Franklin Resources Earnings 2019-06-30

BEN 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-09318

FRANKLIN RESOURCES, INC.

(Exact name of registrant as specified in its charter)



Delaware	13-2670991
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Franklin Parkway, San Mateo, CA 94403

(Address of principal executive offices) (Zip code)

(650) 312-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	BEN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Number of shares of the registrant’s common stock outstanding at July 23, 2019: 503,666,583.

Table of Contents

INDEX TO FORM 10-Q



			Page
PART I		Financial Information
	Item 1.	Financial Statements (unaudited)
		Consolidated Statements of Income	3
		Consolidated Statements of Comprehensive Income	4
		Consolidated Balance Sheets	5
		Consolidated Statements of Stockholders’ Equity	6
		Consolidated Statements of Cash Flows	8
		Notes to Consolidated Financial Statements	10
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
	Item 4.	Controls and Procedures	52

PART II		Other Information
	Item 1.	Legal Proceedings	52
	Item 1A.	Risk Factors	52
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
	Item 6.	Exhibits	52

Exhibit Index			53
Signature			54

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME Unaudited

	Three Months Ended June 30,						Nine Months Ended June 30,
(in millions, except per share data)	2019			2018			2019			2018
Operating Revenues
Investment management fees	$	1,019.4		$	1,077.9		$	2,983.6		$	3,308.6
Sales and distribution fees	367.5			391.4			1,080.8			1,219.0
Shareholder servicing fees	52.7			53.9			164.9			170.1
Other	37.1			35.4			92.7			94.2
Total operating revenues	1,476.7			1,558.6			4,322.0			4,791.9
Operating Expenses
Sales, distribution and marketing	462.4			499.8			1,356.3			1,550.0
Compensation and benefits	437.7			357.5			1,202.3			1,045.5
Information systems and technology	65.7			62.5			188.7			175.6
Occupancy	32.2			30.5			94.8			94.0
General, administrative and other	103.8			105.2			314.0			286.9
Total operating expenses	1,101.8			1,055.5			3,156.1			3,152.0
Operating Income	374.9			503.1			1,165.9			1,639.9
Other Income (Expenses)
Investment and other income (losses), net	44.2			(33.8		)	103.8			134.9
Interest expense	(5.6		)	(22.1		)	(17.7		)	(42.9		)
Other income (expenses), net	38.6			(55.9		)	86.1			92.0
Income before taxes	413.5			447.2			1,252.0			1,731.9
Taxes on income	158.9			91.8			355.8			1,465.5
Net income	254.6			355.4			896.2			266.4
Less: net income (loss) attributable to
Redeemable noncontrolling interests	0.1			(45.0		)	6.2			(18.3		)
Nonredeemable noncontrolling interests	8.6			(1.6		)	0.7			22.8
Net Income Attributable to Franklin Resources, Inc.	$	245.9		$	402.0		$	889.3		$	261.9

Earnings per Share
Basic	$	0.48		$	0.75		$	1.74		$	0.45
Diluted	0.48			0.75			1.74			0.45

See Notes to Consolidated Financial Statements.

Table of Contents

FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Unaudited

(in millions)	Three Months Ended June 30,					Nine Months Ended June 30,
(in millions)	2019		2018			2019			2018
Net Income	$	254.6	$	355.4		$	896.2		$	266.4
Other Comprehensive Income (Loss)
Currency translation adjustments, net of tax	1.9		(86.7		)	(4.8		)	(64.1		)
Net unrealized gains (losses) on defined benefit plans, net of tax	0.1		0.2			(1.0		)	(0.5		)
Net unrealized gains on investments, net of tax	3.6		3.3			3.5			6.6
Total other comprehensive income (loss)	5.6		(83.2		)	(2.3		)	(58.0		)
Total comprehensive income	260.2		272.2			893.9			208.4
Less: comprehensive income (loss) attributable to
Redeemable noncontrolling interests	0.1		(45.0		)	6.2			(18.3		)
Nonredeemable noncontrolling interests	8.6		(1.6		)	0.7			22.8
Comprehensive Income Attributable to Franklin Resources, Inc.	$	251.5	$	318.8		$	887.0		$	203.9

See Notes to Consolidated Financial Statements.

Table of Contents

FRANKLIN RESOURCES, INC. CONSOLIDATED BALANCE SHEETS Unaudited

(in millions, except share and per share data)	June 30, 2019			September 30, 2018
Assets
Cash and cash equivalents	$	5,508.8		$	6,610.8
Receivables	757.8			733.7
Investments (including $619.4 and $551.6 at fair value at June 30, 2019 and September 30, 2018)	1,622.0			1,426.5
Assets of consolidated investment products
Cash and cash equivalents	248.8			299.8
Receivables	92.4			114.2
Investments, at fair value	2,351.1			2,109.4
Property and equipment, net	684.8			535.0
Goodwill and other intangible assets, net	3,013.4			2,333.4
Other	184.2			220.7
Total Assets	$	14,463.3		$	14,383.5

Liabilities
Compensation and benefits	$	460.0		$	405.6
Accounts payable and accrued expenses	207.8			158.9
Dividends	138.3			127.7
Commissions	263.4			297.9
Income taxes	850.1			1,034.8
Debt	697.0			695.9
Liabilities of consolidated investment products
Accounts payable and accrued expenses	52.6			68.0
Debt	31.8			32.6
Deferred taxes	118.9			126.5
Other	271.1			184.1
Total liabilities	3,091.0			3,132.0
Commitments and Contingencies (Note 11)
Redeemable Noncontrolling Interests	806.5			1,043.6
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; 504,120,477 and 519,122,574 shares issued and outstanding at June 30, 2019 and September 30, 2018	50.4			51.9
Retained earnings	10,241.5			10,217.9
Accumulated other comprehensive loss	(380.9		)	(370.6		)
Total Franklin Resources, Inc. stockholders’ equity	9,911.0			9,899.2
Nonredeemable noncontrolling interests	654.8			308.7
Total stockholders’ equity	10,565.8			10,207.9
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	14,463.3		$	14,383.5

See Notes to Consolidated Financial Statements.

Table of Contents

FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Unaudited

	Franklin Resources, Inc.																	Non- redeemable Non- controlling Interests			Total Stockholders’ Equity
	Common Stock					Capital in Excess of Par Value			Retained Earnings			Accum- ulated Other Compre- hensive Loss			Stockholders’ Equity
(in millions)
for the nine months ended June 30, 2019	Shares		Amount
Balance at October 1, 2018	519.1		$	51.9		$	—		$	10,217.9		$	(370.6	)	$	9,899.2		$	308.7		$	10,207.9
Adoption of new accounting guidance									22.9			(8.0		)	14.9						14.9
Net income (loss)									275.9						275.9			(0.5		)	275.4
Other comprehensive loss												(15.0		)	(15.0		)				(15.0		)
Dividends declared on common stock ($0.26 per share)									(133.8		)				(133.8		)				(133.8		)
Repurchase of common stock	(10.7	)	(1.1		)	(30.8		)	(295.0		)				(326.9		)				(326.9		)
Issuance of common stock	3.1		0.3			33.6									33.9						33.9
Stock-based compensation						(2.8		)							(2.8		)				(2.8		)
Net subscriptions and other																		23.1			23.1
Balance at December 31, 2018	511.5		$	51.1		$	—		$	10,087.9		$	(393.6	)	$	9,745.4		$	331.3		$	10,076.7
Net income (loss)									367.5						367.5			(7.4		)	360.1
Other comprehensive income												7.1			7.1						7.1
Dividends declared on common stock ($0.26 per share)									(132.6		)				(132.6		)				(132.6		)
Repurchase of common stock	(4.6	)	(0.4		)	(41.0		)	(103.3		)				(144.7		)				(144.7		)
Issuance of common stock	0.8		0.1			13.3									13.4						13.4
Stock-based compensation						27.7									27.7						27.7
Net subscriptions and other																		51.0			51.0
Consolidation of investment product																		24.3			24.3
Acquisition																		216.1			216.1
Balance at March 31, 2019	507.7		$	50.8		$	—		$	10,219.5		$	(386.5	)	$	9,883.8		$	615.3		$	10,499.1
Net income									245.9						245.9			8.6			254.5
Other comprehensive income												5.6			5.6						5.6
Dividends declared on common stock ($0.26 per share)									(131.7		)				(131.7		)				(131.7		)
Repurchase of common stock	(3.6	)	(0.4		)	(28.7		)	(92.2		)				(121.3		)				(121.3		)
Issuance of common stock	—		—			0.6									0.6						0.6
Stock-based compensation						28.1									28.1						28.1
Net subscriptions and other																		30.9			30.9
Balance at June 30, 2019	504.1		$	50.4		$	—		$	10,241.5		$	(380.9	)	$	9,911.0		$	654.8		$	10,565.8

See Notes to Consolidated Financial Statements.

Table of Contents

FRANKLIN RESOURCES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Unaudited

	Franklin Resources, Inc.																	Non- redeemable Non- controlling Interests			Total Stockholders’ Equity
	Common Stock					Capital in Excess of Par Value			Retained Earnings			Accum- ulated Other Compre- hensive Loss			Stockholders’ Equity
(in millions)	Common Stock
for the nine months ended June 30, 2018	Shares		Amount
Balance at October 1, 2017	554.9		$	55.5		$	—		$	12,849.3		$	(284.8	)	$	12,620.0		$	315.8		$	12,935.8
Adoption of new accounting guidance						2.1			(1.7		)				0.4						0.4
Net loss									(583.3		)				(583.3		)	(0.1		)	(583.4		)
Other comprehensive income												18.2			18.2						18.2
Dividends declared on common stock ($0.23 per share)									(127.4		)				(127.4		)				(127.4		)
Repurchase of common stock	(4.6	)	(0.5		)	(32.1		)	(167.4		)				(200.0		)				(200.0		)
Issuance of common stock

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$33.73	508	$17,120

10-Q	2019-06-30	Quarter: 2019-06-30
10-Q	2019-03-31	Quarter: 2019-03-31
10-Q	2018-12-31	Quarter: 2018-12-31
10-K	2018-09-30	Annual: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-Q	2017-12-31	Quarter: 2017-12-31
10-K	2017-09-30	Annual: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-Q	2016-12-31	Quarter: 2016-12-31
10-K	2016-09-30	Annual: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-Q	2015-12-31	Quarter: 2015-12-31
10-K	2015-09-30	Annual: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31
10-Q	2014-12-31	Quarter: 2014-12-31
10-K	2014-09-30	Annual: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-Q	2014-03-31	Quarter: 2014-03-31
10-Q	2013-12-31	Quarter: 2013-12-31

8-K	2019-07-30	Earnings, Exhibits
8-K	2019-06-11	Officers
8-K	2019-04-26	Earnings, Exhibits
8-K	2019-04-02	Officers
8-K	2019-03-12	Officers, Exhibits
8-K	2019-02-12	Shareholder Vote
8-K	2019-01-30	Earnings, Exhibits
8-K	2018-10-25	Earnings, Other Events, Exhibits
8-K	2018-10-24	Amend Bylaw, Exhibits
8-K	2018-07-27	Earnings, Exhibits
8-K	2018-04-11	Other Events, Exhibits
8-K	2018-02-14	Shareholder Vote

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EX-10.1	exhibit101q32019.htm
EX-10.2	exhibit102q32019.htm
EX-31.1	exhibit311q32019.htm
EX-31.2	exhibit312q32019.htm
EX-32.1	exhibit321q32019.htm
EX-32.2	exhibit322q32019.htm