Legg Mason Reports Results for Third Quarter of Fiscal Year 2010

- Net Income of $44.9 Million, or $0.28 per Diluted Share -

- Real Estate Lease Losses Reduced Diluted EPS by $0.11 per Share -

- Cash Income, As Adjusted, of $93.2 Million -

- Debt Reduced by $550 Million in January 2010 -

Jan 21, 2010, 07:00 ET from Legg Mason, Inc.

BALTIMORE, Jan. 21 /PRNewswire-FirstCall/ -- Legg Mason, Inc. (NYSE: LM) today reported its operating results for the third fiscal quarter ended December 31, 2009.  

The Company reported net income of $44.9 million, or $0.28 per diluted share including $0.11 per diluted share in real estate lease losses, as compared with $45.8 million or $0.30 per share in the previous quarter.  The second quarter included $22.0 million, or $0.09 per diluted share in transaction costs related to the exchange of equity units.  Cash income, as adjusted, for the third quarter was $93.2 million, as compared to $90.0 million in the second quarter of fiscal 2010.

Assets Under Management ("AUM") were $681.6 billion, down 3% from $702.7 billion at September 30, 2009, driven by outflows, and were down 2% from December 31, 2008 AUM of $698.2 billion.

(Amounts in millions, except per share amounts)

Quarters Ended

Nine Months Ended

Dec

Sept

Dec

Dec

Dec

2009

2009

2008

2009

2008

Operating Revenues

$

690.5

$

659.9

$

720.0

$

1,963.5

$

2,740.2

Operating Expenses

611.3

582.0

1,793.0

1,748.1

3,364.0

Operating Income (Loss)

79.2

77.9

(1,073.0)

215.4

(623.8)

Net Income (Loss) 1

44.9

45.8

(1,492.8)

140.8

(1,637.7)

Cash Income (Loss),  as adjusted2

93.2

90.0

(756.6)

270.0

(449.9)

Net Income (Loss) Per Share – Diluted1

0.28

0.30

(10.59)

0.92

(11.64)

Cash Income (Loss) Per Share, as adjusted2

0.57

0.59

(5.37)

1.76

(3.20)

(1) Net income represents net income (loss) attributable to Legg Mason, Inc.

(2) Please see Supplemental Data below for non-GAAP performance measures.

Comments on the Results of the Third Quarter of Fiscal Year 2010

Mark R. Fetting, Chairman and CEO, said, "Overall, we are pleased with the continued progress achieved in the quarter, particularly, the significant improvement of performance at many of our investment managers over the same period a year ago.  While outflows increased this quarter, stronger performance at Western Asset and Permal led to substantially higher performance fees.  Operating margins, as adjusted have improved over the past three quarters and net income and cash income, as adjusted, excluding real estate lease losses this quarter, continued to trend in the right direction.  We have reduced our overall debt significantly, leaving us with $1 billion in corporate cash to reinvest in our business.

However, we can pick up the pace in restoring growth and improving margins. We are cognizant of the fact that it takes some time for flows to follow performance and we are working hard in conjunction with our distribution teams to position ourselves to capture assets as improved performance continues to reflect in our medium and longer term numbers. We will also increase our vigilance on cost and efficiencies."  

Assets Under Management Decreased to $682 Billion

AUM decreased 3% to $681.6 billion as compared with $702.7 billion at September 30, 2009.  AUM decreased 2% from $698.2 billion at December 31, 2008.

  • Total outflows were approximately $33 billion for the quarter ended December 31.  Fixed income, equity and liquidity outflows were $24 billion, $4 billion and $5 billion, respectively.  
  • At December 31, 2009, fixed income represented 54% of total AUM, equity 25% and liquidity 21%.  
  • AUM for U.S. domiciled clients was 65% of total AUM and, for non-US clients, 35%.  By business division, 69% of AUM was in the Americas Division and 31% of AUM was in the International Division.
  • Average AUM during the quarter was $693.3 billion as compared to $684.0 billion in the second quarter of fiscal 2010 and $745.1 billion in the third quarter of fiscal 2009.

Comparison to the Second Quarter of Fiscal Year 2010

Net income was $44.9 million or $0.28 per diluted share as compared to $45.8 million or $0.30 per diluted share in the second quarter.  The current quarter included charges of $28.3 million pre-tax or $0.11 per diluted share related to sublease agreements entered into during the quarter.  The prior quarter included $22.0 million, or $0.09 per diluted share in costs related to the exchange of equity units.

  • Revenues of $690.5 million were up 5% from $659.9 million in the quarter ended September 30, 2009.  This reflects an increase in performance fees earned in the quarter and higher average AUM.
  • Operating expenses of $611.3 million increased 5% from $582.0 million in the second quarter of fiscal 2010.  The increase was primarily attributable to the $28.3 million in real estate lease losses and $5.4 million related to a closed-end fund launch.  Excluding these charges operating expenses were essentially flat compared to the prior quarter.
  • Operating margin was 11.5% as compared to 11.8% in second quarter of fiscal 2010.  Operating margin, as adjusted(1), was 17.9% as compared to 21.0% in the second fiscal quarter. The impact of the real estate lease losses on the operating margin, as adjusted, was 5.5%.
  • Other non-operating income (expense) was ($6.9) million, as compared to ($2.9) million in the second quarter of fiscal 2010, which included $22.0 million in transaction costs from the exchange of equity units.  In addition, gains on funded deferred compensation plan and seed investments that are offset in compensation and benefits were $12.6 million in the current quarter as compared to $24.1 million in the second quarter.  Gains on corporate investments, primarily seed investments, were $7.5 million as compared with $16.2 million in the previous quarter.  
  • Cash income, as adjusted, was $93.2 million, or $0.57 per diluted share, as compared to cash income, as adjusted, of $90.0 million or $0.59 per diluted share in the second quarter.
  • Pre-tax profit margin decreased to 10.5% from 11.4% in the second quarter.  Pre-tax profit margin, as adjusted, was 14.1%, compared to 14.3% in the second quarter of 2010.

Comparison to the Third Quarter of Fiscal Year 2009

Net income was $44.9 million or $0.28 per diluted share, up from a net loss of  $1.5 billion or $10.59 per diluted share, in the third quarter of fiscal 2009 as the prior year's third quarter results included significant money market fund support and impairment charges.

  • Revenues of $690.5 million decreased 4% from the prior year quarter, driven by a decline in fees earned due to lower average AUM.
  • Operating expenses decreased by 66% from the prior year quarter. This was primarily due to impairment charges incurred in the December 2008 quarter of $1.2 billion.
  • Operating margin was 11.5% as compared to a loss in the prior year quarter.  Operating margin, as adjusted, was 17.9% as compared with 20.9% for the prior year quarter.
  • Other non-operating income (expense) in the third quarter was ($6.9) million as compared to ($1.2) billion in the prior year quarter, primarily due to $1.1 billion in money market fund support charges in the prior year period.
  • Cash income, as adjusted, was $93.2 million, or $0.57 per diluted share, as compared to a cash loss, as adjusted, of $756.6 million for the quarter ended December 31, 2008, or $5.37 per diluted share.
  • Pre-tax profit margin increased to 10.5% from a loss in the third fiscal quarter of 2009.  The pre-tax profit margin, as adjusted, was 14.1%, as compared with 4.7% in the prior year quarter.

Quarterly Business Developments

Product

  • Legg Mason raised $315.8 million, assuming full exercise of the underwriters' over allotment option, in the Western Asset Global Corporate Defined Opportunity Fund, their third and largest closed-end fund offering during 2009.
  • ClearBridge Advisors was selected by Pax World and Morningstar to serve as a subadvisor in their new SRI Asset Allocation offering in four strategies: Aggressive Growth, Growth, Moderate and Conservative.
  • The Legg Mason Permal Global Absolute fund, a Dublin domiciled fund was launched in October and registered in the UK.    

Performance

  • At December 31, 2009, 69% of Legg Mason's long-term U.S. fund assets were beating their Lipper category averages for the 1-year period; 69% for the 3-year period; 67% for the 5-year period and 81% for the 10-year period.
  • 52% of Legg Mason's U.S. Mutual fund assets were rated 4 or 5 stars by Morningstar, including 92% of Royce's fund assets, at December 31, 2009.
  • At December 31, 2009, all nine Western Asset Funds outperformed their benchmarks for the quarter-to-date period and eight of nine outperformed their benchmarks for the 1-year period, while longer term performance versus benchmarks continue to improve.  
  • At December 31, 2009, eight of 13 funds managed by ClearBridge outperformed their benchmarks for the 1-year period, seven of 13 outperformed for the 3-year period and 11 of 13 outperformed for the 10-year period.
  • At December 31, 2009, 14 of 25 funds managed by Royce & Associates outperformed their benchmarks for the quarter-to-date period, 17 of 22 outperformed for the 1-year period, and 18 of 20 outperformed for the 3-year period.
  • At December 31, 2009, all six funds managed by LM Capital Management outperformed their benchmarks for the 1-year period, although longer term performance remains challenged.

Balance Sheet

At December 31, 2009, Legg Mason's cash position was $1.4 billion.  Total debt was $2.0 billion and stockholders' equity was $5.8 billion.  The ratio of total debt to total capital (total equity plus total debt) was 25%.  In January 2010, the Company received a tax refund of $459 million and subsequently paid down a $550 million term loan, bringing the ratio of total debt to total capital to 20%.  

Conference Call to Discuss Results

A conference call to discuss the Company's results, hosted by Mr. Fetting, will be held at 8:30 a.m. E.S.T. today. The call will be open to the general public. Interested participants should access the call by dialing 1-866-814-8470 (or for international calls 1-703-639-1369) at least 10 minutes prior to the scheduled start to ensure connection.

The presentation slides that will be reviewed during the conference call will be available on the Investor Relations section of the Legg Mason website (www.leggmason.com/investor_relations.aspx) shortly after the release of the quarter ended December 31, 2009 financial results.

A replay of the live broadcast will be available on the Legg Mason website, in the investor relations section, or by dialing 1-888-266-2081 (or for international calls 1-703-925-2533), access Pin Number 1426214 after the completion of the call.  Please note that the replay will be available beginning at 2:00 p.m., E.S.T. on Thursday, January 21, 2010 and ending on February 4, 2010.  

About Legg Mason

Legg Mason is a global asset management firm, with $681.6 billion in assets under management as of December 31, 2009.  The Company provides active asset management in many major investment centers throughout the world. Legg Mason is headquartered in Baltimore, Maryland, and its common stock is listed on the New York Stock Exchange (symbol: LM).

This release contains forward-looking statements subject to risks, uncertainties and other factors that may cause actual results to differ materially. For a discussion of these risks and uncertainties, see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Legg Mason's Annual Report on Form 10-K for the fiscal year ended March 31, 2009 and in the Company's quarterly reports on Form 10-Q.  

Cash Income (Loss) and Cash Income (Loss), as Adjusted  

We define "cash income" as net income (loss) attributable to Legg Mason, Inc. plus amortization and deferred taxes related to intangible assets and goodwill, and imputed interest and tax benefits on contingent convertible debt less deferred income taxes on goodwill and intangible asset impairment.  We define "cash income, as adjusted" as cash income plus (less) net money market fund support losses (gains) and impairment charges less net losses on the sale of the underlying SIV securities.

We believe that cash income and cash income, as adjusted, provide good representations of our operating performance adjusted for non-cash acquisition related items and other items that facilitate comparison of our results to the results of other asset management firms that have not engaged in money market fund support transactions, issued contingent convertible debt or made significant acquisitions, including any related goodwill or intangible asset impairments.

We also believe that cash income and cash income, as adjusted, are important metrics in estimating the value of an asset management business. These measures are provided in addition to net income, but are not a substitute for net income and may not be comparable to non-GAAP performance measures, including measures of cash earnings or cash income, of other companies. Further, cash income and cash income, as adjusted, are not liquidity measures and should not be used in place of cash flow measures determined under GAAP.  Legg Mason considers cash income and cash income, as adjusted, to be useful to investors because they are important metrics in measuring the economic performance of asset management companies, as indicators of value, and because they facilitate comparisons of Legg Mason's operating results with the results of other asset management firms that have not engaged in money market fund support transactions, significant acquisitions, or issued contingent convertible debt.

In calculating cash income, we add the impact of the amortization of intangible assets from acquisitions, such as management contracts, to net income to reflect the fact that these non-cash expenses distort comparisons of Legg Mason's operating results with the results of other asset management firms that have not engaged in significant acquisitions.  Deferred taxes on indefinite-life intangible assets and goodwill represent actual tax benefits that are not realized under GAAP absent an impairment charge or the disposition of the related business.  Because we actually receive these tax benefits on indefinite-life intangibles and goodwill over time, we add them to net income in the calculation of cash income.  Conversely, we subtract the income tax benefits on impairment charges that have been recognized under GAAP.  We also add back imputed interest on contingent convertible debt, which is a non-cash expense, as well as the actual tax benefits on the related contingent convertible debt that are not realized under GAAP.  In calculating cash income, as adjusted, we add (subtract) net money market fund support losses (gains) (net of losses on the sale of the underlying SIV securities, if applicable) and impairment charges to cash income to reflect that these charges distort comparisons of Legg Mason's operating results to prior periods and the results of other asset management firms that have not engaged in money market fund support transactions or significant acquisitions, including any related impairments. 

Should a disposition or impairment charge for indefinite-life intangibles or goodwill occur, its impact on cash income and cash income, as adjusted, may distort actual changes in the operating performance or value of our firm. Also, realized losses on money market fund support transactions are reflective of changes in the operating performance and value of our firm. Accordingly, we monitor these items and their related impact, including taxes, on cash income and cash income, as adjusted, to ensure that appropriate adjustments and explanations accompany such disclosures.

Although depreciation and amortization of fixed assets are non-cash expenses, we do not add these charges in calculating cash income or cash income, as adjusted, because these charges are related to assets that will ultimately require replacement.

Operating Margin, as Adjusted

We  calculate "operating margin, as adjusted," by dividing (i) operating income, adjusted to exclude the impact on compensation expense of gains or losses on investments made to fund deferred compensation plans, the impact on compensation expense of gains or losses on seed capital investments by our affiliates under revenue sharing agreements and, impairment charges by (ii) our operating revenues less distribution and servicing expenses that are passed through to third-party distributors, which we refer to as "adjusted operating revenues".  The compensation items are removed from operating income in the calculation because they are offset by an equal amount in Other non-operating income (expense), and thus have no impact on Net Income.  We use adjusted operating revenues in the calculation to show the operating margin without distribution revenues that are passed through to third parties as a direct cost of selling our products.  Legg Mason believes that operating margin, as adjusted, is a useful measure of our performance because it provides a measure of our core business activities excluding items that have no impact on net income and because it indicates what Legg Mason's operating margin would have been without the distribution revenues that are passed through to third parties as a direct cost of selling our products.  This measure is provided in addition to the Company's operating margin calculated under GAAP, but is not a substitute for calculations of margins under GAAP and may not be comparable to non-GAAP performance measures, including measures of adjusted margins, of other companies.

Pre-tax Profit Margin, as Adjusted

We calculate "pre-tax margin, as adjusted," by dividing income (loss) from operations before income tax provision adjusted to exclude the impact of net money market fund support gains and losses, and impairment charges by adjusted operating revenues. Legg Mason believes that pre-tax profit margin adjusted for distribution and servicing expense, money market fund support gains and losses, and impairment charges is a useful measure of our performance because it indicates what Legg Mason's pre-tax profit margin would have been without the distribution revenues that are passed through to third parties as a direct cost of selling our products, money market fund support gains and losses, and impairment charges that we do not consider part of our core business metrics, and thus shows the effect of these items on our pre-tax profit margin. This measure is provided in addition to the pre-tax profit margin calculated under GAAP, but is not a substitute for calculations of margin under GAAP and may not be comparable to non-GAAP performance measures, including measures of adjusted margins, of other companies.

(1) Please see supplemental data below

LEGG MASON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

(Unaudited)

Quarters Ended

For the Nine Months Ended

December 2009

September 2009

December 2008

December 2009

December 2008

Operating Revenues:

Investment advisory fees:

Separate accounts

$            208,860 

$            206,972 

$            225,156 

$            606,720 

$            824,947 

Funds

350,767 

347,371 

389,367 

1,026,162 

1,499,754 

Performance fees

31,546 

9,566 

2,910 

46,796 

16,492 

Distribution and service fees

97,900 

94,619 

99,990 

279,220 

389,285 

Other

1,406 

1,368 

2,565 

4,561 

9,678 

Total operating revenues

690,479 

659,896 

719,988 

1,963,459 

2,740,156 

Operating Expenses:

Compensation and benefits

287,657 

287,559 

195,238 

844,028 

895,089 

Distribution and servicing

177,660 

174,388 

202,502 

524,512 

789,344 

Communications and technology

39,845 

40,538 

45,140 

120,873 

144,511 

Occupancy

63,225 

35,689 

70,656 

131,498 

138,555 

Amortization of intangible assets

5,746 

5,664 

9,252 

17,038 

28,475 

Impairment charges

1,225,100 

1,225,100 

Other

37,198 

38,174 

45,105 

110,163 

142,927 

Total operating expenses

611,331 

582,012 

1,792,993 

1,748,112 

3,364,001 

Operating Income (Loss)

79,148 

77,884 

(1,073,005)

215,347 

(623,845)

Other Non-Operating Income (Expense)

Interest income

2,225 

1,737 

8,468 

5,783 

52,761 

Interest expense

(29,241)

(28,565)

(45,588)

(101,196)

(135,883)

Fund support

5,613 

(1,085,296)

23,171 

(1,676,810)

Other income (expense)

20,107 

18,324 

(75,606)

84,831 

(112,945)

Total other non-operating

income (expense)

(6,909)

(2,891)

(1,198,022)

12,589 

(1,872,877)

Income (Loss) before Income

Tax Provision (Benefit)

72,239 

74,993 

(2,271,027)

227,936 

(2,496,722)

Income tax provision (benefit)

26,006 

27,671 

(778,047)

82,057 

(858,672)

Net Income (Loss)

46,233 

47,322 

(1,492,980)

145,879 

(1,638,050)

Less: Net income (loss) attributable

to noncontrolling interests

1,311 

1,548 

(148)

5,129 

(356)

Net Income (Loss) attributable to

Legg Mason, Inc.

$              44,922 

$              45,774 

$       (1,492,832)

$            140,750 

$       (1,637,694)

Net income (Loss) per share

attributable to Legg Mason, Inc.

common shareholders:

Basic

$                  0.28 

$                  0.30 

$              (10.59)

$                  0.93 

$              (11.64)

Diluted

$                  0.28 

$                  0.30 

$              (10.59)

$                  0.92 

$              (11.64)

Weighted average number of shares outstanding:

Basic

160,815 

151,267 

141,019 

151,417 

140,652 

Diluted (1)

162,949 

153,224 

141,019 

153,559 

140,652 

(1)  Diluted shares are the same as basic shares for periods with a loss

LEGG MASON, INC. AND SUBSIDIARIES

SUPPLEMENTAL DATA

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO LEGG MASON, INC.

TO CASH INCOME (LOSS), AND CASH INCOME, AS ADJUSTED (1)

(Amounts in thousands, except per share amounts)

(Unaudited)

Quarters Ended

For the Nine Months Ended

December 2009

September 2009

December 2008

December 2009

December 2008

Net Income (Loss) attributable to Legg Mason, Inc.

$                44,922 

$                45,774 

$          (1,492,832)

$              140,750 

$          (1,637,694)

Plus:

Amortization of intangible assets

5,746 

5,664 

9,252 

17,038 

28,475 

Deferred income taxes on intangible assets

33,855 

34,023 

37,260 

103,175 

107,115 

Deferred income taxes on impairment charges

(374,353)

(374,353)

Imputed interest on convertible debt (2)

8,632 

8,587 

8,105 

25,583 

24,020 

Cash Income (Loss)

93,155 

94,048 

(1,812,568)

286,546 

(1,852,437)

Plus (Less):

Net money market fund support (gains) losses (3)

(4,041)

662,577 

(16,565)

1,009,130 

Impairment charges

1,225,100 

1,225,100 

Less:

Net loss on sale of SIV securities (3)

(831,699)

(831,699)

Cash Income (Loss), as adjusted

$                93,155 

$                90,007 

$             (756,590)

$              269,981 

$             (449,906)

Net Income (Loss) per Diluted Share attributable

to Legg Mason, Inc. common shareholders

$                    0.28 

$                    0.30 

$                 (10.59)

$                    0.92 

$                 (11.64)

Plus:

Amortization of intangible assets

0.03 

0.04 

0.07 

0.11 

0.20 

Deferred income taxes on intangible assets

0.21 

0.22 

0.26 

0.67 

0.75 

Deferred income taxes on impairment charges

(2.65)

(2.65)

Imputed interest on convertible debt (2)

0.05 

0.05 

0.06 

0.17 

0.17 

Cash Income (Loss) per Diluted Share

0.57 

0.61 

(12.85)

1.87 

(13.17)

Plus (Less):

Net money market fund support (gains) losses (3)

(0.02)

4.70 

(0.11)

7.17 

Impairment charges

8.68 

8.71 

Less:

Net loss on sale of SIV securities (3)

(5.90)

(5.91)

Cash Income (Loss) per Diluted Share, as adjusted

$                    0.57 

$                    0.59 

$                   (5.37)

$                    1.76 

$                   (3.20)

(1) See explanations for Use of Supplemental Data as Non-GAAP Performance Measures

(2)   Effective April 1, 2009, Legg Mason was required to retroactively impute (non-cash)

 interest expense on convertible debt using an effective interest rate that would have been attributable to  

 nonconvertible debt at the original date of issuance.  This adjustment also includes the actual tax benefits relating to  

 the convertible debt that are not recognized for GAAP purposes.  

(3)  Includes related adjustments to operating expenses, if applicable, and income tax provision (benefit).  

LEGG MASON, INC. AND SUBSIDIARIES

SUPPLEMENTAL DATA

RECONCILIATION OF OPERATING MARGIN, AS ADJUSTED AND  

PRE-TAX PROFIT MARGIN, AS ADJUSTED (1)

(Amounts in thousands)

(Unaudited)

Quarters Ended

For the Nine Months Ended

December 2009

September 2009

December 2008

December 2009

December 2008

Operating Revenues, GAAP basis

$              690,479

$              659,896

$              719,988

$           1,963,459

$           2,740,156

Less:

Distribution and servicing expense

                177,660

                174,388

                202,502

                524,512

                789,344

Operating Revenues, as adjusted

$              512,819

$              485,508

$              517,486

$           1,438,947

$           1,950,812

Operating Income (Loss)

$                79,148

$                77,884

$          (1,073,005)

$              215,347

$             (623,845)

Add (Less):

Gains (losses) on deferred compensation  

and seed investments

                  12,615

                  24,133

                 (43,981)

                  68,134

                 (69,051)

Impairment charges

                          -  

                          -  

             1,225,100

                          -  

             1,225,100

Operating Income, as adjusted

$                91,763

$              102,017

$              108,114

$              283,481

$              532,204

Operating margin, GAAP basis

                      11.5

%

                      11.8

%

                   (149.0)

%

                      11.0

%

                     (22.8)

%

Operating margin, as adjusted

                      17.9

                      21.0

                      20.9

                      19.7

                      27.3

Income (Loss) before Income

Tax Provision (Benefit), GAAP Basis

$                72,239

$                74,993

$          (2,271,027)

$              227,936

$          (2,496,722)

Add (Less):

Net money market fund support (gains) losses (2)

                          -  

                   (5,613)

             1,070,296

                 (23,171)

             1,631,810

Impairment charges

                          -  

                          -  

             1,225,100

                          -  

             1,225,100

Income (Loss) before Income

Tax Provision (Benefit), as adjusted

$                72,239

$                69,380

$                24,369

$              204,765

$              360,188

Pre-tax profit margin, GAAP basis

                      10.5

%

                      11.4

%

                   (315.4)

%

                      11.6

%

                     (91.1)

%

Pre-tax profit margin, as adjusted

                      14.1

                      14.3

                        4.7

                      14.2

                      18.5

(1) See explanations for Use of Supplemental Data as Non-GAAP Performance Measures

(2) Includes related adjustments to operating expenses, if applicable

LEGG MASON, INC. AND SUBSIDIARIES

(Amounts in billions)

(Unaudited)

Assets Under Management

Quarters Ended

December 2009

September 2009

June 2009

March 2009

December 2008

By asset class:

Equity

$  168.7 

$   165.6 

$  143.6 

$  126.9 

$ 148.4 

Fixed Income

365.8 

385.7 

366.6 

357.6 

392.1 

Liquidity

147.1 

151.4 

146.7 

147.9 

157.7 

Total

$   681.6 

$ 702.7 

$ 656.9 

$  632.4 

$  698.2 

By asset class (average):

Equity

$ 164.6 

$  155.7 

$ 138.0 

$  134.2 

$ 169.6 

Fixed Income

378.8 

377.5 

362.3 

370.0 

408.3 

Liquidity

149.9 

150.8 

146.9 

153.2 

167.2 

Total

$ 693.3 

$   684.0 

$  647.2 

$ 657.4 

$ 745.1 

By division:

Americas

$ 472.9 

$  484.3 

$  457.1 

$  446.7 

$ 490.6 

International

208.7 

218.4 

199.8 

185.7 

207.6 

Total

$ 681.6 

$  702.7 

$   656.9 

$              632.4 

$ 698.2 

Component Changes in Assets Under Management

Quarters Ended

December 2009

September 2009

June 2009

March 2009

December 2008

Beginning of period

$  702.7 

$   656.9 

$   632.4 

$ 698.2 

$  841.9 

Net client cash flows

(32.7)

(8.1)

(30.3)

(43.5)

(77.0)

Market performance and other

11.6 

53.9 

54.8 

(21.7)

(66.7)

Acquisitions (Dispositions), net

(0.6)

End of period

$  681.6 

$ 702.7 

$ 656.9 

$  632.4 

$  698.2 

By Division

Americas

Beginning of period

$  484.3 

$   457.1 

$  446.7 

$ 490.6 

$ 591.5 

Net client cash flows

(21.4)

(11.8)

(27.0)

(28.4)

(47.4)

Market performance and other

10.0 

39.0 

37.4 

(14.9)

(53.5)

Acquisitions (Dispositions), net

(0.6)

End of period

$  472.9 

$  484.3 

$ 457.1 

$  446.7 

$ 490.6 

International

Beginning of period

$ 218.4 

$   199.8 

$ 185.7 

$ 207.6 

$  250.4 

Net client cash flows

(11.3)

3.7 

(3.3)

(15.1)

(29.6)

Market performance and other

1.6 

14.9 

17.4 

(6.8)

(13.2)

Acquisitions (Dispositions), net

End of period

$ 208.7 

$  218.4 

$ 199.8 

$ 185.7 

$ 207.6 

LEGG MASON, INC. AND SUBSIDIARIES

COMPONENT CHANGES IN ASSETS UNDER MANAGEMENT

(Amounts in billions)

(Unaudited)

For the Nine Months Ended

For the Twelve Months Ended

December 2009

December 2008

December 2009

December 2008

Beginning of period

$ 632.4 

$ 950.1 

$ 698.2 

$ 998.5 

Net client cash flows

(71.1)

(115.4)

(114.6)

(134.6)

Market performance and other

120.3 

(136.0)

98.6 

(164.5)

Acquisitions (Dispositions), net

(0.5)

(0.6)

(1.2)

End of period

$681.6 

$  698.2 

$ 681.6 

$ 698.2 

By Division

For the Nine Months Ended

For the Twelve Months Ended

Americas

Beginning of period

$446.7 

$ 672.2 

$ 490.6 

$  713.0 

Net client cash flows

(60.2)

(81.7)

(88.6)

(90.5)

Market performance and other

86.4 

(99.4)

71.5 

(131.4)

Acquisitions (Dispositions), net

(0.5)

(0.6)

(0.5)

End of period

$ 472.9 

$  490.6 

$ 472.9 

$ 490.6 

International

Beginning of period

$  185.7 

$ 277.9 

$ 207.6 

$  285.5 

Net client cash flows

(10.9)

(33.7)

(26.0)

(44.1)

Market performance and other

33.9 

(36.6)

27.1 

(33.1)

Acquisitions (Dispositions), net

(0.7)

End of period

$  208.7 

$  207.6 

$ 208.7 

$  207.6 

Use of Supplemental Data as Non-GAAP Performance Measures

As supplemental information, we are providing the following performance measures that are based on methodologies other than generally accepted accounting principles ("non-GAAP") that management uses as benchmarks in evaluating and comparing the period-to-period operating performance of Legg Mason, Inc. and its subsidiaries:

  • Cash income
  • Cash income, as adjusted
  • Operating margin, as adjusted
  • Pre-tax profit margin, as adjusted

SOURCE Legg Mason, Inc.



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