 | 1,453.3 | (2 | %) | (6 | %) | |||||||||||
Information systems and technology | 219.8 | 207.3 | 224.3 | 6 | % | (8 | %) | |||||||||||
Occupancy | 121.3 | 134.1 | 132.7 | (10 | %) | 1 | % | |||||||||||
General, administrative and other | 322.2 | 340.1 | 348.5 | (5 | %) | (2 | %) | |||||||||||
Total Operating Expenses | $ | 4,127.9 | $ | 4,252.3 | $ | 4,921.1 | (3 | %) | (14 | %) |
(in millions) | 2017 | 2016 | 2015 | 2017 vs. 2016 | 2016 vs. 2015 | |||||||||||||
for the fiscal years ended September 30, | ||||||||||||||||||
Asset-based expenses | $ | 1,735.8 | $ | 1,792.7 | $ | 2,161.0 | (3 | %) | (17 | %) | ||||||||
Sales-based expenses | 323.1 | 342.0 | 488.5 | (6 | %) | (30 | %) | |||||||||||
Amortization of deferred sales commissions | 72.0 | 75.2 | 112.8 | (4 | %) | (33 | %) | |||||||||||
Sales, Distribution and Marketing | $ | 2,130.9 | $ | 2,209.9 | $ | 2,762.3 | (4 | %) | (20 | %) |
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Net carrying value at beginning of year | $ | 88.1 | $ | 89.8 | $ | 85.5 | ||||||
Additions, net of disposals | 63.1 | 46.2 | 50.8 | |||||||||
Amortization | (49.1 | ) | (47.9 | ) | (46.5 | ) | ||||||
Net Carrying Value at End of Year | $ | 102.1 | $ | 88.1 | $ | 89.8 |
(in millions) | 2017 vs. 2016 | 2016 vs. 2015 | ||||||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||||||||
Investment and other income, net | $ | 336.3 | $ | 184.0 | $ | 40.4 | 83 | % | 355 | % | ||||||||
Interest expense | (51.5 | ) | (49.9 | ) | (39.6 | ) | 3 | % | 26 | % | ||||||||
Other Income, Net | $ | 284.8 | $ | 134.1 | $ | 0.8 | 112 | % | NM |
Accounting Classification 1 | Total Direct Portfolio | |||||||||||||||||||
(in millions) | Cash and Cash Equivalents and Other 2 | Trading Investments | Equity Method Investments | Direct Investments in Consolidated SIPs | ||||||||||||||||
Cash and Cash Equivalents | $ | 8,523.3 | $ | — | $ | — | $ | — | $ | 8,523.3 | ||||||||||
Investments | ||||||||||||||||||||
Equity | ||||||||||||||||||||
Global/international | 64.4 | 14.5 | 707.1 | 226.9 | 1,012.9 | |||||||||||||||
United States | 3.2 | 0.4 | 3.4 | 3.3 | 10.3 | |||||||||||||||
Total equity | 67.6 | 14.9 | 710.5 | 230.2 | 1,023.2 | |||||||||||||||
Multi-Asset/Balanced | 15.7 | 5.4 | 20.3 | 216.5 | 257.9 | |||||||||||||||
Fixed Income | ||||||||||||||||||||
Tax-free | 0.2 | — | — | — | 0.2 | |||||||||||||||
Taxable | ||||||||||||||||||||
Global/international | 65.2 | 271.4 | 162.4 | 668.7 | 1,167.7 | |||||||||||||||
United States | 36.9 | 22.8 | 0.3 | 399.4 | 459.4 | |||||||||||||||
Total fixed income | 102.3 | 294.2 | 162.7 | 1,068.1 | 1,627.3 | |||||||||||||||
Total investments | 185.6 | 314.5 | 893.5 | 1,514.8 | 2,908.4 | |||||||||||||||
Total Cash and Cash Equivalents and Investments | $ | 8,708.9 | $ | 314.5 | $ | 893.5 | $ | 1,514.8 | $ | 11,431.7 |
1 | See Note 1 – Significant Accounting Policies in the notes to consolidated financial statements in Item 8 of Part II of this Form 10-K for information on investment accounting classifications. |
2 | Other consists of $112.7 million of available-for-sale investments and $12.8 million of investments in life settlement contracts, both of which are measured at fair value, and $60.1 million of investments carried at cost. |
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Cash Flow Data | ||||||||||||
Operating cash flows | $ | 1,135.4 | $ | 1,727.7 | $ | 2,252.0 | ||||||
Investing cash flows | 52.0 | 192.2 | 248.9 | |||||||||
Financing cash flows | (956.0 | ) | (1,800.7 | ) | (1,612.2 | ) |
(in millions) | ||||||||||||
as of September 30, | 2017 | 2016 | 2015 | |||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 8,523.3 | $ | 8,247.1 | $ | 8,184.9 | ||||||
Receivables | 767.8 | 746.4 | 816.5 | |||||||||
Investments | 1,995.2 | 1,896.7 | 2,105.8 | |||||||||
Total Liquid Assets | $ | 11,286.3 | $ | 10,890.2 | $ | 11,107.2 | ||||||
Liability | ||||||||||||
Debt | $ | 1,044.2 | $ | 1,401.2 | $ | 1,348.0 |
(in millions) | Payments Due by Fiscal Year | |||||||||||||||||||||||||||
as of September 30, 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | There-after | Total | |||||||||||||||||||||
Debt | ||||||||||||||||||||||||||||
Principal 1 | $ | — | $ | — | $ | 350.0 | $ | — | $ | 300.0 | $ | 400.0 | $ | 1,050.0 | ||||||||||||||
Interest | 36.0 | 36.0 | 36.0 | 19.8 | 19.8 | 28.5 | 176.1 | |||||||||||||||||||||
Operating leases | 44.7 | 41.1 | 35.6 | 31.4 | 28.4 | 185.8 | 367.0 | |||||||||||||||||||||
Purchase obligations 2 | 161.4 | 191.6 | 24.6 | 9.1 | 4.7 | 5.9 | 397.3 | |||||||||||||||||||||
Total Contractual Obligations | 242.1 | 268.7 | 446.2 | 60.3 | 352.9 | 620.2 | 1,990.4 | |||||||||||||||||||||
Committed capital contributions 3 | 73.5 | — | — | — | — | — | 73.5 | |||||||||||||||||||||
Contingent consideration liability 4 | 28.0 | 30.2 | — | — | — | — | 58.2 | |||||||||||||||||||||
Total Contractual Obligations, Commitments and Contingent Liability | $ | 343.6 | $ | 298.9 | $ | 446.2 | $ | 60.3 | $ | 352.9 | $ | 620.2 | $ | 2,122.1 |
1 | Debt principal represents maturity amount. |
2 | Purchase obligations include contractual amounts that will be due to purchase goods and services to be used in our operations and may be canceled at earlier times than those indicated under certain conditions that may include termination fees. |
3 | Committed capital contributions relate to discretionary commitments to invest in SIPs and other investment products. Generally, the timing of the funding of these commitments is unknown as they are callable on demand at any time prior to the expiration of the commitment periods. |
4 | Contingent consideration liability relates to the Company’s commitment to acquire the remaining interests in K2. |
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities, which may include published net asset values (“NAV”) for fund products. |
Level 2 | Observable inputs other than Level 1 quoted prices, such as non-binding quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable or corroborated by observable market data. Level 2 quoted prices are generally obtained from two independent third-party brokers or dealers, including prices derived from model-based valuation techniques for which the significant assumptions are observable in the market or corroborated by observable market data. Quoted prices are validated through price variance analysis, subsequent sales testing, stale price review, price comparison across pricing vendors and due diligence reviews of third-party vendors. |
Level 3 | Unobservable inputs that are supported by little or no market activity. These inputs require significant management judgment and reflect our estimation of assumptions that market participants would use in pricing the asset or liability. |
(in millions, except per share data) | ||||||||||||||||
Quarter ended | December 31 | March 31 | June 30 | September 30 | ||||||||||||
Fiscal year 2017 | ||||||||||||||||
Operating revenues | $ | 1,560.8 | $ | 1,600.6 | $ | 1,613.9 | $ | 1,616.9 | ||||||||
Operating income | 586.9 | 555.5 | 564.2 | 557.7 | ||||||||||||
Net income attributable to Franklin Resources, Inc. | 440.2 | 420.7 | 410.6 | 425.2 | ||||||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.77 | $ | 0.74 | $ | 0.73 | $ | 0.76 | ||||||||
Diluted | 0.77 | 0.74 | 0.73 | 0.76 | ||||||||||||
Dividends declared per share | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | ||||||||
Common stock price per share | ||||||||||||||||
High | $ | 42.18 | $ | 44.35 | $ | 45.60 | $ | 47.65 | ||||||||
Low | 33.02 | 39.38 | 40.48 | 40.95 | ||||||||||||
AUM (in billions) | ||||||||||||||||
Ending | $ | 720.0 | $ | 740.0 | $ | 742.8 | $ | 753.2 | ||||||||
Average | 722.7 | 731.7 | 742.1 | 749.0 | ||||||||||||
Fiscal year 2016 | ||||||||||||||||
Operating revenues | $ | 1,758.0 | $ | 1,613.9 | $ | 1,634.3 | $ | 1,611.8 | ||||||||
Operating income | 653.6 | 537.3 | 595.4 | 579.4 | ||||||||||||
Net income attributable to Franklin Resources, Inc. | 447.8 | 360.4 | 446.4 | 472.1 | ||||||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.74 | $ | 0.61 | $ | 0.77 | $ | 0.82 | ||||||||
Diluted | 0.74 | 0.61 | 0.77 | 0.82 | ||||||||||||
Dividends declared per share | $ | 0.18 | $ | 0.18 | $ | 0.18 | $ | 0.18 | ||||||||
Common stock price per share | ||||||||||||||||
High | $ | 42.23 | $ | 39.94 | $ | 41.24 | $ | 36.99 | ||||||||
Low | 34.62 | 31.00 | 30.56 | 31.59 | ||||||||||||
AUM (in billions) | ||||||||||||||||
Ending | $ | 763.9 | $ | 742.6 | $ | 732.1 | $ | 733.3 | ||||||||
Average | 781.5 | 737.1 | 739.8 | 736.4 |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
(in millions) | Carrying Value | Carrying Value Assuming a 10% Increase | Carrying Value Assuming a 10% Decrease | |||||||||
Investment securities, trading | $ | 314.5 | $ | 346.0 | $ | 283.1 | ||||||
Investment securities, available-for-sale | 112.7 | 124.0 | 101.4 | |||||||||
Direct investments in consolidated SIPs | 1,514.8 | 1,666.3 | 1,363.3 | |||||||||
Total | $ | 1,942.0 | $ | 2,136.3 | $ | 1,747.8 |
Item 8. | Financial Statements and Supplementary Data. |
CONTENTS | Page | |
58 | ||
59 | ||
Consolidated Financial Statements of Franklin Resources, Inc. and its consolidated subsidiaries: | ||
60 | ||
61 | ||
62 | ||
63 | ||
65 | ||
67 |
FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
(in millions, except per share data) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Operating Revenues | ||||||||||||
Investment management fees | $ | 4,359.2 | $ | 4,471.7 | $ | 5,327.8 | ||||||
Sales and distribution fees | 1,705.6 | 1,806.4 | 2,252.4 | |||||||||
Shareholder servicing fees | 225.7 | 243.6 | 262.8 | |||||||||
Other | 101.7 | 96.3 | 105.7 | |||||||||
Total operating revenues | 6,392.2 | 6,618.0 | 7,948.7 | |||||||||
Operating Expenses | ||||||||||||
Sales, distribution and marketing | 2,130.9 | 2,209.9 | 2,762.3 | |||||||||
Compensation and benefits | 1,333.7 | 1,360.9 | 1,453.3 | |||||||||
Information systems and technology | 219.8 | 207.3 | 224.3 | |||||||||
Occupancy | 121.3 | 134.1 | 132.7 | |||||||||
General, administrative and other | 322.2 | 340.1 | 348.5 | |||||||||
Total operating expenses | 4,127.9 | 4,252.3 | 4,921.1 | |||||||||
Operating Income | 2,264.3 | 2,365.7 | 3,027.6 | |||||||||
Other Income (Expenses) | ||||||||||||
Investment and other income, net | 336.3 | 184.0 | 40.4 | |||||||||
Interest expense | (51.5 | ) | (49.9 | ) | (39.6 | ) | ||||||
Other income, net | 284.8 | 134.1 | 0.8 | |||||||||
Income before taxes | 2,549.1 | 2,499.8 | 3,028.4 | |||||||||
Taxes on income | 759.4 | 742.1 | 923.7 | |||||||||
Net income | 1,789.7 | 1,757.7 | 2,104.7 | |||||||||
Less: net income (loss) attributable to | ||||||||||||
Nonredeemable noncontrolling interests | 40.0 | 29.4 | 75.5 | |||||||||
Redeemable noncontrolling interests | 53.0 | 1.6 | (6.1 | ) | ||||||||
Net Income Attributable to Franklin Resources, Inc. | $ | 1,696.7 | $ | 1,726.7 | $ | 2,035.3 | ||||||
Earnings per Share | ||||||||||||
Basic | $ | 3.01 | $ | 2.94 | $ | 3.29 | ||||||
Diluted | 3.01 | 2.94 | 3.29 | |||||||||
Dividends Declared per Share | $ | 0.80 | $ | 0.72 | $ | 1.10 |
FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Net Income | $ | 1,789.7 | $ | 1,757.7 | $ | 2,104.7 | ||||||
Other Comprehensive Income (Loss) | ||||||||||||
Net unrealized gains (losses) on investments, net of tax | 2.2 | (12.5 | ) | (11.7 | ) | |||||||
Currency translation adjustments, net of tax | 65.4 | (18.3 | ) | (184.2 | ) | |||||||
Net unrealized gains (losses) on defined benefit plans, net of tax | 2.1 | (2.4 | ) | (0.6 | ) | |||||||
Total other comprehensive income (loss) | 69.7 | (33.2 | ) | (196.5 | ) | |||||||
Total comprehensive income | 1,859.4 | 1,724.5 | 1,908.2 | |||||||||
Less: comprehensive income (loss) attributable to | ||||||||||||
Nonredeemable noncontrolling interests | 40.0 | 29.4 | 75.5 | |||||||||
Redeemable noncontrolling interests | 53.0 | 1.6 | (6.1 | ) | ||||||||
Comprehensive Income Attributable to Franklin Resources, Inc. | $ | 1,766.4 | $ | 1,693.5 | $ | 1,838.8 |
FRANKLIN RESOURCES, INC. CONSOLIDATED BALANCE SHEETS | ||||||||
(in millions, except share and per share data) | ||||||||
as of September 30, | 2017 | 2016 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 8,523.3 | $ | 8,247.1 | ||||
Receivables | 767.8 | 746.4 | ||||||
Investments (including $440.0 and $1,437.6 at fair value at September 30, 2017 and 2016) | 1,393.6 | 2,416.6 | ||||||
Assets of consolidated sponsored investment products | ||||||||
Cash and cash equivalents | 226.4 | 236.2 | ||||||
Receivables | 234.1 | 47.9 | ||||||
Investments, at fair value | 3,467.4 | 1,513.4 | ||||||
Property and equipment, net | 517.2 | 523.2 | ||||||
Goodwill and other intangible assets, net | 2,227.7 | 2,211.3 | ||||||
Other | 176.5 | 156.7 | ||||||
Total Assets | $ | 17,534.0 | $ | 16,098.8 | ||||
Liabilities | ||||||||
Compensation and benefits | $ | 396.6 | $ | 357.4 | ||||
Accounts payable and accrued expenses | 291.5 | 233.3 | ||||||
Dividends | 113.3 | 104.6 | ||||||
Commissions | 313.3 | 302.0 | ||||||
Debt | 1,044.2 | 1,401.2 | ||||||
Debt of consolidated sponsored investment products | 53.4 | 682.2 | ||||||
Deferred taxes | 170.6 | 161.5 | ||||||
Other | 273.4 | 267.3 | ||||||
Total liabilities | 2,656.3 | 3,509.5 | ||||||
Commitments and Contingencies (Note 12) | ||||||||
Redeemable Noncontrolling Interests | 1,941.9 | 61.1 | ||||||
Stockholders’ Equity | ||||||||
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none issued | — | — | ||||||
Common stock, $0.10 par value, 1,000,000,000 shares authorized; 554,865,343 and 570,345,156 shares issued and outstanding at September 30, 2017 and 2016 | 55.5 | 57.0 | ||||||
Retained earnings | 12,849.3 | 12,226.2 | ||||||
Accumulated other comprehensive loss | (284.8 | ) | (347.4 | ) | ||||
Total Franklin Resources, Inc. stockholders’ equity | 12,620.0 | 11,935.8 | ||||||
Nonredeemable noncontrolling interests | 315.8 | 592.4 | ||||||
Total stockholders’ equity | 12,935.8 | 12,528.2 | ||||||
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity | $ | 17,534.0 | $ | 16,098.8 |
Franklin Resources, Inc. | Nonredeemable Noncontrolling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||
(in millions) | Common Stock | Capital in Excess of Par Value | Retained Earnings | Appropriated Retained Earnings of Consolidated Variable Interest Entities | Accumulated Other Compre- hensive Loss | Stockholders’ Equity | |||||||||||||||||||||||||||||
as of and for the fiscal years ended September 30, 2017, 2016 and 2015 | Shares | Amount | |||||||||||||||||||||||||||||||||
Balance at October 1, 2014 | 622.9 | $ | 62.3 | $ | — | $ | 11,625.6 | $ | 13.9 | $ | (117.7 | ) | $ | 11,584.1 | $ | 628.3 | $ | 12,212.4 | |||||||||||||||||
Adoption of new accounting guidance | (0.3 | ) | (13.9 | ) | (14.2 | ) | (14.2 | ) | |||||||||||||||||||||||||||
Net income | 2,035.3 | 2,035.3 | 75.5 | 2,110.8 | |||||||||||||||||||||||||||||||
Other comprehensive loss | (196.5 | ) | (196.5 | ) | (196.5 | ) | |||||||||||||||||||||||||||||
Cash dividends declared on common stock | (682.1 | ) | (682.1 | ) | (682.1 | ) | |||||||||||||||||||||||||||||
Repurchase of common stock | (22.5 | ) | (2.2 | ) | (173.9 | ) | (883.7 | ) | (1,059.8 | ) | (1,059.8 | ) | |||||||||||||||||||||||
Issuance of common stock | 3.1 | 0.3 | 154.5 | 154.8 | 154.8 | ||||||||||||||||||||||||||||||
Tax benefit from stock-based compensation | 10.9 | 10.9 | 10.9 | ||||||||||||||||||||||||||||||||
Stock-based compensation | 8.5 | 8.5 | 8.5 | ||||||||||||||||||||||||||||||||
Net distributions and other | (49.0 | ) | (49.0 | ) | |||||||||||||||||||||||||||||||
Balance at September 30, 2015 | 603.5 | $ | 60.4 | $ | — | $ | 12,094.8 | $ | — | $ | (314.2 | ) | $ | 11,841.0 | $ | 654.8 | $ | 12,495.8 | |||||||||||||||||
Net income | 1,726.7 | 1,726.7 | 29.4 | 1,756.1 | |||||||||||||||||||||||||||||||
Other comprehensive loss | (33.2 | ) | (33.2 | ) | (33.2 | ) | |||||||||||||||||||||||||||||
Cash dividends declared on common stock | (420.7 | ) | (420.7 | ) | (420.7 | ) | |||||||||||||||||||||||||||||
Repurchase of common stock | (36.6 | ) | (3.7 | ) | (146.0 | ) | (1,174.6 | ) | (1,324.3 | ) | (1,324.3 | ) | |||||||||||||||||||||||
Issuance of common stock | 3.4 | 0.3 | 149.8 | 150.1 | 150.1 | ||||||||||||||||||||||||||||||
Tax shortfall from stock-based compensation | (5.9 | ) | (5.9 | ) | (5.9 | ) | |||||||||||||||||||||||||||||
Stock-based compensation | 2.1 | 2.1 | 2.1 | ||||||||||||||||||||||||||||||||
Net distributions and other | (91.8 | ) | (91.8 | ) | |||||||||||||||||||||||||||||||
Balance at September 30, 2016 | 570.3 | $ | 57.0 | $ | — | $ | 12,226.2 | $ | — | $ | (347.4 | ) | $ | 11,935.8 | $ | 592.4 | $ | 12,528.2 |
Franklin Resources, Inc. | Nonredeemable Noncontrolling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||
(in millions) | Common Stock | Capital in Excess of Par Value | Retained Earnings | Appropriated Retained Earnings of Consolidated Variable Interest Entities | Accumulated Other Compre- hensive Loss | Stockholders’ Equity | |||||||||||||||||||||||||||||
as of and for the fiscal years ended September 30, 2017, 2016 and 2015 | Shares | Amount | |||||||||||||||||||||||||||||||||
Balance at September 30, 2016 | 570.3 | $ | 57.0 | $ | — | $ | 12,226.2 | $ | — | $ | (347.4 | ) | $ | 11,935.8 | $ | 592.4 | $ | 12,528.2 | |||||||||||||||||
Adoption of new accounting guidance | 5.8 | (7.1 | ) | (1.3 | ) | (324.6 | ) | (325.9 | ) | ||||||||||||||||||||||||||
Net income | 1,696.7 | 1,696.7 | 40.0 | 1,736.7 | |||||||||||||||||||||||||||||||
Other comprehensive income | 69.7 | 69.7 | 69.7 | ||||||||||||||||||||||||||||||||
Cash dividends declared on common stock | (449.9 | ) | (449.9 | ) | (449.9 | ) | |||||||||||||||||||||||||||||
Repurchase of common stock | (19.1 | ) | (1.9 | ) | (140.1 | ) | (629.5 | ) | (771.5 | ) | (771.5 | ) | |||||||||||||||||||||||
Issuance of common stock | 3.7 | 0.4 | 134.2 | 134.6 | 134.6 | ||||||||||||||||||||||||||||||
Tax shortfall from stock-based compensation | (8.7 | ) | (8.7 | ) | (8.7 | ) | |||||||||||||||||||||||||||||
Stock-based compensation | 14.6 | 14.6 | 14.6 | ||||||||||||||||||||||||||||||||
Net subscriptions and other | 17.3 | 17.3 | |||||||||||||||||||||||||||||||||
Deconsolidation of sponsored investment product | (9.3 | ) | (9.3 | ) | |||||||||||||||||||||||||||||||
Balance at September 30, 2017 | 554.9 | $ | 55.5 | $ | — | $ | 12,849.3 | $ | — | $ | (284.8 | ) | $ | 12,620.0 | $ | 315.8 | $ | 12,935.8 |
FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Net Income | $ | 1,789.7 | $ | 1,757.7 | $ | 2,104.7 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Amortization of deferred sales commissions | 72.0 | 75.2 | 112.8 | |||||||||
Depreciation and other amortization | 80.3 | 87.1 | 97.4 | |||||||||
Impairment of intangible assets | 9.6 | 28.2 | 8.2 | |||||||||
Stock-based compensation | 123.4 | 131.5 | 140.0 | |||||||||
Excess tax benefit from stock-based compensation | (0.9 | ) | (0.8 | ) | (11.0 | ) | ||||||
Gains on sale of assets | (6.8 | ) | (29.7 | ) | (31.6 | ) | ||||||
Losses (income) from investments in equity method investees | (107.9 | ) | (56.7 | ) | 63.2 | |||||||
Net losses (gains) on other investments of consolidated sponsored investment products | (55.4 | ) | 19.7 | (28.9 | ) | |||||||
Other | (8.0 | ) | 15.1 | 3.1 | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
Decrease (increase) in receivables, prepaid expenses and other | (161.0 | ) | (10.8 | ) | 45.2 | |||||||
Decrease in trading securities, net | 130.2 | 120.4 | 23.3 | |||||||||
Increase in trading securities of consolidated sponsored investment products, net | (875.0 | ) | (242.3 | ) | (181.1 | ) | ||||||
Increase (decrease) in accrued compensation and benefits | 37.2 | (76.7 | ) | (16.7 | ) | |||||||
Increase (decrease) in commissions payable | 11.3 | (57.9 | ) | (80.4 | ) | |||||||
Increase (decrease) in income taxes payable | 44.5 | (14.0 | ) | 20.0 | ||||||||
Increase (decrease) in other liabilities | 52.2 | (18.3 | ) | (16.2 | ) | |||||||
Net cash provided by operating activities | 1,135.4 | 1,727.7 | 2,252.0 | |||||||||
Purchase of investments | (372.5 | ) | (367.8 | ) | (297.2 | ) | ||||||
Liquidation of investments | 344.9 | 405.2 | 405.5 | |||||||||
Purchase of other investments by consolidated sponsored investment products | (114.7 | ) | (333.3 | ) | (438.9 | ) | ||||||
Liquidation of other investments by consolidated sponsored investment products | 368.1 | 597.3 | 643.9 | |||||||||
Additions of property and equipment, net | (74.9 | ) | (97.6 | ) | (68.8 | ) | ||||||
Adoption of new accounting guidance | (49.2 | ) | — | — | ||||||||
Acquisition of business | (14.0 | ) | — | — | ||||||||
Net (deconsolidation) consolidation of sponsored investment products | (35.7 | ) | (11.6 | ) | 4.4 | |||||||
Net cash provided by investing activities | 52.0 | 192.2 | 248.9 | |||||||||
Decrease in deposits | — | — | (0.3 | ) | ||||||||
Issuance of common stock | 24.9 | 24.1 | 25.5 | |||||||||
Dividends paid on common stock | (441.2 | ) | (408.7 | ) | (666.4 | ) | ||||||
Repurchase of common stock | (765.3 | ) | (1,308.0 | ) | (1,059.8 | ) | ||||||
Excess tax benefit from stock-based compensation | 0.9 | 0.8 | 11.0 |
FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS [Table continued from previous page] | ||||||||||||
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Proceeds from loan | $ | — | $ | 93.4 | $ | — | ||||||
Payments on loan | (53.7 | ) | (41.2 | ) | — | |||||||
Proceeds from issuance of debt | — | — | 395.7 | |||||||||
Payments on debt | (300.0 | ) | — | (250.0 | ) | |||||||
Proceeds from debt of consolidated sponsored investment products | 20.6 | 33.8 | 571.8 | |||||||||
Payments on debt by consolidated sponsored investment products | (308.5 | ) | (179.8 | ) | (732.2 | ) | ||||||
Payments on contingent consideration liabilities | (35.3 | ) | (3.2 | ) | (7.9 | ) | ||||||
Noncontrolling interests | 901.6 | (11.9 | ) | 100.4 | ||||||||
Net cash used in financing activities | (956.0 | ) | (1,800.7 | ) | (1,612.2 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 35.0 | (4.0 | ) | (116.6 | ) | |||||||
Increase in cash and cash equivalents | 266.4 | 115.2 | 772.1 | |||||||||
Cash and cash equivalents, beginning of year | 8,483.3 | 8,368.1 | 7,596.0 | |||||||||
Cash and Cash Equivalents, End of Year | $ | 8,749.7 | $ | 8,483.3 | $ | 8,368.1 | ||||||
Supplemental Disclosure of Cash Flow Information | ||||||||||||
Cash paid for income taxes | $ | 712.2 | $ | 758.6 | $ | 925.0 | ||||||
Cash paid for interest | 42.3 | 47.4 | 44.6 | |||||||||
Cash paid for interest by consolidated sponsored investment products | 11.2 | 28.3 | 33.0 |
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities, which may include published net asset values (“NAV”) for fund products. |
Level 2 | Observable inputs other than Level 1 quoted prices, such as non-binding quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable or corroborated by observable market data. Level 2 quoted prices are generally obtained from two independent third-party brokers or dealers, including prices derived from model-based valuation techniques for which the significant assumptions are observable in the market or corroborated by observable market data. Quoted prices are validated through price variance analysis, subsequent sales testing, stale price review, price comparison across pricing vendors and due diligence reviews of third-party vendors. |
Level 3 | Unobservable inputs that are supported by little or no market activity. These inputs require significant management judgment and reflect the Company's estimation of assumptions that market participants would use in pricing the asset or liability. |
(in millions, except per share data) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Net income attributable to Franklin Resources, Inc. | $ | 1,696.7 | $ | 1,726.7 | $ | 2,035.3 | ||||||
Less: allocation of earnings to participating nonvested stock and stock unit awards | 12.4 | 10.9 | 12.0 | |||||||||
Net Income Available to Common Stockholders | $ | 1,684.3 | $ | 1,715.8 | $ | 2,023.3 | ||||||
Weighted-average shares outstanding – basic | 558.8 | 583.8 | 614.8 | |||||||||
Dilutive effect of nonparticipating nonvested stock unit awards | 0.3 | — | 0.1 | |||||||||
Weighted-Average Shares Outstanding – Diluted | 559.1 | 583.8 | 614.9 | |||||||||
Earnings per Share | ||||||||||||
Basic | $ | 3.01 | $ | 2.94 | $ | 3.29 | ||||||
Diluted | 3.01 | 2.94 | 3.29 |
(in millions) | ||||||||
as of September 30, | 2017 | 2016 | ||||||
Investment securities, trading | ||||||||
SIPs | $ | 31.1 | $ | 844.4 | ||||
Debt and other equity securities | 283.4 | 277.5 | ||||||
Total investment securities, trading | 314.5 | 1,121.9 | ||||||
Investment securities, available-for-sale | ||||||||
SIPs | 110.8 | 297.7 | ||||||
Debt and other equity securities | 1.9 | 3.7 | ||||||
Total investment securities, available-for-sale | 112.7 | 301.4 | ||||||
Investments in equity method investees | 893.5 | 797.4 | ||||||
Other investments | 72.9 | 195.9 | ||||||
Total | $ | 1,393.6 | $ | 2,416.6 |
Gross Unrealized | ||||||||||||||||
(in millions) | Cost Basis | Gains | Losses | Fair Value | ||||||||||||
as of September 30, 2017 | ||||||||||||||||
SIPs | $ | 107.9 | $ | 9.4 | $ | (6.5 | ) | $ | 110.8 | |||||||
Debt and other equity securities | 1.9 | — | — | 1.9 | ||||||||||||
Total | $ | 109.8 | $ | 9.4 | $ | (6.5 | ) | $ | 112.7 | |||||||
as of September 30, 2016 | ||||||||||||||||
SIPs | $ | 289.6 | $ | 13.7 | $ | (5.6 | ) | $ | 297.7 | |||||||
Debt and other equity securities | 3.6 | 0.1 | — | 3.7 | ||||||||||||
Total | $ | 293.2 | $ | 13.8 | $ | (5.6 | ) | $ | 301.4 |
Less Than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
as of September 30, 2017 | ||||||||||||||||||||||||
SIPs | $ | 28.4 | $ | (6.3 | ) | $ | 2.4 | $ | (0.2 | ) | $ | 30.8 | $ | (6.5 | ) | |||||||||
as of September 30, 2016 | ||||||||||||||||||||||||
SIPs | $ | 75.8 | $ | (4.3 | ) | $ | 18.0 | $ | (1.3 | ) | $ | 93.8 | $ | (5.6 | ) |
(in millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
as of September 30, 2017 | ||||||||||||||||
Assets | ||||||||||||||||
Investment securities, trading | ||||||||||||||||
SIPs | $ | 31.1 | $ | — | $ | — | $ | 31.1 | ||||||||
Debt and other equity securities | 18.2 | 78.4 | 186.8 | 283.4 | ||||||||||||
Investment securities, available-for-sale | ||||||||||||||||
SIPs | 110.8 | — | — | 110.8 | ||||||||||||
Debt and other equity securities | 1.0 | 0.6 | 0.3 | 1.9 | ||||||||||||
Life settlement contracts | — | — | 12.8 | 12.8 | ||||||||||||
Total Assets Measured at Fair Value | $ | 161.1 | $ | 79.0 | $ | 199.9 | $ | 440.0 | ||||||||
Liability | ||||||||||||||||
Contingent consideration liability | $ | — | $ | — | $ | 51.0 | $ | 51.0 |
(in millions) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
as of September 30, 2016 | ||||||||||||||||
Assets | ||||||||||||||||
Investment securities, trading | ||||||||||||||||
SIPs | $ | 844.4 | $ | — | $ | — | $ | 844.4 | ||||||||
Debt and other equity securities | 2.6 | 84.1 | 190.8 | 277.5 | ||||||||||||
Investment securities, available-for-sale | ||||||||||||||||
SIPs | 297.7 | — | — | 297.7 | ||||||||||||
Debt and other equity securities | 1.6 | 2.1 | — | 3.7 | ||||||||||||
Life settlement contracts | — | — | 14.3 | 14.3 | ||||||||||||
Total Assets Measured at Fair Value | $ | 1,146.3 | $ | 86.2 | $ | 205.1 | $ | 1,437.6 | ||||||||
Liability | ||||||||||||||||
Contingent consideration liability | $ | — | $ | — | $ | 98.1 | $ | 98.1 |
2017 | 2016 | |||||||||||||||
(in millions) | Investments | Contingent Consideration Liabilities | Investments | Contingent Consideration Liability | ||||||||||||
for the fiscal years ended September 30, | ||||||||||||||||
Balance at beginning of year | $ | 205.1 | $ | (98.1 | ) | $ | 20.7 | $ | (102.9 | ) | ||||||
Acquisition | — | (5.7 | ) | — | — | |||||||||||
Total realized and unrealized gains (losses) | ||||||||||||||||
Included in investment and other income, net | 8.5 | — | (2.4 | ) | — | |||||||||||
Included in general, administrative and other expense | — | 13.8 | — | 1.0 | ||||||||||||
Purchases | 5.4 | — | 190.4 | — | ||||||||||||
Sales | (17.7 | ) | — | (4.0 | ) | — | ||||||||||
Settlements | (4.8 | ) | 39.0 | (2.8 | ) | 3.8 | ||||||||||
Transfers out of Level 3 | (0.4 | ) | — | — | — | |||||||||||
Foreign exchange revaluation | 3.8 | — | 3.2 | — | ||||||||||||
Balance at End of Year | $ | 199.9 | $ | (51.0 | ) | $ | 205.1 | $ | (98.1 | ) | ||||||
Change in unrealized gains (losses) included in net income relating to assets and liability held at end of year | $ | 6.0 | $ | 8.1 | $ | (4.0 | ) | $ | 1.0 |
(in millions) | ||||||||||
as of September 30, 2017 | Fair Value | Valuation Technique | Significant Unobservable Inputs | Range (Weighted Average) | ||||||
Investment securities, trading – debt and other equity securities | $ | 175.7 | Market pricing | Redemption price | $73 per $100 of par | |||||
Discount rate | 18.6% | |||||||||
11.1 | Discounted cash flow | Discount rate | 4.1%–6.7% (5.7%) | |||||||
Risk premium | 2.0%–4.1% (2.9%) | |||||||||
Life settlement contracts | 12.8 | Discounted cash flow | Life expectancy | 20–123 months (62) | ||||||
Discount rate | 8.0%–20.0% (13.2%) | |||||||||
Contingent consideration liability | 51.0 | Discounted cash flow | AUM growth rate | 1.3%–9.4% (5.3%) | ||||||
EBITDA margin | 8.5%–8.9% (8.7%) | |||||||||
Discount rate | 14.6% |
(in millions) | ||||||||||
as of September 30, 2016 | Fair Value | Valuation Technique | Significant Unobservable Inputs | Range (Weighted Average) | ||||||
Investment securities, trading - debt and other equity securities | $ | 190.8 | Discounted cash flow | Discount rate | 3.6%–6.9% (6.7%) | |||||
Risk premium | 2.0%–17.9% (16.5%) | |||||||||
Liquidity discount | 0.0%–10.0% (9.6%) | |||||||||
Life settlement contracts | 14.3 | Discounted cash flow | Life expectancy | 20–132 months (65) | ||||||
Discount rate | 3.3%–18.0% (11.5%) | |||||||||
Contingent consideration liability | 98.1 | Discounted cash flow | AUM growth rate | 2.4%–11.5% (5.9%) | ||||||
EBITDA margin | 14.3% | |||||||||
Discount rate | 13.2% |
(in millions) | 2017 | 2016 | ||||||||||||||||
as of September 30, | Fair Value Level | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||||
Financial Assets | ||||||||||||||||||
Cash and cash equivalents | 1 | $ | 8,523.3 | $ | 8,523.3 | $ | 8,247.1 | $ | 8,247.1 | |||||||||
Other investments | ||||||||||||||||||
Time deposits | 2 | 13.4 | 13.4 | 131.6 | 131.6 | |||||||||||||
Cost method investments | 3 | 46.7 | 67.7 | 50.0 | 61.3 | |||||||||||||
Financial Liabilities | ||||||||||||||||||
Debt | ||||||||||||||||||
Senior notes | 2 | $ | 1,044.2 | $ | 1,073.5 | $ | 1,348.5 | $ | 1,412.5 | |||||||||
Loan | 2 | — | — | 52.7 | 52.7 |
(in millions) | Useful Lives In Years | |||||||||
as of September 30, | 2017 | 2016 | ||||||||
Furniture, software and equipment | $ | 804.7 | $ | 756.4 | 3 – 10 | |||||
Premises and leasehold improvements | 580.9 | 563.5 | 5 – 35 | |||||||
Land | 74.2 | 74.1 | N/A | |||||||
Total cost | 1,459.8 | 1,394.0 | ||||||||
Less: accumulated depreciation and amortization | (942.6 | ) | (870.8 | ) | ||||||
Property and Equipment, Net | $ | 517.2 | $ | 523.2 |
(in millions) | ||||||||
as of September 30, | 2017 | 2016 | ||||||
Goodwill | $ | 1,687.2 | $ | 1,661.2 | ||||
Indefinite-lived intangible assets | 534.0 | 530.9 | ||||||
Definite-lived intangible assets, net | 6.5 | 19.2 | ||||||
Goodwill and Other Intangible Assets, Net | $ | 2,227.7 | $ | 2,211.3 |
(in millions) | ||||||||
for the fiscal years ended September 30, | 2017 | 2016 | ||||||
Balance at beginning of year | $ | 1,661.2 | $ | 1,661.2 | ||||
Acquisition | 18.8 | — | ||||||
Foreign exchange revaluation | 7.2 | — | ||||||
Balance at End of Year | $ | 1,687.2 | $ | 1,661.2 |
2017 | 2016 | |||||||||||||||||||||||
(in millions) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||||||||||
as of September 30, | ||||||||||||||||||||||||
Management contracts | $ | 52.4 | $ | (45.9 | ) | $ | 6.5 | $ | 60.1 | $ | (40.9 | ) | $ | 19.2 |
(in millions) | ||||
for the fiscal years ending September 30, | Amount | |||
2018 | $ | 1.0 | ||
2019 | 0.8 | |||
2020 | 0.8 | |||
2021 | 0.7 | |||
2022 | 0.5 | |||
Thereafter | 2.7 | |||
Total | $ | 6.5 |
(in millions) | 2017 | Effective Interest Rate | 2016 | Effective Interest Rate | ||||||||||
as of September 30, | ||||||||||||||
Senior Notes | ||||||||||||||
$300 million 1.375% notes due September 2017 | $ | — | N/A | $ | 299.7 | 1.66 | % | |||||||
$350 million 4.625% notes due May 2020 | 349.9 | 4.74 | % | 349.9 | 4.74 | % | ||||||||
$300 million 2.800% notes due September 2022 | 299.6 | 2.93 | % | 299.5 | 2.93 | % | ||||||||
$400 million 2.850% notes due March 2025 | 399.5 | 2.97 | % | 399.4 | 2.97 | % | ||||||||
Total senior notes | 1,049.0 | 1,348.5 | ||||||||||||
Other | ||||||||||||||
Loan due March 2017 | — | N/A | 52.7 | 9.89 | % | |||||||||
Debt issuance costs | (4.8 | ) | — | |||||||||||
Total | $ | 1,044.2 | $ | 1,401.2 |
(in millions) | ||||||||
as of September 30, | 2017 | 2016 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 226.4 | $ | 236.2 | ||||
Receivables | 234.1 | 47.9 | ||||||
Investments, at fair value | 3,467.4 | 1,513.4 | ||||||
Other assets | 0.9 | 1.4 | ||||||
Total Assets | $ | 3,928.8 | $ | 1,798.9 | ||||
Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 124.1 | $ | 65.2 | ||||
Debt | 53.4 | 682.2 | ||||||
Other liabilities | 8.7 | 8.5 | ||||||
Total liabilities | 186.2 | 755.9 | ||||||
Redeemable Noncontrolling Interests | 1,941.9 | 61.1 | ||||||
Stockholders’ Equity | ||||||||
Franklin Resources, Inc.’s interests | 1,511.8 | 414.1 | ||||||
Nonredeemable noncontrolling interests | 288.9 | 567.8 | ||||||
Total stockholders’ equity | 1,800.7 | 981.9 | ||||||
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity | $ | 3,928.8 | $ | 1,798.9 |
(in millions) | ||||||||
as of September 30, | 2017 | 2016 | ||||||
Investment securities, trading | $ | 3,017.2 | $ | 287.8 | ||||
Other equity securities | 306.9 | 607.3 | ||||||
Other debt securities | 143.3 | 618.3 | ||||||
Total | $ | 3,467.4 | $ | 1,513.4 |
(in millions) | ||||||||||
as of September 30, | Redemption Frequency | 2017 | 2016 | |||||||
Real estate and private equity funds | Nonredeemable | $ | 155.2 | $ | 444.2 | |||||
Hedge funds | Monthly, quarterly or triennially | — | 1.8 | |||||||
Total | $ | 155.2 | $ | 446.0 |
(in millions) | Level 1 | Level 2 | Level 3 | NAV as a Practical Expedient | Total | |||||||||||||||
as of September 30, 2017 | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Investments | ||||||||||||||||||||
Equity securities | $ | 331.4 | $ | 128.1 | $ | 160.7 | $ | 155.2 | $ | 775.4 | ||||||||||
Debt securities | 1.4 | 2,555.2 | 135.4 | — | 2,692.0 | |||||||||||||||
Total Assets Measured at Fair Value | $ | 332.8 | $ | 2,683.3 | $ | 296.1 | $ | 155.2 | $ | 3,467.4 | ||||||||||
Liabilities | ||||||||||||||||||||
Other liabilities | $ | 0.4 | $ | 8.3 | $ | — | $ | — | $ | 8.7 |
(in millions) | Level 1 | Level 2 | Level 3 | NAV as a Practical Expedient | Total | |||||||||||||||
as of September 30, 2016 | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Cash and cash equivalents of CLOs | $ | 146.4 | $ | — | $ | — | $ | — | $ | 146.4 | ||||||||||
Receivables of CLOs | — | 23.6 | — | — | 23.6 | |||||||||||||||
Investments | ||||||||||||||||||||
Equity securities | 155.4 | 0.5 | 160.3 | 446.0 | 762.2 | |||||||||||||||
Debt securities | — | 618.9 | 132.3 | — | 751.2 | |||||||||||||||
Total Assets Measured at Fair Value | $ | 301.8 | $ | 643.0 | $ | 292.6 | $ | 446.0 | $ | 1,683.4 | ||||||||||
Liabilities | ||||||||||||||||||||
Other liabilities | $ | 0.1 | $ | 8.4 | $ | — | $ | — | $ | 8.5 |
2017 | 2016 | |||||||||||||||||||||||
(in millions) | Equity Securities | Debt Securities | Total Level 3 Assets | Equity Securities | Debt Securities | Total Level 3 Assets | ||||||||||||||||||
for the fiscal years ended September 30, | ||||||||||||||||||||||||
Balance at beginning of year | $ | 160.3 | $ | 132.3 | $ | 292.6 | $ | 191.6 | $ | 130.2 | $ | 321.8 | ||||||||||||
Adoption of new accounting guidance | (45.4 | ) | (0.5 | ) | (45.9 | ) | — | — | — | |||||||||||||||
Realized and unrealized gains (losses) included in investment and other income, net | 19.2 | (0.3 | ) | 18.9 | 1.2 | (10.5 | ) | (9.3 | ) | |||||||||||||||
Purchases | 30.4 | 24.7 | 55.1 | 1.6 | 26.8 | 28.4 | ||||||||||||||||||
Sales | (6.7 | ) | (22.3 | ) | (29.0 | ) | (34.0 | ) | (15.4 | ) | (49.4 | ) | ||||||||||||
Settlements | — | (0.6 | ) | (0.6 | ) | — | — | — | ||||||||||||||||
Foreign exchange revaluation | 2.9 | 2.1 | 5.0 | (0.1 | ) | 1.2 | 1.1 | |||||||||||||||||
Balance at End of Year | $ | 160.7 | $ | 135.4 | $ | 296.1 | $ | 160.3 | $ | 132.3 | $ | 292.6 | ||||||||||||
Change in unrealized gains (losses) included in net income relating to assets held at end of year | $ | 29.4 | $ | (0.9 | ) | $ | 28.5 | $ | (1.1 | ) | $ | (10.9 | ) | $ | (12.0 | ) |
(in millions) | ||||||||||
as of September 30, 2017 | Fair Value | Valuation Technique | Significant Unobservable Inputs | Range (Weighted Average) | ||||||
Equity securities | $ | 101.9 | Market comparable companies | EBITDA multiple | 5.5–12.3 (9.0) | |||||
44.4 | Discounted cash flow | Discount rate | 5.7%–17.9% (14.3%) | |||||||
14.4 | Market pricing | Price to earnings ratio | 10.0 | |||||||
Debt securities | 112.7 | Discounted cash flow | Discount rate | 5.0%–33.0% (9.5%) | ||||||
Risk premium | 0.0%–25.0% (8.4%) | |||||||||
22.7 | Market pricing | Private sale pricing | $33–$57 ($52) per $100 of par |
(in millions) | ||||||||||
as of September 30, 2016 | Fair Value | Valuation Technique | Significant Unobservable Inputs | Range (Weighted Average) | ||||||
Equity securities | $ | 113.1 | Market comparable companies | EBITDA multiple | 5.0–14.2 (10.3) | |||||
Discount for lack of marketability | 25.0%–50.0% (36.6%) | |||||||||
24.3 | Discounted cash flow | Discount rate | 5.0%–19.0% (13.7%) | |||||||
22.9 | Market pricing | Price to book value ratio | 1.8–2.3 (2.0) | |||||||
Debt securities | 119.7 | Discounted cash flow | Discount rate | 6.0%–15.0% (10.4%) | ||||||
Risk premium | 0.0%–28.0% (9.7%) | |||||||||
EBITDA multiple | 5.5 | |||||||||
12.6 | Market pricing | Private sale pricing | $57 per $100 of par |
(in millions) | 2017 | 2016 | ||||||||||||||||
as of September 30, | Fair Value Level | Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||||
Financial Assets | ||||||||||||||||||
Cash and cash equivalents | 1 | $ | 226.4 | $ | 226.4 | $ | 89.8 | $ | 89.8 | |||||||||
Financial Liabilities | ||||||||||||||||||
Debt, excluding CLOs | 3 | $ | 53.4 | $ | 53.1 | $ | 75.0 | $ | 74.6 | |||||||||
Debt of CLOs1 | 2 or 3 | — | — | 607.2 | 594.5 |
2017 | 2016 | |||||||||||
(in millions) | Amount | Weighted-Average Effective Interest Rate | Amount | Weighted-Average Effective Interest Rate | ||||||||
as of September 30, | ||||||||||||
Debt, excluding CLOs | $ | 53.4 | 5.15% | $ | 75.0 | 4.79% | ||||||
Debt of CLOs | — | N/A | 607.2 | 2.24% | ||||||||
Total | $ | 53.4 | $ | 682.2 |
(in millions) | Carrying Amount | |||
for the fiscal years ending September 30, | ||||
2018 | $ | 5.8 | ||
2019 | 47.6 | |||
Total | $ | 53.4 |
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Balance at beginning of year | $ | 61.1 | $ | 59.6 | $ | 234.8 | ||||||
Adoption of new accounting guidance | 824.7 | — | — | |||||||||
Net income (loss) | 53.0 | 1.6 | (6.1 | ) | ||||||||
Net subscriptions and other | 884.3 | 79.9 | 149.4 | |||||||||
Net consolidations (deconsolidations) | 118.8 | (80.0 | ) | (318.5 | ) | |||||||
Balance at End of Year | $ | 1,941.9 | $ | 61.1 | $ | 59.6 |
(in millions) | ||||||||
as of September 30, | 2017 | 2016 | ||||||
Receivables | $ | 155.6 | $ | 21.4 | ||||
Investments | 129.3 | 77.3 | ||||||
Total | $ | 284.9 | $ | 98.7 |
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Current expense | ||||||||||||
Federal | $ | 585.0 | $ | 582.8 | $ | 733.9 | ||||||
State | 65.3 | 47.5 | 83.1 | |||||||||
Non-U.S. | 100.2 | 102.8 | 121.1 | |||||||||
Deferred expense (benefit) | 8.9 | 9.0 | (14.4 | ) | ||||||||
Total | $ | 759.4 | $ | 742.1 | $ | 923.7 |
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
U.S. | $ | 1,594.5 | $ | 1,641.7 | $ | 2,026.4 | ||||||
Non-U.S. | 954.6 | 858.1 | 1,002.0 | |||||||||
Total | $ | 2,549.1 | $ | 2,499.8 | $ | 3,028.4 |
(in millions) | ||||||||
as of September 30, | 2017 | 2016 | ||||||
Deferred Tax Assets | ||||||||
Deferred compensation and employee benefits | $ | 60.2 | $ | 52.9 | ||||
Stock-based compensation | 36.1 | 36.6 | ||||||
Net operating loss carry-forwards | 28.4 | 32.5 | ||||||
Tax benefit for uncertain tax positions | 17.9 | 19.8 | ||||||
Other | 23.9 | 12.5 | ||||||
Total deferred tax assets | 166.5 | 154.3 | ||||||
Valuation allowance for net operating loss carry-forwards | (25.2 | ) | (24.6 | ) | ||||
Deferred tax assets, net of valuation allowance | 141.3 | 129.7 | ||||||
Deferred Tax Liabilities | ||||||||
Goodwill and other purchased intangibles | 205.2 | 202.8 | ||||||
Depreciation on fixed assets | 35.3 | 18.0 | ||||||
Investments in partnerships | 26.0 | 17.9 | ||||||
Deferred commissions | 15.0 | 18.3 | ||||||
Other | 14.6 | 16.5 | ||||||
Total deferred tax liabilities | 296.1 | 273.5 | ||||||
Net Deferred Tax Liability | $ | 154.8 | $ | 143.8 |
(in millions) | ||||||||
as of September 30, | 2017 | 2016 | ||||||
Other assets | $ | 15.8 | $ | 17.7 | ||||
Deferred tax liabilities | 170.6 | 161.5 | ||||||
Net Deferred Tax Liability | $ | 154.8 | $ | 143.8 |
(in millions) | |||||||||||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | ||||||||||||||||||
Federal taxes at statutory rate | $ | 892.2 | 35.0 | % | $ | 874.9 | 35.0 | % | $ | 1,059.9 | 35.0 | % | |||||||||
State taxes, net of federal tax effect | 41.4 | 1.6 | % | 42.7 | 1.7 | % | 51.6 | 1.7 | % | ||||||||||||
Effect of non-U.S. operations | (146.2 | ) | (5.7 | %) | (153.0 | ) | (6.1 | %) | (148.5 | ) | (4.9 | %) | |||||||||
Effect of net income attributable to noncontrolling interests | (32.6 | ) | (1.3 | %) | (10.9 | ) | (0.4 | %) | (24.3 | ) | (0.8 | %) | |||||||||
Other | 4.6 | 0.2 | % | (11.6 | ) | (0.5 | %) | (15.0 | ) | (0.5 | %) | ||||||||||
Tax Provision | $ | 759.4 | 29.8 | % | $ | 742.1 | 29.7 | % | $ | 923.7 | 30.5 | % |
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Balance at beginning of year | $ | 82.1 | $ | 105.2 | $ | 118.2 | ||||||
Additions for tax positions of prior years | 6.6 | 0.6 | 12.6 | |||||||||
Reductions for tax positions of prior years | (1.3 | ) | (9.0 | ) | (3.4 | ) | ||||||
Tax positions related to the current year | 11.6 | 12.9 | 16.2 | |||||||||
Settlements with taxing authorities | (5.2 | ) | (5.4 | ) | (0.1 | ) | ||||||
Expirations of statute of limitations | (12.7 | ) | (22.2 | ) | (38.3 | ) | ||||||
Balance at End of Year | $ | 81.1 | $ | 82.1 | $ | 105.2 |
(in millions) | ||||
for the fiscal years ending September 30, | Amount | |||
2018 | $ | 44.7 | ||
2019 | 41.1 | |||
2020 | 35.6 | |||
2021 | 31.4 | |||
2022 | 28.4 | |||
Thereafter | 185.8 | |||
Total Minimum Lease Payments | $ | 367.0 |
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Stock and stock unit awards | $ | 117.0 | $ | 125.3 | $ | 133.6 | ||||||
Employee stock investment plan | 6.4 | 6.2 | 6.4 | |||||||||
Total | $ | 123.4 | $ | 131.5 | $ | 140.0 |
(shares in thousands) | Time-Based Shares | Performance-Based Shares | Total Shares | Weighted-Average Grant-Date Fair Value | |||||||||
for the fiscal year ended September 30, 2017 | |||||||||||||
Nonvested balance at September 30, 2016 | 2,369 | 1,288 | 3,657 | $ | 45.67 | ||||||||
Granted | 2,739 | 1,124 | 3,863 | 34.23 | |||||||||
Vested | (2,082 | ) | (355 | ) | (2,437 | ) | 43.90 | ||||||
Forfeited/canceled | (243 | ) | (296 | ) | (539 | ) | 42.86 | ||||||
Nonvested Balance at September 30, 2017 | 2,783 | 1,761 | 4,544 | $ | 37.23 |
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Operating Revenues | ||||||||||||
United States | $ | 3,898.4 | $ | 4,063.6 | $ | 4,634.2 | ||||||
Luxembourg | 1,652.8 | 1,707.9 | 2,278.6 | |||||||||
Asia-Pacific | 281.0 | 267.9 | 311.8 | |||||||||
Canada | 260.8 | 273.8 | 339.0 | |||||||||
The Bahamas | 205.9 | 204.6 | 250.2 | |||||||||
Europe, the Middle East and Africa, excluding Luxembourg | 83.2 | 94.0 | 126.8 | |||||||||
Latin America | 10.1 | 6.2 | 8.1 | |||||||||
Total | $ | 6,392.2 | $ | 6,618.0 | $ | 7,948.7 |
(in millions) | ||||||||||||
as of September 30, | 2017 | 2016 | 2015 | |||||||||
Property and Equipment, Net | ||||||||||||
United States | $ | 426.1 | $ | 428.0 | $ | 406.9 | ||||||
Asia-Pacific | 60.2 | 62.9 | 68.9 | |||||||||
The Bahamas | 13.4 | 14.3 | 14.6 | |||||||||
Europe, the Middle East and Africa | 12.2 | 14.9 | 14.8 | |||||||||
Canada | 5.3 | 3.1 | 4.5 | |||||||||
Latin America | — | — | 0.4 | |||||||||
Total | $ | 517.2 | $ | 523.2 | $ | 510.1 |
(in millions) | ||||||||||||
for the fiscal years ended September 30, | 2017 | 2016 | 2015 | |||||||||
Investment and Other Income, Net | ||||||||||||
Dividend income | $ | 13.9 | $ | 20.6 | $ | 10.3 | ||||||
Interest income | 74.9 | 36.5 | 10.8 | |||||||||
Gains (losses) on trading investment securities, net | 12.2 | 50.1 | (22.3 | ) | ||||||||
Realized gains on sale of investment securities, available-for-sale | 5.6 | 32.1 | 28.1 | |||||||||
Realized losses on sale of investment securities, available-for-sale | (1.6 | ) | (3.2 | ) | (4.0 | ) | ||||||
Income (losses) from investments in equity method investees | 107.9 | 56.7 | (63.2 | ) | ||||||||
Other-than-temporary impairment of investments | (0.8 | ) | (11.1 | ) | (10.0 | ) | ||||||
Gains (losses) on investments of consolidated SIPs, net | 118.2 | (13.5 | ) | 18.0 | ||||||||
Foreign currency exchange gains (losses), net | (16.0 | ) | (2.9 | ) | 57.0 | |||||||
Other, net | 22.0 | 18.7 | 15.7 | |||||||||
Total | 336.3 | 184.0 | 40.4 | |||||||||
Interest Expense | (51.5 | ) | (49.9 | ) | (39.6 | ) | ||||||
Other Income, Net | $ | 284.8 | $ | 134.1 | $ | 0.8 |
(in millions) | Unrealized Gains on Investments | Currency Translation Adjustments | Unrealized Losses on Defined Benefit Plans | Total | ||||||||||||
for the fiscal year ended September 30, 2017 | ||||||||||||||||
Balance at October 1, 2016 | $ | 6.8 | $ | (346.1 | ) | $ | (8.1 | ) | $ | (347.4 | ) | |||||
Adoption of new accounting guidance | (6.8 | ) | (0.3 | ) | — | (7.1 | ) | |||||||||
Other comprehensive income | ||||||||||||||||
Other comprehensive income before reclassifications, net of tax | 6.5 | 65.4 | 2.1 | 74.0 | ||||||||||||
Reclassifications to net investment and other income, net of tax | (4.3 | ) | — | — | (4.3 | ) | ||||||||||
Total other comprehensive income | 2.2 | 65.4 | 2.1 | 69.7 | ||||||||||||
Balance at September 30, 2017 | $ | 2.2 | $ | (281.0 | ) | $ | (6.0 | ) | $ | (284.8 | ) |
(in millions) | Unrealized Gains on Investments | Currency Translation Adjustments | Unrealized Losses on Defined Benefit Plans | Total | ||||||||||||
for the fiscal year ended September 30, 2016 | ||||||||||||||||
Balance at October 1, 2015 | $ | 19.3 | $ | (327.8 | ) | $ | (5.7 | ) | $ | (314.2 | ) | |||||
Other comprehensive loss | ||||||||||||||||
Other comprehensive income (loss) before reclassifications, net of tax | 2.7 | (18.3 | ) | (2.4 | ) | (18.0 | ) | |||||||||
Reclassifications to net investment and other income, net of tax | (15.2 | ) | — | — | (15.2 | ) | ||||||||||
Total other comprehensive loss | (12.5 | ) | (18.3 | ) | (2.4 | ) | (33.2 | ) | ||||||||
Balance at September 30, 2016 | $ | 6.8 | $ | (346.1 | ) | $ | (8.1 | ) | $ | (347.4 | ) |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
Item 9A. | Controls and Procedures. |
Item 9B. | Other Information. |
Item 10. | Directors, Executive Officers and Corporate Governance. |
Item 11. | Executive Compensation. |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||
Equity compensation plans approved by stockholders 1 | 2,397,393 | 2 | N/A | 3 | 24,546,139 | 4 | ||||
Equity compensation plans not approved by stockholders | — | — | — | |||||||
Total | 2,397,393 | N/A | 24,546,139 |
1 | Consists of the 2002 Universal Stock Incentive Plan, as amended and restated (the “USIP”) and the amended and restated Franklin Resources, Inc. 1998 Employee Stock Investment Plan (the “ESIP”). Equity securities granted under the USIP may include awards in connection with the Amended and Restated Annual Incentive Compensation Plan and the 2014 Key Executive Incentive Compensation Plan. |
2 | Represents restricted stock unit awards under the USIP that may be settled in shares of the Company’s common stock. Excludes options to purchase shares of the Company’s common stock accruing under the Company’s ESIP. Under the ESIP, each eligible employee is granted a separate option to purchase up to 6,000 shares of common stock each semi-annual accrual period on January 31 and July 31 at a purchase price per share equal to 85% of the fair market value of the common stock on the enrollment date or the exercise date, whichever is lower. |
3 | Does not take into account restricted stock unit awards under the USIP. |
4 | As of September 30, 2017, 3.6 million shares of common stock were available for future issuance under the ESIP and 21.0 million shares of common stock were available for future issuance under the USIP. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Item 14. | Principal Accountant Fees and Services. |
Item 15. | Exhibits and Financial Statement Schedules. |
(a)(1) | The financial statements filed as part of this report are listed in Item 8 of this Form 10-K. |
(a)(2) | No financial statement schedules are required to be filed as part of this report because all such schedules have been omitted. Such omission has been made on the basis that information is provided in the financial statements, or in the related notes thereto, in Item 8 of this Form 10-K or is not required to be filed as the information is not applicable. |
(a)(3) | The exhibits listed on the Exhibit Index to this Form 10-K are incorporated herein by reference. |
Item 16. | Form 10-K Summary. |
Exhibit No. | Description | ||
3(i)(a) | |||
3(i)(b) | |||
3(i)(c) | |||
3(i)(d) | |||
3(i)(e) | |||
3(ii) | |||
4.1 | |||
4.2 | |||
4.3 | |||
4.4 | |||
4.5 | |||
10.1 |
Exhibit No. | Description | ||
10.2 | |||
10.3 | |||
10.4 | |||
10.5 | |||
10.6 | |||
10.7 | |||
10.8 | |||
10.9 | |||
10.10 | |||
12 | |||
21 | |||
23 | |||
31.1 | |||
31.2 | |||
32.1 | |||
32.2 | |||
101 | The following materials from the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017, formatted in Extensible Business Reporting Language (XBRL), include: (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) related notes (filed herewith) |
FRANKLIN RESOURCES, INC. | |||
Date: | November 13, 2017 | By: | /s/ Kenneth A. Lewis |
Kenneth A. Lewis, Chief Financial Officer and Executive Vice President |
Date: | November 13, 2017 | By: | /s/ Peter K. Barker |
Peter K. Barker, Director | |||
Date: | November 13, 2017 | By: | /s/ Mariann Byerwalter |
Mariann Byerwalter, Director | |||
Date: | November 13, 2017 | By: | /s/ Charles E. Johnson |
Charles E. Johnson, Director | |||
Date: | November 13, 2017 | By: | /s/ Gregory E. Johnson |
Gregory E. Johnson, Chairman, Director and Chief Executive Officer (Principal Executive Officer) | |||
Date: | November 13, 2017 | By: | /s/ Rupert H. Johnson, Jr. |
Rupert H. Johnson, Jr., Vice Chairman and Director | |||
Date: | November 13, 2017 | By: | /s/ Kenneth A. Lewis |
Kenneth A. Lewis, Chief Financial Officer and Executive Vice President (Principal Financial and Accounting Officer) | |||
Date: | November 13, 2017 | By: | /s/ Mark C. Pigott |
Mark C. Pigott, Director | |||
Date: | November 13, 2017 | By: | /s/ Chutta Ratnathicam |
Chutta Ratnathicam, Director | |||
Date: | November 13, 2017 | By: | /s/ Laura Stein |
Laura Stein, Director | |||
Date: | November 13, 2017 | By: | /s/ Seth H. Waugh |
Seth H. Waugh, Director | |||
Date: | November 13, 2017 | By: | /s/ Geoffrey Y. Yang |
Geoffrey Y. Yang, Director |
1. | GENERAL |
2. | OPTIONS AND SARS |
3. | OTHER STOCK AWARDS |
4. | OPERATION AND ADMINISTRATION |
5. | COMMITTEES |
6. | ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR CORPORATE TRANSACTION |
7. | AMENDMENT AND TERMINATION |
8. | DEFINED TERMS |
9. | SECTION 409A |
10. | PLAN HISTORY |
Name and Principal Positions | Base Salary | ||
Gregory E. Johnson Chairman of the Board and Chief Executive Officer | $ | 780,132 | |
Jennifer M. Johnson President and Chief Operating Officer | $ | 600,000 | |
Kenneth A. Lewis Executive Vice President and Chief Financial Officer | $ | 525,000 | |
Craig S. Tyle Executive Vice President and General Counsel | $ | 525,000 | |
Alok Sethi Officer of Various Operations and Technology Subsidiaries | $ | 400,000 | |
Vijay C. Advani 2 Former Co-President | -- |
(a) | receive an annual cash incentive award pursuant to the Company’s 2014 Key Executive Incentive Compensation Plan and the Company’s Amended and Restated Annual Incentive Compensation Plan, each as amended and restated; |
(b) | participate in the Company’s equity incentive program, which currently involves restricted stock awards and restricted stock unit awards (including both time and performance based awards), in each case pursuant to the Company’s 2002 Universal Stock Incentive Plan, as amended and restated; and |
(c) | receive additional cash or equity payments or awards for special recognition of significant contributions or for retention purposes (which may include time and performance based awards). |
(a) | participate in the Company’s broad-based benefit programs generally available to its salaried employees, including health, disability and life insurance programs, the Franklin Templeton 401(k) Retirement Plan and the Company’s 1998 Employee Stock Investment Plan, as amended and restated (the “ESIP”); provided that Mr. G. Johnson and Ms. J. Johnson are not eligible to participate in the ESIP; and |
(b) | receive certain perquisites offered by the Company, including club memberships, and, in certain limited cases, use of the Company’s aircraft for personal use. |
1 | The Named Executive Officers listed herein are the Company’s principal executive officer, principal financial officer, and the three most highly compensated executive officers of the Company as of October 1, 2017. |
2 | Mr. Advani’s employment with the Company terminated on December 30, 2016. |
(in millions) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
for the fiscal years ended September 30, | ||||||||||||||||||||
Income before taxes excluding income (losses) from equity method investees | $ | 2,441.2 | $ | 2,443.1 | $ | 3,091.6 | $ | 3,341.5 | $ | 2,952.6 | ||||||||||
Additions: | ||||||||||||||||||||
Dividends received from equity method investees | 9.5 | 10.9 | 21.9 | 13.3 | 18.8 | |||||||||||||||
Interest on uncertain tax positions included in income before taxes | 1.6 | (1.3 | ) | (6.6 | ) | 2.4 | 1.0 | |||||||||||||
Fixed charges | ||||||||||||||||||||
Interest expense excluding interest on deposits | 51.5 | 49.9 | 39.6 | 47.4 | 48.9 | |||||||||||||||
Interest expense on deposits | — | — | — | 0.2 | 1.2 | |||||||||||||||
Interest on uncertain tax positions not related to third party | (1.6 | ) | 1.3 | 6.6 | (2.4 | ) | (1.0 | ) | ||||||||||||
Interest factor on rent 1 | 18.8 | 23.1 | 19.3 | 19.4 | 19.1 | |||||||||||||||
Total fixed charges | 68.7 | 74.3 | 65.5 | 64.6 | 68.2 | |||||||||||||||
Adjusted earnings | $ | 2,521.0 | $ | 2,527.0 | $ | 3,172.4 | $ | 3,421.8 | $ | 3,040.6 | ||||||||||
Ratio of adjusted earnings to fixed charges including interest on deposits | 36.7 | 34.0 | 48.4 | 53.0 | 44.6 | |||||||||||||||
Ratio of adjusted earnings to fixed charges excluding interest on deposits | 36.7 | 34.0 | 48.4 | 53.1 | 45.4 |
Name | State or Nation of Incorporation or Organization | |
Balanced Equity Management Pty. Limited | Australia | |
Darby Asia Investors (India) Private Limited | India | |
Darby - Hana Infrastructure Fund Management Co., Ltd. | South Korea | |
Fiduciary Trust Company of Canada | Canada | |
Fiduciary Trust (International) Sàrl | Switzerland | |
Franklin Advisers, Inc. | California | |
Franklin Advisers GP, LLC | Delaware | |
Franklin Advisory Services, LLC | Delaware | |
Franklin Mutual Advisers, LLC | Delaware | |
Franklin Templeton Asset Management (India) Private Limited | India | |
Franklin Templeton Asset Management (Malaysia) Sdn. Bhd. | Malaysia | |
Franklin Templeton Asset Management Mexico, S.A. de C.V., Sociedad Operadora de Fondos de Inversion | Mexico | |
Franklin Templeton Austria GmbH | Austria | |
Franklin Templeton Capital Holdings Private Limited | Singapore | |
Franklin Templeton Chile SpA | Chile | |
Franklin Templeton Companies, LLC | Delaware | |
Franklin Templeton Financial Services Limited | Hong Kong | |
Franklin Templeton France S.A. | France | |
Franklin Templeton Fund Management Limited | United Kingdom | |
Franklin Templeton Global Investors Limited | United Kingdom | |
Franklin Templeton GSC Asset Management Sdn. Bhd. | Malaysia | |
Franklin Templeton Holding Limited | Mauritius | |
Franklin Templeton International Services (India) Private Limited | India | |
Franklin Templeton International Services S.à r.l. | Luxembourg | |
Franklin Templeton Investímentos (Brasil) Ltda. | Brazil | |
Franklin Templeton Investment Consulting (Shanghai) Limited | China | |
Franklin Templeton Investment Management Limited | United Kingdom | |
Franklin Templeton Investment Services GmbH | Germany | |
Franklin Templeton Investment Services Mexico S. de R.L. | Mexico | |
Franklin Templeton Investment Trust Management Co., Ltd. | South Korea | |
Franklin Templeton Investments (Asia) Limited | Hong Kong | |
Franklin Templeton Investments Australia Limited | Australia | |
Franklin Templeton Investments Corp. | Canada | |
Franklin Templeton Investments Japan Limited | Japan | |
Franklin Templeton Investments (ME) Limited | Dubai, U.A.E. | |
Franklin Templeton Investments Poland sp. z o.o. | Poland | |
Franklin Templeton Investments South Africa (Pty) Ltd | South Africa | |
Franklin Templeton Investor Services, LLC | Delaware | |
Franklin Templeton Luxembourg S.A. | Luxembourg | |
Franklin Templeton Magyarorszag Kft. | Hungary |
Name | State or Nation of Incorporation or Organization | |
Franklin Templeton Management Luxembourg S.A. | Luxembourg | |
Franklin Templeton Services, LLC | Delaware | |
Franklin Templeton Services (India) Private Limited | India | |
Franklin Templeton Servicios de Asesoria Mexico, S. de R.L. de C.V. | Mexico | |
Franklin Templeton Slovakia, s.r.o. | Slovakia | |
Franklin Templeton Strategic Investments Ltd. | Cayman Islands | |
Franklin Templeton Switzerland Ltd. | Switzerland | |
Franklin Templeton Trustee Services Private Limited | India | |
Franklin Templeton Uruguay S.A. | Uruguay | |
Franklin/Templeton Distributors, Inc. | New York | |
FT FinTech Holdings, LLC | Delaware | |
FT Opportunistic Distressed Fund Ltd. | Cayman Islands | |
FTC Investor Services Inc. | Canada | |
FTCI (Cayman) Ltd. | Cayman Islands | |
ITI Capital Markets Limited | India | |
LSIMC, LLC | Delaware | |
Riva Financial Systems Limited | Isle of Man | |
Templeton Asset Management (Labuan) Limited | Malaysia | |
Templeton Asset Management Limited Mexico, S. de R.L. de C.V. | Mexico | |
Templeton Asset Management Ltd. | Singapore | |
Templeton Asset Management (Poland) TFI S.A. | Poland | |
Templeton do Brasil Ltda. | Brazil | |
Templeton Global Advisors Limited | The Bahamas | |
Templeton Global Holdings Ltd. | The Bahamas | |
Templeton International, Inc. | Delaware | |
Templeton Investment Counsel, LLC | Delaware | |
Templeton Restructured Investments, L.L.C. | Delaware | |
Templeton Restructured Investments III, Ltd. | Cayman Islands | |
Templeton Restructured Investments IV, Ltd. | Cayman Islands | |
Templeton Worldwide, Inc. | Delaware | |
Templeton/Franklin Investment Services, Inc. | Delaware | |
TSEMF III (Jersey) Limited | Jersey (Channel Islands) | |
TSEMF IV (Jersey) Limited | Jersey (Channel Islands) |
* | Certain subsidiaries have been omitted because, when considered in the aggregate, they do not constitute a significant subsidiary. |
** | All subsidiaries currently do business principally under their respective corporate names except as follows: |
• | some of our subsidiaries may use the names Franklin Templeton Investments, Franklin Templeton International and Templeton Worldwide; |
• | our Darby subsidiaries may use the name Darby Private Equity; |
• | Fiduciary Trust Company of Canada may use the names Fiduciary Trust Canada and Franklin Templeton Solutions in various Canadian jurisdictions; and |
• | Franklin Templeton Investments Corp. may use the names Franklin Bissett Investment Management, Franklin Templeton Investments and Franklin Templeton Institutional in various Canadian jurisdictions. |
1. | I have reviewed this annual report on Form 10-K of Franklin Resources, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 13, 2017 | /s/ GREGORY E. JOHNSON | |
Gregory E. Johnson Chairman of the Board and Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of Franklin Resources, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 13, 2017 | /s/ KENNETH A. LEWIS | |
Kenneth A. Lewis Chief Financial Officer and Executive Vice President |
1. | The Annual Report on Form 10-K of the Company for the fiscal year ended September 30, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
Dated: | November 13, 2017 | /s/ GREGORY E. JOHNSON | |
Gregory E. Johnson Chairman of the Board and Chief Executive Officer |
1. | The Annual Report on Form 10-K of the Company for the fiscal year ended September 30, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
Dated: | November 13, 2017 | /s/ KENNETH A. LEWIS | |
Kenneth A. Lewis Chief Financial Officer and Executive Vice President |
Document and Entity Information - USD ($) $ in Billions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Oct. 31, 2017 |
Mar. 31, 2017 |
|
Document And Entity Information [Abstract] | |||
Entity Registrant Name | Franklin Resources Inc | ||
Entity Central Index Key | 0000038777 | ||
Document Type | 10-K | ||
Document Period End Date | Sep. 30, 2017 | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --09-30 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 14.2 | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 553,908,023 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Statement of Comprehensive Income [Abstract] | |||
Net Income | $ 1,789.7 | $ 1,757.7 | $ 2,104.7 |
Other Comprehensive Income (Loss) | |||
Net unrealized gains (losses) on investments, net of tax | 2.2 | (12.5) | (11.7) |
Currency translation adjustments, net of tax | 65.4 | (18.3) | (184.2) |
Net unrealized gains (losses) on defined benefit plans, net of tax | 2.1 | (2.4) | (0.6) |
Total other comprehensive income (loss) | 69.7 | (33.2) | (196.5) |
Total comprehensive income | 1,859.4 | 1,724.5 | 1,908.2 |
Less: comprehensive income (loss) attributable to | |||
Nonredeemable noncontrolling interests | 40.0 | 29.4 | 75.5 |
Redeemable noncontrolling interests | 53.0 | 1.6 | (6.1) |
Comprehensive Income Attributable to Franklin Resources, Inc. | $ 1,766.4 | $ 1,693.5 | $ 1,838.8 |
Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Investments, at fair value | $ 440.0 | $ 1,437.6 |
Preferred stock, par value | $ 1 | $ 1 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.1 | $ 0.1 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 554,865,343 | 570,345,156 |
Common stock, shares outstanding | 554,865,343 | 570,345,156 |
Significant Accounting Policies |
12 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||
Significant Accounting Policies | Significant Accounting Policies Business. Franklin Resources, Inc. (“Franklin”) is a holding company that, together with its various subsidiaries (collectively, the “Company”) is referred to as Franklin Templeton Investments. The Company provides investment management and related services to investors globally through products that include investment funds and institutional, high net-worth and separately-managed accounts (collectively, the “sponsored investment products” or “SIPs”). In addition to investment management, the Company’s services include fund administration, sales, distribution, marketing, shareholder servicing, and trust, custody and other services. Basis of Presentation. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Management believes that the accounting estimates are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual amounts may differ from these estimates. Certain comparative amounts for prior fiscal years have been reclassified to conform to the financial statement presentation as of and for the fiscal year ended September 30, 2017 (“fiscal year 2017”). Consolidation. The consolidated financial statements include the accounts of Franklin and its subsidiaries and SIPs in which it has a controlling financial interest. The Company has a controlling financial interest when it owns a majority of the voting interest in a voting interest entity (“VOE”) or is the primary beneficiary of a variable interest entity (“VIE”). All material intercompany accounts and transactions have been eliminated. A VIE is an entity in which the equity investment holders have not contributed sufficient capital to finance its activities or do not have defined rights and obligations normally associated with an equity investment. The Company’s VIEs are all investment entities, and its variable interests consist of its equity ownership interests in and certain investment management fees earned from these entities. The Company is the primary beneficiary of a VIE if it has the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of or right to receive benefits from the VIE that could potentially be significant to the VIE. Investment management fees earned from VIEs are excluded from the primary beneficiary determination if they are deemed to be at market and commensurate with service. The key estimates and assumptions used in the analyses include the amount of assets under management (“AUM”) and the life of the investment product. Related Parties include the investment funds sponsored by the Company as a result of the Company’s advisory relationship and equity method investees. A substantial amount of the Company’s operating revenues and receivables are from related parties. Earnings per Share. Basic and diluted earnings per share are computed using the two-class method, which considers participating securities as a separate class of shares. The Company’s participating securities consist of its nonvested stock and stock unit awards that contain nonforfeitable rights to dividends or dividend equivalents. Basic earnings per share is computed by dividing net income available to the Company’s common shareholders, adjusted to exclude earnings allocated to participating securities, by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period. Fair Value Measurements. The Company uses a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on whether the inputs to those valuation techniques are observable or unobservable. The three levels of fair value hierarchy are set forth below. The Company’s assessment of the hierarchy level of the assets or liabilities measured at fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Transfers between levels are recognized at the end of each quarter.
Quoted market prices may be adjusted if events occur, such as significant price changes in U.S.-traded market proxies after the close of corresponding foreign markets, trade halts or suspensions, or unscheduled market closures. The market proxies consist of correlated country-specific exchange-traded securities, such as futures, American Depositary Receipts indices or exchange-traded funds. The price adjustments are primarily determined based on third-party factors derived from model-based valuation techniques for which the significant assumptions are observable in the market. The fair values for Level 3 assets and liabilities are determined using various methodologies in accordance with the Company’s global valuation and pricing policy which defines valuation and pricing conventions for each security type. The Company may employ a market-based method, using purchase multiples observed for comparable third-party transactions, valuations of comparable entities, projected operating results of the investee entity or subsequent financing transactions entered into by the investee entity. If the inputs for a market-based method are not available, the Company utilizes an income-based method, which considers the net present value of anticipated future cash flows of the investment. A discount may be applied due to the nature or duration of any restrictions on the disposition of the investment. The Company reviews and approves the market-based and income-based methods on a periodic basis for changes that would impact the unobservable inputs incorporated into the valuation process. The fair value measurements from these methods are further validated through price variance analysis, subsequent sales testing and market comparable sales. The Company records a substantial amount of its investments at fair value or amounts that approximate fair value on a recurring basis. Investments in fund products for which fair value is estimated using NAV as a practical expedient (when the NAV is available to the Company as an investor but is not publicly available) are not classified in the fair value hierarchy. The financial assets and financial liabilities of consolidated collateralized loan obligations (“CLOs”) at September 30, 2016 were measured using the more observable fair value of either the financial assets or financial liabilities. Fair values are estimated for disclosure purposes for financial instruments that are not measured at fair value. Cash and Cash Equivalents primarily consist of debt instruments with original maturities of three months or less at the purchase date, nonconsolidated SIP money market funds, time deposits with maturities of three months or less, and deposits with financial institutions. Cash and cash equivalents are carried at cost, except for debt instruments which are carried at amortized cost. Due to the short-term nature and liquidity of these financial instruments, the carrying values of these assets approximate fair value. The Company maintains cash and cash equivalents with financial institutions in various countries, limits the amount of credit exposure with any given financial institution and conducts ongoing evaluations of the creditworthiness of the financial institutions with which it does business. Receivables consist primarily of fees receivable from SIPs and are carried at invoiced amounts. Due to the short-term nature and liquidity of the receivables, the carrying values of these assets approximate fair value. Investments consist of investment securities, trading and available-for-sale, investments in equity method investees and other investments. Investment Securities, Trading consist of corporate debt securities, nonconsolidated SIPs and other debt and equity securities, and are carried at fair value. Changes in the fair value of trading securities are recognized as gains and losses in earnings. The fair value of the corporate debt securities is determined using market pricing. The fair values of all SIPs and certain other equity securities are determined based on their published NAV. The fair values of certain other debt and equity securities are determined using independent third-party broker or dealer price quotes. The fair value of certain other debt securities is determined based on discounted cash flows using significant unobservable inputs. Investment Securities, Available-for-Sale consist primarily of nonconsolidated SIPs and to a lesser extent, debt and other equity securities, and are carried at fair value. Realized gains and losses are included in investment income using the average cost method. Unrealized gains and losses are recorded net of tax as part of accumulated other comprehensive income (loss) until realized. The fair value of the SIPs is determined based on their published NAV. The fair value of the debt securities is primarily determined using independent third-party broker or dealer price quotes. The fair value of other equity securities is determined using quoted market prices. Investments in Equity Method Investees consist of equity investments in entities, including SIPs, over which the Company is able to exercise significant influence, but not control. Significant influence is generally considered to exist when the Company’s ownership interest in the investee is between 20% and 50%, although other factors, such as representation on the investee’s board of directors and the impact of commercial arrangements, also are considered in determining whether the equity method of accounting is appropriate. Investments in limited partnerships and limited liability companies are accounted for using the equity method when the Company’s investment is more than minor or when the Company is the general partner. Under the equity method of accounting, the investments are initially carried at cost and subsequently adjusted by the Company’s proportionate share of the entities’ net income, which is recognized in earnings. Other Investments consist of equity investments in entities over which the Company is unable to exercise significant influence and are not marketable, time deposits with maturities greater than three months from the date of purchase, and life settlement contracts. The equity investments are accounted for under the cost method and their fair value is generally estimated using NAV as a practical expedient. The time deposits are carried at cost, which approximates fair value due to their short-term nature and liquidity. Life settlement contracts are carried at fair value, which is determined based on discounted cash flows using significant unobservable inputs. Impairment of Investments. Investments other than trading securities are evaluated for other-than-temporary impairment on a quarterly basis when the cost of an investment exceeds its fair value. The evaluation of equity securities includes the severity and duration of the decline in the fair value below cost, the Company’s intent and ability to hold the security for a period of time sufficient for an anticipated recovery in fair value, and the financial condition and specific events related to the issuer. When an impairment of an equity security is determined to be other-than-temporary, the impairment is recognized in earnings. Cash and Cash Equivalents of Consolidated SIPs consist of deposits with financial institutions and highly liquid investments, including money market funds, which are readily convertible into cash, and are carried at cost. Due to the short-term nature and liquidity of these financial instruments, their carrying values approximate fair value. At September 30, 2016, cash and cash equivalents of consolidated SIPs also included investments in a money market fund held by consolidated CLOs which were carried at fair value based on the fund’s published NAV. Receivables of Consolidated SIPs consist of trades pending settlement and other investment and share transaction related receivables and are carried at transacted amounts. Due to the short-term nature and liquidity of the receivables, the carrying values of these assets approximate fair value. Investments of Consolidated SIPs consist of trading securities and other investments that are not generally traded in active markets, and are carried at fair value. Changes in the fair value of the investments are recognized as gains and losses in earnings. The fair value of the trading securities is determined using quoted market prices, or independent third-party broker or dealer price quotes if quoted market prices are not available. The investments that are not generally traded in active markets consist of debt and equity securities of entities in emerging markets and fund products. The fair values of the debt and equity securities are determined using significant unobservable inputs in either a market-based or income-based approach. The fair value of the fund products is determined using NAV as a practical expedient. At September 30, 2016, investments of consolidated SIPs also included corporate debt securities held by consolidated CLOs for which the fair value was primarily obtained from independent third-party broker or dealer price quotes. Property and Equipment, net are recorded at cost and depreciated using the straight-line method over their estimated useful lives which range from three to 35 years. Expenditures for repairs and maintenance are charged to expense when incurred. Leasehold improvements are amortized using the straight-line method over their estimated useful lives or the lease term, whichever is shorter. Internal and external costs incurred in connection with developing or obtaining software for internal use are capitalized and amortized over the shorter of the estimated useful lives of the software or the license terms, beginning when the software project is complete and the application is put into production. Property and equipment is tested for impairment when there is an indication that the carrying value of an asset may not be recoverable. Carrying values are not recoverable when the undiscounted cash flows estimated to be generated by the assets are less than their carrying values. When an asset is determined to not be recoverable, the impairment is measured based on the excess, if any, of the carrying value of the asset over its respective fair value. Fair value is determined by discounted future cash flows models, appraisals or other applicable methods. Goodwill and Other Intangible Assets, net. Goodwill represents the excess cost of a business acquisition over the fair value of the net assets acquired. Other intangible assets consist of investment management contracts resulting from business acquisitions. These intangible assets are amortized over their estimated useful lives, which range from five to 15 years, using the straight-line method, unless the asset is determined to have an indefinite useful life. Indefinite-lived intangible assets represent contracts to manage investment assets for which there is no foreseeable limit on the contract period. Goodwill and indefinite-lived intangible assets are tested for impairment annually as of August 1 and when an event occurs or circumstances change that more likely than not reduce the fair value of the related reporting unit or indefinite-lived intangible asset below its carrying value. The Company has one reporting unit, investment management and related services, consistent with its single operating segment, to which all goodwill has been assigned. Goodwill and indefinite-lived intangible assets may first be assessed for qualitative factors to determine whether it is necessary to perform a quantitative impairment test. The qualitative analysis considers entity-specific and macroeconomic factors and their potential impact on the key assumptions used in the determination of the fair value of the reporting unit or indefinite-lived intangible asset. A quantitative impairment test is performed if the results of the qualitative assessment indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying value or an indefinite-lived intangible asset is impaired, or if a qualitative assessment is not performed. The quantitative goodwill impairment test involves a two-step process. The first step compares the fair value of the reporting unit to its carrying value. If the carrying value is less than the fair value, no impairment exists and the second step is not performed. If the carrying value is higher than the fair value, there is an indication that impairment may exist and the second step is performed to compute the amount of any impairment. In the second step, impairment is computed by comparing the implied fair value of the reporting unit goodwill with the carrying value of the goodwill. The quantitative indefinite-lived intangible assets impairment test compares the fair value of the asset to its carrying value. If the carrying value is higher than the fair value, impairment is recognized in the amount of the difference in values. In estimating the fair value of the reporting unit and indefinite-lived intangible assets, the Company uses an income approach under which future cash flows are discounted. The future cash flow estimates include assumptions about the AUM growth rate, pre-tax profit margin, average effective fee rate, effective tax rate and discount rate, which is based on the Company’s weighted average cost of capital. Definite-lived intangible assets are tested for impairment quarterly. Impairment is indicated when the carrying value of the asset is not recoverable and exceeds its fair value. In evaluating the recoverability of definite-lived intangible assets, the Company estimates the undiscounted future cash flows to be derived from these assets. The future undiscounted cash flow projections include assumptions about AUM growth and effective fee rates, investor redemptions, the pre-tax profit margin, and expected useful lives. If the carrying value of an asset is not recoverable through the related undiscounted cash flows, the impairment is measured based on the amount by which the carrying value of the asset exceeds its fair value, as determined by discounted cash flows or other methods as appropriate for the asset type. Impairment is recognized in general, administrative and other expense. Deferred Sales Commissions consist of up-front commissions paid to financial advisers and broker-dealers on shares sold without a front-end sales charge to investors, and are amortized over the periods in which they are generally recovered from related revenues, which range from one to seven years. Deferred sales commissions are included in other assets in the consolidated balance sheet. Debt consists of senior notes which are carried at amortized cost. At September 30, 2016, debt also included a loan. The fair values are estimated using quoted market prices, independent third-party broker or dealer price quotes, or prices of publicly traded debt with similar maturities, credit risk and interest rates. Debt of Consolidated SIPs is carried at amortized cost. The fair value is estimated using a discounted cash flow model that considers current interest rate levels, the quality of the underlying collateral and current economic conditions. At September 30, 2016, debt of consolidated SIPs also included debt of consolidated CLOs which was measured based on the fair value of the assets of the CLOs less the fair value of the Company’s own economic interests in the CLOs. Contingent Consideration Liability consists of the expected future payments related to the Company’s commitment to acquire the remaining interests in K2 Advisors Holdings, LLC (“K2”) and is included in other liabilities in the consolidated balance sheet. The liability is carried at fair value, determined using an income-based method which considers the net present value of anticipated future cash flows based on estimated future revenue and profits and timing of payments. Noncontrolling Interests relate almost entirely to consolidated SIPs. Noncontrolling interests that are currently redeemable or convertible for cash or other assets at the option of the holder are classified as temporary equity. Nonredeemable noncontrolling interests are classified as a component of equity. Net income (loss) attributable to third-party investors is reflected as net income (loss) attributable to nonredeemable and redeemable noncontrolling interests in the consolidated statements of income. Sales and redemptions of shares of consolidated SIPs by third-party investors are a component of the change in noncontrolling interests included in financing activities in the consolidated statements of cash flows. Revenues. Fees from providing investment management and fund administration services (“investment management fees”), distribution fees and shareholder servicing fees are recognized as earned, over the period in which services are rendered, except for performance-based investment management fees, which are recognized when earned. Sales commissions related to the sale of shares of SIPs are recognized on trade date. Investment management fees, other than performance-based fees, and distribution fees are determined based on a percentage of AUM, primarily on a monthly basis using average daily AUM. Performance-based investment management fees are based on performance targets established in the related investment management contracts. Shareholder servicing fees are generally calculated based on the number and type of accounts serviced. AUM is generally based on the fair value of the underlying securities held by SIPs and is calculated using fair value methods derived primarily from unadjusted quoted market prices, unadjusted independent third-party broker or dealer price quotes in active markets, or market prices or price quotes adjusted for observable price movements after the close of the primary market. The fair values of the underlying securities for which market prices are not readily available are internally valued using various methodologies which incorporate significant unobservable inputs as appropriate for each security type and represent an insignificant percentage of total AUM. Pricing of the securities held by SIPs is governed by the Company’s global valuation and pricing policy, which defines valuation and pricing conventions for each security type, including practices for responding to unexpected or unusual market events. Sales commissions and distribution fees are recorded gross of sales and distribution expenses paid to financial advisers and other intermediaries as the Company acts as the principal in its role as primary obligor to the sales and distribution agreements. Stock-Based Compensation. The fair value of share-based payment awards is estimated on the date of grant based on the market price of the underlying shares of the Company’s common stock and is amortized to compensation expense on a straight-line basis over the related vesting period, which is generally three years. Expense relating to awards subject to performance conditions is recognized if it is probable that the performance goals will be achieved. The probability of achievement is assessed on a quarterly basis. The total number of awards expected to vest is adjusted for estimated forfeitures. Postretirement Benefits. Defined contribution plan costs are expensed as incurred. Income Taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and the reported amounts in the consolidated financial statements using the statutory tax rates in effect for the year when the reported amount of the asset or liability is expected to be recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying values of deferred tax assets to the amount that is more likely than not to be realized. For each tax position taken or expected to be taken in a tax return, the Company determines whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. The Company recognizes the accrual of interest on uncertain tax positions in interest expense and penalties in other operating expenses. As a multinational corporation, the Company operates in various locations outside the United States and generates earnings from its non-U.S. subsidiaries. The Company indefinitely reinvests the undistributed earnings of all its non-U.S. subsidiaries, except for income previously taxed in the U.S. or subject to regulatory or legal repatriation restrictions or requirements. Foreign Currency Translation and Transactions. Assets and liabilities of non-U.S. subsidiaries for which the local currency is the functional currency are translated at current exchange rates as of the end of the accounting period. The related revenues and expenses are translated at average exchange rates in effect during the period. Net exchange gains and losses resulting from translation are excluded from income and are recorded as part of accumulated other comprehensive income (loss). Transactions denominated in a foreign currency are revalued at the current exchange rate at the transaction date and any related gains and losses are recognized in earnings. |
New Accounting Guidance |
12 Months Ended |
---|---|
Sep. 30, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Guidance | New Accounting Guidance Recently Adopted Accounting Guidance On October 1, 2016, the Company adopted an amendment to the consolidation guidance issued by the Financial Accounting Standards Board (“FASB”) using the modified retrospective approach which did not require the restatement of prior-year periods. The amendment modifies the consolidation framework for certain investment entities and all limited partnerships. It also eliminates certain criteria used to determine whether fees paid to a decision maker are a variable interest and results in a lower consolidation threshold for VIEs. The adoption caused the consolidation of 24 SIPs that changed from VOEs to VIEs and three other SIPs that are VIEs. In addition, two CLOs for which the Company was previously the primary beneficiary and five limited partnerships were deconsolidated. The adoption resulted in net increases in total assets, redeemable noncontrolling interests and retained earnings of $180.9 million, $824.7 million and $5.8 million, and net decreases in total liabilities, nonredeemable noncontrolling interests and other equity of $317.9 million, $324.6 million and $7.1 million as of October 1, 2016. Accounting Guidance Not Yet Adopted The FASB issued an amendment to the existing stock-based compensation guidance in March 2016. The amendment requires all income tax effects of stock-based awards to be recognized as income tax expense when the awards vest or settle and clarifies the classification of these transactions within the statement of cash flows. The amendment also provides an election to account for forfeitures as they occur, which the Company will make. The Company will adopt the amendment on October 1, 2017. The income tax effect and statement of cash flow changes will be adopted on a prospective basis, and the forfeitures change will be adopted using a modified retrospective basis which will not have a material impact on retained earnings. The Company expects the adoption to increase the volatility of income tax expense as a result of fluctuations in its stock price. The FASB issued new guidance in May 2014 that requires use of a single principles-based model for recognition of revenue from contracts with customers. The core principle of the model is that revenue is recognized upon the transfer of promised goods or services to customers in an amount that reflects the expected consideration to be received for the goods or services. The guidance also changes the accounting for certain contract costs and revises the criteria for determining if an entity is acting as a principal or agent in certain arrangements. The guidance is effective for the Company on October 1, 2018 and allows for either a full retrospective or modified approach at adoption. While the Company’s implementation efforts are ongoing, it does not expect adoption of the guidance to have a significant impact on the timing of recognition for the majority of its operating revenue. The Company is evaluating certain costs to determine if they should be capitalized or expensed based on the criteria in the guidance for costs to obtain or fulfill a contract. Additionally, it is assessing certain arrangements to determine whether it continues to act as a principal and present the related revenue gross of associated expenses. The overall impact upon adoption may differ based on further evaluation, issuance of additional interpretive guidance and other facts and circumstances identified during implementation. The Company has not yet determined its transition approach. The FASB issued an amendment to the existing financial instruments guidance in January 2016. The amendment requires substantially all equity investments in nonconsolidated entities to be measured at fair value with changes recognized in earnings, except for those accounted for using the equity method of accounting, which will impact all equity securities currently classified as available-for-sale. The amendment also provides an election to measure equity investments that do not have a readily determinable fair value at cost less impairment, if any, which the Company expects to take. The amendment is effective for the Company on October 1, 2018 and requires a cumulative effect adjustment to retained earnings at adoption. The Company does not expect the adoption to have a material impact on its consolidated financial statements; however, this could be affected by market volatility as well as additional facts and circumstances identified during implementation. The FASB issued new guidance for the accounting for leases in February 2016. The new guidance requires lessees to recognize assets and liabilities arising from substantially all leases. The guidance also requires an evaluation at the inception of a contract to determine whether the contract is or contains a lease. The guidance is effective for the Company on October 1, 2019 and requires a modified retrospective approach at adoption. The Company is currently evaluating the impact of adopting the guidance. The FASB issued new guidance for the accounting for credit losses in June 2016. The new guidance requires the application of a current expected credit loss model for financial assets measured at amortized cost and an allowance for credit loss model for available-for-sale debt securities. The guidance is effective for the Company on October 1, 2020 and requires a cumulative effect adjustment to retained earnings at adoption. The Company is currently evaluating the impact of adopting the guidance. |
Earnings per Share |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share The components of basic and diluted earnings per share were as follows:
Nonparticipating nonvested stock unit awards excluded from the calculation of diluted earnings per share because their effect would have been antidilutive were 0.7 million for fiscal year 2017, 1.3 million for the fiscal year ended September 30, 2016 (“fiscal year 2016”), and 0.9 million for the fiscal year ended September 30, 2015 (“fiscal year 2015”). |
Investments |
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Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Investments The disclosures below include details of the Company’s investments, excluding those of consolidated SIPs. See Note 9 – Consolidated Sponsored Investment Products for information related to the investments held by these entities. Investments consisted of the following:
Debt and other equity trading securities consist primarily of corporate debt. Investment securities with aggregate carrying amounts of $0.8 million and $117.3 million were pledged as collateral at September 30, 2017 and 2016. Gross unrealized gains and losses relating to investment securities, available-for-sale were as follows:
Gross unrealized losses relating to investment securities, available-for-sale aggregated by length of time that individual securities have been in a continuous unrealized loss position were as follows:
The Company recognized $0.8 million, $11.1 million and $10.0 million of other-than-temporary impairment during fiscal years 2017, 2016 and 2015, of which $5.8 million and $8.2 million in fiscal years 2016 and 2015 related to available-for-sale SIPs. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements The disclosures below include details of the Company’s fair value measurements, excluding those of consolidated SIPs. See Note 9 – Consolidated Sponsored Investment Products for information related to fair value measurements of the assets and liabilities of these entities. The assets and liability measured at fair value on a recurring basis were as follows:
There were no transfers between Level 1 and Level 2, or into Level 3, during fiscal years 2017 and 2016. Changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:
Valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements were as follows:
For investment securities, trading - debt and other equity securities using the market pricing technique, a significant increase (decrease) in the redemption price in isolation would result in a significantly higher (lower) fair value measurement, while a significant increase (decrease) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. For investment securities, trading - debt and other equity securities using the discounted cash flow technique, a significant increase (decrease) in the discount rate, risk premium or liquidity discount in isolation would result in a significantly lower (higher) fair value measurement. For life settlement contracts, a significant increase (decrease) in the life expectancy or the discount rate in isolation would result in a significantly lower (higher) fair value measurement. For the contingent consideration liability, a significant increase (decrease) in the AUM growth rate or EBITDA margin, or decrease (increase) in the discount rate, in isolation would result in a significantly higher (lower) fair value measurement. Financial instruments that were not measured at fair value were as follows:
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Property and Equipment |
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Property, Plant and Equipment, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | Property and Equipment Property and equipment, net consisted of the following:
Depreciation and amortization expense related to property and equipment was $81.5 million, $81.0 million and $81.6 million in fiscal years 2017, 2016 and 2015. The Company recognized insignificant impairment of equipment during each year. |
Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill and other intangible assets, net consisted of the following:
Changes in the carrying value of goodwill were as follows:
Indefinite-lived intangible assets consist of management contracts. No impairment of goodwill or indefinite-lived intangible assets was recognized during fiscal years 2017, 2016 and 2015. Definite-lived intangible assets were as follows:
Amortization expense related to definite-lived intangible assets was $3.9 million, $10.4 million and $20.1 million for fiscal years 2017, 2016 and 2015. The Company recognized impairment of management contract definite-lived intangible assets of $9.6 million, $28.2 million and $8.2 million during fiscal years 2017, 2016 and 2015. The impairments were primarily related to the K2 acquisition and resulted from increased investor redemptions, as well as lower estimates of future sales and renegotiations of certain investment management fees in fiscal year 2016. Definite-lived intangible assets had a weighted-average remaining useful life of 8.8 years at September 30, 2017, with estimated remaining amortization expense as follows:
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt The disclosures below include details of the Company’s debt, excluding that of consolidated SIPs. See Note 9 – Consolidated Sponsored Investment Products for information related to the debt of these entities. Debt consisted of the following:
At September 30, 2017, the Company’s outstanding senior unsecured unsubordinated notes had an aggregate face value of $1.1 billion. The notes have fixed interest rates with interest payable semi-annually and contain an optional redemption feature that allows the Company to redeem each series of notes prior to maturity in whole or in part at any time, at a make-whole redemption price. The indentures governing the notes contain limitations on the Company’s ability and the ability of its subsidiaries to pledge voting stock or profit participating equity interests in its subsidiaries to secure other debt without similarly securing the notes equally and ratably. The indentures also include requirements that must be met if the Company consolidates or merges with, or sells all or substantially all of its assets to, another entity. At September 30, 2016, other debt consisted of the outstanding balance of a loan originated in March 2016 for 6.3 billion Indian Rupees ($93.4 million) at a fixed interest rate of 9.89% to purchase certain securities from SIPs domiciled in India. The loan was secured by a standby letter of credit for 6.5 billion Indian Rupees ($96.6 million) collateralized by a $116.0 million time deposit. The loan agreement was amended in February 2017 with a revised maturity of March 2018, and the loan was fully paid in September 2017. The Company was in compliance with all debt covenants at September 30, 2017. At September 30, 2017, the Company had $500.0 million of short-term commercial paper available for issuance under an uncommitted private placement program which has been inactive since 2012. |
Consolidated Sponsored Investment Products |
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Consolidated Sponsored Investment Products [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Sponsored Investment Products | Consolidated Sponsored Investment Products The Company consolidates SIPs, which consist of both VOEs and VIEs, when it has a controlling financial interest. New accounting guidance adopted on October 1, 2016 modified the consolidation framework for certain investment entities and all limited partnerships. See Note 2 - New Accounting Guidance in these notes to consolidated financial statements. Consolidated SIPs consist of mutual and other investment funds, limited partnerships and similar structures and CLOs, which are asset-backed financing entities collateralized by a pool of corporate debt securities. The Company consolidated 58 SIPs, none of which are CLOs, as of September 30, 2017 and 40 SIPs, including three CLOs, as of September 30, 2016. Amounts for prior periods have been reclassified to combine amounts previously presented separately as consolidated SIPs and consolidated VIEs. The balances of consolidated SIPs included in the Company’s consolidated balance sheets were as follows:
The consolidated SIPs did not have a significant impact on net income attributable to the Company in fiscal years 2017, 2016 and 2015. The Company has no right to the consolidated SIPs’ assets, other than its direct equity investments in them and investment management fees earned from them. The debt holders of the consolidated SIPs have no recourse to the Company’s assets beyond the level of its direct investment, therefore the Company bears no other risks associated with the SIPs’ liabilities. SIPs are typically consolidated when the Company makes an initial investment in a newly launched investment entity. They are typically deconsolidated when the Company no longer has a controlling financial interest due to redemptions of its investment or increases in third-party investments. The Company’s investments in SIPs subsequent to deconsolidation are accounted for as trading or available-for-sale investment securities, or equity method or cost method investments depending on the structure of the SIP and the Company’s role and level of ownership. Investments Investments of consolidated SIPs consisted of the following:
Investment securities, trading consist of debt and equity securities that are traded in active markets. Other equity securities consist of equity securities of entities in emerging markets and fund products. Other debt securities consist of debt securities of entities in emerging markets and also included corporate debt securities held by CLOs at September 30, 2016. Investments in fund products for which fair value was estimated using NAV as a practical expedient were as follows:
The investments in real estate and private equity funds are expected to be returned through distributions as a result of liquidations of the funds’ underlying assets over a weighted-average period of 4.4 years and 3.2 years at September 30, 2017 and 2016. The consolidated SIPs’ unfunded commitments to these funds totaled $1.9 million and $74.4 million at September 30, 2017 and 2016, of which the Company was contractually obligated to fund $0.4 million and $2.2 million based on its ownership percentage in the SIPs. Fair Value Measurements Assets and liabilities of consolidated SIPs measured at fair value on a recurring basis were as follows:
Receivables of CLOs consisted primarily of investment trades pending settlement. The fair value of the assets was obtained from independent third-party broker or dealer quotes. Other liabilities consist of short positions in debt and equity securities. The fair value of the liabilities is determined based on the fair value of the underlying securities using quoted market prices, or independent third-party broker or dealer price quotes if quoted market prices securities are not available. There were no transfers between Level 1 and Level 2, or into or out of Level 3, during fiscal years 2017 and 2016. Changes in Level 3 assets measured at fair value on a recurring basis were as follows:
Valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements were as follows:
Following are descriptions of the sensitivity of the Level 3 recurring fair value measurements to changes in the significant unobservable inputs presented in the above tables. For securities using the market comparable companies valuation technique, a significant increase (decrease) in the EBITDA multiple in isolation would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the discount for lack of marketability in isolation would result in a significantly lower (higher) fair value measurement. The discount for lack of marketability used to determine fair value may include other factors such as liquidity or credit risk. For securities using the discounted cash flow valuation technique, a significant increase (decrease) in the discount rate or risk premium in isolation would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in the EBITDA multiple in isolation would result in a significantly higher (lower) fair value measurement. For securities using a market pricing valuation technique, a significant increase (decrease) in the price to earnings ratio, private sale pricing or price to book value ratio would result in a significantly higher (lower) fair value measurement. Financial instruments of consolidated SIPs that were not measured at fair value were as follows:
_________________ 1 Substantially all was Level 2. Debt Debt of consolidated SIPs consisted of the following:
Debt, excluding CLOs had fixed and floating interest rates ranging from 2.84% to 6.75% at September 30, 2017, and from 2.36% to 6.19% at September 30, 2016. At September 30, 2017, maturities for debt of consolidated SIPs were as follows:
Redeemable Noncontrolling Interests Changes in redeemable noncontrolling interests of consolidated SIPs were as follows:
Collateralized Loan Obligations During fiscal years 2017 and 2016, the Company recognized $4.8 million and $6.2 million of net gains related to its own economic interests in consolidated CLOs. |
Nonconsolidated Variable Interest Entities |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nonconsolidated Variable Interest Entities | Nonconsolidated Variable Interest Entities VIEs for which the Company is not the primary beneficiary consist of SIPs and other investment products in which the Company has an equity ownership interest. The Company’s maximum exposure to loss from these VIEs consists of equity investments and investment management fee receivables as follows:
While the Company has no contractual obligation to do so, it routinely makes cash investments in the course of launching SIPs. The Company also may voluntarily elect to provide its SIPs with additional direct or indirect financial support based on its business objectives. The Company did not provide financial or other support to its SIPs during fiscal year 2017. During fiscal year 2016, the Company purchased $182.7 million of certain debt securities from six SIPs domiciled in India in order to provide additional liquidity to the SIPs. |
Taxes on Income |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxes on Income | Taxes on Income Taxes on income were as follows:
The tax benefit from the utilization of net operating loss carry-forwards was insignificant in fiscal years 2017, 2016 and 2015. The Company had tax shortfalls of $8.7 million and $5.9 million in fiscal years 2017 and 2016 associated with stock-based compensation plans, which increased the amount of income taxes that would have otherwise been payable, and a tax benefit of $10.9 million in fiscal year 2015 which reduced the amount of income taxes that would have otherwise been payable. The tax shortfalls and benefit are reflected as components of stockholders’ equity. Income before taxes consisted of the following:
The Company’s income in certain countries is subject to reduced tax rates due to tax rulings. The impact of the reduced rates on income tax expense was $28.8 million or $0.05 per diluted share for fiscal year 2017, $34.2 million or $0.06 per diluted share for fiscal year 2016, and $68.3 million or $0.11 per diluted share for fiscal year 2015. The tax rulings will expire in fiscal years 2019 and 2022. The significant components of deferred tax assets and deferred tax liabilities were as follows:
Deferred income tax assets and liabilities that relate to the same tax jurisdiction are presented net on the consolidated balance sheets. The components of the net deferred tax liability were classified in the consolidated balance sheets as follows:
At September 30, 2017, there were $131.4 million of non-U.S. net operating loss carry-forwards, $62.4 million of which expire between fiscal years 2019 and 2038 with the remaining carry-forwards having an indefinite life. In addition, there were $32.2 million in state net operating loss carry-forwards that expire between fiscal years 2020 and 2037. A partial valuation allowance has been provided to offset the related deferred tax assets due to the uncertainty of realizing the benefit of the net operating loss carry-forwards. The valuation allowance increased $0.6 million in fiscal year 2017 and decreased $9.4 million in fiscal year 2016. The Company has made no provision for U.S. income taxes on $9.0 billion of cumulative undistributed non-U.S. earnings that are indefinitely reinvested at September 30, 2017. Determination of the potential amount of unrecognized deferred U.S. income tax liability related to such reinvested non-U.S. earnings is not practicable because of the numerous assumptions associated with this hypothetical calculation. However, foreign tax credits would be available to reduce some portion of this amount. Changes to the Company’s policy of reinvestment or repatriation of non-U.S. earnings may have a significant effect on its financial condition and results of operations. A reconciliation of the amount of tax expense at the federal statutory rate and taxes on income as reflected in the consolidated statements of income is as follows:
A reconciliation of the beginning and ending balances of gross unrecognized tax benefits is as follows:
If recognized, substantially all of the balance, net of any deferred tax benefits, would favorably affect the Company’s effective income tax rate in future periods. Accrued interest on uncertain tax positions at September 30, 2017 and 2016 was $10.4 million and $9.6 million, and is not presented in the unrecognized tax benefits table above. Interest expense (benefit) of $1.6 million, $(1.3) million and $(6.6) million was recognized during fiscal years 2017, 2016 and 2015. Accrued penalties at September 30, 2017 and 2016 were insignificant. The Company files a consolidated U.S. federal income tax return, multiple U.S. state and local income tax returns, and income tax returns in multiple non-U.S. jurisdictions. The Company is subject to examination by the taxing authorities in these jurisdictions. The Company’s major tax jurisdictions and the tax years for which the statutes of limitations have not expired are as follows: India 2003 to 2017; Canada 2010 to 2017; Hong Kong 2011 to 2017; Singapore 2012 to 2017; Luxembourg 2014 to 2017; the U.K. 2015 to 2017; U.S. federal 2014 to 2017; the States of California and Florida 2013 to 2017; the States of Massachusetts and New York, and City of New York 2014 to 2017; and the State of Minnesota 2015 to 2017. The Company has on-going examinations in various stages of completion in the States of California, Missouri and New York, and in Canada, Hong Kong, India and Switzerland. Examination outcomes and the timing of settlements are subject to significant uncertainty. Such settlements may involve some or all of the following: the payment of additional taxes, the adjustment of deferred taxes and/or the recognition of unrecognized tax benefits. The Company has recognized a tax benefit only for those positions that meet the more-likely-than-not recognition threshold. It is reasonably possible that the total unrecognized tax benefit as of September 30, 2017 could decrease by an estimated $12.6 million within the next twelve months as a result of the expiration of statutes of limitations in the U.S. federal and certain U.S. state and local and non-U.S. tax jurisdictions, and potential settlements with U.S. states and non-U.S. taxing authorities. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Legal Proceedings On July 28, 2016, a former employee filed a class action lawsuit captioned Cryer v. Franklin Resources, Inc., et al. in the United States District Court for the Northern District of California against Franklin, the Franklin Templeton 401(k) Retirement Plan (“Plan”) Investment Committee (“Investment Committee”), and unnamed Investment Committee members. The plaintiff asserts a claim for breach of fiduciary duty under the Employee Retirement Income Security Act (“ERISA”), alleging that the defendants selected mutual funds sponsored and managed by the Company (the “Funds”) as investment options for the Plan when allegedly lower-cost and better performing non-proprietary investment vehicles were available. The plaintiff also claims that the total Plan costs, inclusive of investment management and administrative fees, are excessive. The plaintiff alleges that Plan losses exceed $79.0 million and seeks, among other things, damages, disgorgement, rescission of the Plan’s investments in the Funds, attorneys’ fees and costs, and pre- and post-judgment interest. On November 2, 2017, a second former employee, represented by the same law firm, filed another putative class action lawsuit relating to the Plan in the same court, captioned Fernandez v. Franklin Resources, Inc., et al. This second action names the same defendants as those named in the Cryer action, but also includes as defendants the Franklin Board of Directors, individual current and former Franklin directors, and individual current and former Investment Committee members. The plaintiff in this second lawsuit seeks to assert the same ERISA breach of fiduciary duty claim asserted in the Cryer action, as well as claims for alleged prohibited transactions by virtue of the Plan’s investments in the Funds and for an alleged failure to monitor the performance of the Investment Committee. The plaintiff alleges that Plan losses exceed $60.0 million and seeks the same relief sought in the Cryer action. Management strongly believes that the claims made in these lawsuits are without merit. Discovery is continuing in the Cryer action and the Fernandez action has not yet been served. Franklin will defend against both actions vigorously. Franklin cannot at this time predict the eventual outcome of the lawsuits or whether they will have a material negative impact on the Company, or reasonably estimate the possible loss or range of loss that may arise from any negative outcome. The Company is from time to time involved in other litigation relating to claims arising in the normal course of business. Management is of the opinion that the ultimate resolution of such claims will not materially affect the Company’s business, financial position, results of operations or liquidity. In management’s opinion, an adequate accrual has been made as of September 30, 2017 to provide for any probable losses that may arise from such matters for which the Company could reasonably estimate an amount. Other Commitments and Contingencies The Company leases office space and equipment under operating leases expiring at various dates through fiscal year 2032. Lease expense was $56.3 million, $69.3 million and $58.0 million in fiscal years 2017, 2016 and 2015. Sublease income totaled $0.4 million, $1.6 million and $1.7 million in fiscal years 2017, 2016 and 2015. Future minimum lease payments under long-term non-cancelable operating leases were as follows as of September 30, 2017:
Future minimum rentals to be received under non-cancelable subleases totaled $0.5 million at September 30, 2017. While the Company has no contractual obligation to do so, it routinely makes cash investments in the course of launching SIPs. At September 30, 2017, the Company had $73.5 million of committed capital contributions which relate to discretionary commitments to invest in SIPs and other investment products. These unfunded commitments are not recorded in the Company’s consolidated balance sheet. |
Stock-Based Compensation |
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Share-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation The Company’s stock-based compensation plans consist of the Amended and Restated Annual Incentive Compensation Plan (the “AIP”), the 2002 Universal Stock Incentive Plan, as amended and restated (the “USIP”) and the amended and restated Franklin Resources, Inc. 1998 Employee Stock Investment Plan (the “ESIP”). The Compensation Committee of the Board of Directors determines the terms and conditions of awards under the AIP, the USIP and the ESIP. Stock-based compensation expenses were as follows:
Stock and Stock Unit Awards Under the terms of the AIP, eligible employees may receive cash, equity awards and/or mutual fund unit awards generally based on the performance of the Company, its funds and the individual employee. The USIP provides for the issuance of the Company’s common stock for various stock-related awards to officers, directors and employees. There are 120.0 million shares authorized under the USIP, of which 21.0 million shares were available for grant at September 30, 2017. Stock awards generally entitle holders to the right to sell the underlying shares of the Company’s common stock once the awards vest. Stock unit awards generally entitle holders to receive the underlying shares of common stock once the awards vest. Awards generally vest based on the passage of time or the achievement of predetermined Company financial performance goals. In the event a performance measure is not achieved at or above a specified threshold level, the portion of the award tied to such performance measure is forfeited. Stock and stock unit award activity was as follows:
Total unrecognized compensation expense related to nonvested stock and stock unit awards, net of estimated forfeitures, was $118.9 million at September 30, 2017. This expense is expected to be recognized over a remaining weighted-average vesting period of 1.6 years. The weighted-average grant-date fair values of stock awards and stock unit awards granted during fiscal years 2017, 2016 and 2015 were $34.23, $40.88 and $55.65 per share. The total fair value of stock and stock unit awards vested during the same periods was $104.0 million, $92.8 million and $115.2 million. The Company generally does not repurchase shares upon vesting of stock and stock unit awards. However, in order to pay taxes due in connection with the vesting of employee and executive officer stock and stock unit awards, shares are repurchased using a net stock issuance method. Employee Stock Investment Plan The ESIP allows eligible participants to buy shares of the Company’s common stock at a discount of its market value on defined dates. A total of 0.8 million shares were issued under the ESIP during fiscal year 2017, and 3.6 million shares were reserved for future issuance at September 30, 2017. |
Defined Contribution Plans |
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Compensation and Retirement Disclosure [Abstract] | |
Defined Contribution Plans | Defined Contribution Plans The Company sponsors a 401(k) plan that covers substantially all U.S. employees who meet certain employment requirements. Participants may contribute up to 50% of pretax annual compensation and up to 100% of the cash portion of the participant’s year-end bonus, as defined by the plan and subject to Internal Revenue Code limitations, each year to the plan. In addition, certain of the Company’s non-U.S. subsidiaries sponsor defined contribution plans primarily for the purpose of providing deferred compensation incentives for employees and to comply with local regulatory requirements. The total expenses recognized for defined contribution plans were $45.5 million, $46.8 million and $46.4 million for fiscal years 2017, 2016 and 2015. |
Segment and Geographic Information |
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Segment and Geographic Information | Segment and Geographic Information The Company has one operating segment, investment management and related services. Geographic information was as follows:
Operating revenues are generally allocated to geographic areas based on the location of the subsidiary providing services. |
Other Income (Expenses) |
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Other Income (Expenses) | Other Income (Expenses) Other income (expenses) consisted of the following:
Substantially all of the Company’s dividend income and realized gains and losses on sale of available-for-sale securities were generated by investments in its nonconsolidated SIPs. Interest income was primarily generated by cash equivalents and trading investment securities. Proceeds from the sale of available-for-sale securities were $51.6 million, $269.4 million and $221.3 million for fiscal years 2017, 2016 and 2015. Net gains (losses) recognized on the Company’s trading investment securities that were held at September 30, 2017, 2016 and 2015 were $5.0 million, $27.9 million and $(20.3) million. Net gains (losses) recognized on trading investment securities of consolidated SIPs that were held at September 30, 2017, 2016 and 2015 were $21.9 million, $9.4 million and $(17.7) million. |
Accumulated Other Comprehensive Income (Loss) |
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Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) Changes in accumulated other comprehensive income (loss) by component were as follows:
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Significant Accounting Policies (Policies) |
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Business | Business. Franklin Resources, Inc. (“Franklin”) is a holding company that, together with its various subsidiaries (collectively, the “Company”) is referred to as Franklin Templeton Investments. The Company provides investment management and related services to investors globally through products that include investment funds and institutional, high net-worth and separately-managed accounts (collectively, the “sponsored investment products” or “SIPs”). In addition to investment management, the Company’s services include fund administration, sales, distribution, marketing, shareholder servicing, and trust, custody and other services. |
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Basis of Presentation | Basis of Presentation. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Management believes that the accounting estimates are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual amounts may differ from these estimates. Certain comparative amounts for prior fiscal years have been reclassified to conform to the financial statement presentation as of and for the fiscal year ended September 30, 2017 (“fiscal year 2017”). |
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Consolidation | Consolidation. The consolidated financial statements include the accounts of Franklin and its subsidiaries and SIPs in which it has a controlling financial interest. The Company has a controlling financial interest when it owns a majority of the voting interest in a voting interest entity (“VOE”) or is the primary beneficiary of a variable interest entity (“VIE”). All material intercompany accounts and transactions have been eliminated. A VIE is an entity in which the equity investment holders have not contributed sufficient capital to finance its activities or do not have defined rights and obligations normally associated with an equity investment. The Company’s VIEs are all investment entities, and its variable interests consist of its equity ownership interests in and certain investment management fees earned from these entities. The Company is the primary beneficiary of a VIE if it has the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of or right to receive benefits from the VIE that could potentially be significant to the VIE. Investment management fees earned from VIEs are excluded from the primary beneficiary determination if they are deemed to be at market and commensurate with service. The key estimates and assumptions used in the analyses include the amount of assets under management (“AUM”) and the life of the investment product. |
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Related Parties | Related Parties include the investment funds sponsored by the Company as a result of the Company’s advisory relationship and equity method investees. A substantial amount of the Company’s operating revenues and receivables are from related parties. |
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Earnings per Share | Earnings per Share. Basic and diluted earnings per share are computed using the two-class method, which considers participating securities as a separate class of shares. The Company’s participating securities consist of its nonvested stock and stock unit awards that contain nonforfeitable rights to dividends or dividend equivalents. Basic earnings per share is computed by dividing net income available to the Company’s common shareholders, adjusted to exclude earnings allocated to participating securities, by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period. |
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Fair Value Measurements | Fair Value Measurements. The Company uses a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on whether the inputs to those valuation techniques are observable or unobservable. The three levels of fair value hierarchy are set forth below. The Company’s assessment of the hierarchy level of the assets or liabilities measured at fair value is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Transfers between levels are recognized at the end of each quarter.
Quoted market prices may be adjusted if events occur, such as significant price changes in U.S.-traded market proxies after the close of corresponding foreign markets, trade halts or suspensions, or unscheduled market closures. The market proxies consist of correlated country-specific exchange-traded securities, such as futures, American Depositary Receipts indices or exchange-traded funds. The price adjustments are primarily determined based on third-party factors derived from model-based valuation techniques for which the significant assumptions are observable in the market. The fair values for Level 3 assets and liabilities are determined using various methodologies in accordance with the Company’s global valuation and pricing policy which defines valuation and pricing conventions for each security type. The Company may employ a market-based method, using purchase multiples observed for comparable third-party transactions, valuations of comparable entities, projected operating results of the investee entity or subsequent financing transactions entered into by the investee entity. If the inputs for a market-based method are not available, the Company utilizes an income-based method, which considers the net present value of anticipated future cash flows of the investment. A discount may be applied due to the nature or duration of any restrictions on the disposition of the investment. The Company reviews and approves the market-based and income-based methods on a periodic basis for changes that would impact the unobservable inputs incorporated into the valuation process. The fair value measurements from these methods are further validated through price variance analysis, subsequent sales testing and market comparable sales. The Company records a substantial amount of its investments at fair value or amounts that approximate fair value on a recurring basis. Investments in fund products for which fair value is estimated using NAV as a practical expedient (when the NAV is available to the Company as an investor but is not publicly available) are not classified in the fair value hierarchy. The financial assets and financial liabilities of consolidated collateralized loan obligations (“CLOs”) at September 30, 2016 were measured using the more observable fair value of either the financial assets or financial liabilities. Fair values are estimated for disclosure purposes for financial instruments that are not measured at fair value. |
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Cash and Cash Equivalents | Cash and Cash Equivalents primarily consist of debt instruments with original maturities of three months or less at the purchase date, nonconsolidated SIP money market funds, time deposits with maturities of three months or less, and deposits with financial institutions. Cash and cash equivalents are carried at cost, except for debt instruments which are carried at amortized cost. Due to the short-term nature and liquidity of these financial instruments, the carrying values of these assets approximate fair value. The Company maintains cash and cash equivalents with financial institutions in various countries, limits the amount of credit exposure with any given financial institution and conducts ongoing evaluations of the creditworthiness of the financial institutions with which it does business. |
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Receivables | Receivables consist primarily of fees receivable from SIPs and are carried at invoiced amounts. Due to the short-term nature and liquidity of the receivables, the carrying values of these assets approximate fair value. |
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Investments | Investments consist of investment securities, trading and available-for-sale, investments in equity method investees and other investments. Investment Securities, Trading consist of corporate debt securities, nonconsolidated SIPs and other debt and equity securities, and are carried at fair value. Changes in the fair value of trading securities are recognized as gains and losses in earnings. The fair value of the corporate debt securities is determined using market pricing. The fair values of all SIPs and certain other equity securities are determined based on their published NAV. The fair values of certain other debt and equity securities are determined using independent third-party broker or dealer price quotes. The fair value of certain other debt securities is determined based on discounted cash flows using significant unobservable inputs. Investment Securities, Available-for-Sale consist primarily of nonconsolidated SIPs and to a lesser extent, debt and other equity securities, and are carried at fair value. Realized gains and losses are included in investment income using the average cost method. Unrealized gains and losses are recorded net of tax as part of accumulated other comprehensive income (loss) until realized. The fair value of the SIPs is determined based on their published NAV. The fair value of the debt securities is primarily determined using independent third-party broker or dealer price quotes. The fair value of other equity securities is determined using quoted market prices. Investments in Equity Method Investees consist of equity investments in entities, including SIPs, over which the Company is able to exercise significant influence, but not control. Significant influence is generally considered to exist when the Company’s ownership interest in the investee is between 20% and 50%, although other factors, such as representation on the investee’s board of directors and the impact of commercial arrangements, also are considered in determining whether the equity method of accounting is appropriate. Investments in limited partnerships and limited liability companies are accounted for using the equity method when the Company’s investment is more than minor or when the Company is the general partner. Under the equity method of accounting, the investments are initially carried at cost and subsequently adjusted by the Company’s proportionate share of the entities’ net income, which is recognized in earnings. Other Investments consist of equity investments in entities over which the Company is unable to exercise significant influence and are not marketable, time deposits with maturities greater than three months from the date of purchase, and life settlement contracts. The equity investments are accounted for under the cost method and their fair value is generally estimated using NAV as a practical expedient. The time deposits are carried at cost, which approximates fair value due to their short-term nature and liquidity. Life settlement contracts are carried at fair value, which is determined based on discounted cash flows using significant unobservable inputs. Impairment of Investments. Investments other than trading securities are evaluated for other-than-temporary impairment on a quarterly basis when the cost of an investment exceeds its fair value. The evaluation of equity securities includes the severity and duration of the decline in the fair value below cost, the Company’s intent and ability to hold the security for a period of time sufficient for an anticipated recovery in fair value, and the financial condition and specific events related to the issuer. When an impairment of an equity security is determined to be other-than-temporary, the impairment is recognized in earnings. |
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Cash and Cash Equivalents of Consolidated SIPs | Cash and Cash Equivalents of Consolidated SIPs consist of deposits with financial institutions and highly liquid investments, including money market funds, which are readily convertible into cash, and are carried at cost. Due to the short-term nature and liquidity of these financial instruments, their carrying values approximate fair value. At September 30, 2016, cash and cash equivalents of consolidated SIPs also included investments in a money market fund held by consolidated CLOs which were carried at fair value based on the fund’s published NAV. |
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Receivables of Consolidated SIPs | Receivables of Consolidated SIPs consist of trades pending settlement and other investment and share transaction related receivables and are carried at transacted amounts. Due to the short-term nature and liquidity of the receivables, the carrying values of these assets approximate fair value. |
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Investments of Consolidated SIPs | Investments of Consolidated SIPs consist of trading securities and other investments that are not generally traded in active markets, and are carried at fair value. Changes in the fair value of the investments are recognized as gains and losses in earnings. The fair value of the trading securities is determined using quoted market prices, or independent third-party broker or dealer price quotes if quoted market prices are not available. The investments that are not generally traded in active markets consist of debt and equity securities of entities in emerging markets and fund products. The fair values of the debt and equity securities are determined using significant unobservable inputs in either a market-based or income-based approach. The fair value of the fund products is determined using NAV as a practical expedient. At September 30, 2016, investments of consolidated SIPs also included corporate debt securities held by consolidated CLOs for which the fair value was primarily obtained from independent third-party broker or dealer price quotes. |
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Property and Equipment, net | Property and Equipment, net are recorded at cost and depreciated using the straight-line method over their estimated useful lives which range from three to 35 years. Expenditures for repairs and maintenance are charged to expense when incurred. Leasehold improvements are amortized using the straight-line method over their estimated useful lives or the lease term, whichever is shorter. Internal and external costs incurred in connection with developing or obtaining software for internal use are capitalized and amortized over the shorter of the estimated useful lives of the software or the license terms, beginning when the software project is complete and the application is put into production. Property and equipment is tested for impairment when there is an indication that the carrying value of an asset may not be recoverable. Carrying values are not recoverable when the undiscounted cash flows estimated to be generated by the assets are less than their carrying values. When an asset is determined to not be recoverable, the impairment is measured based on the excess, if any, of the carrying value of the asset over its respective fair value. Fair value is determined by discounted future cash flows models, appraisals or other applicable methods. |
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Goodwill and Other Intangible Assets, net | Goodwill and Other Intangible Assets, net. Goodwill represents the excess cost of a business acquisition over the fair value of the net assets acquired. Other intangible assets consist of investment management contracts resulting from business acquisitions. These intangible assets are amortized over their estimated useful lives, which range from five to 15 years, using the straight-line method, unless the asset is determined to have an indefinite useful life. Indefinite-lived intangible assets represent contracts to manage investment assets for which there is no foreseeable limit on the contract period. Goodwill and indefinite-lived intangible assets are tested for impairment annually as of August 1 and when an event occurs or circumstances change that more likely than not reduce the fair value of the related reporting unit or indefinite-lived intangible asset below its carrying value. The Company has one reporting unit, investment management and related services, consistent with its single operating segment, to which all goodwill has been assigned. Goodwill and indefinite-lived intangible assets may first be assessed for qualitative factors to determine whether it is necessary to perform a quantitative impairment test. The qualitative analysis considers entity-specific and macroeconomic factors and their potential impact on the key assumptions used in the determination of the fair value of the reporting unit or indefinite-lived intangible asset. A quantitative impairment test is performed if the results of the qualitative assessment indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying value or an indefinite-lived intangible asset is impaired, or if a qualitative assessment is not performed. The quantitative goodwill impairment test involves a two-step process. The first step compares the fair value of the reporting unit to its carrying value. If the carrying value is less than the fair value, no impairment exists and the second step is not performed. If the carrying value is higher than the fair value, there is an indication that impairment may exist and the second step is performed to compute the amount of any impairment. In the second step, impairment is computed by comparing the implied fair value of the reporting unit goodwill with the carrying value of the goodwill. The quantitative indefinite-lived intangible assets impairment test compares the fair value of the asset to its carrying value. If the carrying value is higher than the fair value, impairment is recognized in the amount of the difference in values. In estimating the fair value of the reporting unit and indefinite-lived intangible assets, the Company uses an income approach under which future cash flows are discounted. The future cash flow estimates include assumptions about the AUM growth rate, pre-tax profit margin, average effective fee rate, effective tax rate and discount rate, which is based on the Company’s weighted average cost of capital. Definite-lived intangible assets are tested for impairment quarterly. Impairment is indicated when the carrying value of the asset is not recoverable and exceeds its fair value. In evaluating the recoverability of definite-lived intangible assets, the Company estimates the undiscounted future cash flows to be derived from these assets. The future undiscounted cash flow projections include assumptions about AUM growth and effective fee rates, investor redemptions, the pre-tax profit margin, and expected useful lives. If the carrying value of an asset is not recoverable through the related undiscounted cash flows, the impairment is measured based on the amount by which the carrying value of the asset exceeds its fair value, as determined by discounted cash flows or other methods as appropriate for the asset type. Impairment is recognized in general, administrative and other expense. |
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Deferred Sales Commissions | Deferred Sales Commissions consist of up-front commissions paid to financial advisers and broker-dealers on shares sold without a front-end sales charge to investors, and are amortized over the periods in which they are generally recovered from related revenues, which range from one to seven years. Deferred sales commissions are included in other assets in the consolidated balance sheet. |
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Debt | Debt consists of senior notes which are carried at amortized cost. At September 30, 2016, debt also included a loan. The fair values are estimated using quoted market prices, independent third-party broker or dealer price quotes, or prices of publicly traded debt with similar maturities, credit risk and interest rates. |
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Debt of Consolidated SIPs | Debt of Consolidated SIPs is carried at amortized cost. The fair value is estimated using a discounted cash flow model that considers current interest rate levels, the quality of the underlying collateral and current economic conditions. At September 30, 2016, debt of consolidated SIPs also included debt of consolidated CLOs which was measured based on the fair value of the assets of the CLOs less the fair value of the Company’s own economic interests in the CLOs. |
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Contingent Consideration Liability | Contingent Consideration Liability consists of the expected future payments related to the Company’s commitment to acquire the remaining interests in K2 Advisors Holdings, LLC (“K2”) and is included in other liabilities in the consolidated balance sheet. The liability is carried at fair value, determined using an income-based method which considers the net present value of anticipated future cash flows based on estimated future revenue and profits and timing of payments. |
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Noncontrolling Interests | Noncontrolling Interests relate almost entirely to consolidated SIPs. Noncontrolling interests that are currently redeemable or convertible for cash or other assets at the option of the holder are classified as temporary equity. Nonredeemable noncontrolling interests are classified as a component of equity. Net income (loss) attributable to third-party investors is reflected as net income (loss) attributable to nonredeemable and redeemable noncontrolling interests in the consolidated statements of income. Sales and redemptions of shares of consolidated SIPs by third-party investors are a component of the change in noncontrolling interests included in financing activities in the consolidated statements of cash flows. |
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Revenues | Revenues. Fees from providing investment management and fund administration services (“investment management fees”), distribution fees and shareholder servicing fees are recognized as earned, over the period in which services are rendered, except for performance-based investment management fees, which are recognized when earned. Sales commissions related to the sale of shares of SIPs are recognized on trade date. Investment management fees, other than performance-based fees, and distribution fees are determined based on a percentage of AUM, primarily on a monthly basis using average daily AUM. Performance-based investment management fees are based on performance targets established in the related investment management contracts. Shareholder servicing fees are generally calculated based on the number and type of accounts serviced. AUM is generally based on the fair value of the underlying securities held by SIPs and is calculated using fair value methods derived primarily from unadjusted quoted market prices, unadjusted independent third-party broker or dealer price quotes in active markets, or market prices or price quotes adjusted for observable price movements after the close of the primary market. The fair values of the underlying securities for which market prices are not readily available are internally valued using various methodologies which incorporate significant unobservable inputs as appropriate for each security type and represent an insignificant percentage of total AUM. Pricing of the securities held by SIPs is governed by the Company’s global valuation and pricing policy, which defines valuation and pricing conventions for each security type, including practices for responding to unexpected or unusual market events. Sales commissions and distribution fees are recorded gross of sales and distribution expenses paid to financial advisers and other intermediaries as the Company acts as the principal in its role as primary obligor to the sales and distribution agreements. |
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Stock-Based Compensation | Stock-Based Compensation. The fair value of share-based payment awards is estimated on the date of grant based on the market price of the underlying shares of the Company’s common stock and is amortized to compensation expense on a straight-line basis over the related vesting period, which is generally three years. Expense relating to awards subject to performance conditions is recognized if it is probable that the performance goals will be achieved. The probability of achievement is assessed on a quarterly basis. The total number of awards expected to vest is adjusted for estimated forfeitures. |
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Postretirement Benefits | Postretirement Benefits. Defined contribution plan costs are expensed as incurred. |
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Income Taxes | Income Taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and the reported amounts in the consolidated financial statements using the statutory tax rates in effect for the year when the reported amount of the asset or liability is expected to be recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying values of deferred tax assets to the amount that is more likely than not to be realized. For each tax position taken or expected to be taken in a tax return, the Company determines whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. The Company recognizes the accrual of interest on uncertain tax positions in interest expense and penalties in other operating expenses. As a multinational corporation, the Company operates in various locations outside the United States and generates earnings from its non-U.S. subsidiaries. The Company indefinitely reinvests the undistributed earnings of all its non-U.S. subsidiaries, except for income previously taxed in the U.S. or subject to regulatory or legal repatriation restrictions or requirements. |
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Foreign Currency Translation and Transactions | Foreign Currency Translation and Transactions. Assets and liabilities of non-U.S. subsidiaries for which the local currency is the functional currency are translated at current exchange rates as of the end of the accounting period. The related revenues and expenses are translated at average exchange rates in effect during the period. Net exchange gains and losses resulting from translation are excluded from income and are recorded as part of accumulated other comprehensive income (loss). Transactions denominated in a foreign currency are revalued at the current exchange rate at the transaction date and any related gains and losses are recognized in earnings. |
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Other Assets and Liabilities of Consolidated VIEs | Receivables of CLOs consisted primarily of investment trades pending settlement. The fair value of the assets was obtained from independent third-party broker or dealer quotes. |
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Other Liabilities of Consolidated SIPs | Other liabilities consist of short positions in debt and equity securities. The fair value of the liabilities is determined based on the fair value of the underlying securities using quoted market prices, or independent third-party broker or dealer price quotes if quoted market prices securities are not available. |
Earnings per Share (Tables) |
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of basic and diluted earnings per share | The components of basic and diluted earnings per share were as follows:
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Investments (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of investments | Investments consisted of the following:
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Summary of the gross unrealized gains and losses relating to investment securities, available-for-sale | Gross unrealized gains and losses relating to investment securities, available-for-sale were as follows:
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Summary of gross unrealized losses and fair values of investment securities in a continuous unrealized loss position | Gross unrealized losses relating to investment securities, available-for-sale aggregated by length of time that individual securities have been in a continuous unrealized loss position were as follows:
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Fair Value Measurements (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets and liabilities measured at fair value on a recurring basis | The assets and liability measured at fair value on a recurring basis were as follows:
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Schedule of changes in Level 3 assets and liabilities measured at fair value on a recurring basis | Changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:
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Schedule of valuation techniques and significant unobservable inputs used in Level 3 fair value measurements | Valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements were as follows:
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Schedule of financial instruments not measured at fair value | Financial instruments that were not measured at fair value were as follows:
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Property and Equipment (Tables) |
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of property and equipment | Property and equipment, net consisted of the following:
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Goodwill and Other Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of goodwill and other intangible assets, net | Goodwill and other intangible assets, net consisted of the following:
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Schedule of changes in carrying value of goodwill | Changes in the carrying value of goodwill were as follows:
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Schedule of definite-lived intangible assets | Definite-lived intangible assets were as follows:
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Schedule of estimated remaining amortization expense | Definite-lived intangible assets had a weighted-average remaining useful life of 8.8 years at September 30, 2017, with estimated remaining amortization expense as follows:
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of outstanding debt | Debt consisted of the following:
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Consolidated Sponsored Investment Products (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Sponsored Investment Products [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of balances of CSIPs | The balances of consolidated SIPs included in the Company’s consolidated balance sheets were as follows:
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Schedule of investments of CSIPs | Investments of consolidated SIPs consisted of the following:
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Schedule of investments in fund products for which fair value was estimated using NAV as a practical expedient | Investments in fund products for which fair value was estimated using NAV as a practical expedient were as follows:
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Schedule of assets and liabilities measured at fair value on a recurring basis | Assets and liabilities of consolidated SIPs measured at fair value on a recurring basis were as follows:
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Schedule of changes in Level 3 assets and liabilities of CSIPs on a recurring basis | Changes in Level 3 assets measured at fair value on a recurring basis were as follows:
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Schedule of valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements | Valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements were as follows:
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Schedule of financial instruments of CSIPs not measured at fair value | Financial instruments of consolidated SIPs that were not measured at fair value were as follows:
_________________ 1 Substantially all was Level 2. |
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Schedule of debt of consolidated SIPs | Debt of consolidated SIPs consisted of the following:
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Schedule of contractual maturities for debt of CSIPs | At September 30, 2017, maturities for debt of consolidated SIPs were as follows:
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Schedule of changes in redeemable noncontrolling interests of CSIPs | Changes in redeemable noncontrolling interests of consolidated SIPs were as follows:
|
Nonconsolidated Variable Interest Entities (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of maximum exposure loss from nonconsolidated VIEs | The Company’s maximum exposure to loss from these VIEs consists of equity investments and investment management fee receivables as follows:
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Taxes on Income (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of taxes on income | Taxes on income were as follows:
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Schedule of income before taxes | Income before taxes consisted of the following:
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Components of deferred tax assets and liabilities | The significant components of deferred tax assets and deferred tax liabilities were as follows:
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Components of net deferred tax assets or liabilities as classified in the consolidated balance sheets | The components of the net deferred tax liability were classified in the consolidated balance sheets as follows:
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Reconciliation of the amount of tax expense at the federal statutory rate and taxes on income | A reconciliation of the amount of tax expense at the federal statutory rate and taxes on income as reflected in the consolidated statements of income is as follows:
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Reconciliation of gross unrecognized tax benefits | A reconciliation of the beginning and ending balances of gross unrecognized tax benefits is as follows:
|
Commitments and Contingencies (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future minimum lease payments under long-term non-cancelable operating leases | Future minimum lease payments under long-term non-cancelable operating leases were as follows as of September 30, 2017:
|
Stock-Based Compensation (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of stock-based compensation expenses | Stock-based compensation expenses were as follows:
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Summary of nonvested stock and stock unit award activity | Stock and stock unit award activity was as follows:
|
Segment and Geographic Information (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting, Measurement Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of operating revenues, property and equipment by geographic areas | Geographic information was as follows:
|
Other Income (Expenses) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other income (expenses) | Other income (expenses) consisted of the following:
|
Accumulated Other Comprehensive Income (Loss) (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in accumulated other comprehensive income (loss) by component | Changes in accumulated other comprehensive income (loss) by component were as follows:
|
Significant Accounting Policies - Narrative (Details) |
12 Months Ended |
---|---|
Sep. 30, 2017 | |
Property, Plant and Equipment [Line Items] | |
Number of reporting units | 1 |
Stock-based compensation awards vesting period | 3 years |
Deferred sales commission amortization period, minimum | 1 year |
Deferred sales commission amortization period, maximum | 7 years |
Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and equipment, estimated useful lives | 3 years |
Intangible assets, estimated useful lives | 5 years |
Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property and equipment, estimated useful lives | 35 years |
Intangible assets, estimated useful lives | 15 years |
Earnings per Share - Narrative (Details) - shares shares in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Earnings Per Share [Abstract] | |||
Shares of nonparticipating nonvested stock unit awards excluded from the calculation of diluted EPS | 0.7 | 1.3 | 0.9 |
Earnings per Share - Components of Basic and Diluted Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Earnings Per Share Reconciliation [Abstract] | |||
Net income attributable to Franklin Resources, Inc. | $ 1,696.7 | $ 1,726.7 | $ 2,035.3 |
Less: allocation of earnings to participating nonvested stock and stock unit awards - basic | 12.4 | 10.9 | 12.0 |
Less: allocation of earnings to participating nonvested stock and stock unit awards - diluted | 12.4 | 10.9 | 12.0 |
Net Income Available to Common Stockholders - basic | 1,684.3 | 1,715.8 | 2,023.3 |
Net Income Available to Common Stockholders - diluted | $ 1,684.3 | $ 1,715.8 | $ 2,023.3 |
Weighted-average shares outstanding – basic | 558.8 | 583.8 | 614.8 |
Dilutive effect of nonparticipating nonvested stock unit awards | 0.3 | 0.0 | 0.1 |
Weighted-Average Shares Outstanding – Diluted | 559.1 | 583.8 | 614.9 |
Earnings per Share [Abstract] | |||
Basic | $ 3.01 | $ 2.94 | $ 3.29 |
Diluted | $ 3.01 | $ 2.94 | $ 3.29 |
Investments - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Investments [Abstract] | |||
Aggregate carrying values of investment securities pledged as collateral | $ 0.8 | $ 117.3 | |
Other-than-temporary impairment of investments | $ 0.8 | 11.1 | $ 10.0 |
SIPs [Member] | |||
Investment Holdings [Line Items] | |||
Other-than-temporary impairment of available-for-sale SIPs | $ 5.8 | $ 8.2 |
Investments - Summary of Investments (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Investment Holdings [Line Items] | ||
Investment securities, trading | $ 314.5 | $ 1,121.9 |
Investment securities, available-for-sale | 112.7 | 301.4 |
Investments in equity method investees | 893.5 | 797.4 |
Other investments | 72.9 | 195.9 |
Total | 1,393.6 | 2,416.6 |
SIPs [Member] | ||
Investment Holdings [Line Items] | ||
Investment securities, trading | 31.1 | 844.4 |
Investment securities, available-for-sale | 110.8 | 297.7 |
Debt and Other Equity Securities [Member] | ||
Investment Holdings [Line Items] | ||
Investment securities, trading | 283.4 | 277.5 |
Investment securities, available-for-sale | $ 1.9 | $ 3.7 |
Investments - Summary of Gross Unrealized Gains and Losses Relating to Investment Securities, available-for-Sale (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Investment Holdings [Line Items] | ||
Cost Basis | $ 109.8 | $ 293.2 |
Gross Unrealized Gains | 9.4 | 13.8 |
Gross Unrealized Losses | (6.5) | (5.6) |
Fair Value | 112.7 | 301.4 |
SIPs [Member] | ||
Investment Holdings [Line Items] | ||
Cost Basis | 107.9 | 289.6 |
Gross Unrealized Gains | 9.4 | 13.7 |
Gross Unrealized Losses | (6.5) | (5.6) |
Fair Value | 110.8 | 297.7 |
Debt and Other Equity Securities [Member] | ||
Investment Holdings [Line Items] | ||
Cost Basis | 1.9 | 3.6 |
Gross Unrealized Gains | 0.0 | 0.1 |
Gross Unrealized Losses | 0.0 | 0.0 |
Fair Value | $ 1.9 | $ 3.7 |
Investments - Summary of Gross Unrealized Losses, AFS, Continuous Loss Position (Details) - SIPs [Member] - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value | $ 28.4 | $ 75.8 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Gross Unrealized Losses | (6.3) | (4.3) |
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Greater, Fair Value | 2.4 | 18.0 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Greater, Gross Unrealized Losses | (0.2) | (1.3) |
Available-for-sale Securities, Continuous Unrealized Loss Position, Total Fair Value | 30.8 | 93.8 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Total Gross Unrealized Losses | $ (6.5) | $ (5.6) |
Fair Value Measurement - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Fair Value Disclosures [Abstract] | ||
Transfers into Level 1 from Level 2 - assets | $ 0.0 | $ 0.0 |
Transfers into Level 2 from Level 1 - assets | 0.0 | 0.0 |
Transfers into Level 1 from Level 2 - liabilities | 0.0 | 0.0 |
Transfers into Level 2 from Level 1 - liabilities | 0.0 | 0.0 |
Transfers into Level 3 - assets | 0.0 | 0.0 |
Transfers into Level 3 - liabilities | $ 0.0 | $ 0.0 |
Property and Equipment - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Property, Plant and Equipment, Net [Abstract] | |||
Depreciation and amortization expense | $ 81.5 | $ 81.0 | $ 81.6 |
Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Goodwill, Impairment Loss | $ 0.0 | $ 0.0 | $ 0.0 |
Indefinite-lived intangible assets, impairment | 0.0 | 0.0 | 0.0 |
Amortization of Intangible Assets | 3.9 | 10.4 | 20.1 |
Finite-Lived Intangible Assets [Line Items] | |||
Impairment of intangible assets | $ 9.6 | 28.2 | 8.2 |
Definite-lived intangible assets weighted-average remaining useful life | 8 years 9 months | ||
Management contracts [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Impairment of intangible assets | $ 9.6 | $ 28.2 | $ 8.2 |
Goodwill and Other Intangible Assets - Schedule of Goodwill and Intangible Assets (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
---|---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Goodwill | $ 1,687.2 | $ 1,661.2 | $ 1,661.2 |
Indefinite-lived intangible assets | 534.0 | 530.9 | |
Definite-lived intangible assets, net | 6.5 | 19.2 | |
Total | $ 2,227.7 | $ 2,211.3 |
Goodwill and Other Intangible Assets Schedule of Changes in Carrying Values of Goodwill (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Balance at beginning of year | $ 1,661.2 | $ 1,661.2 |
Acquisition | 18.8 | 0.0 |
Foreign exchange revaluation | 7.2 | 0.0 |
Balance at End of Year | $ 1,687.2 | $ 1,661.2 |
Goodwill and Other Intangible Assets - Schedule of Definite Lived Intangible Assets (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Net Carrying Value | $ 6.5 | $ 19.2 |
Management contracts [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | 52.4 | 60.1 |
Accumulated Amortization | (45.9) | (40.9) |
Net Carrying Value | $ 6.5 | $ 19.2 |
Goodwill and Other Intangible Assets - Schedule of Estimated Remaining Amortization Expense (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2018 | $ 1.0 | |
2019 | 0.8 | |
2020 | 0.8 | |
2021 | 0.7 | |
2022 | 0.5 | |
Thereafter | 2.7 | |
Net Carrying Value | $ 6.5 | $ 19.2 |
Debt - Narrative (Details) $ in Millions, ₨ in Billions |
Sep. 30, 2017
USD ($)
|
Sep. 30, 2016
USD ($)
|
Mar. 31, 2016
USD ($)
|
Mar. 31, 2016
INR (₨)
|
---|---|---|---|---|
Line of Credit Facility [Line Items] | ||||
Face value of senior unsecured and unsubordinated notes | $ 1,100.0 | |||
Loan | 0.0 | $ 52.7 | $ 93.4 | ₨ 6.3 |
Stated interest rate | 9.89% | 9.89% | ||
Collateralized time deposit | $ 116.0 | |||
Standby Letters of Credit [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Standby letter of credit | $ 96.6 | ₨ 6.5 | ||
Commercial Paper [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Commercial paper available for issuance under an uncommitted private placement program | $ 500.0 |
Consolidated Sponsored Investment Products - Schedule of Investments of CSIPs (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Schedule Of Consolidated Sponsored Investment Products [Line Items] | ||
Investment securities, trading | $ 314.5 | $ 1,121.9 |
Fair value | 440.0 | 1,437.6 |
Consolidated SIPs [Member] | ||
Schedule Of Consolidated Sponsored Investment Products [Line Items] | ||
Investment securities, trading | 3,017.2 | 287.8 |
Other equity securities | 306.9 | 607.3 |
Other debt securities | 143.3 | 618.3 |
Fair value | $ 3,467.4 | $ 1,513.4 |
Consolidated Sponsored Investment Products - Schedule of Investments in Fund Products for which Fair Value was Estimated using NAV as a Practical Expedient (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Investments in funds products for which fair value was estimated using NAV | $ 155.2 | $ 446.0 |
Real Estate and Private Equity Funds [Member] | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Investments in funds products for which fair value was estimated using NAV | 155.2 | 444.2 |
Hedge Funds [Member] | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share [Line Items] | ||
Investments in funds products for which fair value was estimated using NAV | $ 0.0 | $ 1.8 |
Consolidated Sponsored Investment Products - Schedule of Debt of CSIPs (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Schedule Of Consolidated Sponsored Investment Products [Line Items] | ||
Debt | $ 1,044.2 | $ 1,401.2 |
Effective Interest Rate | 9.89% | |
Consolidated SIPs [Member] | ||
Schedule Of Consolidated Sponsored Investment Products [Line Items] | ||
Debt, excluding CLOs | 53.4 | $ 75.0 |
Debt | $ 53.4 | $ 682.2 |
Effective Interest Rate | 5.15% | 4.79% |
Consolidated SIPs [Member] | CLOs [Member] | ||
Schedule Of Consolidated Sponsored Investment Products [Line Items] | ||
Debt | $ 0.0 | $ 607.2 |
Effective Interest Rate | 2.24% |
Consolidated Sponsored Investment Products - Schedule of Contractual Maturities for Debt of CSIPs (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Schedule Of Consolidated Sponsored Investment Products [Line Items] | ||
Total | $ 1,044.2 | $ 1,401.2 |
Consolidated SIPs [Member] | ||
Schedule Of Consolidated Sponsored Investment Products [Line Items] | ||
2018 | 5.8 | |
2019 | 47.6 | |
Total | $ 53.4 | $ 682.2 |
Consolidated Sponsored Investment Products - Schedule of Redeemable Noncontrolling Interest of CSIPs (Details) - USD ($) $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Oct. 01, 2016 |
|
Temporary Equity [Line Items] | ||||
Balance at beginning of year | $ 61.1 | $ 59.6 | $ 234.8 | |
Net income (loss) | 53.0 | 1.6 | (6.1) | |
Net subscriptions and other | 17.3 | (91.8) | (49.0) | |
Net consolidations (deconsolidations) | (9.3) | |||
Balance at End of Year | 1,941.9 | 61.1 | 59.6 | |
Redeemable Noncontrolling Interests [Member] | ||||
Temporary Equity [Line Items] | ||||
Net subscriptions and other | 884.3 | 79.9 | 149.4 | |
Net consolidations (deconsolidations) | $ 118.8 | (80.0) | $ (318.5) | |
ASU 2015-02 [Member] | ||||
Temporary Equity [Line Items] | ||||
Adoption of new accounting guidance | $ (325.9) | |||
ASU 2015-02 [Member] | Redeemable Noncontrolling Interests [Member] | ||||
Temporary Equity [Line Items] | ||||
Adoption of new accounting guidance | $ 824.7 |
Nonconsolidated Variable Interest Entities - Narrative (Details) - INDIA $ in Millions |
12 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Variable Interest Entity [Line Items] | |
Number of SIPs | 6 |
Debt Securities [Member] | |
Variable Interest Entity [Line Items] | |
Purchase of debt securities | $ 182.7 |
Nonconsolidated Variable Interest Entities Nonconsolidated Variable Interest Entities (Details) - Nonconsolidated VIEs [Member] - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Variable Interest Entity [Line Items] | ||
Maximum exposure to loss | $ 284.9 | $ 98.7 |
Receivables [Member] | ||
Variable Interest Entity [Line Items] | ||
Maximum exposure to loss | 155.6 | 21.4 |
Investments [Member] | ||
Variable Interest Entity [Line Items] | ||
Maximum exposure to loss | $ 129.3 | $ 77.3 |
Taxes on Income - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Tax Disclosure [Abstract] | |||
Tax benefit (shortfall) associated with stock-based compensation plans | $ (8.7) | $ (5.9) | $ 10.9 |
Reduced rates on income tax expense, amount | $ 28.8 | $ 34.2 | $ 68.3 |
Reduced rates on income tax expense, income tax benefits per diluted share | $ 0.05 | $ 0.06 | $ 0.11 |
Income Tax Examination [Line Items] | |||
Valuation allowance | $ 0.6 | $ (9.4) | |
Cumulative undistributed foreign earnings | 9,000.0 | ||
Accrued interest on uncertain tax positions | 10.4 | 9.6 | |
Unrecognized Tax Benefits, Interest on Income Taxes Expense | 1.6 | $ (1.3) | $ (6.6) |
Estimated decrease in unrecognized tax benefits within the next twelve months | 12.6 | ||
Foreign Tax Authority [Member] | |||
Income Tax Examination [Line Items] | |||
Operating loss carry-forwards | 131.4 | ||
State [Member] | |||
Income Tax Examination [Line Items] | |||
Operating loss carry-forwards | 32.2 | ||
Expire between 2019 and 2038 [Member] | Foreign Tax Authority [Member] | |||
Income Tax Examination [Line Items] | |||
Operating loss carry-forwards | $ 62.4 |
Taxes on Income - Schedule of Taxes on Income (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Tax Disclosure [Abstract] | |||
Federal | $ 585.0 | $ 582.8 | $ 733.9 |
State | 65.3 | 47.5 | 83.1 |
Non-U.S. | 100.2 | 102.8 | 121.1 |
Deferred expense (benefit) | 8.9 | 9.0 | (14.4) |
Total | $ 759.4 | $ 742.1 | $ 923.7 |
Taxes on Income - Schedule of Income Before Taxes (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Tax Disclosure [Abstract] | |||
U.S. | $ 1,594.5 | $ 1,641.7 | $ 2,026.4 |
Non-U.S. | 954.6 | 858.1 | 1,002.0 |
Total | $ 2,549.1 | $ 2,499.8 | $ 3,028.4 |
Taxes on Income - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Deferred Tax Assets | ||
Deferred compensation and employee benefits | $ 60.2 | $ 52.9 |
Stock-based compensation | 36.1 | 36.6 |
Net operating loss carry-forwards | 28.4 | 32.5 |
Tax benefit for uncertain tax positions | 17.9 | 19.8 |
Other | 23.9 | 12.5 |
Total deferred tax assets | 166.5 | 154.3 |
Valuation allowance for net operating loss carry-forwards | (25.2) | (24.6) |
Deferred tax assets, net of valuation allowance | 141.3 | 129.7 |
Deferred Tax Liabilities | ||
Goodwill and other purchased intangibles | 205.2 | 202.8 |
Depreciation on fixed assets | 35.3 | 18.0 |
Investments in partnerships | 26.0 | 17.9 |
Deferred commissions | 15.0 | 18.3 |
Other | 14.6 | 16.5 |
Total deferred tax liabilities | 296.1 | 273.5 |
Net Deferred Tax Liability | $ 154.8 | $ 143.8 |
Taxes on Income - Components of Net Deferred Tax Assets or Liabilities as Classified in the Consolidated Balance Sheets (Details) - USD ($) $ in Millions |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Other assets | $ 15.8 | $ 17.7 |
Deferred tax liabilities | 170.6 | 161.5 |
Net Deferred Tax Liability | $ 154.8 | $ 143.8 |
Taxes on Income - Reconciliation of the Amount of Tax Expense at the Federal Statutory Rate and Taxes on Income (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Effective Income Tax Rate Reconciliation, Percent [Abstract] | |||
Federal taxes at statutory rate | $ 892.2 | $ 874.9 | $ 1,059.9 |
Federal statutory rate | 35.00% | 35.00% | 35.00% |
State taxes, net of federal tax effect | $ 41.4 | $ 42.7 | $ 51.6 |
State taxes, net of federal tax effect rate | 1.60% | 1.70% | 1.70% |
Effect of non-U.S. operations | $ (146.2) | $ (153.0) | $ (148.5) |
Effect of non-U.S. operation rate | (5.70%) | (6.10%) | (4.90%) |
Effect of net income attributable to noncontrolling interests | $ (32.6) | $ (10.9) | $ (24.3) |
Effect of net income attributable to noncontrolling interest rate | (1.30%) | (0.40%) | (0.80%) |
Other | $ 4.6 | $ (11.6) | $ (15.0) |
Other rate | 0.20% | (0.50%) | (0.50%) |
Tax Provision | $ 759.4 | $ 742.1 | $ 923.7 |
Effective Tax Rate | 29.80% | 29.70% | 30.50% |
Taxes on Income - Reconciliation of Gross Unrecognized Tax Benefits (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Balance at beginning of year | $ 82.1 | $ 105.2 | $ 118.2 |
Additions for tax positions of prior years | 6.6 | 0.6 | 12.6 |
Reductions for tax positions of prior years | (1.3) | (9.0) | (3.4) |
Tax positions related to the current year | 11.6 | 12.9 | 16.2 |
Settlements with taxing authorities | (5.2) | (5.4) | (0.1) |
Expirations of statute of limitations | (12.7) | (22.2) | (38.3) |
Balance at End of Year | $ 81.1 | $ 82.1 | $ 105.2 |
Commitments and Contingencies - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Loss Contingencies [Line Items] | |||
Lease expense | $ 56.3 | $ 69.3 | $ 58.0 |
Sublease income | 0.4 | $ 1.6 | $ 1.7 |
Future minimum rentals to be received under non-cancelable subleases | 0.5 | ||
Committed capital contributions | 73.5 | ||
Plaintiff Cryer 401K Plan [Member] | |||
Loss Contingencies [Line Items] | |||
The plaintiff alleges that Plan losses exceed | 79.0 | ||
Plaintiff Fernandez 401K Plan [Member] | |||
Loss Contingencies [Line Items] | |||
The plaintiff alleges that Plan losses exceed | $ 60.0 |
Commitments and Contingencies - Future Minimum Lease Payments under Long-Term Non-Cancelable Operating Leases (Details) $ in Millions |
Sep. 30, 2017
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2018 | $ 44.7 |
2019 | 41.1 |
2020 | 35.6 |
2021 | 31.4 |
2022 | 28.4 |
Thereafter | 185.8 |
Total Minimum Lease Payments | $ 367.0 |
Stock-Based Compensation - Narrative (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Share-based Compensation [Abstract] | |||
Number of shares authorized for issuance under the USIP | 120.0 | ||
Number of shares available for grant under USIP | 21.0 | ||
Unrecognized compensation expense related to nonvested stock and stock unit awards, net of estimated forfeitures | $ 118.9 | ||
Remaining weighted-average vesting period | 1 year 7 months 18 days | ||
Weighted-average grant-date fair values of stock awards and stock unit awards granted | $ 34.23 | $ 40.88 | $ 55.65 |
Fair value of stock awards and stock unit awards vested | $ 104.0 | $ 92.8 | $ 115.2 |
Total shares issued under ESIP | 0.8 | ||
Shares reserved for future issuance under ESIP | 3.6 |
Stock-Based Compensation - Summary of Stock-Based Compensation Expense (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Stock-based compensation expenses | $ 123.4 | $ 131.5 | $ 140.0 |
Stock and stock unit awards [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Stock-based compensation expenses | 117.0 | 125.3 | 133.6 |
Employee stock investment plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | |||
Stock-based compensation expenses | $ 6.4 | $ 6.2 | $ 6.4 |
Stock-Based Compensation - Summary of Nonvested Stock and Stock Unit Award Activity (Details) - $ / shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |||
Nonvested balance at September 30, 2016 | 3,657 | ||
Granted | 3,863 | ||
Vested | (2,437) | ||
Forfeited/canceled | (539) | ||
Nonvested Balance at September 30, 2017 | 4,544 | 3,657 | |
Nonvested beginning balance, Weighted Average Grant Date Fair Value | $ 45.67 | ||
Weighted Average Grant Date Fair Value of shares granted | 34.23 | $ 40.88 | $ 55.65 |
Weighted Average Grant Date Fair Value of shares vested | 43.90 | ||
Weighted Average Grant Date Fair Value of shares forfeited/canceled | 42.86 | ||
Nonvested ending balance, Weighted Average Grant Date Fair Value | $ 37.23 | $ 45.67 | |
Time-Based Shares [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |||
Nonvested balance at September 30, 2016 | 2,369 | ||
Granted | 2,739 | ||
Vested | (2,082) | ||
Forfeited/canceled | (243) | ||
Nonvested Balance at September 30, 2017 | 2,783 | 2,369 | |
Performance-Based Shares [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |||
Nonvested balance at September 30, 2016 | 1,288 | ||
Granted | 1,124 | ||
Vested | (355) | ||
Forfeited/canceled | (296) | ||
Nonvested Balance at September 30, 2017 | 1,761 | 1,288 |
Defined Contribution Plans - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Compensation and Retirement Disclosure [Abstract] | |||
Participants annual maximum contribution to defined contribution plan, pre-tax | 50.00% | ||
Percentage of annual bonus eligible for defined contribution to plan | 100.00% | ||
Expenses recognized for defined contribution plans | $ 45.5 | $ 46.8 | $ 46.4 |
Segment and Geographic Information - Narrative (Details) |
12 Months Ended |
---|---|
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Number of operating segments | 1 |
Segment and Geographic Information - Schedule of Operating Revenues, Property and Equipment by Geographic Areas (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Operating Revenues | $ 6,392.2 | $ 6,618.0 | $ 7,948.7 |
Property and Equipment, Net | 517.2 | 523.2 | 510.1 |
United States [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Operating Revenues | 3,898.4 | 4,063.6 | 4,634.2 |
Property and Equipment, Net | 426.1 | 428.0 | 406.9 |
Luxembourg [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Operating Revenues | 1,652.8 | 1,707.9 | 2,278.6 |
Asia-Pacific [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Operating Revenues | 281.0 | 267.9 | 311.8 |
Property and Equipment, Net | 60.2 | 62.9 | 68.9 |
Canada [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Operating Revenues | 260.8 | 273.8 | 339.0 |
Property and Equipment, Net | 5.3 | 3.1 | 4.5 |
The Bahamas [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Operating Revenues | 205.9 | 204.6 | 250.2 |
Property and Equipment, Net | 13.4 | 14.3 | 14.6 |
Europe, the Middle East and Africa [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Property and Equipment, Net | 12.2 | 14.9 | 14.8 |
Europe, the Middle East and Africa, excluding Luxembourg [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Operating Revenues | 83.2 | 94.0 | 126.8 |
Latin America [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Operating Revenues | 10.1 | 6.2 | 8.1 |
Property and Equipment, Net | $ 0.0 | $ 0.0 | $ 0.4 |
Other Income (Expenses) - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Other Income and Expenses [Abstract] | |||
Proceeds from the sale of available-for-sale securities | $ 51.6 | $ 269.4 | $ 221.3 |
Net gains (losses) recognized on trading investment securities | 5.0 | 27.9 | (20.3) |
Net gains (losses) recognized on trading investment securities of consolidated SIPs | $ 21.9 | $ 9.4 | $ (17.7) |
Other Income (Expenses) - Schedule of Other Income (Expense) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Other Income and Expenses [Abstract] | |||
Dividend income | $ 13.9 | $ 20.6 | $ 10.3 |
Interest income | 74.9 | 36.5 | 10.8 |
Gains (losses) on trading investment securities, net | 12.2 | 50.1 | (22.3) |
Realized gains on sale of investment securities, available-for-sale | 5.6 | 32.1 | 28.1 |
Realized losses on sale of investment securities, available-for-sale | (1.6) | (3.2) | (4.0) |
Income (losses) from investments in equity method investees | 107.9 | 56.7 | (63.2) |
Other-than-temporary impairment of investments | (0.8) | (11.1) | (10.0) |
Gains (losses) on investments of consolidated SIPs, net | 118.2 | (13.5) | 18.0 |
Foreign currency exchange gains (losses), net | (16.0) | (2.9) | 57.0 |
Other, net | 22.0 | 18.7 | 15.7 |
Total | 336.3 | 184.0 | 40.4 |
Interest Expense | (51.5) | (49.9) | (39.6) |
Other Income, Net | $ 284.8 | $ 134.1 | $ 0.8 |
Accumulated Other Comprehensive Income (Loss) - Changes in Accumulated Other Comprehensive Income (Loss) by Component (Details) - USD ($) $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Oct. 01, 2016 |
|
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Balance at beginning of period | $ (347.4) | $ (314.2) | ||
Other comprehensive income (loss) before reclassifications, net of tax | 74.0 | (18.0) | ||
Reclassifications to net investment and other income, net of tax | (4.3) | (15.2) | ||
Total other comprehensive income (loss) | 69.7 | (33.2) | $ (196.5) | |
Balance at end of period | (284.8) | (347.4) | (314.2) | |
Unrealized Gains on Investments [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Balance at beginning of period | 6.8 | 19.3 | ||
Other comprehensive income (loss) before reclassifications, net of tax | 6.5 | 2.7 | ||
Reclassifications to net investment and other income, net of tax | (4.3) | (15.2) | ||
Total other comprehensive income (loss) | 2.2 | (12.5) | ||
Balance at end of period | 2.2 | 6.8 | 19.3 | |
Currency Translation Adjustments [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Balance at beginning of period | (346.1) | (327.8) | ||
Other comprehensive income (loss) before reclassifications, net of tax | 65.4 | (18.3) | ||
Reclassifications to net investment and other income, net of tax | 0.0 | 0.0 | ||
Total other comprehensive income (loss) | 65.4 | (18.3) | ||
Balance at end of period | (281.0) | (346.1) | (327.8) | |
Unrealized Losses on Defined Benefit Plans [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Balance at beginning of period | (8.1) | (5.7) | ||
Other comprehensive income (loss) before reclassifications, net of tax | 2.1 | (2.4) | ||
Reclassifications to net investment and other income, net of tax | 0.0 | 0.0 | ||
Total other comprehensive income (loss) | 2.1 | (2.4) | ||
Balance at end of period | (6.0) | (8.1) | (5.7) | |
Other equity [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Total other comprehensive income (loss) | $ 69.7 | (33.2) | $ (196.5) | |
ASU 2015-02 [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Adoption of new accounting guidance | $ (325.9) | |||
ASU 2015-02 [Member] | Unrealized Gains on Investments [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Adoption of new accounting guidance | $ (6.8) | |||
ASU 2015-02 [Member] | Currency Translation Adjustments [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Adoption of new accounting guidance | (0.3) | |||
ASU 2015-02 [Member] | Unrealized Losses on Defined Benefit Plans [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Adoption of new accounting guidance | 0.0 | |||
ASU 2015-02 [Member] | Other equity [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Adoption of new accounting guidance | $ (7.1) |
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