Earnings Per Share

3 Months Ended

Jun. 30, 2016

10. Earnings Per Share

Basic earnings per share attributable to Legg Mason, Inc. shareholders ("EPS") is calculated by dividing Net Income Attributable to Legg Mason, Inc. (adjusted by earnings allocated to participating securities) by the weighted-average number of shares outstanding. Legg Mason issues to employees restricted stock and restricted stock units that are deemed to be participating securities prior to vesting, because the related unvested restricted shares/units entitle their holder to nonforfeitable dividend rights. In this circumstance, accounting guidance requires a “two-class method” for EPS calculations that excludes earnings (potentially both distributed and undistributed) allocated to participating securities.

Diluted EPS is similar to basic EPS, but adjusts for the effect of potential common shares unless they are antidilutive.

During the three months ended June 30, 2016, Legg Mason purchased and retired 3,475 shares of its common stock for $111,673 through open market purchases. These total repurchases reduced weighted-average shares outstanding by 1,772 shares for the three months ended June 30, 2016.

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.

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



	Three Months Ended June 30,
	2016		2015
Basic weighted-average shares outstanding for EPS	104,465		108,954
Potential common shares:
Dilutive employee stock options	212		1,281
Diluted weighted-average shares outstanding for EPS	104,677		110,235

Net Income Attributable to Legg Mason, Inc.	$	33,452	$	94,548
Less: Earnings (distributed and undistributed) allocated to participating securities	1,051		2,327
Net Income (Distributed and Undistributed) Allocated to Shareholders (Excluding Participating Securities)	$	32,401	$	92,221

Net Income per share Attributable to Legg Mason, Inc. Shareholders
Basic	$	0.31	$	0.85
Diluted	0.31		0.84

The weighted-average shares for the three months ended June 30, 2016 and 2015, exclude weighted-average unvested restricted shares deemed to be participating securities of 3,134 and 2,737, respectively.

The diluted EPS calculations for the three months ended June 30, 2016 and 2015, exclude any potential common shares issuable under the 14,205 warrants issued in connection with the repurchase of the Convertible Notes in May 2012 because the market price of Legg Mason common stock did not exceed the exercise price, and therefore, the warrants would be antidilutive.

Options to purchase 3,493 and 1,482 shares for the three months ended June 30, 2016 and 2015, respectively, were not included in the computation of diluted EPS because the presumed proceeds from exercising such options, including the related income tax benefits, exceed the average price of the common shares for the period and therefore, the options are deemed antidilutive. Further, market- and performance-based awards are excluded from potential dilution until the designated market or performance condition is met. Unvested restricted shares for the three months ended June 30, 2016 and 2015, were antidilutive and therefore do not further impact diluted EPS.