Date of Report (Date of earliest event reported) | April 26, 2017 |
LEGG MASON, INC. |
(Exact name of registrant as specified in its charter) |
Maryland | 1-8529 | 52-1200960 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File No.) | (IRS Employer Identification No.) |
100 International Drive, Baltimore, Maryland | 21202 | |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: | (410) 539-0000 |
Not Applicable |
(Former name or former address if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). |
Emerging growth company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Item 2.02 | Results of Operations and Financial Condition. | ||||
On April 26, 2017, Legg Mason, Inc. announced its results of operations for the quarter ended March 31, 2017. A copy of the related press release is attached hereto as Exhibit 99. | |||||
The information in this Section 2.02 and Exhibit 99 attached hereto shall not be deemed "filed" for purposes of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. | |||||
Item 9.01 | Financial Statements and Exhibits. | ||||
(d) | Exhibits | ||||
Exhibit No. | Subject Matter | ||||
99 | Press Release of Legg Mason, Inc. dated April 26, 2017 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. |
LEGG MASON, INC. | |||
(Registrant) | |||
Date: April 26, 2017 | By: | /s/ Thomas C. Merchant | |
Thomas C. Merchant | |||
Executive Vice President and General Counsel |
Exhibit No. | Subject Matter | ||
99 | Press Release of Legg Mason, Inc. dated April 26, 2017 |
Investor Relations: | Media: | |||
Alan Magleby | Mary Athridge | |||
410-454-5246 | 212-805-6035 | |||
amagleby@leggmason.com | mkathridge@leggmason.com |
Quarters Ended | Fiscal Years Ended | ||||||||||||||||||
Financial Results | Mar | Dec | Mar | Mar | Mar | ||||||||||||||
(Amounts in millions, except per share amounts) | 2017 | 2016 | 2016 | 2017 | 2016 | ||||||||||||||
Operating Revenues | $ | 723.1 | $ | 715.2 | $ | 619.6 | $ | 2,886.9 | $ | 2,660.8 | |||||||||
Operating Expenses | 613.2 | 604.1 | 585.6 | 2,464.7 | 2,610.0 | ||||||||||||||
Operating Income | 109.9 | 111.2 | 33.9 | 422.2 | 50.8 | ||||||||||||||
Net Income (Loss)1 | 75.9 | 51.4 | (45.3 | ) | 227.3 | (25.0 | ) | ||||||||||||
Net Income (Loss) Per Share - Diluted1 | 0.76 | 0.50 | (0.43 | ) | 2.18 | (0.25 | ) | ||||||||||||
Assets Under Management | |||||||||||||||||||
(Amounts in billions) | |||||||||||||||||||
End of Period Assets Under Management | $ | 728.4 | $ | 710.4 | $ | 669.6 | $ | 728.4 | $ | 669.6 | |||||||||
Average Assets Under Management | 718.9 | 716.7 | 662.3 | 720.2 | 684.8 | ||||||||||||||
(1) Net Income (Loss) Attributable to Legg Mason, Inc. |
• | For the quarter, long-term net inflows of $3.9 billion included fixed income inflows of $3.5 billion and equity inflows of $3.1 billion, which were partially offset by alternative outflows of $2.7 billion. Liquidity outflows were $3.1 billion. |
• | At March 31, 2017, fixed income represented 54% of AUM, while equity represented 25%, liquidity represented 12% and alternatives represented 9%. |
• | By geography, 67% of AUM was from clients domiciled in the United States and 33% from non-US domiciled clients. |
• | Average AUM during the quarter was $718.9 billion compared to $716.7 billion in the prior quarter and $662.3 billion in the fourth quarter of fiscal year 2016. Average long-term AUM was $632.7 billion compared to $625.8 billion in the prior quarter and $547.6 billion in the fourth quarter of fiscal year 2016. |
• | Operating revenues of $723.1 million were up 1% compared with $715.2 million in the prior quarter, as this quarter's results included $8.1 million of performance fees at Clarion that, per the terms of the acquisition, |
• | Operating expenses of $613.2 million were up 2% compared with $604.1 million in the prior quarter principally due to higher compensation related to seasonal factors and the Royce MEP charge of $4.6 million. The current quarter included acquisition and transition-related charges of $2.1 million, as compared with the prior quarter costs of $3.0 million. The current quarter also included $2.7 million in severance charges and a $6.3 million increase in advertising and professional fees. The prior quarter included non-cash impairment charges of $35.0 million as well as a credit of $14.5 million for contingent consideration fair value adjustments. Finally, current quarter expenses included a $5.4 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 to a gain of $1.5 million in the prior quarter. |
• | Non-operating expense was $7.1 million, as compared to $20.2 million in the prior quarter. Interest expense increased by $1.7 million primarily due to a non-cash charge for the revolving credit facility amendment. Gains on corporate investments, not offset in compensation, were $7.2 million compared with gains of $1.3 million last quarter. Both quarters included gains on funded deferred compensation and seed investments, as described above. The current quarter included gains of $4.7 million on the sales of non-strategic managers, while the prior quarter included a $4.0 million gain on the sale of Legg Mason Poland. In addition, the current quarter included $5.2 million in gains associated with the consolidation of sponsored investment vehicles compared to $0.8 million in gains 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 15.2% compared to 15.5% in the prior quarter. Operating margin, as adjusted2, was 20.6%, as compared to 23.9% with the decrease primarily due to seasonal costs. |
• | Net income attributable to noncontrolling interests, excluding consolidated investment vehicles, was $11.1 million compared to $13.1 million in the prior quarter, principally related to Clarion, EnTrustPermal, RARE and Royce. |
• | Operating revenues of $723.1 million were up 17% compared with $619.6 million in the fourth quarter of fiscal year 2016, principally due to revenues related to the addition of recently-acquired Clarion and EnTrust, higher average equity AUM, as well as higher performance fees, as this quarter's results included $8.1 million of performance fees at Clarion, that per the terms of the acquisition were passed through as compensation. |
• | Operating expenses of $613.2 million were up 5% compared with $585.6 million in the fourth quarter of fiscal year 2016 primarily related to the addition of expenses of Clarion and Entrust. The current quarter also included a non-cash charge of $4.6 million related to the Royce MEP grant as compared with a charge of $21.4 million in the prior year's quarter. The current quarter also included acquisition and transition-related costs at EnTrustPermal of $2.1 million, as compared with $49.1 million in the prior year's quarter. Further, the current quarter expenses included a $5.4 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 to a $0.3 million gain in the prior year quarter. |
• | Non-operating expense was $7.1 million, compared to $27.5 million in the fourth quarter of fiscal year 2016. Interest expense increased $16.0 million primarily due to the issuance of additional debt to fund the Clarion and EnTrust acquisitions. Gains on corporate investments, not offset in compensation, were $7.2 million compared with losses of $4.8 million in the prior year quarter. The current quarter included gains of $4.7 million on the sales of non-strategic managers. |
• | Both quarters included gains on funded deferred compensation and seed investments, as described above. In addition, the current quarter also included $5.2 million in gains associated with the consolidation of sponsored investment vehicles, as compared to $9.5 million in losses 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 15.2% as compared to 5.5% in the fourth quarter of fiscal year 2016 driven by lower acquisition and transition-related costs. Operating margin, as adjusted, was 20.6%, as compared to 5.9% in the fourth quarter of fiscal year 2016. The increase was principally the result of lower acquisition and transition-related costs and lower Royce MEP costs in the current quarter. |
• | Net income attributable to noncontrolling interests, excluding consolidated investment vehicles, was $11.1 million, principally related to Clarion, EnTrustPermal, RARE and Royce, compared to $1.6 million in the prior year quarter, related to RARE and Royce. |
• | Operating revenues of $2.9 billion were up 8% compared with $2.7 billion in fiscal year 2016, principally due to the addition of revenues of Clarion and EnTrust, as well as higher non-pass through performance fees. |
• | Operating expenses of $2.5 billion were down 6% compared with $2.6 billion in fiscal year 2016. Excluding non-cash impairment charges of $35.0 million in the current year and $371.0 million in the prior year, operating expenses were up 9% primarily related to the addition of expenses of Clarion and Entrust. The current year also included acquisition and transition-related costs and a Royce MEP charge of $79.7 million, compared with $73.3 million of such costs in the prior year. The current year also included a credit of $39.5 million for contingent consideration fair value adjustments. Further, the current year expenses included $14.4 million of gains 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 losses of $1.2 million in the prior year. |
• | Non-operating expense was $51.4 million, compared to $76.0 million in fiscal year 2016. Interest expense increased $64.7 million primarily due to the issuance of additional debt to fund the Clarion and EnTrust acquisitions. Gains on corporate investments, not offset in compensation, were $16.3 million compared with losses of $14.6 million in the prior year. The current year included $8.7 million in gains on the sales of non-strategic managers. The current year included gains on funded deferred compensation and seed investments, as compared to losses in the prior year, as described above. In addition, the current year also included $15.6 million in gains associated with the consolidation of sponsored investment vehicles, as compared to $12.9 million in losses 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 14.6% as compared to 1.9% in fiscal year 2016 driven by the non-cash impairment charges in that year. Operating margin, as adjusted, was 19.7%, as compared to 18.6% in fiscal year 2016. |
• | Net income attributable to noncontrolling interests, excluding consolidated investment vehicles, was $48.0 million, principally related to Clarion, EnTrustPermal, RARE and Royce, compared to $3.2 million related to RARE and Royce in the prior fiscal year. |
• | The ClearBridge Large Cap Growth Fund, the Western Asset Core Bond Fund, the QS Global Dividend Fund, the QS International Dividend Fund and the EnTrustPermal Alternative Core Fund each won a 2017 Lipper Fund Award recognizing mutual funds that have demonstrated consistent, strong risk-adjusted returns against their peers. |
• | On January 30, 2017, Legg Mason filed a form N1-A with the Securities & Exchange Commission for a fully transparent active ETF product, the Clearbridge All Cap Growth ETF. |
• | On March 1, 2017, Legg Mason filed forms N1-A with the Securities & Exchange Commission for two fully transparent active ETF products, the Clearbridge Large Cap Growth ESG ETF and the Clearbridge Dividend Strategy ESG ETF. |
• | On March 6, 2017, Morningstar upgraded its "Parent Pillar" rating for Legg Mason to Positive from Neutral. |
• | Joe Sullivan won FundAction's Fund Leader of the Year Award for his innovation and contributions to the mutual fund industry over the past year. |
At March 31, 2017: | |||||
1-Year | 3-Year | 5-Year | 10-Year | ||
% of Strategy AUM beating Benchmark3 | 79% | 71% | 80% | 88% | |
% of Long-Term US Fund Assets Beating Lipper Category Average3 | |||||
Alternatives | 98% | 100% | 100% | n/a | |
Equity | 57% | 49% | 64% | 75% | |
Fixed Income | 75% | 79% | 78% | 82% | |
Total US Fund Assets | 65% | 63% | 70% | 78% |
LEGG MASON, INC. AND SUBSIDIARIES | ||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME (LOSS) | ||||||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
Quarters Ended | Fiscal Years Ended | |||||||||||||||||||||
March | December | March | March | March | ||||||||||||||||||
2017 | 2016 | 2016 | 2017 | 2016 | ||||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||
Investment advisory fees: | ||||||||||||||||||||||
Separate accounts | $ | 233,147 | $ | 231,922 | $ | 204,320 | $ | 925,250 | $ | 826,080 | ||||||||||||
Funds | 372,541 | 368,962 | 319,342 | 1,482,045 | 1,409,059 | |||||||||||||||||
Performance fees | 25,935 | 22,913 | 6,252 | 108,277 | 41,982 | |||||||||||||||||
Distribution and service fees | 90,555 | 90,195 | 89,105 | 366,677 | 381,486 | |||||||||||||||||
Other | 948 | 1,249 | 532 | 4,653 | 2,237 | |||||||||||||||||
Total operating revenues | 723,126 | 715,241 | 619,551 | 2,886,902 | 2,660,844 | |||||||||||||||||
Operating Expenses: (1) | ||||||||||||||||||||||
Compensation and benefits | 346,831 | 327,862 | 324,562 | 1,401,648 | 1,204,817 | |||||||||||||||||
Distribution and servicing | 122,403 | 123,191 | 124,632 | 499,125 | 545,710 | |||||||||||||||||
Communications and technology | 52,242 | 52,630 | 50,826 | 208,885 | 197,857 | |||||||||||||||||
Occupancy | 26,477 | 23,537 | 35,157 | 113,714 | 122,610 | |||||||||||||||||
Amortization of intangible assets | 6,939 | 7,277 | 2,072 | 26,190 | 4,979 | |||||||||||||||||
Impairment of intangible assets | — | 35,000 | — | 35,000 | 371,000 | |||||||||||||||||
Other | 58,345 | 34,578 | 48,399 | 180,097 | 163,040 | |||||||||||||||||
Total operating expenses | 613,237 | 604,075 | 585,648 | 2,464,659 | 2,610,013 | |||||||||||||||||
Operating Income | 109,889 | 111,166 | 33,903 | 422,243 | 50,831 | |||||||||||||||||
Non-Operating Income (Expense): | ||||||||||||||||||||||
Interest income | 1,709 | 1,713 | 1,711 | 6,815 | 5,634 | |||||||||||||||||
Interest expense | (31,188 | ) | (29,495 | ) | (15,231 | ) | (113,173 | ) | (48,463 | ) | ||||||||||||
Other income (expense), net | 18,978 | 6,126 | (10,098 | ) | 41,664 | (25,977 | ) | |||||||||||||||
Non-operating income (expense) of | ||||||||||||||||||||||
consolidated investment vehicles, net | 3,437 | 1,458 | (3,837 | ) | 13,329 | (7,243 | ) | |||||||||||||||
Total non-operating income (expense) | (7,064 | ) | (20,198 | ) | (27,455 | ) | (51,365 | ) | (76,049 | ) | ||||||||||||
Income (Loss) Before Income Tax Provision | 102,825 | 90,968 | 6,448 | 370,878 | (25,218 | ) | ||||||||||||||||
Income tax provision | 12,521 | 26,441 | 58,606 | 84,175 | 7,692 | |||||||||||||||||
Net Income (Loss) | 90,304 | 64,527 | (52,158 | ) | 286,703 | (32,910 | ) | |||||||||||||||
Less: Net income (loss) attributable | ||||||||||||||||||||||
to noncontrolling interests | 14,380 | 13,088 | (6,885 | ) | 59,447 | (7,878 | ) | |||||||||||||||
Net Income (Loss) Attributable to Legg Mason, Inc. | $ | 75,924 | $ | 51,439 | $ | (45,273 | ) | $ | 227,256 | $ | (25,032 | ) | ||||||||||
(Continued) | ||||||||||||||||||||||
(1) Operating expenses include acquisition and transition-related costs related to business combinations. | ||||||||||||||||||||||
Acquisition and transition-related costs: | ||||||||||||||||||||||
Compensation | $ | 1,744 | $ | 3,763 | $ | 32,172 | $ | 42,514 | $ | 32,172 | ||||||||||||
Occupancy | 312 | (962 | ) | 8,355 | 13,529 | 8,355 | ||||||||||||||||
Other | 78 | 222 | 8,561 | 19,075 | 11,360 | |||||||||||||||||
Total acquisition and transition-related costs | $ | 2,134 | $ | 3,023 | $ | 49,088 | $ | 75,118 | $ | 51,887 |
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 | ||||||||||||||||||
2017 | 2016 | 2016 | 2017 | 2016 | ||||||||||||||||||
Net Income (Loss) Attributable to Legg Mason, Inc. | $ | 75,924 | $ | 51,439 | $ | (45,273 | ) | $ | 227,256 | $ | (25,032 | ) | ||||||||||
Less: Earnings (distributed and undistributed) | ||||||||||||||||||||||
allocated to participating securities (1) | 2,552 | 1,706 | 613 | 7,384 | 2,287 | |||||||||||||||||
Net Income (Loss) (Distributed and Undistributed) | ||||||||||||||||||||||
Allocated to Shareholders (Excluding | ||||||||||||||||||||||
Participating Securities) | $ | 73,372 | $ | 49,733 | $ | (45,886 | ) | $ | 219,872 | $ | (27,319 | ) | ||||||||||
Net Income (Loss) per Share Attributable to | ||||||||||||||||||||||
Legg Mason, Inc. Shareholders: | ||||||||||||||||||||||
Basic | $ | 0.76 | $ | 0.50 | $ | (0.43 | ) | $ | 2.19 | $ | (0.25 | ) | ||||||||||
Diluted | $ | 0.76 | $ | 0.50 | $ | (0.43 | ) | $ | 2.18 | $ | (0.25 | ) | ||||||||||
Weighted-Average Number of Shares | ||||||||||||||||||||||
Outstanding: (2) | ||||||||||||||||||||||
Basic | 96,555 | 99,403 | 106,393 | 100,580 | 107,406 | |||||||||||||||||
Diluted | 96,830 | 99,568 | 106,393 | 100,799 | 107,406 | |||||||||||||||||
(1) | Participating securities excluded from weighted-average number of shares outstanding were 3,353, 3,404, and 3,004 for the quarters ended March 2017, December 2016, and March 2016, respectively, and 3,335 and 2,831 for the fiscal years ended March 2017 and March 2016, respectively. | |||||||||||||||||||||
(2) | Diluted shares are the same as basic shares for periods with a loss. |
LEGG MASON, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||
CONSOLIDATING STATEMENTS OF INCOME (LOSS) | ||||||||||||||||||||||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||||||
Quarters Ended | ||||||||||||||||||||||||||||||||||||||
March 2017 | December 2016 | March 2016 | ||||||||||||||||||||||||||||||||||||
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 | Consolidated Investment Vehicles | Consolidated Totals | ||||||||||||||||||||||||||||||
Total operating revenues | $ | 723,269 | $ | (143 | ) | $ | 723,126 | $ | 715,601 | $ | (360 | ) | $ | 715,241 | $ | 619,623 | $ | (72 | ) | $ | 619,551 | |||||||||||||||||
Total operating expenses | 613,170 | 67 | 613,237 | 604,075 | — | 604,075 | 585,595 | 53 | 585,648 | |||||||||||||||||||||||||||||
Operating Income (Loss) | 110,099 | (210 | ) | 109,889 | 111,526 | (360 | ) | 111,166 | 34,028 | (125 | ) | 33,903 | ||||||||||||||||||||||||||
Non-operating income (expense) | (10,573 | ) | 3,509 | (7,064 | ) | (20,545 | ) | 347 | (20,198 | ) | (19,070 | ) | (8,385 | ) | (27,455 | ) | ||||||||||||||||||||||
Income (Loss) Before Income Tax Provision | 99,526 | 3,299 | 102,825 | 90,981 | (13 | ) | 90,968 | 14,958 | (8,510 | ) | 6,448 | |||||||||||||||||||||||||||
Income tax provision | 12,521 | — | 12,521 | 26,441 | — | 26,441 | 58,606 | — | 58,606 | |||||||||||||||||||||||||||||
Net Income (Loss) | 87,005 | 3,299 | 90,304 | 64,540 | (13 | ) | 64,527 | (43,648 | ) | (8,510 | ) | (52,158 | ) | |||||||||||||||||||||||||
Less: Net income (loss) attributable | ||||||||||||||||||||||||||||||||||||||
to noncontrolling interests | 11,081 | 3,299 | 14,380 | 13,101 | (13 | ) | 13,088 | 1,625 | (8,510 | ) | (6,885 | ) | ||||||||||||||||||||||||||
Net Income (Loss) Attributable to Legg Mason, Inc. | $ | 75,924 | $ | — | $ | 75,924 | $ | 51,439 | $ | — | $ | 51,439 | $ | (45,273 | ) | $ | — | $ | (45,273 | ) | ||||||||||||||||||
Fiscal Years Ended | ||||||||||||||||||||||||||||||||||||||
March 2017 | March 2016 | |||||||||||||||||||||||||||||||||||||
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 | Consolidated Investment Vehicles | Consolidated Totals | |||||||||||||||||||||||||||||||||
Total operating revenues | $ | 2,887,431 | $ | (529 | ) | $ | 2,886,902 | $ | 2,661,162 | $ | (318 | ) | $ | 2,660,844 | ||||||||||||||||||||||||
Total operating expenses | 2,464,369 | 290 | 2,464,659 | 2,609,870 | 143 | 2,610,013 | ||||||||||||||||||||||||||||||||
Operating Income (Loss) | 423,062 | (819 | ) | 422,243 | 51,292 | (461 | ) | 50,831 | ||||||||||||||||||||||||||||||
Non-operating income (expense) | (63,636 | ) | 12,271 | (51,365 | ) | (65,458 | ) | (10,591 | ) | (76,049 | ) | |||||||||||||||||||||||||||
Income (Loss) Before Income Tax Provision | 359,426 | 11,452 | 370,878 | (14,166 | ) | (11,052 | ) | (25,218 | ) | |||||||||||||||||||||||||||||
Income tax provision | 84,175 | — | 84,175 | 7,692 | — | 7,692 | ||||||||||||||||||||||||||||||||
Net Income (Loss) | 275,251 | 11,452 | 286,703 | (21,858 | ) | (11,052 | ) | (32,910 | ) | |||||||||||||||||||||||||||||
Less: Net income (loss) attributable | ||||||||||||||||||||||||||||||||||||||
to noncontrolling interests | 47,995 | 11,452 | 59,447 | 3,174 | (11,052 | ) | (7,878 | ) | ||||||||||||||||||||||||||||||
Net Income (Loss) Attributable to Legg Mason, Inc. | $ | 227,256 | $ | — | $ | 227,256 | $ | (25,032 | ) | $ | — | $ | (25,032 | ) | ||||||||||||||||||||||||
(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 | ||||||||||||||||||||
2017 | 2016 | 2016 | 2017 | 2016 | ||||||||||||||||||||
Operating Revenues, GAAP basis | $ | 723,126 | $ | 715,241 | $ | 619,551 | $ | 2,886,902 | $ | 2,660,844 | ||||||||||||||
Plus (less): | ||||||||||||||||||||||||
Pass-through performance fees | (8,075 | ) | (2,250 | ) | — | (60,756 | ) | — | ||||||||||||||||
Operating revenues eliminated upon | ||||||||||||||||||||||||
consolidation of investment vehicles | 143 | 360 | 72 | 529 | 318 | |||||||||||||||||||
Distribution and servicing expense excluding | ||||||||||||||||||||||||
consolidated investment vehicles | (122,404 | ) | (123,326 | ) | (124,618 | ) | (499,126 | ) | (545,668 | ) | ||||||||||||||
Operating Revenues, as Adjusted | $ | 592,790 | $ | 590,025 | $ | 495,005 | $ | 2,327,549 | $ | 2,115,494 | ||||||||||||||
Operating Income, GAAP basis | $ | 109,889 | $ | 111,166 | $ | 33,903 | $ | 422,243 | $ | 50,831 | ||||||||||||||
Plus (less): | ||||||||||||||||||||||||
Gains (losses) on deferred compensation | ||||||||||||||||||||||||
and seed investments, net | 5,355 | 1,474 | 342 | 14,427 | (1,205 | ) | ||||||||||||||||||
Impairment of intangible assets | — | 35,000 | — | 35,000 | 371,000 | |||||||||||||||||||
Amortization of intangible assets | 6,939 | 7,277 | 2,072 | 26,190 | 4,979 | |||||||||||||||||||
Contingent consideration fair value adjustments | — | (14,500 | ) | (7,000 | ) | (39,500 | ) | (33,375 | ) | |||||||||||||||
Operating income of consolidated investment | ||||||||||||||||||||||||
vehicles, net | 210 | 360 | 125 | 819 | 461 | |||||||||||||||||||
Operating Income, as Adjusted | $ | 122,393 | $ | 140,777 | $ | 29,442 | $ | 459,179 | $ | 392,691 | ||||||||||||||
Operating Margin, GAAP basis | 15.2 | % | 15.5 | % | 5.5 | % | 14.6 | % | 1.9 | % | ||||||||||||||
Operating Margin, as Adjusted | 20.6 | 23.9 | 5.9 | 19.7 | 18.6 | |||||||||||||||||||
(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 | |||||||||||||||||||
2017 | 2016 | 2016 | 2017 | 2016 | |||||||||||||||||||
Cash provided by operating activities, GAAP basis | $ | 192,811 | $ | 209,102 | $ | 148,059 | $ | 539,772 | $ | 454,451 | |||||||||||||
Plus (less): | |||||||||||||||||||||||
Interest expense, net of accretion and amortization | |||||||||||||||||||||||
of debt discounts and premiums | 31,189 | 28,534 | 14,240 | 110,116 | 45,323 | ||||||||||||||||||
Current tax expense (benefit) | 14,446 | (2,981 | ) | 10,102 | 26,371 | 15,419 | |||||||||||||||||
Net change in assets and liabilities | (55,246 | ) | (108,242 | ) | (92,575 | ) | (33,900 | ) | 26,565 | ||||||||||||||
Net change in assets and liabilities | |||||||||||||||||||||||
of consolidated investment vehicles | (26,324 | ) | 43,732 | (4,884 | ) | (41,365 | ) | 3,519 | |||||||||||||||
Net (income) loss attributable to noncontrolling interests | (14,380 | ) | (13,088 | ) | 6,885 | (59,447 | ) | 7,878 | |||||||||||||||
Net gains (losses) and earnings on investments | 3,615 | 2,432 | (1,321 | ) | 9,717 | 13,404 | |||||||||||||||||
Net gains (losses) on consolidated investment vehicles | 3,437 | 1,458 | (3,837 | ) | 13,329 | (7,243 | ) | ||||||||||||||||
Other | (3,217 | ) | (638 | ) | 3,243 | (4,353 | ) | 2,116 | |||||||||||||||
Adjusted EBITDA | $ | 146,331 | $ | 160,309 | $ | 79,912 | $ | 560,240 | $ | 561,432 | |||||||||||||
(1) | See explanations for "Use of Supplemental Non-GAAP Financial Information." We have previously disclosed Adjusted EBITDA (also referred to as "EBITDA, bank defined" in the past) that conformed to calculations required by our debt covenants, which adjusted for certain items that required cash settlement that are not part of the current definition. |
LEGG MASON, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
(Amounts in billions) | |||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||
Assets Under Management | |||||||||||||||||||||||||||||
Quarters Ended | |||||||||||||||||||||||||||||
By asset class: | March 2017 | December 2016 | September 2016 | June 2016 | March 2016 | ||||||||||||||||||||||||
Equity | $ | 179.8 | $ | 169.0 | $ | 168.4 | $ | 161.1 | $ | 162.3 | |||||||||||||||||||
Fixed Income | 394.3 | 381.1 | 396.9 | 387.2 | 372.3 | ||||||||||||||||||||||||
Alternative | 67.9 | 71.5 | 72.0 | 72.6 | 22.7 | ||||||||||||||||||||||||
Long-Term Assets | 642.0 | 621.6 | 637.3 | 620.9 | 557.3 | ||||||||||||||||||||||||
Liquidity | 86.4 | 88.8 | 95.6 | 121.0 | 112.3 | ||||||||||||||||||||||||
Total | $ | 728.4 | $ | 710.4 | $ | 732.9 | $ | 741.9 | $ | 669.6 | |||||||||||||||||||
Quarters Ended | Fiscal Years Ended | ||||||||||||||||||||||||||||
By asset class (average): | March 2017 | December 2016 | September 2016 | June 2016 | March 2016 | March 2017 | March 2016 | ||||||||||||||||||||||
Equity | $ | 174.2 | $ | 166.7 | $ | 166.1 | $ | 162.3 | $ | 159.0 | $ | 167.6 | $ | 173.4 | |||||||||||||||
Fixed Income | 388.1 | 387.8 | 393.7 | 377.6 | 365.3 | 386.5 | 367.2 | ||||||||||||||||||||||
Alternative | 70.4 | 71.3 | 72.1 | 57.8 | 23.3 | 66.9 | 21.1 | ||||||||||||||||||||||
Long-Term Assets | 632.7 | 625.8 | 631.9 | 597.7 | 547.6 | 621.0 | 561.7 | ||||||||||||||||||||||
Liquidity | 86.2 | 90.9 | 110.2 | 111.4 | 114.7 | 99.2 | 123.1 | ||||||||||||||||||||||
Total | $ | 718.9 | $ | 716.7 | $ | 742.1 | $ | 709.1 | $ | 662.3 | $ | 720.2 | $ | 684.8 | |||||||||||||||
Component Changes in Assets Under Management | |||||||||||||||||||||||||||||
Quarters Ended | Fiscal Years Ended | ||||||||||||||||||||||||||||
March 2017 | December 2016 | September 2016 | June 2016 | March 2016 | March 2017 | March 2016 | |||||||||||||||||||||||
Beginning of period | $ | 710.4 | $ | 732.9 | $ | 741.9 | $ | 669.6 | $ | 671.5 | $ | 669.6 | $ | 702.7 | |||||||||||||||
Net client cash flows: | |||||||||||||||||||||||||||||
Equity | 3.1 | (3.7 | ) | (1.5 | ) | (3.0 | ) | (4.4 | ) | (5.2 | ) | (9.7 | ) | ||||||||||||||||
Fixed Income | 3.5 | 0.5 | 2.8 | 3.9 | (7.8 | ) | 10.8 | 0.4 | |||||||||||||||||||||
Alternative | (2.7 | ) | (0.8 | ) | (1.6 | ) | (2.0 | ) | (1.0 | ) | (7.2 | ) | (1.9 | ) | |||||||||||||||
Long-Term flows | 3.9 | (4.0 | ) | (0.3 | ) | (1.1 | ) | (13.2 | ) | (1.6 | ) | (11.2 | ) | ||||||||||||||||
Liquidity | (3.1 | ) | (6.9 | ) | (25.4 | ) | 8.0 | (3.3 | ) | (27.3 | ) | (14.9 | ) | ||||||||||||||||
Total net client cash flows | 0.8 | (10.9 | ) | (25.7 | ) | 6.9 | (16.5 | ) | (28.9 | ) | (26.1 | ) | |||||||||||||||||
Market performance and other | 17.1 | (2.3 | ) | 15.7 | 12.3 | 9.7 | 42.7 | (15.3 | ) | ||||||||||||||||||||
Impact of foreign exchange | 4.0 | (8.4 | ) | 1.0 | 2.0 | 4.7 | (1.3 | ) | 1.4 | ||||||||||||||||||||
Acquisitions (disposition), net | (3.9 | ) | (0.9 | ) | — | 51.1 | 0.2 | 46.3 | 6.9 | ||||||||||||||||||||
End of period | $ | 728.4 | $ | 710.4 | $ | 732.9 | $ | 741.9 | $ | 669.6 | $ | 728.4 | $ | 669.6 | |||||||||||||||
NOTE 1: Alternative assets include all AUM managed by Clarion Partners, EnTrustPermal, RARE Infrastructure, and Glouston Capital Partners (formerly Permal Capital Management). | |||||||||||||||||||||||||||||
NOTE 2: Due to effects of rounding, the sum of the quarterly results may differ immaterially from the year-to-date results. |
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