(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Exhibit No. | Description | ||
99.1 | |||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
FRANKLIN RESOURCES, INC. | ||
Date: | October 27, 2020 | /s/ Matthew Nicholls |
Matthew Nicholls | ||
Executive Vice President and Chief Financial Officer | ||
Date: | October 27, 2020 | /s/ Gwen L. Shaneyfelt |
Gwen L. Shaneyfelt | ||
Chief Accounting Officer |
Contact: | Franklin Resources, Inc. |
Investor Relations: Brian Sevilla (650) 312-4091, brian.sevilla@franklintempleton.com | |
Media Relations: Matt Walsh (650) 312-2245, matthew.walsh@franklintempleton.com | |
investors.franklinresources.com |
Quarter Ended | % Change | Quarter Ended | % Change | Fiscal Year Ended September 30, | % Change | ||||||||||||||||||||||||
30-Sep-20 | 30-Jun-20 | Qtr. vs. Qtr. | 30-Sep-19 | Year vs. Year | 2020 | 2019 | |||||||||||||||||||||||
Financial Results2 | |||||||||||||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||||||||||||
Operating revenues | $ | 1,705.0 | $ | 1,161.1 | 47 | % | $ | 1,422.8 | 20 | % | $ | 5,566.5 | $ | 5,669.4 | (2 | %) | |||||||||||||
Operating income | 103.6 | 232.5 | (55 | %) | 365.1 | (72 | %) | 1,048.9 | 1,466.9 | (28 | %) | ||||||||||||||||||
Operating margin | 6.1 | % | 20.0 | % | 25.7 | % | 18.8 | % | 25.9 | % | |||||||||||||||||||
Net income¹ | $ | 78.9 | $ | 290.4 | (73 | %) | $ | 306.4 | (74 | %) | $ | 798.9 | $ | 1,195.7 | (33 | %) | |||||||||||||
Diluted earnings per share | 0.15 | 0.58 | (74 | %) | 0.61 | (75 | %) | 1.59 | 2.35 | (32 | %) | ||||||||||||||||||
As adjusted (non-GAAP):3 | |||||||||||||||||||||||||||||
Adjusted operating income | $ | 428.9 | $ | 270.8 | 58 | % | $ | 406.8 | 5 | % | $ | 1,491.1 | $ | 1,654.2 | (10 | %) | |||||||||||||
Adjusted operating margin | 34.7 | % | 34.0 | % | 42.1 | % | 38.5 | % | 42.6 | % | |||||||||||||||||||
Adjusted net income | $ | 291.0 | $ | 348.9 | (17 | %) | $ | 358.4 | (19 | %) | $ | 1,311.0 | $ | 1,331.3 | (2 | %) | |||||||||||||
Adjusted diluted earnings per share | 0.56 | 0.70 | (20 | %) | 0.71 | (21 | %) | 2.61 | 2.62 | 0 | % | ||||||||||||||||||
Assets Under Management | |||||||||||||||||||||||||||||
(in billions) | |||||||||||||||||||||||||||||
Ending | $ | 1,418.9 | $ | 622.8 | 128 | % | $ | 692.6 | 105 | % | $ | 1,418.9 | $ | 692.6 | 105 | % | |||||||||||||
Average4 | 1,227.8 | 605.0 | 103 | % | 702.0 | 75 | % | 832.9 | 697.0 | 19 | % | ||||||||||||||||||
Long-term net flows | (12.6 | ) | (11.3 | ) | (12.8 | ) | (61.6 | ) | (31.8 | ) |
FRANKLIN RESOURCES, INC. PRELIMINARY CONSOLIDATED STATEMENTS OF INCOME2 Unaudited | ||||||||||||||||||||||
(in millions, except per share data) | Three Months Ended September 30, | % Change | Twelve Months Ended September 30, | % Change | ||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||
Investment management fees | $ | 1,284.6 | $ | 1,001.6 | 28 | % | $ | 3,981.7 | $ | 3,985.2 | 0 | % | ||||||||||
Sales and distribution fees | 366.7 | 363.8 | 1 | % | 1,362.0 | 1,444.6 | (6 | %) | ||||||||||||||
Shareholder servicing fees | 45.7 | 51.4 | (11 | %) | 195.1 | 216.3 | (10 | %) | ||||||||||||||
Other | 8.0 | 6.0 | 33 | % | 27.7 | 23.3 | 19 | % | ||||||||||||||
Total operating revenues | 1,705.0 | 1,422.8 | 20 | % | 5,566.5 | 5,669.4 | (2 | %) | ||||||||||||||
Operating Expenses | ||||||||||||||||||||||
Compensation and benefits | 732.3 | 382.4 | 92 | % | 1,873.9 | 1,584.7 | 18 | % | ||||||||||||||
Sales, distribution and marketing | 466.7 | 463.3 | 1 | % | 1,703.1 | 1,819.6 | (6 | %) | ||||||||||||||
Information systems and technology | 102.0 | 69.8 | 46 | % | 288.4 | 258.5 | 12 | % | ||||||||||||||
Occupancy | 47.5 | 38.8 | 22 | % | 147.9 | 133.6 | 11 | % | ||||||||||||||
Amortization of intangible assets | 40.1 | 5.0 | 702 | % | 54.0 | 14.7 | 267 | % | ||||||||||||||
General, administrative and other | 212.8 | 98.4 | 116 | % | 450.3 | 391.4 | 15 | % | ||||||||||||||
Total operating expenses | 1,601.4 | 1,057.7 | 51 | % | 4,517.6 | 4,202.5 | 7 | % | ||||||||||||||
Operating Income | 103.6 | 365.1 | (72 | %) | 1,048.9 | 1,466.9 | (28 | %) | ||||||||||||||
Other Income (Expenses) | ||||||||||||||||||||||
Investment and other income (losses), net | 25.1 | 22.1 | 14 | % | (38.4 | ) | 141.4 | NM | ||||||||||||||
Interest expense | (18.4 | ) | (6.4 | ) | 188 | % | (33.4 | ) | (22.4 | ) | 49 | % | ||||||||||
Investment and other income of consolidated investment products,net | 95.6 | 18.9 | 406 | % | 70.2 | 78.8 | (11 | %) | ||||||||||||||
Expenses of consolidated investment products | (6.3 | ) | (3.9 | ) | 62 | % | (29.4 | ) | (16.9 | ) | 74 | % | ||||||||||
Other income (expenses), net | 96.0 | 30.7 | 213 | % | (31.0 | ) | 180.9 | NM | ||||||||||||||
Income before taxes | 199.6 | 395.8 | (50 | %) | 1,017.9 | 1,647.8 | (38 | %) | ||||||||||||||
Taxes on income5 | 73.1 | 86.5 | (15 | %) | 230.8 | 442.3 | (48 | %) | ||||||||||||||
Net income | 126.5 | 309.3 | (59 | %) | 787.1 | 1,205.5 | (35 | %) | ||||||||||||||
Less: net income (loss) attributable to | ||||||||||||||||||||||
Redeemable noncontrolling interests | 36.8 | — | NM | 48.6 | 6.2 | 684 | % | |||||||||||||||
Nonredeemable noncontrolling interests | 10.8 | 2.9 | 272 | % | (60.4 | ) | 3.6 | NM | ||||||||||||||
Net Income Attributable to Franklin Resources, Inc. | $ | 78.9 | $ | 306.4 | (74 | %) | $ | 798.9 | $ | 1,195.7 | (33 | %) | ||||||||||
Earnings per Share | ||||||||||||||||||||||
Basic | $ | 0.15 | $ | 0.61 | (75 | %) | $ | 1.59 | $ | 2.35 | (32 | %) | ||||||||||
Diluted | 0.15 | 0.61 | (75 | %) | 1.59 | 2.35 | (32 | %) | ||||||||||||||
Dividends Declared per Share | $ | 0.27 | $ | 0.26 | 4 | % | $ | 1.08 | $ | 1.04 | 4 | % | ||||||||||
Average Shares Outstanding | ||||||||||||||||||||||
Basic | 491.1 | 497.9 | (1 | %) | 491.9 | 503.6 | (2 | %) | ||||||||||||||
Diluted | 491.7 | 498.8 | (1 | %) | 492.4 | 504.3 | (2 | %) | ||||||||||||||
Operating Margin | 6.1 | % | 25.7 | % | 18.8 | % | 25.9 | % |
FRANKLIN RESOURCES, INC. PRELIMINARY CONSOLIDATED STATEMENTS OF INCOME2 Unaudited | |||||||||||||||||||||||
(in millions, except per share data) | Three Months Ended | % Change | Three Months Ended | ||||||||||||||||||||
30-Sep-20 | 30-Jun-20 | 31-Mar-20 | 31-Dec-19 | 30-Sep-19 | |||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||
Investment management fees | $ | 1,284.6 | $ | 809.2 | 59 | % | $ | 908.2 | $ | 979.7 | $ | 1,001.6 | |||||||||||
Sales and distribution fees | 366.7 | 302.1 | 21 | % | 341.7 | 351.5 | 363.8 | ||||||||||||||||
Shareholder servicing fees | 45.7 | 44.6 | 2 | % | 54.8 | 50.0 | 51.4 | ||||||||||||||||
Other | 8.0 | 5.2 | 54 | % | 6.5 | 8.0 | 6.0 | ||||||||||||||||
Total operating revenues | 1,705.0 | 1,161.1 | 47 | % | 1,311.2 | 1,389.2 | 1,422.8 | ||||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Compensation and benefits | 732.3 | 386.5 | 89 | % | 365.7 | 389.4 | 382.4 | ||||||||||||||||
Sales, distribution and marketing | 466.7 | 368.6 | 27 | % | 423.9 | 443.9 | 463.3 | ||||||||||||||||
Information systems and technology | 102.0 | 62.1 | 64 | % | 61.8 | 62.5 | 69.8 | ||||||||||||||||
Occupancy | 47.5 | 31.5 | 51 | % | 34.4 | 34.5 | 38.8 | ||||||||||||||||
Amortization of intangible assets | 40.1 | 4.7 | 753 | % | 4.4 | 4.8 | 5.0 | ||||||||||||||||
General, administrative and other | 212.8 | 75.2 | 183 | % | 81.1 | 81.2 | 98.4 | ||||||||||||||||
Total operating expenses | 1,601.4 | 928.6 | 72 | % | 971.3 | 1,016.3 | 1,057.7 | ||||||||||||||||
Operating Income | 103.6 | 232.5 | (55 | %) | 339.9 | 372.9 | 365.1 | ||||||||||||||||
Other Income (Expenses) | |||||||||||||||||||||||
Investment and other income (losses), net | 25.1 | 49.6 | (49 | %) | (181.0 | ) | 67.9 | 22.1 | |||||||||||||||
Interest expense | (18.4 | ) | (5.2 | ) | 254 | % | (3.7 | ) | (6.1 | ) | (6.4 | ) | |||||||||||
Investment and other income of consolidated investment products, net | 95.6 | 0.3 | NM | (40.9 | ) | 15.2 | 18.9 | ||||||||||||||||
Expenses of consolidated investment products | (6.3 | ) | (7.4 | ) | (15 | %) | (11.4 | ) | (4.3 | ) | (3.9 | ) | |||||||||||
Other income (expenses), net | 96.0 | 37.3 | 157 | % | (237.0 | ) | 72.7 | 30.7 | |||||||||||||||
Income before taxes | 199.6 | 269.8 | (26 | %) | 102.9 | 445.6 | 395.8 | ||||||||||||||||
Taxes on income5 | 73.1 | 16.1 | 354 | % | 44.1 | 97.5 | 86.5 | ||||||||||||||||
Net income | 126.5 | 253.7 | (50 | %) | 58.8 | 348.1 | 309.3 | ||||||||||||||||
Less: net income (loss) attributable to | |||||||||||||||||||||||
Redeemable noncontrolling interests | 36.8 | 31.3 | 18 | % | (28.5 | ) | 9.0 | — | |||||||||||||||
Nonredeemable noncontrolling interests | 10.8 | (68.0 | ) | NM | 8.2 | (11.4 | ) | 2.9 | |||||||||||||||
Net Income Attributable to Franklin Resources, Inc. | $ | 78.9 | $ | 290.4 | (73 | %) | $ | 79.1 | $ | 350.5 | $ | 306.4 | |||||||||||
Earnings per Share | |||||||||||||||||||||||
Basic | $ | 0.15 | $ | 0.58 | (74 | %) | $ | 0.16 | $ | 0.70 | $ | 0.61 | |||||||||||
Diluted | 0.15 | 0.58 | (74 | %) | 0.16 | 0.70 | 0.61 | ||||||||||||||||
Dividends Declared per Share | $ | 0.27 | $ | 0.27 | 0% | $ | 0.27 | $ | 0.27 | $ | 0.26 | ||||||||||||
Average Shares Outstanding | |||||||||||||||||||||||
Basic | 491.1 | 490.4 | 0 | % | 491.5 | 494.7 | 497.9 | ||||||||||||||||
Diluted | 491.7 | 490.7 | 0 | % | 491.8 | 495.3 | 498.8 | ||||||||||||||||
Operating Margin | 6.1 | % | 20.0 | % | 25.9 | % | 26.8 | % | 25.7 | % |
(in billions) | Three Months Ended September 30, | % Change | Twelve Months Ended September 30, | % Change | ||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Beginning AUM | $ | 622.8 | $ | 715.2 | (13 | %) | $ | 692.6 | $ | 717.1 | (3 | %) | ||||||||||
Long-term inflows | 65.4 | 34.8 | 88 | % | 182.4 | 175.0 | 4 | % | ||||||||||||||
Long-term outflows | (78.0 | ) | (47.6 | ) | 64 | % | (244.0 | ) | (206.8 | ) | 18 | % | ||||||||||
Long-term net flows | (12.6 | ) | (12.8 | ) | (2 | %) | (61.6 | ) | (31.8 | ) | 94 | % | ||||||||||
Cash management net flows | (11.1 | ) | 0.5 | NM | (9.9 | ) | 0.9 | NM | ||||||||||||||
Total net flows | (23.7 | ) | (12.3 | ) | 93 | % | (71.5 | ) | (30.9 | ) | 131 | % | ||||||||||
Acquisitions | 797.4 | — | NM | 806.5 | 26.4 | NM | ||||||||||||||||
Net market change, distributions and other6 | 22.4 | (10.3 | ) | NM | (8.7 | ) | (20.0 | ) | (57 | %) | ||||||||||||
Ending AUM | $ | 1,418.9 | $ | 692.6 | 105 | % | $ | 1,418.9 | $ | 692.6 | 105 | % | ||||||||||
Average AUM | $ | 1,227.8 | $ | 702.0 | 75 | % | $ | 832.9 | $ | 697.0 | 19 | % |
(in billions) | 30-Sep-20 | 30-Jun-20 | % Change | 31-Mar-20 | 31-Dec-19 | 30-Sep-19 | |||||||||||||||||
Fixed Income | $ | 656.7 | $ | 211.3 | 211 | % | $ | 214.9 | $ | 243.0 | $ | 250.6 | |||||||||||
Equity | 432.0 | 235.8 | 83 | % | 200.9 | 273.2 | 263.9 | ||||||||||||||||
Multi-Asset | 133.8 | 118.5 | 13 | % | 107.4 | 125.6 | 123.6 | ||||||||||||||||
Alternative | 124.0 | 46.8 | 165 | % | 46.4 | 46.1 | 45.0 | ||||||||||||||||
Cash Management | 72.4 | 10.4 | 596 | % | 10.7 | 10.4 | 9.5 | ||||||||||||||||
Total AUM | $ | 1,418.9 | $ | 622.8 | 128 | % | $ | 580.3 | $ | 698.3 | $ | 692.6 | |||||||||||
Average AUM for the Three-Month Period | $ | 1,227.8 | $ | 605.0 | 103 | % | $ | 655.8 | $ | 693.8 | $ | 702.0 |
As of and for the Three Months Ended | |||||||||||||||||||||
(in billions) | 30-Sep-20 | % of Total | 30-Jun-20 | % of Total | 30-Sep-19 | % of Total | |||||||||||||||
Long-Term Inflows | |||||||||||||||||||||
United States | $ | 47.4 | 72 | % | $ | 24.5 | 70 | % | $ | 21.6 | 62 | % | |||||||||
International | 18.0 | 28 | % | 10.6 | 30 | % | 13.2 | 38 | % | ||||||||||||
Total long-term inflows | $ | 65.4 | 100 | % | $ | 35.1 | 100 | % | $ | 34.8 | 100 | % | |||||||||
Long-Term Outflows | |||||||||||||||||||||
United States | $ | (50.9 | ) | 65 | % | $ | (30.8 | ) | 66 | % | $ | (29.4 | ) | 62 | % | ||||||
International | (27.1 | ) | 35 | % | (15.6 | ) | 34 | % | (18.2 | ) | 38 | % | |||||||||
Total long-term outflows | $ | (78.0 | ) | 100 | % | $ | (46.4 | ) | 100 | % | $ | (47.6 | ) | 100 | % | ||||||
AUM | |||||||||||||||||||||
United States | $ | 1,024.0 | 72 | % | $ | 439.7 | 71 | % | $ | 477.9 | 69 | % | |||||||||
International | 394.9 | 28 | % | 183.1 | 29 | % | 214.7 | 31 | % | ||||||||||||
Total AUM | $ | 1,418.9 | 100 | % | $ | 622.8 | 100 | % | $ | 692.6 | 100 | % |
(in billions) | ||||||||||||||||||||||||
for the three months ended September 30, 2020 | Fixed Income | Equity | Multi-Asset | Alternative | Cash Management | Total | ||||||||||||||||||
AUM at July 1, 2020 | $ | 211.3 | $ | 235.8 | $ | 118.5 | $ | 46.8 | $ | 10.4 | $ | 622.8 | ||||||||||||
Long-term inflows | 34.4 | 19.5 | 7.9 | 3.6 | — | 65.4 | ||||||||||||||||||
Long-term outflows | (36.8 | ) | (29.0 | ) | (9.6 | ) | (2.6 | ) | — | (78.0 | ) | |||||||||||||
Long-term net flows | (2.4 | ) | (9.5 | ) | (1.7 | ) | 1.0 | — | (12.6 | ) | ||||||||||||||
Cash management net flows | — | — | — | — | (11.1 | ) | (11.1 | ) | ||||||||||||||||
Total net flows | (2.4 | ) | (9.5 | ) | (1.7 | ) | 1.0 | (11.1 | ) | (23.7 | ) | |||||||||||||
Acquisition | 449.4 | 183.2 | 13.4 | 75.8 | 75.6 | 797.4 | ||||||||||||||||||
Net market change, distributions and other6 | (1.6 | ) | 22.5 | 3.6 | 0.4 | (2.5 | ) | 22.4 | ||||||||||||||||
AUM at September 30, 2020 | $ | 656.7 | $ | 432.0 | $ | 133.8 | $ | 124.0 | $ | 72.4 | $ | 1,418.9 |
(in billions) | ||||||||||||||||||||||||
for the three months ended June 30, 2020 | Fixed Income | Equity | Multi-Asset | Alternative | Cash Management | Total | ||||||||||||||||||
AUM at April 1, 2020 | $ | 214.9 | $ | 200.9 | $ | 107.4 | $ | 46.4 | $ | 10.7 | $ | 580.3 | ||||||||||||
Long-term inflows | 13.0 | 14.0 | 6.3 | 1.8 | — | 35.1 | ||||||||||||||||||
Long-term outflows | (21.4 | ) | (17.1 | ) | (6.9 | ) | (1.0 | ) | — | (46.4 | ) | |||||||||||||
Long-term net flows | (8.4 | ) | (3.1 | ) | (0.6 | ) | 0.8 | — | (11.3 | ) | ||||||||||||||
Cash management net flows | — | — | — | — | (0.3 | ) | (0.3 | ) | ||||||||||||||||
Total net flows | (8.4 | ) | (3.1 | ) | (0.6 | ) | 0.8 | (0.3 | ) | (11.6 | ) | |||||||||||||
Acquisition | — | — | 3.5 | — | — | 3.5 | ||||||||||||||||||
Net market change, distributions and other6 | 4.8 | 38.0 | 8.2 | (0.4 | ) | — | 50.6 | |||||||||||||||||
AUM at June 30, 2020 | $ | 211.3 | $ | 235.8 | $ | 118.5 | $ | 46.8 | $ | 10.4 | $ | 622.8 |
(in billions) | ||||||||||||||||||||||||
for the three months ended September 30, 2019 | Fixed Income | Equity | Multi-Asset | Alternative | Cash Management | Total | ||||||||||||||||||
AUM at July 1, 2019 | $ | 260.2 | $ | 276.6 | $ | 125.0 | $ | 44.2 | $ | 9.2 | $ | 715.2 | ||||||||||||
Long-term inflows | 17.1 | 9.9 | 6.0 | 1.8 | — | 34.8 | ||||||||||||||||||
Long-term outflows | (20.2 | ) | (19.3 | ) | (6.7 | ) | (1.4 | ) | — | (47.6 | ) | |||||||||||||
Long-term net flows | (3.1 | ) | (9.4 | ) | (0.7 | ) | 0.4 | — | (12.8 | ) | ||||||||||||||
Cash management net flows | — | — | — | — | 0.5 | 0.5 | ||||||||||||||||||
Total net flows | (3.1 | ) | (9.4 | ) | (0.7 | ) | 0.4 | 0.5 | (12.3 | ) | ||||||||||||||
Net market change, distributions and other6 | (6.5 | ) | (3.3 | ) | (0.7 | ) | 0.4 | (0.2 | ) | (10.3 | ) | |||||||||||||
AUM at September 30, 2019 | $ | 250.6 | $ | 263.9 | $ | 123.6 | $ | 45.0 | $ | 9.5 | $ | 692.6 |
• | Elimination of operating revenues upon consolidation of investment products. |
• | Acquisition-related retention compensation. |
• | Impact on compensation and benefits expense from gains and losses on investments related to Legg Mason deferred compensation plans and seed investments, which is offset in investment and other income (expense), net. |
• | Other acquisition-related expenses including professional fees and fair value adjustments related to contingent consideration liabilities. |
• | Amortization and impairment of intangible assets and goodwill. |
• | Special termination benefits related to workforce optimization initiatives related to the acquisition of Legg Mason in the fiscal year ended September 30, 2020 (“fiscal year 2020”), and voluntary separation and workforce reduction initiatives of 4.5% of our global workforce in the fiscal year ended September 30, 2019 (“fiscal year 2019”). |
• | Acquisition-related performance-based investment management fees which are passed through as compensation and benefits expense. |
• | Sales and distribution fees and a portion of investment management fees allocated to cover sales, distribution and marketing expenses paid to the financial advisers and other intermediaries who sell our funds on our behalf. |
• | Elimination of operating revenues upon consolidation of investment products. |
• | Activities of consolidated investment products, including investment and other income (losses), net, other expenses and income (loss) attributable to noncontrolling interests, net of revenues eliminated upon consolidation of investment products. |
• | Acquisition-related retention compensation. |
• | Other acquisition-related expenses including professional fees and fair value adjustments related to contingent consideration liabilities and the market-based component of retention awards. |
• | Amortization and impairment of intangible assets. |
• | Impairment of goodwill and write off of noncontrolling interests related to the wind down of a recently acquired business. |
• | Special termination benefits related to workforce optimization initiatives related to the acquisition of Legg Mason in fiscal year 2020, and voluntary separation and workforce reduction initiatives of 4.5% of our global workforce in fiscal year 2019. |
• | Net gains or losses on investments related to Legg Mason deferred compensation plans which are not offset by compensation and benefits expense. |
• | Unrealized investment gains and losses included in investment and other income (losses), net, other than those that are offset by compensation and benefits expense. |
• | Interest expense for amortization of Legg Mason debt premium from acquisition-date fair value adjustment. |
• | Net income tax expense of the above adjustments based on the respective blended rates applicable to the adjustments. |
(in millions) | Three Months Ended | Twelve Months Ended | ||||||||||||||||||
30-Sep-20 | 30-Jun-20 | 30-Sep-19 | 30-Sep-20 | 30-Sep-19 | ||||||||||||||||
Operating income | $ | 103.6 | $ | 232.5 | $ | 365.1 | $ | 1,048.9 | $ | 1,466.9 | ||||||||||
Add (subtract): | ||||||||||||||||||||
Elimination of operating revenues upon consolidation of investment products* | 5.7 | 5.0 | 7.0 | 23.6 | 30.7 | |||||||||||||||
Acquisition-related retention | 131.8 | 15.5 | 20.7 | 195.8 | 63.7 | |||||||||||||||
Compensation and benefits expense from gain on deferred compensation and seed investments, net | 1.2 | — | — | 1.2 | — | |||||||||||||||
Other acquisition-related expenses | 47.8 | 4.4 | 0.1 | 57.4 | 9.4 | |||||||||||||||
Amortization of intangible assets | 40.1 | 4.7 | 5.0 | 54.0 | 14.7 | |||||||||||||||
Impairment of goodwill and intangible assets | 52.6 | — | 4.0 | 55.4 | 13.3 | |||||||||||||||
Special termination benefits | 46.1 | 8.7 | 4.9 | 54.8 | 55.5 | |||||||||||||||
Adjusted operating income | $ | 428.9 | $ | 270.8 | $ | 406.8 | $ | 1,491.1 | $ | 1,654.2 | ||||||||||
Total operating revenues | $ | 1,705.0 | $ | 1,161.1 | $ | 1,422.8 | $ | 5,566.5 | $ | 5,669.4 | ||||||||||
Add (subtract): | ||||||||||||||||||||
Acquisition-related pass through performance fees | (9.4 | ) | — | — | (9.4 | ) | — | |||||||||||||
Sales and distribution fees | (366.7 | ) | (302.1 | ) | (363.8 | ) | (1,362.0 | ) | (1,444.6 | ) | ||||||||||
Allocation of investment management fees for sales, distribution and marketing expenses | (100.0 | ) | (66.5 | ) | (99.5 | ) | (341.1 | ) | (375.0 | ) | ||||||||||
Net revenues of consolidated investment products* | 5.7 | 5.0 | 7.0 | 23.6 | 30.7 | |||||||||||||||
Adjusted operating revenues | $ | 1,234.6 | $ | 797.5 | $ | 966.5 | $ | 3,877.6 | $ | 3,880.5 | ||||||||||
Operating margin | 6.1 | % | 20.0 | % | 25.7 | % | 18.8 | % | 25.9 | % | ||||||||||
Adjusted operating margin | 34.7 | % | 34.0 | % | 42.1 | % | 38.5 | % | 42.6 | % |
(in millions, except per share data) | Three Months Ended | Twelve Months Ended | ||||||||||||||||||
30-Sep-20 | 30-Jun-20 | 30-Sep-19 | 30-Sep-20 | 30-Sep-19 | ||||||||||||||||
Net income attributable to Franklin Resources, Inc. | $ | 78.9 | $ | 290.4 | $ | 306.4 | $ | 798.9 | $ | 1,195.7 | ||||||||||
Add (subtract): | ||||||||||||||||||||
Net (income) loss of consolidated investment products* | 1.5 | 5.7 | (5.3 | ) | (4.6 | ) | (3.7 | ) | ||||||||||||
Acquisition-related retention | 131.8 | 15.5 | 20.7 | 195.8 | 63.7 | |||||||||||||||
Other acquisition-related expenses | 50.7 | 2.7 | 0.1 | 58.6 | 9.4 | |||||||||||||||
Amortization of intangible assets | 40.1 | 4.7 | 5.0 | 54.0 | 14.7 | |||||||||||||||
Impairment of goodwill and intangible assets | 52.6 | — | 4.0 | 55.4 | 13.3 | |||||||||||||||
Special termination benefits | 46.1 | 8.7 | 4.9 | 54.8 | 55.5 | |||||||||||||||
Net gains on deferred compensation plan investments not offset by compensation and benefits expense | (0.1 | ) | — | — | (0.1 | ) | — | |||||||||||||
Unrealized investment (gains) losses included in investment and other (income) losses, net | (26.9 | ) | 26.7 | 29.9 | 221.0 | 20.0 | ||||||||||||||
Interest expense for amortization of debt premium | (4.7 | ) | — | — | (4.7 | ) | — | |||||||||||||
Write off of noncontrolling interests | (16.7 | ) | — | — | (16.7 | ) | — | |||||||||||||
Net income tax expense of adjustments | (62.3 | ) | (5.5 | ) | (7.3 | ) | (101.4 | ) | (37.3 | ) | ||||||||||
Adjusted net income | $ | 291.0 | $ | 348.9 | $ | 358.4 | $ | 1,311.0 | $ | 1,331.3 | ||||||||||
Diluted earnings per share | $ | 0.15 | $ | 0.58 | $ | 0.61 | $ | 1.59 | $ | 2.35 | ||||||||||
Adjusted diluted earnings per share | 0.56 | 0.70 | 0.71 | 2.61 | 2.62 |
* | The impact of consolidated investment products is summarized as follows: |
(in millions) | Three Months Ended | Twelve Months Ended | ||||||||||||||||||
30-Sep-20 | 30-Jun-20 | 30-Sep-19 | 30-Sep-20 | 30-Sep-19 | ||||||||||||||||
Elimination of operating revenues upon consolidation | $ | (5.7 | ) | $ | (5.0 | ) | $ | (7.0 | ) | $ | (23.6 | ) | $ | (30.7 | ) | |||||
Other (income) expenses, net | 55.3 | (20.8 | ) | 14.0 | 33.6 | 39.8 | ||||||||||||||
Less: income (loss) attributable to noncontrolling interests | 51.1 | (20.1 | ) | 1.7 | 5.4 | 5.4 | ||||||||||||||
Net income (loss) | $ | (1.5 | ) | $ | (5.7 | ) | $ | 5.3 | $ | 4.6 | $ | 3.7 |
1. | Net income represents net income attributable to Franklin Resources, Inc. |
2. | In the quarter ended September 30, 2020, the Company changed the presentation of its consolidated statements of income to include dividend and interest income and other expenses from consolidated investment products in non-operating income. Amounts for the comparative prior fiscal periods have been reclassified to conform to the current presentation, including the reclassification of investment income and interest expense of consolidated investment products. These reclassifications had no impact on previously reported net income or financial position. |
3. | “Adjusted operating income,” “adjusted operating margin,” “adjusted net income” and “adjusted diluted earnings per share” are based on methodologies other than generally accepted accounting principles. See “Supplemental Non-GAAP Financial Measures” for definitions and reconciliations of these measures. |
4. | Average AUM represents simple monthly average AUM. |
5. | Taxes on income for the quarter ended June 30, 2020 includes a $38.6 million tax benefit from capital losses subsequent to the change in corporate tax structure of a foreign holding company to a U.S. branch. Taxes on income for the quarter ended June 30, 2019 includes an $86.4 million reversal of a tax benefit recognized in the prior fiscal year upon issuance of final regulations by the U.S. Department of Treasury for the Tax Cuts and Jobs Act of 2017. |
6. | Net market change, distributions and other includes appreciation (depreciation), distributions to investors that represent return on investments and return of capital, and foreign exchange revaluation. |
7. | International includes North America-based advisors serving non-resident clients. |
• | Our acquisition of Legg Mason, Inc. remains subject to integration-related and other risks. |
• | Our business operations are subject to adverse effects from the outbreak and spread of contagious diseases such as COVID-19, and we expect such adverse effects to continue. |
• | Failure to establish adequate controls and risk management policies, or the circumvention of controls and policies, could have an adverse effect on our operations. |
• | Failure to protect our intellectual property may negatively impact our business. |
• | Volatility and disruption of the capital and credit markets, and adverse changes in the global economy, may significantly affect our results of operations and may put pressure on our financial results. |
• | The amount and mix of our AUM are subject to significant fluctuations. |
• | We are subject to significant risk of asset volatility from changes in the global financial, equity, debt and commodity markets. |
• | Our funds may be subject to liquidity risks or an unanticipated large number of redemptions. |
• | A shift in our asset mix toward lower fee products may negatively impact our revenues. |
• | We may not effectively manage risks associated with the replacement of benchmark indices. |
• | Poor investment performance of our products could reduce the level of our AUM or affect our sales, and negatively impact our revenues and income. |
• | Harm to our reputation may negatively impact our revenues and income. |
• | Our business operations are complex and a failure to perform operational tasks properly or the misrepresentation of our services and products resulting, without limitation, in the termination of investment management agreements representing a significant portion of our AUM, could have an adverse effect on our revenues and income. |
• | We face risks, and corresponding potential costs and expenses, associated with conducting operations and growing our business in numerous countries. |
• | Our increasing focus on international markets as a source of investments and sales of our products subjects us to increased exchange rate and market-specific political, economic or other risks that may adversely impact our revenues and income generated overseas. |
• | We may review and pursue strategic transactions that could pose risks to our business. |
• | Strong competition from numerous and sometimes larger companies with competing offerings and products could limit or reduce sales of our products, potentially resulting in a decline in our market share, revenues and income. |
• | Increasing competition and other changes in the third-party distribution and sales channels on which we depend could reduce our income and hinder our growth. |
• | Any failure of our third-party providers to fulfill their obligations, or our failure to maintain good relationships with our providers, could adversely impact our business. |
• | We may be adversely affected if any of our third-party providers is subject to a successful cyber or security attack. |
• | Our ability to manage and grow our business successfully can be impeded by systems and other technological limitations. |
• | Any significant limitation, failure or security breach of our information and cyber security infrastructure, software applications, technology or other systems that are critical to our operations could disrupt our business and harm our operations and reputation. |
• | Our inability to recover successfully, should we experience a disaster or other business continuity problem, could cause material financial loss, regulatory actions, legal liability, and/or reputational harm. |
• | We depend on key personnel and our financial performance could be negatively affected by the loss of their services. |
• | Our future results are dependent upon maintaining an appropriate expense level. |
• | Our ability to meet cash needs depends upon certain factors, including the market value of our assets, our operating cash flows and our perceived creditworthiness. |
• | We are dependent on the earnings of our subsidiaries. |
• | We are subject to extensive, complex, overlapping and frequently changing rules, regulations, policies, and legal interpretations. |
• | We may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation of existing laws and regulations. |
• | Global regulatory and legislative actions and reforms have made the regulatory environment in which we operate more costly and future actions and reforms could adversely impact our financial condition and results of operations. |
• | Failure to comply with the laws, rules or regulations in any of the jurisdictions in which we operate could result in substantial harm to our reputation and results of operations. |
• | Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our financial condition, results of operations and liquidity. |
• | Regulatory and governmental examinations and/or investigations, litigation and the legal risks associated with our business, could adversely impact our AUM, increase costs and negatively impact our profitability and/or our future financial results. |
• | Our contractual obligations may subject us to indemnification costs and liability to third parties. |
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