BALTIMORE, May 13, 2019 /PRNewswire/ -- Legg Mason, Inc.
(NYSE: LM) today reported its operating results for the fourth
fiscal quarter and the fiscal year ended March 31,
2019.
|
|
|
|
|
Quarters
Ended
|
|
Fiscal Years
Ended
|
Financial
Results
|
Mar
|
|
Dec
|
|
Mar
|
|
Mar
|
|
Mar
|
(Amounts in
millions, except per share amounts)
|
2019
|
|
2018
|
|
2018
|
|
2019
|
|
2018
|
Operating
Revenues
|
$
|
692.6
|
|
|
$
|
704.3
|
|
|
$
|
785.1
|
|
|
$
|
2,903.3
|
|
|
$
|
3,140.3
|
|
Operating
Expenses
|
614.5
|
|
|
940.7
|
|
|
685.3
|
|
|
2,800.2
|
|
|
2,816.3
|
|
Operating Income
(Loss)
|
78.1
|
|
|
(236.4)
|
|
|
99.7
|
|
|
103.1
|
|
|
324.0
|
|
Net Income
(Loss)1
|
49.5
|
|
|
(216.9)
|
|
|
9.3
|
|
|
(28.5)
|
|
|
285.1
|
|
Net Income (Loss) Per
Share - Diluted1
|
0.56
|
|
|
(2.55)
|
|
|
0.10
|
|
|
(0.38)
|
|
|
3.01
|
|
|
|
|
|
|
|
|
|
|
|
Assets Under
Management
|
|
|
|
|
|
|
|
|
|
(Amounts in
billions)
|
|
|
|
|
|
|
|
|
|
End of Period Assets
Under Management
|
$
|
758.0
|
|
|
$
|
727.2
|
|
|
$
|
754.1
|
|
|
$
|
758.0
|
|
|
$
|
754.1
|
|
Average Assets Under
Management
|
748.7
|
|
|
739.3
|
|
|
766.9
|
|
|
748.0
|
|
|
754.4
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Net Income (Loss) Attributable to Legg Mason, Inc.
|
|
Joseph A. Sullivan, Chairman and
CEO of Legg Mason said, "This quarter's results reinforce the
benefits of diversification of our investment management platform
across asset classes, with alternative and fixed income net
inflows offset by decelerating equity net outflows. Our
distribution platform contributed with a favorable inflection in
retail net flows reflecting higher sales and slower
redemptions. We continue to focus on meeting evolving client
demand by expanding client choice in investment strategies,
vehicles and distribution access. Looking ahead, lead
indicators of improving investment performance, ongoing product
development, and increasing interest in alternative strategies bode
well for organic growth prospects.
"On top of improving fundamental trends, we have refined the
perspective and scope of our strategic restructuring which will
deliver meaningful cost reductions. Finally, we are
thoughtfully allocating capital, including paying down $250
million of our public debt in July, and approving an 18% increase
in the quarterly dividend."
Assets Under Management of $758.0
Billion
Assets Under Management were $758.0
billion at March 31, 2019 compared with $727.2 billion at December
31, 2018, resulting from $39.2
billion in positive market performance and other, offset by
$0.3 billion in realizations, and
liquidity outflows of $8.1
billion.
|
|
|
|
|
|
|
|
|
|
Quarter Ended March
31, 2019
|
|
|
Assets Under
Management
($ in
billions)
|
AUM
|
|
Flows
|
|
Operating
Revenue Yield 1
|
|
|
Equity
|
$
|
202.0
|
|
|
$
|
(1.0)
|
|
|
58 bps
|
|
|
Fixed
Income
|
419.6
|
|
|
0.1
|
|
|
27 bps
|
|
|
Alternative
|
68.6
|
|
|
0.9
|
|
2
|
60 bps
|
|
|
Long-Term
Assets
|
690.2
|
|
|
0.0
|
|
|
|
|
|
Liquidity
|
67.8
|
|
|
(8.1)
|
|
|
14
bps
|
|
|
Total
|
$
|
758.0
|
|
|
$
|
(8.1)
|
|
|
37
bps
|
|
|
|
|
|
|
|
|
|
|
(1) Operating revenue
yield equals total operating revenues less performance fees divided
by average AUM
|
|
|
(2) Excludes
realizations of $0.3 billion
|
|
At March 31, 2019, fixed income represented 55% of AUM,
while equity represented 27%, alternative represented 9% and
liquidity represented 9%.
By geography, 69% of AUM was from clients domiciled in
the United States and 31% from
non-US domiciled clients.
Average AUM during the quarter was $748.7
billion compared to $739.3
billion in the prior quarter and $766.9 billion in the fourth quarter of fiscal
year 2018. Average long-term AUM was $676.1 billion compared to $672.4 billion in the prior quarter and
$697.1 billion in the fourth quarter
of fiscal year 2018.
|
Quarterly
Performance
|
|
|
|
1-Year
|
|
3-Year
|
|
5-Year
|
|
10-Year
|
% of Strategy AUM
beating Benchmark3
|
|
56%
|
|
78%
|
|
74%
|
|
84%
|
|
|
|
|
|
|
|
|
|
|
% of Long-Term U.S.
Fund Assets Beating Lipper Category Average
|
|
48%
|
|
63%
|
|
72%
|
|
61%
|
|
|
|
|
|
|
|
|
|
|
(3)
See "Supplemental Data Regarding Quarterly Performance."
|
|
|
|
|
|
|
|
|
|
Of Legg Mason's long-term U.S. mutual fund assets, 56% were in
funds rated 4 or 5 stars by Morningstar.
Operating Results - Comparison to the Third Quarter of Fiscal
Year 2019
Net income was $49.5
million, or $0.56 per diluted
share, compared to a net loss of $216.9
million, or $2.55 per diluted
share, in the third quarter of fiscal year 2019. In addition to the
net impact of the factors listed below, the changes were driven by
two fewer days in the quarter and higher seasonal
compensation.
This quarter's results included:
- Strategic restructuring costs4 of $9.4 million, or $0.08 per diluted share.
- Affiliate charges of $9.2
million, or $0.06 per diluted
share, which included Royce management equity plan costs of
$2.4 million.
The prior quarter's results included:
- Non-cash intangible asset impairment charges of $365.2 million, or $3.11 per diluted share, primarily related
to commingled fund management contracts at EnTrust Global and RARE Infrastructure.
- Net discrete tax expenses and other tax items of $10.5 million, or $0.12 per diluted share.
- Corporate restructuring costs4 of $5.9 million, or $0.05 per diluted share.
Operating revenues of $692.6
million were down 2% compared to $704.3 million in the prior quarter
reflecting:
- A decrease in separate account and fund advisory fee revenues
of $15.3 million, or 2%, reflecting
two fewer days in the quarter.
- This was partially offset by a $3.8
million increase in performance fees.
Operating expenses were $614.5
million compared to $940.7
million in the prior quarter, but excluding the non-cash
impairment charges of $365.2 million
in the fiscal third quarter, expenses were up 7%, reflecting:
- Higher compensation of $38.8
million driven by a $16.0
million gain in the market value of deferred compensation
and seed investments which is recorded as an increase in
compensation and benefits, with an offset in non-operating income,
as compared to a loss of $10.8
million in the prior quarter, as well as seasonal
compensation expenses.
- An increase in occupancy expenses of $4.9 million driven by Corporate restructuring
costs.
- An increase in other expenses of $4.3
million related to Corporate and other restructuring costs,
as well as an increase in affiliate related legal and professional
fees.
Non-operating expense was $2.8
million, as compared to $30.3
million in the prior quarter reflecting:
- Gain on corporate investments, not offset in compensation, were
$10.2 million compared with losses of
$4.9 million in the prior
quarter.
- A residual distribution of $8.4
million from an investment holding in the prior quarter.
- Gains on funded deferred compensation and seed investments, as
described above.
- A $4.5 million loss associated
with the consolidation of sponsored investment vehicles compared to
a $2.6 million gain in the prior
quarter. The consolidation of sponsored investment vehicles
has no impact on net income as the effects of consolidation are
fully attributable to noncontrolling interests.
Operating margin was 11.3% compared to (33.6)% in the
prior quarter, reflecting the impact of the non-cash impairment
charges of $365.2 million in the
prior quarter. Operating margin, as adjusted5, was
17.1%, as compared to 21.1% in the prior quarter.
Net income attributable to noncontrolling interests,
excluding consolidated investment vehicles, was $5.7 million compared to $9.0 million in the prior quarter, principally
related to Clarion, EnTrust Global,
RARE and Royce.
(4) For the March and December quarters, Strategic
restructuring costs include both global business platform as well
as other corporate functions
(5) See "Use of Supplemental Non-GAAP Financial
Information."
Operating Results - Comparison to the Fourth Quarter of
Fiscal Year 2018
Net income was $49.5
million, or $0.56 per diluted
share, compared to net income of $9.3
million, or $0.10 per diluted
share, in the fourth quarter of fiscal year 2018. In addition
to the factors listed below, the changes reflecting lower revenues
driven by lower average long-term AUM and lower non-pass through
performance fees.
This quarter's results included:
- Strategic restructuring costs4 of $9.4 million, or $0.08 per diluted share.
- Affiliate charges of $9.2
million, or $0.06 per diluted
share, which included Royce management equity plan costs of
$2.4 million.
The prior year quarter's results included:
- A charge of $67.0 million, or
$0.76 per diluted share, related to
the previously disclosed regulatory matter.
- Contingent consideration credit adjustments of $15.5 million, or $0.11 per diluted share.
- EnTrust Global acquisition and
transition-related costs of $1.8
million, or $0.01 per diluted
share.
- Corporate severance costs of $1.9
million, or $0.01 per diluted
share.
Operating revenues of $692.6
million down 12% compared with $785.1
million in the prior year quarter reflecting:
- Decreases principally due to lower average long-term AUM.
- A decrease in non-pass through performance fees of $21.6 million.
Operating expenses of $614.5
million were down 10% compared with $685.3 million in the prior year quarter
reflecting:
- Decreased compensation and distribution and service fees,
related to decreased revenues driven by lower average long-term AUM
and performance fees.
- Regulatory charge of $67.0
million reflected in Other Expenses in the prior year
quarter.
- Excluding the regulatory charge, other expenses increased
$7.3 million related to Corporate and
other restructuring costs, as well as an increase in affiliate
related legal and professional fees.
- A $16.0 million gain in the
market value of deferred compensation and seed investments, which
is recorded as an increase in compensation and benefits with an
offset in non-operating income, compared with a loss of
$2.2 million in the prior year
quarter.
Non-operating expense was $2.8
million, compared to $43.1
million in the prior year quarter reflecting:
- Gains on corporate investments, not offset in compensation,
were $10.2 million compared with
losses of $11.9 million in the prior
year quarter.
- Gains on funded deferred compensation and seed investments as
described above.
- A $4.5 million loss associated
with the consolidation of sponsored investment vehicles, as
compared to an $1.3 million loss in
the prior year quarter. The consolidation of sponsored
investment vehicles has no impact on net income as the effects of
consolidation are fully attributable to noncontrolling
interests.
Operating margin was 11.3% as compared to12.7% in the
prior year quarter. Operating margin, as adjusted, was 17.1%,
as compared to 23.8% in the prior year quarter.
Net income attributable to noncontrolling interests,
excluding consolidated investment vehicles, was $5.7 million, compared to $8.6 million in the prior year quarter,
principally related to Clarion, EnTrust Global, RARE and Royce.
Comparison to the Full Fiscal Year 2018
Net loss was $28.5 million,
or $0.38 per diluted share, compared
to net income of $285.1 million, or
$3.01 per diluted share, for fiscal
year 2018. In addition to the factors listed below, the
decreased earnings were driven by lower advisory fee and
distribution and service fee revenue due to a lower operating
revenue yield and lower non-pass through performance
fees.
This year's results included:
- Non-cash impairment charges of $365.2
million, or $3.07 per diluted
share
- Strategic and corporate
restructuring costs of $18.5 million,
or $0.15 per diluted share.
- Affiliate charges of $9.2
million, or $0.06 per diluted
share, which included Royce management equity plan costs of
$2.4 million.
- A charge of $4.2 million, or
$0.05 per diluted share, reflecting
the previously disclosed regulatory matter.
- Net discrete tax expenses and other tax items of $7.7 million, or $0.09 per diluted share.
The prior year's results included:
- Tax benefit of $213.7 million, or
$2.26 per diluted share
- Non-cash impairment charges of $229.0
million, or $1.96 per diluted
share
- A charge of $67.0 million, or
$0.71 per diluted share, related to a
previously disclosed regulatory matter.
- Contingent consideration credit adjustments of $31.3 million, or $0.33 per diluted share.
- EnTrust Global acquisition and
transition-related costs of $7.0
million, or $0.05 per diluted
share.
Operating revenues of $2.9
billion were down 8% compared with $3.1 billion in the prior year reflecting:
- Lower advisory fee and distribution and service fee revenue due
to a lower operating revenue yield.
- A decrease in non-pass through performance fees of $83.2 million, and a decrease in pass through
performance fees of $59.7
million.
Operating expenses of $2.8
billion were in line with the prior year, but excluding the
non-cash impairment charges in both years, and the regulatory
charges in both years and contingent consideration credit
adjustments, were down 5% reflecting:
- Decreased compensation, related to decreased revenues driven by
lower average long-term AUM and lower performance fees.
- Distribution and servicing expenses decreased $50.0 million resulting from lower AUM on which
we pay third party distributors.
- An $18.8 million increase in
other expenses, due to global business platform and other corporate
restructuring costs of $20.3
million.
- A $10.4 million gain in the
market value of deferred compensation and seed investments, which
is recorded as an increase in compensation and benefits with an
offset in non-operating income, compared with a gain of
$12.3 million in the prior year.
Non-operating expense was $74.6
million, compared to $90.2
million in the prior year reflecting:
- Gain on corporate investments, not offset in compensation, were
$22.5 million compared with net
losses of $1.8 million in the prior
year.
- Gains on funded deferred compensation and seed investments, as
described above.
- A $2.4 million loss associated
with the consolidation of sponsored investment vehicles, as
compared to a $10.0 million gain in
the prior year. The consolidation of sponsored investment
vehicles has no impact on net income as the effects of
consolidation are fully attributable to noncontrolling
interests.
Operating margin was 3.6% as compared to 10.3% in the
prior year. Operating margin, as adjusted, was 21.1%, as
compared to 24.6% in the prior year.
Net income attributable to noncontrolling interests,
excluding consolidated investment vehicles, was $35.7 million, compared to $44.6 million in the prior year, principally
related to Clarion, EnTrust Global,
RARE and Royce.
Quarterly Business Developments and Recent
Announcements
- On April 15, 2019, S&P Global
Ratings affirmed the BBB senior debt rating of Legg Mason and moved
the rating outlook to positive from stable.
- On April 10, 2019, Clarion
Partners acquired a majority stake in Gramercy Europe
(Jersey) Limited, a European real estate business specializing in
pan-European logistics and industrial assets.
- On April 8, 2019, The U.S.
Securities and Exchange Commission (SEC) issued a notice of
application for exemptive relief for Precidian Investments'
proprietary exchange traded fund (ETF) intellectual property,
ActiveShares®.
- On April 2, 2019 Legg Mason
announced that it has received a perfect score of 100 on the 2019
Corporate Equality Index (CEI), the nation's premier benchmarking
survey and report on corporate policies and practices related to
LGBTQ+ workplace equality.
Balance Sheet
At March 31, 2019, Legg Mason's
cash position was $921.1
million. Total debt was $2.2
billion, and stockholders' equity was $3.7 billion. The ratio of total debt to
total capital was 38%, in line with the prior quarter.
Seed investments totaled $227.8
million.
The Board of Directors has declared a quarterly cash dividend on
the Company's common stock in the amount of $0.40, per share. The dividend is
payable on July 22, 2019 to
shareholders of record at the close of business on July 2, 2019.
Conference Call to Discuss Results
A conference call to discuss the Company's results, hosted by
Joseph A. Sullivan, will be held at
5:00 p.m. EDT today. The call will be
open to the general public. Interested participants should
access the call by dialing 1-800-447-0521 (or for international
calls 1-847-413-3238), confirmation number 48533739, at least 10
minutes prior to the scheduled start to ensure connection. A
live, listen-only webcast will also be available via the Investor
Relations section of www.leggmason.com.
The presentation slides that will be reviewed during the
conference call will be available on the Investor Relations section
of the Legg Mason website shortly after the release of the
financial results.
A replay of the live broadcast will be available on the Legg
Mason website, www.leggmason.com, in the Investor Relations
section, or by dialing 1-888-843-7419 (or for international calls
1-630-652-3042), enter pass code 48533739# when prompted.
Please note that the replay will be available beginning at
8:00 p.m. EDT on Monday, May 13,
2019, and ending at 11:59 p.m. EDT on
Monday, May 27, 2019.
About Legg Mason
Guided by a mission of Investing to Improve
Lives,™ Legg Mason helps investors globally
achieve better financial outcomes by expanding choice across
investment strategies, vehicles and investor access through
independent investment managers with diverse expertise in equity,
fixed income, alternative and liquidity investments. Legg
Mason's assets under management are $758.0
billion as of March 31,
2019. To learn more, visit our web site, our newsroom, or
follow us on LinkedIn, Twitter, or Facebook.
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, 2018 and, in the Company's,
quarterly reports on Form 10-Q.
Supplemental Data Regarding Quarterly Performance
Strategy Performance
For purposes of investment performance comparisons, strategies
are an aggregation of discretionary portfolios (separate accounts,
investment funds, and other products) into a single group that
represents a particular investment objective. In the case of
separate accounts, the investment performance of the account is
based upon the performance of the strategy to which the account has
been assigned. Each of our asset managers has its own
specific guidelines for including portfolios in their strategies.
For those managers which manage both separate accounts and
investment funds in the same strategy, the performance comparison
for all of the assets is based upon the performance of the separate
account.
Approximately 88% of total AUM is included in strategy AUM as of
March 31, 2019, although not all
strategies have three-, five-, and ten-year histories. Total
strategy AUM includes liquidity assets. Certain assets are
not included in reported performance comparisons. These include:
accounts that are not managed in accordance with the guidelines
outlined above; accounts in strategies not marketed to potential
clients; accounts that have not yet been assigned to a strategy;
and certain smaller products at some of our affiliates.
Past performance is not indicative of future results. For
AUM included in institutional and retail separate accounts and
investment funds managed in the same strategy as separate accounts,
performance comparisons are based on gross-of-fee performance. For
investment funds which are not managed in a separate account
format, performance comparisons are based on net-of-fee
performance. Funds-of-hedge funds generally do not have specified
benchmarks. For purposes of this comparison, performance of those
products is net of fees, and is compared to the relevant HFRX
index. These performance comparisons do not reflect the
actual performance of any specific separate account or investment
fund; individual separate account and investment fund performance
may differ. The information in this presentation is provided
solely for use regarding this presentation and is not directed
toward existing or potential clients of Legg Mason.
|
|
|
At March 31,
2019:
|
|
1-Year
|
|
3-Year
|
|
5-Year
|
|
10-Year
|
% of Strategy AUM
beating Benchmark
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
Income
|
|
46%
|
|
89%
|
|
84%
|
|
96%
|
|
Equity
|
|
47%
|
|
45%
|
|
45%
|
|
35%
|
|
Alternatives
|
|
98%
|
|
83%
|
|
97%
|
|
100%
|
|
Long-term US Fund Assets Beating Lipper Category
Average
Long-term US fund assets include open-end, closed-end, and
variable annuity funds. These performance comparisons do not
reflect the actual performance of any specific fund; individual
fund performance may differ. Past performance is not a
guarantee of future results. Source: Lipper Inc.
|
|
|
At March 31,
2019:
|
|
1-Year
|
|
3-Year
|
|
5-Year
|
|
10-Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Long-Term U.S.
Fund Assets Beating Lipper Category Average
|
|
|
|
|
|
|
|
|
|
Fixed
Income
|
|
29%
|
|
73%
|
|
81%
|
|
84%
|
|
Equity
|
|
67%
|
|
54%
|
|
63%
|
|
36%
|
|
Alternatives
(performance relates to only 3 funds)
|
|
32%
|
|
0%
|
|
0%
|
|
n/a
|
|
LEGG MASON, INC.
AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF INCOME (LOSS)
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Fiscal Years
Ended
|
|
|
|
|
March
|
|
December
|
|
March
|
|
March
|
|
March
|
|
|
|
|
2019
|
|
2018
|
|
2018
|
|
2019
|
|
2018
|
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Investment advisory
fees:
|
|
|
|
|
|
|
|
|
|
|
|
Separate
accounts
|
$
251,234
|
|
$
256,657
|
|
$
261,920
|
|
$
1,029,353
|
|
$
1,020,790
|
|
|
Funds
|
351,312
|
|
361,173
|
|
394,206
|
|
1,479,972
|
|
1,564,839
|
|
|
Performance
fees
|
16,371
|
|
12,619
|
|
46,501
|
|
84,900
|
|
227,785
|
|
Distribution and
service fees
|
72,518
|
|
72,185
|
|
80,899
|
|
302,967
|
|
321,936
|
|
Other
|
1,170
|
|
1,688
|
|
1,526
|
|
6,067
|
|
4,972
|
|
|
|
Total operating
revenues
|
692,605
|
|
704,322
|
|
785,052
|
|
2,903,259
|
|
3,140,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
355,640
|
|
316,876
|
|
365,469
|
|
1,398,969
|
|
1,508,798
|
|
Distribution and
servicing
|
99,317
|
|
108,842
|
|
119,094
|
|
439,276
|
|
489,331
|
|
Communications and
technology
|
57,245
|
|
56,664
|
|
56,957
|
|
228,138
|
|
212,798
|
|
Occupancy
|
28,963
|
|
24,077
|
|
26,199
|
|
105,296
|
|
100,760
|
|
Amortization of
intangible assets
|
6,033
|
|
6,089
|
|
6,112
|
|
24,404
|
|
24,604
|
|
Impairment of
intangible assets
|
—
|
|
365,200
|
|
—
|
|
365,200
|
|
229,000
|
|
Contingent
consideration fair value adjustments
|
—
|
|
—
|
|
(15,518)
|
|
571
|
|
(31,329)
|
|
Other
|
67,282
|
|
63,001
|
|
127,029
|
|
238,303
|
|
282,359
|
|
|
|
Total operating
expenses
|
614,480
|
|
940,749
|
|
685,342
|
|
2,800,157
|
|
2,816,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
(Loss)
|
78,125
|
|
(236,427)
|
|
99,710
|
|
103,102
|
|
324,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Operating
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
4,184
|
|
3,126
|
|
2,239
|
|
12,176
|
|
7,106
|
|
Interest
expense
|
(28,794)
|
|
(28,770)
|
|
(30,441)
|
|
(117,341)
|
|
(117,872)
|
|
Other income
(expense), net
|
24,286
|
|
(7,042)
|
|
(13,372)
|
|
31,123
|
|
10,824
|
|
Non-operating income
(expense) of
|
|
|
|
|
|
|
|
|
|
|
|
consolidated
investment vehicles, net
|
(2,519)
|
|
2,369
|
|
(1,535)
|
|
(565)
|
|
9,781
|
|
|
|
Total non-operating
income (expense)
|
(2,843)
|
|
(30,317)
|
|
(43,109)
|
|
(74,607)
|
|
(90,161)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Income Tax Provision
|
|
|
|
|
|
|
|
|
|
|
(Benefit)
|
75,282
|
|
(266,744)
|
|
56,601
|
|
28,495
|
|
233,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
(benefit)
|
20,396
|
|
(60,354)
|
|
39,958
|
|
20,561
|
|
(102,510)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
54,886
|
|
(206,390)
|
|
16,643
|
|
7,934
|
|
336,350
|
|
Less: Net income
attributable
|
|
|
|
|
|
|
|
|
|
|
|
to noncontrolling
interests
|
5,399
|
|
10,498
|
|
7,374
|
|
36,442
|
|
51,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
Attributable to Legg
|
|
|
|
|
|
|
|
|
|
|
Mason,
Inc.
|
$
49,487
|
|
$
(216,888)
|
|
$
9,269
|
|
$
(28,508)
|
|
$
285,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
|
LEGG MASON, INC.
AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF INCOME (LOSS), CONTINUED
|
(Amounts in
thousands, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Fiscal Years
Ended
|
|
|
|
|
March
|
|
December
|
|
March
|
|
March
|
|
March
|
|
|
|
|
2019
|
|
2018
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
Attributable to Legg Mason, Inc.
|
$
49,487
|
|
$
(216,888)
|
|
$
9,269
|
|
$
(28,508)
|
|
$
285,075
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Earnings
(distributed and undistributed)
|
|
|
|
|
|
|
|
|
|
|
|
allocated to
participating securities (1)
|
1,703
|
|
1,049
|
|
923
|
|
4,225
|
|
10,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
(Distributed and Undistributed)
|
|
|
|
|
|
|
|
|
|
|
Allocated to
Shareholders (Excluding
|
|
|
|
|
|
|
|
|
|
|
Participating
Securities)
|
$
47,784
|
|
$
(217,937)
|
|
$
8,346
|
|
$
(32,733)
|
|
$
274,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
per Share Attributable to
|
|
|
|
|
|
|
|
|
|
|
Legg Mason, Inc.
Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
0.56
|
|
$
(2.55)
|
|
$
0.10
|
|
$
(0.38)
|
|
$
3.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
$
0.56
|
|
$
(2.55)
|
|
$
0.10
|
|
$
(0.38)
|
|
$
3.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
Number of Shares
|
|
|
|
|
|
|
|
|
|
|
Outstanding:
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
85,552
|
|
85,537
|
|
84,526
|
|
85,423
|
|
90,734
|
|
|
|
Diluted
|
85,613
|
|
85,537
|
|
85,079
|
|
85,423
|
|
91,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Participating
securities excluded from weighted-average number of shares
outstanding were 3,055, 3,104, and 3,343 for the quarters ended
March 2019, December 2018, and March 2018, respectively, and 3,092
and 3,327 for the fiscal years ended March 2019 and March 2018,
respectively.
|
(2)
|
Diluted shares are
the same as basic shares for periods with a loss.
|
|
|
|
|
|
Strategic
Restructuring effective January 1, 2019
|
Quarter
Ended
March
2019
|
|
|
|
|
|
|
|
|
|
Strategic
restructuring cost savings:
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
$
1,663
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
300
|
|
|
|
|
|
|
|
|
|
|
Other
|
1,642
|
|
|
|
|
|
|
|
|
|
|
|
Total strategic
restructuring cost savings
|
$
3,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic
restructuring costs:
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
$
2,848
|
|
|
|
|
|
|
|
|
|
|
Other
|
6,504
|
|
|
|
|
|
|
|
|
|
|
|
Total strategic
restructuring costs
|
$
9,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LEGG MASON, INC.
AND SUBSIDIARIES
|
CONSOLIDATING
STATEMENTS OF INCOME (LOSS)
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
Quarters
Ended
|
|
|
|
|
March 2019
|
|
December
2018
|
|
March 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Before
Consolidation of
Consolidated
Investment Vehicles
and Other (1)
|
|
Consolidated
Investment
Vehicles and
Other (1)
|
|
Consolidated
Totals
|
Balance Before
Consolidation of
Consolidated
Investment Vehicles
and Other (1)
|
|
Consolidated
Investment
Vehicles and
Other (1)
|
|
Consolidated
Totals
|
Balance Before
Consolidation of
Consolidated
Investment Vehicles
and Other (1)
|
|
Consolidated
Investment
Vehicles and
Other (1)
|
|
Consolidated
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
revenues
|
$
692,743
|
|
$
(138)
|
|
$
692,605
|
$
704,477
|
|
$
(155)
|
|
$
704,322
|
$
785,280
|
|
$
(228)
|
|
$
785,052
|
Total operating
expenses
|
614,361
|
|
119
|
|
614,480
|
940,561
|
|
188
|
|
940,749
|
685,610
|
|
(268)
|
|
685,342
|
Operating Income
(Loss)
|
78,382
|
|
(257)
|
|
78,125
|
(236,084)
|
|
(343)
|
|
(236,427)
|
99,670
|
|
40
|
|
99,710
|
Non-operating income
(expense)
|
(2,840)
|
|
(3)
|
|
(2,843)
|
(32,158)
|
|
1,841
|
|
(30,317)
|
(41,802)
|
|
(1,307)
|
|
(43,109)
|
Income (Loss)
Before Income Tax Provision (Benefit)
|
75,542
|
|
(260)
|
|
75,282
|
(268,242)
|
|
1,498
|
|
(266,744)
|
57,868
|
|
(1,267)
|
|
56,601
|
Income tax provision
(benefit)
|
20,396
|
|
—
|
|
20,396
|
(60,354)
|
|
—
|
|
(60,354)
|
39,958
|
|
—
|
|
39,958
|
Net Income
(Loss)
|
55,146
|
|
(260)
|
|
54,886
|
(207,888)
|
|
1,498
|
|
(206,390)
|
17,910
|
|
(1,267)
|
|
16,643
|
Less: Net income
(loss) attributable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to noncontrolling
interests
|
5,659
|
|
(260)
|
|
5,399
|
9,000
|
|
1,498
|
|
10,498
|
8,641
|
|
(1,267)
|
|
7,374
|
Net Income (Loss)
Attributable to Legg Mason, Inc.
|
$
49,487
|
|
$
—
|
|
$
49,487
|
$
(216,888)
|
|
$
—
|
|
$
(216,888)
|
$
9,269
|
|
$
—
|
|
$
9,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
Ended
|
|
|
|
|
|
|
|
|
|
|
March 2019
|
|
March 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Before
Consolidation of
Consolidated
Investment Vehicles
and Other (1)
|
|
Consolidated
Investment
Vehicles and
Other (1)
|
|
Consolidated
Totals
|
Balance Before
Consolidation of
Consolidated
Investment Vehicles
and Other (1)
|
|
Consolidated
Investment
Vehicles and
Other (1)
|
|
Consolidated
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
revenues
|
$
2,903,858
|
|
$
(599)
|
|
$
2,903,259
|
$
3,140,900
|
|
$
(578)
|
|
$
3,140,322
|
|
|
|
|
|
Total operating
expenses
|
2,799,168
|
|
989
|
|
2,800,157
|
2,816,022
|
|
299
|
|
2,816,321
|
|
|
|
|
|
Operating Income
(Loss)
|
104,690
|
|
(1,588)
|
|
103,102
|
324,878
|
|
(877)
|
|
324,001
|
|
|
|
|
|
Non-operating income
(expense)
|
(76,971)
|
|
2,364
|
|
(74,607)
|
(97,694)
|
|
7,533
|
|
(90,161)
|
|
|
|
|
|
Income Before
Income Tax Provision (Benefit)
|
27,719
|
|
776
|
|
28,495
|
227,184
|
|
6,656
|
|
233,840
|
|
|
|
|
|
Income tax provision
(benefit)
|
20,561
|
|
—
|
|
20,561
|
(102,510)
|
|
—
|
|
(102,510)
|
|
|
|
|
|
Net
Income
|
7,158
|
|
776
|
|
7,934
|
329,694
|
|
6,656
|
|
336,350
|
|
|
|
|
|
Less: Net income
attributable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to noncontrolling
interests
|
35,666
|
|
776
|
|
36,442
|
44,619
|
|
6,656
|
|
51,275
|
|
|
|
|
|
Net Income (Loss)
Attributable to Legg Mason, Inc.
|
$
(28,508)
|
|
$
—
|
|
$
(28,508)
|
$
285,075
|
|
$
—
|
|
$
285,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Other
represents consolidated sponsored investment products that are not
designated as CIVs
|
|
|
|
|
|
|
LEGG MASON, INC.
AND SUBSIDIARIES
|
|
SUPPLEMENTAL
DATA
|
|
RECONCILIATION OF OPERATING MARGIN, AS
ADJUSTED (1)
|
|
(Amounts in
thousands)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
|
Fiscal Years
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
|
|
December
|
|
March
|
|
|
March
|
|
March
|
|
|
|
|
|
2019
|
|
2018
|
|
2018
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Revenues, GAAP basis
|
$
692,605
|
|
$
704,322
|
|
$
785,052
|
|
|
$
2,903,259
|
|
$
3,140,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus
(less):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass-through
performance fees
|
(4,986)
|
|
(7,436)
|
|
(13,482)
|
|
|
(49,048)
|
|
(108,757)
|
|
|
|
Operating revenues
eliminated upon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
consolidation of
investment vehicles
|
138
|
|
155
|
|
228
|
|
|
599
|
|
578
|
|
|
|
Distribution and
servicing expense excluding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
consolidated
investment vehicles
|
(99,299)
|
|
(108,771)
|
|
(119,312)
|
|
|
(439,144)
|
|
(489,310)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Revenues, as Adjusted
|
$
588,458
|
|
$
588,270
|
|
$
652,486
|
|
|
$
2,415,666
|
|
$
2,542,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
(Loss), GAAP basis
|
$
78,125
|
|
$
(236,427)
|
|
$
99,710
|
|
|
$
103,102
|
|
$
324,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus
(less):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on
deferred compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and seed investments,
net
|
16,006
|
|
(10,826)
|
|
(2,240)
|
|
|
10,416
|
|
12,345
|
|
|
|
Impairment of
intangible assets
|
—
|
|
365,200
|
|
—
|
|
|
365,200
|
|
229,000
|
|
|
|
Amortization of
intangible assets
|
6,033
|
|
6,089
|
|
6,112
|
|
|
24,404
|
|
24,604
|
|
|
|
Contingent
consideration fair value adjustments
|
—
|
|
—
|
|
(15,518)
|
|
|
571
|
|
(31,329)
|
|
|
|
Charge related to
regulatory matter
|
—
|
|
—
|
|
67,000
|
|
|
4,151
|
|
67,000
|
|
|
|
Operating (income)
loss of consolidated investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
vehicles,
net
|
257
|
|
343
|
|
(40)
|
|
|
1,588
|
|
877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income,
as Adjusted
|
$
100,421
|
|
$
124,379
|
|
$
155,024
|
|
|
$
509,432
|
|
$
626,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Margin,
GAAP basis
|
11.3
|
%
|
(33.6)
|
%
|
12.7
|
%
|
|
3.6
|
%
|
10.3
|
%
|
Operating Margin, as
Adjusted
|
17.1
|
|
21.1
|
|
23.8
|
|
|
21.1
|
|
24.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)See
explanations for "Use of Supplemental Non-GAAP Financial
Information."
|
|
LEGG MASON, INC.
AND SUBSIDIARIES
|
SUPPLEMENTAL
DATA
|
RECONCILIATION OF
CASH PROVIDED BY OPERATING ACTIVITIES
|
TO ADJUSTED EBITDA
(1)
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Fiscal Years
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
|
|
December
|
|
March
|
|
March
|
|
March
|
|
|
|
|
2019
|
|
2018
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by
operating activities, GAAP basis
|
$
116,877
|
|
$
256,591
|
|
$
197,550
|
|
$
560,866
|
|
$
489,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus
(less):
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
of accretion and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
of debt discounts and
premiums
|
28,328
|
|
28,259
|
|
29,880
|
|
115,284
|
|
115,056
|
|
|
Current tax expense
(benefit)
|
9,081
|
|
(1,218)
|
|
14,426
|
|
26,716
|
|
38,983
|
|
|
Net change in assets
and liabilities
|
(27,724)
|
|
(170,384)
|
|
(128,797)
|
|
(52,518)
|
|
(31,125)
|
|
|
Net change in assets
and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
of consolidated
investment vehicles
|
(7,701)
|
|
60,158
|
|
16,569
|
|
(17,667)
|
|
67,792
|
|
|
Net income
attributable to noncontrolling interests
|
(5,399)
|
|
(10,498)
|
|
(7,374)
|
|
(36,442)
|
|
(51,275)
|
|
|
Net gains (losses)
and earnings on investments
|
(8,790)
|
|
21,367
|
|
(3,179)
|
|
27,705
|
|
(305)
|
|
|
Net gains (losses) on
consolidated investment vehicles
|
(2,519)
|
|
2,369
|
|
(1,535)
|
|
(565)
|
|
9,781
|
|
|
Other
|
(866)
|
|
(68)
|
|
(1,981)
|
|
(1,155)
|
|
(1,047)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
101,287
|
|
$
186,576
|
|
$
115,559
|
|
$
622,224
|
|
$
637,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
See explanations for
"Use of Supplemental Non-GAAP Financial Information."
|
|
|
|
|
LEGG MASON, INC.
AND SUBSIDIARIES
|
(Amounts in
billions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Under
Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
|
|
|
By asset
class:
|
March 2019
|
|
December
2018
|
|
September
2018
|
|
June 2018
|
|
March 2018
|
|
|
|
|
|
Equity
|
$
202.0
|
|
$
181.0
|
|
$
214.5
|
|
$
206.4
|
|
$
203.0
|
|
|
|
|
|
Fixed
Income
|
419.6
|
|
406.6
|
|
411.0
|
|
412.3
|
|
422.3
|
|
|
|
|
|
Alternative
|
68.6
|
|
66.3
|
|
67.4
|
|
66.4
|
|
66.1
|
|
|
|
|
|
|
Long-Term
Assets
|
690.2
|
|
653.9
|
|
692.9
|
|
685.1
|
|
691.4
|
|
|
|
|
|
Liquidity
|
67.8
|
|
73.3
|
|
62.5
|
|
59.5
|
|
62.7
|
|
|
|
|
|
|
Total
|
$
758.0
|
|
$
727.2
|
|
$
755.4
|
|
$
744.6
|
|
$
754.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Fiscal Years
Ended
|
By asset class
(average):
|
March 2019
|
|
December
2018
|
|
September
2018
|
|
June 2018
|
|
March 2018
|
|
March 2019
|
|
March 2018
|
|
Equity
|
$
195.4
|
|
$
198.2
|
|
$
212.2
|
|
$
205.0
|
|
$
208.8
|
|
$
203.1
|
|
$
200.5
|
|
Fixed
Income
|
413.7
|
|
407.4
|
|
411.4
|
|
416.7
|
|
422.2
|
|
412.9
|
|
412.0
|
|
Alternative
|
67.0
|
|
66.8
|
|
66.4
|
|
66.0
|
|
66.1
|
|
66.5
|
|
66.3
|
|
|
Long-Term
Assets
|
676.1
|
|
672.4
|
|
690.0
|
|
687.7
|
|
697.1
|
|
682.5
|
|
678.8
|
|
Liquidity
|
72.6
|
|
66.9
|
|
60.2
|
|
61.8
|
|
69.8
|
|
65.5
|
|
75.6
|
|
|
Total
|
$
748.7
|
|
$
739.3
|
|
$
750.2
|
|
$
749.5
|
|
$
766.9
|
|
$
748.0
|
|
$
754.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Component Changes
in Assets Under Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Fiscal Years
Ended
|
|
|
|
March 2019
|
|
December
2018
|
|
September
2018
|
|
June 2018
|
|
March 2018
|
|
March 2019
|
|
March 2018
|
Beginning of
period
|
$
727.2
|
|
$
755.4
|
|
$
744.6
|
|
$
754.1
|
|
$
767.2
|
|
$
754.1
|
|
$
728.4
|
Net client cash
flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
(1.0)
|
|
(3.3)
|
|
(1.1)
|
|
(2.2)
|
|
(2.1)
|
|
(7.5)
|
|
(6.7)
|
Fixed
Income
|
0.1
|
|
(5.1)
|
|
(0.5)
|
|
1.3
|
|
2.8
|
|
(4.3)
|
|
9.4
|
Alternative
|
0.9
|
|
(0.1)
|
|
0.6
|
|
—
|
|
0.5
|
|
1.5
|
|
(1.0)
|
Long-Term
flows
|
—
|
|
(8.5)
|
|
(1.0)
|
|
(0.9)
|
|
1.2
|
|
(10.3)
|
|
1.7
|
Liquidity
|
(8.1)
|
|
10.5
|
|
3.0
|
|
(2.9)
|
|
(10.7)
|
|
2.3
|
|
(24.3)
|
Total net client cash
flows
|
(8.1)
|
|
2.0
|
|
2.0
|
|
(3.8)
|
|
(9.5)
|
|
(8.0)
|
|
(22.6)
|
Realizations(1)
|
(0.3)
|
|
(0.2)
|
|
(0.2)
|
|
(0.3)
|
|
(0.5)
|
|
(1.0)
|
|
(2.6)
|
Market performance
and other
|
39.1
|
|
(30.0)
|
|
11.0
|
|
1.1
|
|
(6.0)
|
|
21.3
|
|
45.7
|
Impact of foreign
exchange
|
0.1
|
|
—
|
|
(2.0)
|
|
(6.5)
|
|
2.9
|
|
(8.4)
|
|
5.4
|
Acquisitions
(disposition), net
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(0.2)
|
End of
period
|
$
758.0
|
|
$
727.2
|
|
$
755.4
|
|
$
744.6
|
|
$
754.1
|
|
$
758.0
|
|
$
754.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Realizations
represent investment manager-driven distributions primarily related
to the sale of assets. Realizations are specific to our alternative
managers and do not include client-driven distributions (e.g.
client requested redemptions, liquidations or asset
transfers).
|
(2) Due to effects of
rounding, the sum of the quarterly results may differ immaterially
from the year-to-date results.
|
Use of Supplemental Non-GAAP Financial Information
As supplemental information, we are providing a performance
measure for "Operating Margin, as Adjusted" and a liquidity measure
for "Adjusted EBITDA", each of which are based on methodologies
other than generally accepted accounting principles
("non-GAAP"). Our management uses these measures as
benchmarks in evaluating and comparing our period-to-period
operating performance and liquidity.
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 arrangements, amortization related to intangible assets,
income (loss) of consolidated investment vehicles, the impact of
fair value adjustments of contingent consideration liabilities, if
any, unusual and other non-core charges (including the previously
disclosed regulatory charge), and impairment charges by (ii) our
operating revenues, adjusted to add back net investment advisory
fees eliminated upon consolidation of investment vehicles, less
distribution and servicing expenses which we use as an approximate
measure of revenues that are passed through to third parties, and
less performance fees that are passed through as compensation
expense or net income (loss) attributable to noncontrolling
interests, which we refer to as "Operating Revenues, as Adjusted."
The deferred compensation items are removed from Operating Income
in the calculation because they are offset by an equal amount in
Non-operating income (expense), net, and thus have no impact on Net
Income (Loss) Attributable to Legg Mason, Inc. We adjust for the
impact of the amortization of management contract assets and the
impact of fair value adjustments of contingent consideration
liabilities, if any, which arise from acquisitions to reflect the
fact that these items distort comparison of our operating results
with the results of other asset management firms that have not
engaged in significant acquisitions. Impairment charges, unusual
and other non-core charges (including the previously disclosed
regulatory charge), and income (loss) of consolidated investment
vehicles are removed from Operating Income in the calculation
because these items are not reflective of our core asset management
operations. We use Operating Revenues, as Adjusted, in the
calculation to show the operating margin without distribution and
servicing expenses, which we use to approximate our distribution
revenues that are passed through to third parties as a direct cost
of selling our products, although distribution and servicing
expenses may include commissions paid in connection with the
launching of closed-end funds for which there is no corresponding
revenue in the period. We also use Operating Revenues, as
Adjusted, in the calculation to show the operating margin without
performances fees which are passed through as compensation expense
or net income (loss) attributable to noncontrolling interests per
the terms of certain more recent acquisitions. Operating
Revenues, as Adjusted, also include our advisory revenues we
receive from consolidated investment vehicles that are eliminated
in consolidation under GAAP.
We believe that Operating Margin, as Adjusted, is a useful
measure of our performance because it provides a measure of our
core business activities. It excludes items that have no impact on
Net Income (Loss) Attributable to Legg Mason, Inc. and indicates
what our operating margin would have been without distribution
revenues that are passed through to third parties as a direct cost
of selling our products, performance fees that are passed through
as compensation expense or net income (loss) attributable to
noncontrolling interests per the terms of certain more recent
acquisitions, amortization related to intangible assets, changes in
the fair value of contingent consideration liabilities, if any,
impairment charges, unusual and other non-core charges (including
the previously disclosed regulatory charge), and the impact of the
consolidation of certain investment vehicles described above.
The consolidation of these investment vehicles does not have an
impact on Net Income (Loss) Attributable to Legg Mason, Inc.
This measure is provided in addition to our 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.
Adjusted EBITDA
We define Adjusted EBITDA as cash provided by (used in)
operating activities plus (minus) interest expense, net of
accretion and amortization of debt discounts and premiums, current
income tax expense (benefit), the net change in assets and
liabilities, net (income) loss attributable to noncontrolling
interests, net gains (losses) and earnings on investments, net
gains (losses) on consolidated investment vehicles, and
other. The net change in assets and liabilities adjustment
aligns with the Consolidated Statements of Cash Flows.
Adjusted EBITDA is not reduced by equity-based compensation
expense, including management equity plan non-cash issuance-related
charges. Most management equity plan units may be put to or
called by Legg Mason for cash payment, although their terms do not
require this to occur.
We believe that this measure is useful to investors and us as it
provides additional information with regard to our ability to meet
working capital requirements, service our debt, and return capital
to our stockholders. This measure is provided in addition to
Cash provided by operating activities and may not be comparable to
non-GAAP performance measures or liquidity measures of other
companies, including their measures of EBITDA or Adjusted
EBITDA. Further, this measure is not to be confused with Net
Income, Cash provided by operating activities, or other measures of
earnings or cash flows under GAAP, and are provided as a supplement
to, and not in replacement of, GAAP measures.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/legg-mason-reports-results-for-fourth-fiscal-quarter-and-fiscal-year-ended-2019-300849168.html
SOURCE Legg Mason, Inc.