9. Earnings Per Share

Basic earnings per share ("EPS") is calculated by dividing Net Income Attributable to Legg Mason, Inc. by the weighted-average number of shares outstanding. The calculation of weighted-average shares includes common shares and unvested restricted shares deemed to be participating securities. Diluted EPS is similar to basic EPS, but adjusts for the effect of potentially issuable common shares, except when inclusion is antidilutive.

In May 2012, as part of a new capital plan, Legg Mason's Board of Directors authorized $1,000,000 for additional purchases of Legg Mason common stock, as well as the completion of the repurchase of the then remaining approximate $155,000 of Legg Mason common stock previously authorized. The new capital plan authorizes using up to 65% of cash generated from future operations, beginning in fiscal 2013, to purchase shares of Legg Mason common stock.

During the three and six months ended September 30, 2012, Legg Mason purchased and retired 3,554 and 9,727 shares of its common stock for $90,071 and $245,071, respectively, through open market purchases, which completed the repurchase of its common stock under the previous authorization, and began purchases under the new authorization. These repurchases reduced weighted-average shares outstanding by 7,718 and 4,953 shares for the three and six months ended September 30, 2012, respectively. The par value of the shares repurchased is charged to common stock, with the excess of the purchase price over par first charged against additional paid-in capital, with the remaining balance, if any, charged against retained earnings.

In connection with the change in its Chief Executive Officer in September 2012, Legg Mason issued 325 shares of restricted stock, during the three months ended September 30, 2012 to certain executives and key employees to retain and motivate these employees. During the six months ended September 30, 2012, Legg Mason issued 2,167 shares of restricted stock related to its annual incentive awards and the retention awards mentioned above. Of the shares issued in the six month period, 1,917 and 1,427 shares are included in weighted-average shares outstanding for the three and six months ended September 30, 2012, respectively. Legg Mason issued 56 and 1,303 shares, respectively, of restricted stock related to its annual incentive awards, during the three and six months ended September 30, 2011. Of the shares issued in the six month period, 1,286 and 960 shares are included in weighted-average shares outstanding for the three and six months ended September 30, 2011, respectively.

In June 2011, Legg Mason issued 1,830 shares of common stock upon the exercise of purchase contracts on the remaining outstanding Equity Units issued in May 2008. Of these shares, 1,830 and 930 shares are included in weighted-average shares outstanding for the three and six months ended September 30, 2011.

The following table presents the computations of basic and diluted EPS:



	Three Months Ended September 30,
	2012				2011
	Basic		Diluted		Basic		Diluted
Weighted-average basic shares outstanding	134,098		134,098		143,877		143,877
Potential common shares:
Employee stock options	—		30		—		54
Weighted-average diluted shares	134,098		134,128		143,877		143,931
Net Income	$	81,095	$	81,095	$	57,383	$	57,383
Less: Net income attributable to noncontrolling interests	298		298		719		719
Net Income Attributable to Legg Mason, Inc.	$	80,797	$	80,797	$	56,664	$	56,664
Net Income per Share Attributable to Legg Mason, Inc. Common Shareholders	$	0.60	$	0.60	$	0.39	$	0.39



	Six Months Ended September 30,
	2012						2011
	Basic			Diluted			Basic		Diluted
Weighted-average basic shares outstanding	136,396			136,396			146,529		146,529
Potential common shares:
Employee stock options	—			29			—		96
Weighted-average diluted shares	136,396			136,425			146,529		146,625
Net Income	$	68,111		$	68,111		$	119,081	$	119,081
Less: Net income (loss) attributable to noncontrolling interests	(3,228		)	(3,228		)	2,465		2,465
Net Income Attributable to Legg Mason, Inc.	$	71,339		$	71,339		$	116,616	$	116,616
Net Income per Share Attributable to Legg Mason, Inc. Common Shareholders	$	0.52		$	0.52		$	0.80	$	0.80

The diluted EPS calculation for the three and six months ended September 30, 2012 and 2011, excludes any potential common shares issuable under the Notes extinguished in May 2012, or the Warrants exchanged for the Note conversion feature, because the market price of Legg Mason common stock had not exceeded the price at which conversion/exercise would be dilutive using the treasury stock method. Also, for the three and six months ended September 30, 2011, warrants issued in connection with the convertible note hedge transactions associated with the issuance of the 2.5% Convertible Senior Notes are excluded from the calculation of diluted earnings per share because the effect would be antidilutive.

Options to purchase 6,011 and 5,379 shares for the three months ended September 30, 2012 and 2011, respectively, and 5,897 and 7,144 shares for the six months ended September 30, 2012 and 2011, respectively, were not included in the computation of diluted earnings per share because the presumed proceeds from exercising such options, including related income tax benefits, exceed the average price of the common shares for the period and therefore the options are deemed antidilutive.