Janus Capital Group Inc. Announces Second Quarter 2013 Results

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Janus Capital Group Inc. Announces Second Quarter 2013 Results

DENVER--(BUSINESS WIRE)-- Janus Capital Group Inc. ("JCG") (NYS: JNS) today reported second quarter net income of $15.8 million, or $0.08 per diluted share, compared with first quarter 2013 net income of $28.0 million, or $0.15 per diluted share, and net income of $23.4 million, or $0.13 per diluted share, in the second quarter 2012. Second quarter 2013 included a charge of $0.04 per share from the early extinguishment of debt associated with the exchange of $110.0 million of JCG's 3.25% convertible senior notes due 2014 for $116.6 million of newly issued 0.75% convertible senior notes due 2018 and a charge of $0.02 per share (or a $0.04 per share decline quarter over quarter) primarily due to the mark-to-market impact on our seed capital program.

Flows and Assets Under Management


Average assets under management during the second quarter 2013 were $164.2 billion compared with $161.8 billion during the first quarter 2013 and $155.0 billion during the second quarter 2012.

At June 30, 2013, JCG's total assets under management were $160.6 billion compared with $163.8 billion at March 31, 2013 and $152.4 billion at June 30, 2012.

The decrease in complex-wide assets during the second quarter 2013 reflects long-term net outflows of $5.4 billion offset by net market appreciation of $2.2 billion. Fundamental equity and mathematical equity long-term net outflows totaled $4.3 billion and $1.2 billion, respectively, while fixed income long-term net inflows totaled $0.1 billion.

Investment Performance

As of June 30, 2013, 50% of complex-wide mutual funds had a 4- or 5-star Overall Morningstar RatingTM.1

As of June 30, 2013, 45%, 37% and 40% of fundamental equity mutual fund assets ranked in the top half of their Morningstar categories on a one-, three- and five-year total return basis, respectively.2

Fixed income mutual funds continue to generate strong long-term relative investment performance with 54%, 100% and 100% of mutual fund assets ranked in the top half of their Morningstar categories on a one-, three- and five-year total return basis as of June 30, 2013.3

Mathematical equity relative investment performance declined, with 33%, 57% and 55% of strategies surpassing their respective benchmarks, net of fees, over the one-, three- and five-year periods, respectively, as of June 30, 2013.4

Financial Discussion

Financial Highlights
(dollars in millions, except per share data or as noted)
   
Three Months Ended
June 30,March 31,June 30,
201320132012
 
 
Average Assets (in billions)$164.2$161.8$155.0
Ending AUM (in billions)$160.6$163.8$152.4
Revenues$215.8$214.2$206.0
Operating Expenses$157.4$159.5$153.9
Operating Income$58.4$54.7$52.1
Operating Margin27.1%25.5%25.3%
 
Net Income Attributable to JCG$15.8$28.0$23.4
 
Diluted Earnings per Share$0.08$0.15$0.13
       
 

Second quarter 2013 revenues of $215.8 million increased from first quarter 2013, primarily due to higher investment management fee revenue, partially offset by lower private account performance fees. Second quarter 2013 operating expenses of $157.4 million decreased $2.1 million, or 1.3%, from first quarter 2013, primarily due to lower long-term incentive compensation expenses.

Capital and Liquidity

At June 30, 2013, JCG had stockholders' equity of $1.5 billion, cash and investments of $759.9 million and outstanding debt of $549.4 million.

Cash flows from operations during the second quarter 2013 were $67.0 million compared with $(13.3) million during the first quarter 2013 and $71.1 million during the second quarter 2012. The change in cash flows from operations comparing second quarter 2013 to first quarter 2013 is due to payment of annual incentive compensation in the first quarter 2013.

As referenced above, on June 13, 2013, JCG entered into separate privately negotiated exchange agreements pursuant to which $110.0 million aggregate principal amount of the existing, 3.25% convertible senior notes due 2014 were exchanged for $116.6 million aggregate principal amount of newly issued, 0.75% convertible senior notes due 2018. JCG recognized a $12.6 million loss on extinguishment of debt as a result of the exchange. The exchange takes advantage of favorable conditions in the marketplace and allows JCG to reduce its annual interest expense, extend the existing debt maturities and increase its financial flexibility. The additional financial flexibility provided by the transaction may allow JCG to retire additional existing, long-term debt obligations should the opportunity arise in the future.

As part of its capital management, JCG repurchased 1,036,934 shares of its common stock at an average price of $8.74 per share and a total cost of $9.1 million during the second quarter 2013.

On July 22, 2013, JCG's Board of Directors declared a regular quarterly cash dividend of $0.07 per share. The quarterly dividend will be paid on August 23, 2013, to stockholders of record at the close of business on August 9, 2013.

Executive Team Changes

JCG is also announcing today that Chief Financial Officer ("CFO") Bruce Koepfgen will be promoted to a newly established role as President of JCG. Replacing Mr. Koepfgen as CFO will be Jennifer J. McPeek, who is currently Senior Vice President and Treasurer and has been with the firm since 2009. Both promotions will be effective August 1, 2013.

In his new role as President, Mr. Koepfgen will focus on business leadership. "Bruce is a very talented and proven leader, with more than 37 years of experience in the financial services and asset management industry, and is a terrific person. I look forward to getting him more deeply involved in driving our global business forward," said Richard M. Weil, Chief Executive Officer of JCG. "Ms. McPeek has proven her excellence in the financial and strategy duties. I am very confident that she will do an outstanding job as our new CFO."

Ms. McPeek, age 43, has 21 years of corporate finance and strategy experience. Prior to joining JCG in late-2009, she was Senior Vice President of Strategic Planning at ING Investment Management - Americas Region. Ms. McPeek earned a bachelor of arts degree in mathematics from Duke University, magna cum laude, a master of science degree in Financial Engineering from the Massachusetts Institute of Technology and holds the Chartered Financial Analyst designation.

Second Quarter 2013 Earnings Call Information

JCG will discuss its results during a conference call on Thursday, July 25, 2013, at 10 a.m. Eastern Daylight Time. The call-in number will be (888) 397-5338. Anyone outside the U.S. or Canada should call (719) 325-2145. The slides used during the presentation will be available in the investor relations section of the JCG website (http://ir.janus.com). For those unable to join the conference call at the scheduled time, an audio replay will be available on www.janus.com/ir.

About Janus Capital Group Inc.

Janus Capital Group Inc. (JCG) is a global investment firm dedicated to delivering better outcomes for clients through differentiated investment solutions from three independent managers: Janus Capital Management LLC (Janus), INTECH Investment Management LLC (INTECH) and Perkins Investment Management LLC (Perkins). Each manager brings a distinct perspective, style-specific expertise and a disciplined approach to risk. JCG's multi-boutique approach provides clients with distinctive solutions across a broad range of asset classes including equities, fixed income, alternatives, asset allocation and income products.

At the end of June 2013, JCG managed approximately $160.6 billion in assets for shareholders, clients and institutions around the globe. Based in Denver, JCG also has offices in London, Milan, Munich, Singapore, Hong Kong, Tokyo, Melbourne, Paris, The Hague, Zurich, Frankfurt, Dubai and Taipei.

_____________________________________

1 For the period ending June 30, 2013, 43%, 44% and 67% of complex-wide mutual funds had a 4- or 5-star Morningstar rating for the 3-, 5- and 10-year periods based on risk-adjusted returns for 40, 39 and 30 funds, respectively. 40 funds were included in the analysis for the Overall period.
 
2 References Morningstar relative performance on an asset-weighted basis. For the 10-year period ending June 30, 2013, 82% of the fundamental equity mutual fund assets outperformed the majority of their Morningstar peers based on total returns. For the 1-, 3-, 5- and 10-year periods ending June 30, 2013, 50%, 44%, 58% and 83% of the 40, 32, 31 and 24 fundamental equity mutual funds outperformed the majority of their Morningstar peers based on total returns.
 
3 References Morningstar relative performance on an asset-weighted basis. For the 10-year period ending June 30, 2013, 100% of the fixed income mutual fund assets outperformed the majority of their Morningstar peers based on total returns. For the 1-, 3-, 5- and 10-year periods ending June 30, 2013, 33%, 100%, 100% and 100% of the 6, 4, 4 and 4 fixed income mutual funds outperformed the majority of their Morningstar peers based on total returns.
 
4 For the period ending June 30, 2013, 60%, 75%, 50% and 67% of the mathematical equity mutual funds were beating their benchmarks on a 1-, 3-, 5-year and since-fund inception basis. Funds included in the analysis and their inception dates are: INTECH U.S. Growth Fund - Class S (1/03); INTECH U.S. Core Fund - Class T (2/03); INTECH U.S. Value Fund - Class I (12/05); INTECH International Fund - Class I (5/07); INTECH Global Dividend Fund - Class I (12/11) and Janus INTECH U.S. Low Volatility Portfolio - Service Shares (9/12).
 
 
JANUS CAPITAL GROUP INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in millions, except per share data or as noted)
   
 
Three Months Ended
June 30,March 31,June 30,
201320132012
Revenues:
Investment management fees$202.8$198.2$192.4
Performance fees(22.2)(19.5)(21.9)
Shareowner servicing fees and other 35.2  35.5  35.5 
Total 215.8  214.2  206.0 
 
Operating expenses:
Employee compensation and benefits74.474.366.6
Long-term incentive compensation13.715.815.2
Marketing and advertising4.84.96.1
Distribution31.831.431.4
Depreciation and amortization7.37.58.0
General, administrative and occupancy 25.4  25.6  26.6 
Total 157.4  159.5  153.9 
 
Operating income58.454.752.1
 
Interest expense(11.0)(11.2)(11.0)
Investment (losses) gains, net(6.1)4.6(7.0)
Other (expense) income, net(0.8)1.81.8
Loss on early extinguishment of debt(12.6)--
Income tax provision (11.1) (20.2) (11.2)
 
Net income16.829.724.7
 
Noncontrolling interests (1.0) (1.7) (1.3)
 
Net income attributable to JCG$15.8 $28.0 $23.4 
 
 
Diluted weighted-average shares outstanding (in millions)186.2186.3185.4
 
 

Diluted earnings per share attributable to JCG common shareholders:

$

0.08

$0.15$0.13
 
Average assets under management (in billions)$164.2$161.8$155.0
 
 
JANUS CAPITAL GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
   
June 30,December 31,
20132012
Assets:
Cash and cash equivalents$349.3$387.0
Investment securities410.6350.5
Other assets160.8159.1
Property and equipment, net31.033.3
Intangible assets and goodwill, net 1,724.4  1,730.5 
Total assets$2,676.1 $2,660.4 
 
Liabilities and equity:
Debt$549.4$545.1
Other liabilities159.4201.3
Deferred income taxes438.0436.0
Redeemable noncontrolling interests40.342.9
Total equity 1,489.0  1,435.1 
Total liabilities and equity$2,676.1 $2,660.4 
 
 
UNAUDITED CONDENSED CASH FLOW INFORMATION
(dollars in millions)
 
Three Months Ended
June 30,March 31,June 30,
201320132012
Cash provided by (used in):
Operating activities$67.0$(13.3)$71.1
Investing activities(5.9)(50.2)6.9
Financing activities(30.2)(3.6)(26.0)
Effect of exchange rate changes (1.5) -  - 
Net change during period$29.4 $(67.1)$52.0 
 
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JANUS CAPITAL GROUP INC.
ASSETS & FLOWS BY INVESTMENT DISCIPLINE
(dollars in billions)
 
Three Months Ended
June 30, 2013March 31, 2013June 30, 2012
Growth/Core(1)
Beginning of period assets$57.8$53.8$56.6
Sales2.53.52.2
Redemptions (4.6) (3.4) (3.5)
Net sales (redemptions)(2.1)0.1(1.3)
Market/fund performance 1.4  3.9  (2.6)
End of period assets$57.1 $57.8 $52.7