Company Quick10K Filing
Quick10K
Janus Henderson Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$22.50 195 $4,390
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
8-K 2019-05-02 Earnings, Exhibits
8-K 2019-05-02 Shareholder Vote
8-K 2019-03-21 Regulation FD, Exhibits
8-K 2019-02-05 Earnings, Exhibits
8-K 2018-12-11 Officers, Exhibits
8-K 2018-11-01 Earnings, Exhibits
8-K 2018-08-06 Regulation FD, Exhibits
8-K 2018-07-31 Earnings, Officers, Exhibits
8-K 2018-05-03 Shareholder Vote
8-K 2018-03-22 Regulation FD, Exhibits
8-K 2018-02-28 Earnings, Exhibits
8-K 2018-02-06 Earnings, Exhibits
FND Floor & Decor Holdings 4,140
AIMT Aimmune Therapeutics 1,280
TRUP Trupanion 1,110
PACQ Pure Acquisition 523
CBMG Cellular Biomedicine Group 312
URG UR-Energy 135
STCN Steel Connect 119
EEQ Enbridge Energy Management 0
IAIC Information Analysis 0
TKOI Telkonet 0
JHG 2019-03-31
Part I — Financial Information
Item 1. Financial Statements
Note 1 — Basis of Presentation and Significant Accounting Policies
Note 2 — Consolidation
Note 3 — Investment Securities
Note 4 — Fair Value Measurements
Note 5 — Goodwill and Intangible Assets
Note 6 — Leases
Note 7 — Debt
Note 8 — Income Taxes
Note 9 — Noncontrolling Interests
Note 10 — Long-Term Incentive and Employee Compensation
Note 11 — Retirement Benefit Plans
Note 12 — Accumulated Other Comprehensive Loss
Note 13 — Earnings and Dividends per Share
Note 14 — Commitments and Contingencies
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations of Janus Henderson Group Plc
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II — Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.19.9 jhg-20190331ex10199d907.htm
EX-15.1 jhg-20190331ex151754afb.htm
EX-15.2 jhg-20190331ex152247d49.htm
EX-31.1 jhg-20190331ex31140bd10.htm
EX-31.2 jhg-20190331ex312d14310.htm
EX-32.1 jhg-20190331ex32145b144.htm
EX-32.2 jhg-20190331ex3229f3c28.htm

Janus Henderson Group Earnings 2019-03-31

JHG 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 jhg-20190331x10q.htm 10-Q jhg_Current_Folio_10Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10‑Q

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

For the quarterly period ended March 31, 2019

OR

☐    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‑ 38103

 

Picture 1

Janus Henderson Group plc

(Exact name of registrant as specified in its charter)

 

 

Jersey, Channel Islands
(State or other jurisdiction of
incorporation or organization)

98‑1376360
(I.R.S. Employer
Identification No.)

201 Bishopsgate EC2M 3AE

United Kingdom
(Address of principal executive offices)

N/A
(Zip Code)

+44 (0) 20 7818 1818

(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

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, $1.50 Per Share Par Value

JHG

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 Company was required to file such reports), and (2) has been subject to the 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,” “non-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 ☒

As of April 29, 2019, there were 195,154,321 shares of the Group’s common stock, $1.50 par value per share, issued and outstanding

 

 

 


 

PART I — FINANCIAL INFORMATION

Item 1.  Financial Statements

JANUS HENDERSON GROUP PLC

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(U.S. Dollars in Millions, Except Share Data)

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

    

2019

    

2018

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

717.1

 

$

880.4

Investment securities

 

 

270.7

 

 

291.8

Fees and other receivables

 

 

300.2

 

 

309.2

OEIC and unit trust receivables

 

 

264.7

 

 

144.4

Assets of consolidated VIEs:

 

 

 

 

 

 

Cash and cash equivalents

 

 

22.8

 

 

36.2

Investment securities

 

 

297.4

 

 

282.7

Other current assets

 

 

9.8

 

 

5.0

Other current assets

 

 

78.0

 

 

69.4

Total current assets

 

 

1,960.7

 

 

2,019.1

Non-current assets:

 

 

 

 

 

 

Property, equipment and software, net

 

 

72.6

 

 

69.5

Intangible assets, net

 

 

3,125.4

 

 

3,123.3

Goodwill

 

 

1,493.6

 

 

1,478.0

Retirement benefit asset, net

 

 

213.0

 

 

206.5

Other non-current assets

 

 

157.8

 

 

15.5

Total assets

 

$

7,023.1

 

$

6,911.9

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

263.3

 

$

233.2

Current portion of accrued compensation, benefits and staff costs

 

 

167.3

 

 

345.4

OEIC and unit trust payables

 

 

274.7

 

 

143.3

Liabilities of consolidated VIEs:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

11.0

 

 

6.5

Total current liabilities

 

 

716.3

 

 

728.4

 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

 

Accrued compensation, benefits and staff costs

 

 

44.6

 

 

54.7

Long-term debt

 

 

318.4

 

 

319.1

Deferred tax liabilities, net

 

 

730.7

 

 

729.9

Retirement benefit obligations, net

 

 

3.7

 

 

3.7

Other non-current liabilities

 

 

197.3

 

 

79.2

Total liabilities

 

 

2,011.0

 

 

1,915.0

Commitments and contingencies (See Note 14)

 

 

 

 

 

 

 

 

 

 

 

 

 

REDEEMABLE NONCONTROLLING INTERESTS

 

 

137.0

 

 

136.1

EQUITY

 

 

 

 

 

 

Common stock ($1.50 par, 480,000,000 shares authorized and 195,177,421 and 196,412,764 shares issued and outstanding, respectively)

 

 

292.7

 

 

294.6

Additional paid-in-capital

 

 

3,802.1

 

 

3,824.5

Treasury shares (4,326,953 and 4,523,802 shares held, respectively)

 

 

(165.4)

 

 

(170.8)

Accumulated other comprehensive loss, net of tax

 

 

(386.8)

 

 

(423.5)

Retained earnings

 

 

1,309.9

 

 

1,314.5

Total shareholders’ equity

 

 

4,852.5

 

 

4,839.3

Nonredeemable noncontrolling interests

 

 

22.6

 

 

21.5

Total equity

 

 

4,875.1

 

 

4,860.8

Total liabilities, redeemable noncontrolling interests and equity

 

$

7,023.1

 

$

6,911.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

JANUS HENDERSON GROUP PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(U.S. Dollars in Millions, Except per Share Data)

 

 

 

 

 

 

 

 

 

Three months ended

 

 

March 31, 

 

    

2019

    

2018

Revenue:

 

 

 

 

 

 

Management fees

 

$

441.9

 

$

502.9

Performance fees

 

 

(5.6)

 

 

(3.9)

Shareowner servicing fees

 

 

35.9

 

 

38.4

Other revenue

 

 

47.1

 

 

50.3

Total revenue

 

 

519.3

 

 

587.7

Operating expenses:

 

 

 

 

 

 

Employee compensation and benefits

 

 

145.0

 

 

146.7

Long-term incentive plans

 

 

48.4

 

 

40.0

Distribution expenses

 

 

101.9

 

 

117.3

Investment administration

 

 

11.8

 

 

11.4

Marketing

 

 

7.5

 

 

8.5

General, administrative and occupancy

 

 

65.2

 

 

72.2

Depreciation and amortization

 

 

15.0

 

 

15.4

Total operating expenses

 

 

394.8

 

 

411.5

Operating income

 

 

124.5

 

 

176.2

Interest expense

 

 

(4.1)

 

 

(3.8)

Investment gains (losses), net

 

 

13.3

 

 

(0.7)

Other non-operating income (expenses), net

 

 

(3.9)

 

 

38.9

Income before taxes

 

 

129.8

 

 

210.6

Income tax provision

 

 

(29.9)

 

 

(47.4)

Net income

 

 

99.9

 

 

163.2

Net loss (income) attributable to noncontrolling interests

 

 

(5.8)

 

 

2.0

Net income attributable to JHG

 

$

94.1

 

$

165.2

 

 

 

 

 

 

 

Earnings per share attributable to JHG common shareholders:

 

 

 

 

 

 

Basic

 

$

0.48

 

$

0.82

Diluted

 

$

0.48

 

$

0.82

Other comprehensive income, net of tax:

 

 

 

 

 

 

Foreign currency translation gains

 

$

36.8

 

$

52.7

Other comprehensive loss (income) attributable to noncontrolling interests

 

 

(0.1)

 

 

0.2

Other comprehensive income (loss) attributable to JHG

 

$

36.7

 

$

52.9

Total comprehensive income

 

$

136.7

 

$

215.9

Total comprehensive loss (income) attributable to noncontrolling interests

 

 

(5.9)

 

 

2.2

Total comprehensive income attributable to JHG

 

$

130.8

 

$

218.1

 

The accompanying notes are an integral part of these condensed consolidated financial statements.  

2


 

JANUS HENDERSON GROUP PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. Dollars in Millions)

 

 

 

 

 

 

 

 

 

Three months ended

 

 

March 31, 

 

 

2019

 

2018

CASH FLOWS PROVIDED BY (USED FOR):

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

Net income

 

$

99.9

 

$

163.2

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

15.0

 

 

15.4

Deferred income taxes

 

 

0.4

 

 

 —

Stock-based compensation plan expense

 

 

20.1

 

 

16.4

Impairment of ROU operating asset

 

 

4.7

 

 

 —

Investment (gains) losses, net

 

 

(13.3)

 

 

0.7

Gain from BNP Paribas transaction

 

 

 —

 

 

(23.0)

Dai-ichi option fair value adjustments

 

 

 —

 

 

(22.8)

Contributions to pension plans in excess of costs recognized

 

 

(1.8)

 

 

(4.6)

Other, net

 

 

(3.2)

 

 

(13.8)

Changes in operating assets and liabilities:

 

 

 

 

 

 

OEIC and unit trust receivables and payables

 

 

11.1

 

 

2.3

Other assets

 

 

1.8

 

 

119.5

Other accruals and liabilities

 

 

(169.4)

 

 

(191.6)

Net operating activities

 

 

(34.7)

 

 

61.7

Investing activities:

 

 

 

 

 

 

Proceeds from (purchase of):

 

 

 

 

 

 

Investment securities, net

 

 

19.3

 

 

17.1

Property, equipment and software

 

 

(7.5)

 

 

(6.5)

Investment securities by consolidated seeded investment products, net

 

 

46.1

 

 

(38.4)

Proceeds from BNP Paribas transaction, net

 

 

 —

 

 

36.5

Cash received (paid) on settled hedges, net

 

 

(7.4)

 

 

2.9

Dividends received from equity-method investments

 

 

0.5

 

 

 —

Proceeds from sale of Volantis

 

 

0.3

 

 

 —

Net investing activities

 

 

51.3

 

 

11.6

Financing activities:

 

 

 

 

 

 

Proceeds from stock-based compensation plans

 

 

 —

 

 

0.2

Purchase of common stock for stock-based compensation plans

 

 

(37.1)

 

 

(82.7)

Purchase of common stock for share buyback program

 

 

(30.9)

 

 

 —

Dividends paid to shareholders

 

 

(69.7)

 

 

(63.1)

Repayment of long-term debt

 

 

 —

 

 

(81.6)

Payment of contingent consideration

 

 

(14.1)

 

 

(18.8)

Distributions to noncontrolling interests

 

 

(0.1)

 

 

(0.2)

Third-party sales (redemptions) in consolidated seeded investment products, net

 

 

(46.1)

 

 

38.4

Principal payments under capital lease obligations

 

 

(0.3)

 

 

(0.4)

Net financing activities

 

 

(198.3)

 

 

(208.2)

Cash and cash equivalents:

 

 

 

 

 

 

Effect of foreign exchange rate changes

 

 

5.0

 

 

6.1

Net change

 

 

(176.7)

 

 

(128.8)

At beginning of period

 

 

916.6

 

 

794.2

At end of period

 

$

739.9

 

$

665.4

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

7.3

 

$

7.4

Cash paid for income taxes, net of refunds

 

$

12.6

 

$

26.4

Reconciliation of cash and cash equivalents:

 

 

 

 

 

 

Cash and cash equivalents

 

$

717.1

 

$

611.4

Cash and cash equivalents held in consolidated VIEs

 

 

22.8

 

 

54.0

Total cash and cash equivalents

 

$

739.9

 

$

665.4

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

JANUS HENDERSON GROUP PLC

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

(Amounts in Millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

 

 

    

 

 

    

 

Accumulated

    

 

 

    

 

 

    

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

other

 

 

 

 

 

Nonredeemable

 

 

 

 

 

Number of

 

 

Common

 

 

paid-in

 

 

Treasury

 

 

comprehensive

 

 

Retained

 

 

noncontrolling

 

 

Total

 

 

shares

 

 

stock

 

 

capital

 

 

shares

 

 

loss

 

 

earnings

 

 

interests

 

 

equity

Balance at January 1, 2019

 

196.4

 

$

294.6

 

$

3,824.5

 

$

(170.8)

 

$

(423.5)

 

$

1,314.5

 

$

21.5

 

$

4,860.8

Net income

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

94.1

 

 

1.2

 

 

95.3

Other comprehensive income (loss)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

36.7

 

 

 —

 

 

 —

 

 

36.7

Dividends paid to shareholders

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(69.7)

 

 

 —

 

 

(69.7)

Share buyback program

 

(1.2)

 

 

(1.9)

 

 

 —

 

 

 —

 

 

 —

 

 

(29.0)

 

 

 —

 

 

(30.9)

Distributions to noncontrolling interests

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(0.1)

 

 

(0.1)

Purchase of common stock for stock-based compensation plans

 

 —

 

 

 —

 

 

(31.4)

 

 

(5.7)

 

 

 —

 

 

 —

 

 

 —

 

 

(37.1)

Vesting of stock-based compensation plans

 

 —

 

 

 —

 

 

(11.1)

 

 

11.1

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Stock-based compensation plan expense

 

 —

 

 

 —

 

 

20.1

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

20.1

Balance at March 31, 2019

 

195.2

 

$

292.7

 

$

3,802.1

 

$

(165.4)

 

$

(386.8)

 

$

1,309.9

 

$

22.6

 

$

4,875.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

 

 

    

 

 

    

 

Accumulated

    

 

 

    

 

 

    

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

other

 

 

 

 

 

Nonredeemable

 

 

 

 

 

Number of

 

 

Common

 

 

paid-in

 

 

Treasury

 

 

comprehensive

 

 

Retained

 

 

noncontrolling

 

 

Total

 

 

shares

 

 

stock

 

 

capital

 

 

shares

 

 

loss

 

 

earnings

 

 

interests

 

 

equity

Balance at January 1, 2018

 

200.4

 

$

300.6

 

$

3,842.9

 

$

(155.8)

 

$

(304.3)

 

$

1,154.1

 

$

38.2

 

$

4,875.7

Net income

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

165.2

 

 

(3.4)

 

 

161.8

Other comprehensive income

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

52.9

 

 

 —

 

 

 —

 

 

52.9

Dividends paid to shareholders

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(63.1)

 

 

 —

 

 

(63.1)

Distributions to noncontrolling interests

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(0.1)

 

 

(0.1)

Fair value adjustments to redeemable noncontrolling interests

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(0.3)

 

 

 —

 

 

(0.3)

Redemptions of convertible debt

 

 —

 

 

 —

 

 

(33.9)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(33.9)

Purchase of common stock for stock-based compensation plans

 

 —

 

 

 —

 

 

(37.3)

 

 

(45.4)

 

 

 —

 

 

 —

 

 

 —

 

 

(82.7)

Vesting of stock-based compensation plans

 

 —

 

 

 —

 

 

(2.3)

 

 

2.3

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Stock-based compensation plan expense

 

 —

 

 

 —

 

 

16.4

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

16.4

Proceeds from stock-based compensation plans

 

 —

 

 

 —

 

 

0.2

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

0.2

Balance at March 31, 2018

 

200.4

 

$

300.6

 

$

3,786.0

 

$

(198.9)

 

$

(251.4)

 

$

1,255.9

 

$

34.7

 

$

4,926.9

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

JANUS HENDERSON GROUP PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 — Basis of Presentation and Significant Accounting Policies

Basis of Presentation

In the opinion of management of Janus Henderson Group plc (“JHG” or “the Group”), the accompanying unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary to fairly state the financial position, results of operations and cash flows of JHG in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Such financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the annual consolidated financial statements and notes presented in JHG’s Annual Report on Form 10-K for the year ended December 31, 2018. The December 31, 2018 condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying financial statements through the issuance date and are included in the notes to the condensed consolidated financial statements.

Certain prior year amounts in the Condensed Consolidated Statements of Comprehensive Income have been reclassified to conform to current year presentation. Specifically, revenue amounts related to certain transfer agent and administrative activities performed for investment products that were previously classified in other revenue were reclassified to shareowner servicing fees. There is no change to consolidated total revenue, operating income, net income or cash flows as a result of this change in classification.

Recent Accounting Pronouncements Adopted

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued a new standard on accounting for leases. The new standard represents a significant change to lease accounting and introduces a lessee model that brings leases onto the balance sheet. The standard also aligns certain underlying principles of the new lessor model with those in the FASB’s new revenue recognition standard. Furthermore, the new standard addresses other concerns related to the prior leases model. The standard became effective January 1, 2019.

The Group adopted the new standard effective January 1, 2019, using the modified retrospective approach. Comparative prior periods were not adjusted upon adoption, as the Group utilized the practical expedients available under the guidance. Specifically, the Group did not (i) reassess existing contracts for embedded leases, (ii) reassess existing lease agreements for finance or operating classification, or (iii) reassess existing lease agreements in consideration of initial direct costs.

Upon adoption, the Group recognized $129.8 million in right-of-use (“ROU”) assets related to its leased property and equipment. Corresponding lease liabilities of $146.4 million were also recognized. The Group’s property leases represent the vast majority of its right of use assets and lease liabilities, with office spaces in Denver and London representing a significant portion of its leased property.

The Group’s leases policy follows. Refer to further disclosure in Note 6.

Leases Policy – Updated January 1, 2019

The Group determines if an arrangement is a lease at inception. Operating lease ROU assets are included in other non-current assets in the Group’s Condensed Consolidated Balance Sheets. The current and non-current portions of operating lease liabilities are included in accounts payable and accrued liabilities and other non-current liabilities, respectively.

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Finance lease ROU assets are included in property, equipment and software, net, and finance lease liabilities are included in other non-current liabilities. 

ROU assets represent the Group’s right to use an underlying asset for the lease term, and lease liabilities represent the Group’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of JHG’s leases do not provide an implicit rate, the Group uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Group’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Hedge Accounting

In August 2017, the FASB issued an updated standard that amended hedge accounting. The standard expanded the strategies eligible for hedge accounting, changed how companies assess hedge effectiveness and required new disclosures and presentation. The Group adopted the standard effective January 1, 2019. The adoption did not have a material impact on the Group’s results of operations or financial position.

Recent Accounting Pronouncements Not Yet Adopted

Retirement Benefit Plans

In August 2018, the FASB issued an accounting standards update (“ASU”) that modifies the disclosure requirements for employers that sponsor defined benefit pension plans. The ASU removes, adds and clarifies a number of disclosure requirements related to sponsored benefit plans. The standard is effective January 1, 2021, for calendar year-end companies, and early adoption is permitted. The Group is evaluating the effect of adopting this new accounting standard.

Implementation Costs — Cloud Computing Arrangements

In August 2018, the FASB issued an ASU that aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement with the requirements for implementation costs incurred to develop or obtain internal-use software. The ASU is effective January 1, 2020, for calendar year-end companies and for the interim periods within those years. Early adoption is permitted. The ASU allows either a retrospective or prospective approach to all implementation costs incurred after adoption. The Group is evaluating the effect of adopting this new accounting standard.

 

 

Note 2 — Consolidation

Variable Interest Entities

Consolidated Variable Interest Entities

JHG’s consolidated variable interest entities (“VIEs”) as of March 31, 2019, and December 31, 2018, include certain consolidated seeded investment products in which the Group has an investment and acts as the investment manager. The assets of these VIEs are not available to JHG or the creditors of JHG. JHG may not, under any circumstances, access cash and cash equivalents held by consolidated VIEs to use in its operating activities or otherwise. In addition, the investors in these VIEs have no recourse to the credit of the Group.

Unconsolidated Variable Interest Entities

At March 31, 2019, and December 31, 2018, JHG’s carrying values of investment securities included on the Condensed Consolidated Balance Sheets pertaining to unconsolidated VIEs were $3.6 million and $3.1 million, respectively. JHG’s

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total exposure to unconsolidated VIEs represents the value of its economic ownership interest in the investment securities.

Voting Rights Entities

Consolidated Voting Rights Entities

The following table presents the balances related to consolidated voting rights entities (“VREs”) that were recorded on JHG’s Condensed Consolidated Balance Sheets, including JHG’s net interest in these products (in millions):

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2019

 

2018

Investment securities

 

$

9.2

 

$

13.9

Cash and cash equivalents

 

 

0.2

 

 

1.4

Other current assets

 

 

0.1

 

 

0.1

Accounts payable and accrued liabilities

 

 

(0.1)

 

 

(0.1)

Total

 

 

9.4

 

 

15.3

Redeemable noncontrolling interests in consolidated VREs

 

 

(4.3)

 

 

(6.0)

JHG's net interest in consolidated VREs

 

$

5.1

 

$

9.3

 

JHG’s total exposure to consolidated VREs represents the value of its economic ownership interest in these seeded investment products. JHG may not, under any circumstances, access cash and cash equivalents held by consolidated VREs to use in its operating activities or for any other purpose.

Unconsolidated Voting Rights Entities

At March 31, 2019, and December 31, 2018, JHG’s carrying values of investment securities included on the Condensed Consolidated Balance Sheets pertaining to unconsolidated VREs were $55.4 million and $50.7 million, respectively. JHG’s total exposure to unconsolidated VREs represents the value of its economic ownership interest in the investment securities.

 

Note 3 — Investment Securities

JHG’s investment securities as of March 31, 2019, and December 31, 2018, are summarized as follows (in millions):

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

    

2019

    

2018

Seeded investment products:

 

 

 

 

 

 

Consolidated VIEs

 

$

297.4

 

$

282.7

Consolidated VREs

 

 

9.2

 

 

13.9

Unconsolidated VIEs and VREs

 

 

59.0

 

 

53.8

Separate accounts

 

 

66.5

 

 

71.6

Pooled investment funds

 

 

10.6

 

 

25.5

Total seeded investment products

 

 

442.7

 

 

447.5

Investments related to deferred compensation plans

 

 

125.0

 

 

120.3

Other investments

 

 

0.4

 

 

6.7

Total investment securities

 

$

568.1

 

$

574.5

 

 

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Trading Securities

Net unrealized gains (losses) on investment securities held as of March 31, 2019 and 2018, are summarized as follows (in millions):

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

    

2019

    

2018

Unrealized gains (losses) on investment securities held at period end

 

$

11.1

 

$

(7.9)

 

Derivative Instruments

JHG maintains an economic hedge program that uses derivative instruments to mitigate against market volatility of certain seeded investments by using index and commodity futures (“futures”), index swaps, total return swaps (“TRSs”) and credit default swaps. Foreign currency exposures associated with the Group’s seeded investment products are also hedged by using foreign currency forward contracts. The Group also has a net investment hedge related to foreign currency translation on hedged seed investments denominated in currencies other than the Group’s functional currency.

JHG was party to the following derivative instruments as of March 31, 2019, and December 31, 2018 (in millions):

 

 

 

 

 

 

 

 

 

Notional Value

 

    

March 31, 2019

    

December 31, 2018

Futures

 

$

135.8

 

$

147.1

Credit default swaps

 

 

84.8

 

 

133.2

Total return swaps

 

 

72.0

 

 

77.2

Foreign currency forward contracts

 

 

167.7

 

 

131.8

 

The derivative instruments are not designated as hedges for accounting purposes, with the exception of certain foreign currency forward contracts used for net investment hedging. Changes in fair value of the futures, index swaps, TRSs and credit default swaps are recognized in investment gains (losses), net on JHG’s Condensed Consolidated Statements of Comprehensive Income. Changes in the fair value of the foreign currency forward contracts designated as hedges for accounting purposes are recognized in other comprehensive income, net of tax on JHG’s Condensed Consolidated Statements of Comprehensive Income.

The value of the individual derivative contracts is recognized on a gross basis and included in other current assets or accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets and are immaterial individually and in aggregate.

The Group recognized the following net foreign currency translation gains and losses on hedged seed investments denominated in currencies other than the Group’s functional currency and net gains and losses associated with foreign currency forward contracts under net investment hedge accounting for the three months ended March 31, 2019 and 2018 (in millions):

 

 

 

 

 

 

 

 

 

Three months ended

 

 

March 31, 

 

    

2019

    

2018

Foreign currency translation

    

$

0.3

    

$

(0.5)

Foreign currency forward contracts

 

 

(0.3)

 

 

0.5

Total

 

$

 —

 

$

 —

 

Derivative Instruments in Consolidated Seeded Investment Products

Certain of the Group’s consolidated seeded investment products utilize derivative instruments to contribute to the achievement of defined investment objectives. These derivative instruments are classified within other current assets or accounts payable and accrued liabilities on JHG’s Condensed Consolidated Balance Sheets and are immaterial

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individually and in aggregate. Gains and losses on these derivative instruments are classified within investment gains (losses), net on JHG’s Condensed Consolidated Statements of Comprehensive Income.

JHG’s consolidated seeded investment products were party to the following derivative instruments as of March 31, 2019, and December 31, 2018 (in millions):

 

 

 

 

 

 

 

 

 

Notional Value

 

    

March 31, 2019

    

December 31, 2018

Futures

 

$

118.6

 

$

267.8

Contracts for differences

 

 

6.5

 

 

8.7

Credit default swaps

 

 

1.3

 

 

6.2

Total return swaps

 

 

42.1

 

 

23.7

Interest rate swaps

 

 

27.8

 

 

61.5

Options

 

 

2.7

 

 

9.6

Swaptions

 

 

 —

 

 

8.3

Foreign currency forward contracts

 

 

143.9

 

 

154.9

 

As of March 31, 2019, and December 31, 2018, certain consolidated seeded investment products sold credit protection through the use of credit default swap contracts. The contracts provide alternative credit risk exposure to individual companies and countries outside of traditional bond markets. The terms of the credit default swap contracts range from one to five years.

As sellers in credit default swap contracts, the consolidated seeded investment products would be required to pay the notional value of a referenced debt obligation to the counterparty in the event of a default on the debt obligation by the issuer. The notional value represents the estimated maximum potential undiscounted amount of future payments required upon the occurrence of a credit default event. As of March 31, 2019, and December 31, 2018, the notional values of the agreements totaled $2.9 million and $3.9 million, respectively. The credit default swap contracts include recourse provisions that allow for recovery of a certain percentage of amounts paid upon the occurrence of a credit default event. As of March 31, 2019, and December 31, 2018, the fair value of the credit default swap contracts selling protection was $0.1 million for both periods.

Investment Gains (Losses), Net

Investment gains (losses), net on JHG’s Condensed Consolidated Statements of Comprehensive Income included the following for the three months ended March 31, 2019 and 2018 (in millions):

 

 

 

 

 

 

 

 

 

Three months ended

 

 

March 31, 

 

    

2019

    

2018

Seeded investment products and derivatives, net

 

$

8.2

 

$

(0.8)

Other

 

 

5.1

 

 

0.1

Investment gains (losses), net

 

$

13.3

 

$

(0.7)

 

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Cash Flows

Cash flows related to investment securities for the three months ended March 31, 2019 and 2018, are summarized as follows (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

2019

 

2018

 

    

 

 

    

Sales,

    

 

 

    

Sales,

 

 

Purchases

 

settlements

 

Purchases

 

settlements

 

 

and

 

and

 

and

 

and

 

 

settlements

 

maturities

 

settlements

 

maturities

Investment securities

 

$

(176.7)

 

$

222.8

 

$

(52.3)

 

$

31.0

 

 

Note 4 — Fair Value Measurements

The following table presents assets, liabilities and redeemable noncontrolling interests presented in the financial statements or disclosed in the notes to the financial statements at fair value on a recurring basis as of March 31, 2019 (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value measurements using:

 

 

 

 

 

Quoted prices in

 

 

 

 

 

 

 

 

 

 

    

active markets for

    

 

 

    

 

 

    

 

 

 

 

identical assets

 

Significant other

 

Significant

 

 

 

 

 

and liabilities

 

observable inputs

 

unobservable inputs

 

 

 

 

 

(Level 1)

 

(Level 2)