Date of Report (Date of earliest event reported) | February 4, 2019 |
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 February 4, 2019, Legg Mason, Inc. announced its results of operations for the quarter ended December 31, 2018. 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 February 4, 2019 |
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: February 4, 2019 | By: | /s/ Thomas C. Merchant | |
Thomas C. Merchant | |||
Executive Vice President and General Counsel |
Exhibit No. | Subject Matter | ||
99 |
Investor Relations: | Media: | |||
Alan Magleby | Mary Athridge | |||
410-454-5246 | 212-805-6035 | |||
amagleby@leggmason.com | mkathridge@leggmason.com |
-- | Third Quarter Net Loss of $216.9 Million, or $2.55 per Diluted Share, Including: |
• | Non-Cash Intangible Asset Impairment Charges of $365.2 Million, or $3.11 per Diluted Share |
• | Net Discrete Expenses and Other Tax Items of $10.5 Million, or $0.12 per Diluted Share |
Quarters Ended | Nine Months Ended | ||||||||||||||||||
Financial Results | Dec | Sep | Dec | Dec | Dec | ||||||||||||||
(Amounts in millions, except per share amounts) | 2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||
Operating Revenues | $ | 704.3 | $ | 758.4 | $ | 793.1 | $ | 2,210.7 | $ | 2,355.3 | |||||||||
Operating Expenses | 940.7 | 622.7 | 820.4 | 2,185.7 | 2,131.0 | ||||||||||||||
Operating Income (Loss) | (236.4 | ) | 135.7 | (27.3 | ) | 25.0 | 224.3 | ||||||||||||
Net Income (Loss)1 | (216.9 | ) | 72.8 | 149.2 | (78.0 | ) | 275.8 | ||||||||||||
Net Income (Loss) Per Share - Diluted1 | (2.55 | ) | 0.82 | 1.58 | (0.95 | ) | 2.86 | ||||||||||||
Assets Under Management | |||||||||||||||||||
(Amounts in billions) | |||||||||||||||||||
End of Period Assets Under Management | $ | 727.2 | $ | 755.4 | $ | 767.2 | $ | 727.2 | $ | 767.2 | |||||||||
Average Assets Under Management | 739.3 | 750.2 | 759.9 | 745.6 | 750.6 | ||||||||||||||
(1) Net Income (Loss) Attributable to Legg Mason, Inc. | |||||||||||||||||||
Quarter Ended December 31, 2018 | |||||||||||
Assets Under Management | AUM (in billions) | Flows (in billions) | Operating Revenue Yield 1 | ||||||||
Equity | $ | 181.0 | $ | (3.3 | ) | 59 bps | |||||
Fixed Income | 406.6 | (5.1 | ) | 27 bps | |||||||
Alternative | 66.3 | (0.1 | ) | 2 | 59 bps | ||||||
Long-Term Assets | 653.9 | (8.5 | ) | ||||||||
Liquidity | 73.3 | 10.5 | 13 bps | ||||||||
Total | $ | 727.2 | $ | 2.0 | 37 bps | ||||||
(1) Operating revenue yield equals total operating revenues less performance fees divided by average AUM | |||||||||||
(2) Excludes realizations of $0.2 billion |
Quarterly Performance | |||||||||||
At December 31, 2018: | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
% of Strategy AUM beating Benchmark3 | 41% | 80% | 73% | 81% | |||||||
% of Long-Term U.S. Fund Assets Beating Lipper Category Average | 43% | 69% | 71% | 65% | |||||||
(3) See “Supplemental Data Regarding Quarterly Performance.” |
• | Non-cash intangible asset impairment charges of $365.2 million, or $3.11 per diluted share, primarily related to commingled fund management contracts at EnTrustPermal and RARE Infrastructure. |
• | Net discrete expenses and other tax items of $10.5 million, or $0.12 per diluted share. |
• | Global operating platform implementation costs4 of $5.9 million, or $0.05 per diluted share. |
• | Discrete tax benefit related to the completion of a prior year audit of $2.8 million, or $0.03 per diluted share. |
• | Real estate charge associated with the sublease of office space in the Company’s Baltimore headquarters of $2.4 million, or $0.02 per diluted share. |
• | A decrease in separate account and fund advisory fee revenues of $27.7 million, or 4% reflecting lower average AUM. |
• | A $16.6 million decrease in pass-through performance fees. |
• | Lower compensation of $48.0 million driven by lower operating revenues. |
• | An increase in other expenses of $10.8 million. |
• | A $10.8 million loss in the market value of deferred compensation and seed investments which is recorded as a decrease in compensation and benefits with an offset in non-operating income, as compared to a $4.0 million gain in the prior quarter. |
• | Losses on corporate investments, not offset in compensation, were $4.9 million compared with gains of $2.9 million in the prior quarter. |
• | A residual distribution of $8.4 million from an investment holding. |
• | Gains on funded deferred compensation and seed investments, as described above. |
• | A $2.6 million gain associated with the consolidation of sponsored investment vehicles compared to a $4.3 million loss 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. |
• | Non-cash intangible asset impairment charges of $365.2 million, or $3.11 per diluted share, primarily related to commingled fund management contracts at EnTrustPermal and RARE Infrastructure. |
• | Net discrete expenses and other tax items of $10.5 million, or $0.12 per diluted share. |
• | Global operating platform implementation costs of $5.9 million, or $0.05 per diluted share. |
• | One-time non-cash tax benefit of $213.7 million, or $2.27 per diluted share, related to the tax law change. |
• | Non-cash intangible asset impairment charge of $195.0 million, or $1.62 per diluted share. |
• | Discrete tax expense items of $7.4 million, or $0.08 per diluted share. |
• | EnTrustPermal acquisition and transition-related costs of $1.3 million, or $0.01 per diluted share. |
• | Decreases principally due to lower average long-term AUM. |
• | A decrease in non-pass through performance fees of $43.8 million. |
• | Non-cash intangible impairment charges of $365.2 million, compared with a non-cash impairment charge of $195.0 million in the prior year quarter. |
• | Decreased compensation, related to decreased revenues driven by lower average long-term AUM and performance fees. |
• | An increase in other expenses of $9.9 million. |
• | A $10.8 million loss 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 $4.3 million in the prior year quarter. |
• | Losses on corporate investments, not offset in compensation, were $4.9 million compared with gains of $1.5 million in the prior year quarter. |
• | Losses on funded deferred compensation and seed investments this quarter, as compared to gains in the prior year quarter, as described above. |
• | A residual distribution of $8.4 million from an investment holding. |
• | A $2.6 million gain associated with the consolidation of sponsored investment vehicles, as compared to an $7.9 million gain 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. |
• | Legg Mason initiated a new global operating platform, which will result in annual expense savings of $90 million to $110 million, and costs to implement of $130 million to $150 million. |
• | Legg Mason, Brandywine Global, ClearBridge Investments and Western Asset were all recognized by Pensions & Investments (P&I) in their Best Places to Work in Investment Management survey for 2018. |
• | Legg Mason was ranked #3 among 32 Capital Markets companies and was ranked in the top quintile overall in the Forbes/Just Capital annual ranking. |
• | Western Asset Management is the sub-advisor on the launch of the first active fixed income ETF in Australia on November 11, 2018, the Betashares Legg Mason Australia Bond Fund. |
At December 31, 2018: | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
% of Strategy AUM beating Benchmark | |||||||||||
Fixed Income | 19% | 88% | 81% | 92% | |||||||
Equity | 56% | 57% | 36% | 51% | |||||||
Alternatives | 75% | 73% | 93% | 56% | |||||||
At December 31, 2018: | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
% of Long-Term U.S. Fund Assets Beating Lipper Category Average | |||||||||||
Fixed Income | 26% | 75% | 83% | 84% | |||||||
Equity | 62% | 63% | 59% | 44% | |||||||
Alternatives (performance relates to only 3 funds) | 30% | 0% | 0% | n/a | |||||||
LEGG MASON, INC. AND SUBSIDIARIES | ||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME (LOSS) | ||||||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
Quarters Ended | Nine Months Ended | |||||||||||||||||||||
December | September | December | December | December | ||||||||||||||||||
2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Operating Revenues: | ||||||||||||||||||||||
Investment advisory fees: | ||||||||||||||||||||||
Separate accounts | $ | 256,657 | $ | 261,567 | $ | 255,696 | $ | 778,119 | $ | 758,870 | ||||||||||||
Funds | 361,173 | 383,923 | 395,370 | 1,128,660 | 1,170,633 | |||||||||||||||||
Performance fees | 12,619 | 31,874 | 58,926 | 68,529 | 181,284 | |||||||||||||||||
Distribution and service fees | 72,185 | 79,074 | 81,463 | 230,449 | 241,037 | |||||||||||||||||
Other | 1,688 | 1,989 | 1,635 | 4,897 | 3,446 | |||||||||||||||||
Total operating revenues | 704,322 | 758,427 | 793,090 | 2,210,654 | 2,355,270 | |||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||
Compensation and benefits | 316,876 | 364,885 | 362,071 | 1,043,329 | 1,143,329 | |||||||||||||||||
Distribution and servicing | 108,842 | 114,525 | 124,254 | 339,959 | 370,237 | |||||||||||||||||
Communications and technology | 56,664 | 57,489 | 54,239 | 170,893 | 155,841 | |||||||||||||||||
Occupancy | 24,077 | 27,352 | 24,982 | 76,333 | 74,561 | |||||||||||||||||
Amortization of intangible assets | 6,089 | 6,102 | 6,071 | 18,371 | 18,492 | |||||||||||||||||
Impairment of intangible assets | 365,200 | — | 195,000 | 365,200 | 229,000 | |||||||||||||||||
Contingent consideration fair value adjustments | — | 145 | 739 | 571 | (15,811 | ) | ||||||||||||||||
Other | 63,001 | 52,201 | 53,067 | 171,021 | 155,330 | |||||||||||||||||
Total operating expenses | 940,749 | 622,699 | 820,423 | 2,185,677 | 2,130,979 | |||||||||||||||||
Operating Income (Loss) | (236,427 | ) | 135,728 | (27,333 | ) | 24,977 | 224,291 | |||||||||||||||
Non-Operating Income (Expense): | ||||||||||||||||||||||
Interest income | 3,126 | 2,420 | 1,827 | 7,992 | 4,867 | |||||||||||||||||
Interest expense | (28,770 | ) | (29,860 | ) | (29,088 | ) | (88,547 | ) | (87,431 | ) | ||||||||||||
Other income (expense), net | (7,042 | ) | 6,627 | 5,519 | 6,837 | 24,196 | ||||||||||||||||
Non-operating income (expense) of | ||||||||||||||||||||||
consolidated investment vehicles, net | 2,369 | (3,998 | ) | 8,225 | 1,954 | 11,316 | ||||||||||||||||
Total non-operating income (expense) | (30,317 | ) | (24,811 | ) | (13,517 | ) | (71,764 | ) | (47,052 | ) | ||||||||||||
Income Before Income Tax Provision | ||||||||||||||||||||||
(Benefit) | (266,744 | ) | 110,917 | (40,850 | ) | (46,787 | ) | 177,239 | ||||||||||||||
Income tax provision (benefit) | (60,354 | ) | 29,844 | (209,396 | ) | 165 | (142,468 | ) | ||||||||||||||
Net Income (Loss) | (206,390 | ) | 81,073 | 168,546 | (46,952 | ) | 319,707 | |||||||||||||||
Less: Net income attributable | ||||||||||||||||||||||
to noncontrolling interests | 10,498 | 8,270 | 19,324 | 31,043 | 43,901 | |||||||||||||||||
Net Income (Loss) Attributable to Legg | ||||||||||||||||||||||
Mason, Inc. | $ | (216,888 | ) | $ | 72,803 | $ | 149,222 | $ | (77,995 | ) | $ | 275,806 | ||||||||||
(Continued) | ||||||||||||||||||||||
LEGG MASON, INC. AND SUBSIDIARIES | ||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME (LOSS), CONTINUED | ||||||||||||||||||||||
(Amounts in thousands, except per share amounts) | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
Quarters Ended | Nine Months Ended | |||||||||||||||||||||
December | September | December | December | December | ||||||||||||||||||
2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Net Income (Loss) Attributable to Legg Mason, Inc. | $ | (216,888 | ) | $ | 72,803 | $ | 149,222 | $ | (77,995 | ) | $ | 275,806 | ||||||||||
Less: Earnings (distributed and undistributed) | ||||||||||||||||||||||
allocated to participating securities (1) | 1,049 | 2,577 | 5,347 | 3,190 | 9,639 | |||||||||||||||||
Net Income (Loss) (Distributed and Undistributed) | ||||||||||||||||||||||
Allocated to Shareholders (Excluding | ||||||||||||||||||||||
Participating Securities) | $ | (217,937 | ) | $ | 70,226 | $ | 143,875 | $ | (81,185 | ) | $ | 266,167 | ||||||||||
Net Income (Loss) per Share Attributable to | ||||||||||||||||||||||
Legg Mason, Inc. Shareholders: | ||||||||||||||||||||||
Basic | $ | (2.55 | ) | $ | 0.82 | $ | 1.59 | $ | (0.95 | ) | $ | 2.87 | ||||||||||
Diluted | $ | (2.55 | ) | $ | 0.82 | $ | 1.58 | $ | (0.95 | ) | $ | 2.86 | ||||||||||
Weighted-Average Number of Shares | ||||||||||||||||||||||
Outstanding: (2) | ||||||||||||||||||||||
Basic | 85,537 | 85,482 | 90,377 | 85,381 | 92,770 | |||||||||||||||||
Diluted | 85,537 | 85,612 | 90,833 | 85,381 | 93,199 | |||||||||||||||||
(1) | Participating securities excluded from weighted-average number of shares outstanding were 3,104, 3,156, and 3,357 for the quarters ended December 2018, September 2018, and December 2017, respectively, and 3,104 and 3,322 for the nine months ended December 2018 and December 2017, 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 | ||||||||||||||||||||||||||||||||||||||
December 2018 | September 2018 | December 2017 | ||||||||||||||||||||||||||||||||||||
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 | $ | 704,477 | $ | (155 | ) | $ | 704,322 | $ | 758,530 | $ | (103 | ) | $ | 758,427 | $ | 793,373 | $ | (283 | ) | $ | 793,090 | |||||||||||||||||
Total operating expenses | 940,561 | 188 | 940,749 | 622,430 | 269 | 622,699 | 819,984 | 439 | 820,423 | |||||||||||||||||||||||||||||
Operating Income (Loss) | (236,084 | ) | (343 | ) | (236,427 | ) | 136,100 | (372 | ) | 135,728 | (26,611 | ) | (722 | ) | (27,333 | ) | ||||||||||||||||||||||
Non-operating income (expense) | (32,158 | ) | 1,841 | (30,317 | ) | (22,189 | ) | (2,622 | ) | (24,811 | ) | (19,970 | ) | 6,453 | (13,517 | ) | ||||||||||||||||||||||
Income (Loss) Before Income Tax Provision (Benefit) | (268,242 | ) | 1,498 | (266,744 | ) | 113,911 | (2,994 | ) | 110,917 | (46,581 | ) | 5,731 | (40,850 | ) | ||||||||||||||||||||||||
Income tax provision (benefit) | (60,354 | ) | — | (60,354 | ) | 29,844 | — | 29,844 | (209,396 | ) | — | (209,396 | ) | |||||||||||||||||||||||||
Net Income (Loss) | (207,888 | ) | 1,498 | (206,390 | ) | 84,067 | (2,994 | ) | 81,073 | 162,815 | 5,731 | 168,546 | ||||||||||||||||||||||||||
Less: Net income (loss) attributable | ||||||||||||||||||||||||||||||||||||||
to noncontrolling interests | 9,000 | 1,498 | 10,498 | 11,264 | (2,994 | ) | 8,270 | 13,593 | 5,731 | 19,324 | ||||||||||||||||||||||||||||
Net Income (Loss) Attributable to Legg Mason, Inc. | $ | (216,888 | ) | $ | — | $ | (216,888 | ) | $ | 72,803 | $ | — | $ | 72,803 | $ | 149,222 | $ | — | $ | 149,222 | ||||||||||||||||||
Nine Months Ended | ||||||||||||||||||||||||||||||||||||||
December 2018 | December 2017 | |||||||||||||||||||||||||||||||||||||
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 | $ | 2,211,115 | $ | (461 | ) | $ | 2,210,654 | $ | 2,355,620 | $ | (350 | ) | $ | 2,355,270 | ||||||||||||||||||||||||
Total operating expenses | 2,184,807 | 870 | 2,185,677 | 2,130,412 | 567 | 2,130,979 | ||||||||||||||||||||||||||||||||
Operating Income (Loss) | 26,308 | (1,331 | ) | 24,977 | 225,208 | (917 | ) | 224,291 | ||||||||||||||||||||||||||||||
Non-operating income (expense) | (74,131 | ) | 2,367 | (71,764 | ) | (55,892 | ) | 8,840 | (47,052 | ) | ||||||||||||||||||||||||||||
Income (Loss) Before Income Tax Provision (Benefit) | (47,823 | ) | 1,036 | (46,787 | ) | 169,316 | 7,923 | 177,239 | ||||||||||||||||||||||||||||||
Income tax provision (benefit) | 165 | — | 165 | (142,468 | ) | — | (142,468 | ) | ||||||||||||||||||||||||||||||
Net Income (Loss) | (47,988 | ) | 1,036 | (46,952 | ) | 311,784 | 7,923 | 319,707 | ||||||||||||||||||||||||||||||
Less: Net income attributable | ||||||||||||||||||||||||||||||||||||||
to noncontrolling interests | 30,007 | 1,036 | 31,043 | 35,978 | 7,923 | 43,901 | ||||||||||||||||||||||||||||||||
Net Income (Loss) Attributable to Legg Mason, Inc. | $ | (77,995 | ) | $ | — | $ | (77,995 | ) | $ | 275,806 | $ | — | $ | 275,806 | ||||||||||||||||||||||||
(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 | Nine Months Ended | |||||||||||||||||||||||
December | September | December | December | December | ||||||||||||||||||||
2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||
Operating Revenues, GAAP basis | $ | 704,322 | $ | 758,427 | $ | 793,090 | $ | 2,210,654 | $ | 2,355,270 | ||||||||||||||
Plus (less): | ||||||||||||||||||||||||
Pass-through performance fees | (7,436 | ) | (24,006 | ) | (9,970 | ) | (44,062 | ) | (95,275 | ) | ||||||||||||||
Operating revenues eliminated upon | ||||||||||||||||||||||||
consolidation of investment vehicles | 155 | 103 | 283 | 461 | 350 | |||||||||||||||||||
Distribution and servicing expense excluding | ||||||||||||||||||||||||
consolidated investment vehicles | (108,771 | ) | (114,516 | ) | (124,071 | ) | (339,845 | ) | (369,998 | ) | ||||||||||||||
Operating Revenues, as Adjusted | $ | 588,270 | $ | 620,008 | $ | 659,332 | $ | 1,827,208 | $ | 1,890,347 | ||||||||||||||
Operating Income (Loss), GAAP basis | $ | (236,427 | ) | $ | 135,728 | $ | (27,333 | ) | $ | 24,977 | $ | 224,291 | ||||||||||||
Plus (less): | ||||||||||||||||||||||||
Gains (losses) on deferred compensation | ||||||||||||||||||||||||
and seed investments, net | (10,826 | ) | 3,964 | 4,333 | (5,590 | ) | 14,585 | |||||||||||||||||
Impairment of intangible assets | 365,200 | — | 195,000 | 365,200 | 229,000 | |||||||||||||||||||
Amortization of intangible assets | 6,089 | 6,102 | 6,071 | 18,371 | 18,492 | |||||||||||||||||||
Contingent consideration fair value adjustments | — | 145 | 739 | 571 | (15,811 | ) | ||||||||||||||||||
Charge related to regulatory matter | — | 151 | — | 4,151 | — | |||||||||||||||||||
Operating loss of consolidated investment | ||||||||||||||||||||||||
vehicles, net | 343 | 372 | 722 | 1,331 | 917 | |||||||||||||||||||
Operating Income, as Adjusted | $ | 124,379 | $ | 146,462 | $ | 179,532 | $ | 409,011 | $ | 471,474 | ||||||||||||||
Operating Margin, GAAP basis | (33.6 | ) | % | 17.9 | % | (3.4 | ) | % | 1.1 | % | 9.5 | % | ||||||||||||
Operating Margin, as Adjusted | 21.1 | 23.6 | 27.2 | 22.4 | 24.9 | |||||||||||||||||||
(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 | Nine Months Ended | |||||||||||||||||||||
December | September | December | December | December | ||||||||||||||||||
2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Cash provided by operating activities, GAAP basis | $ | 256,591 | $ | 289,568 | $ | 116,912 | $ | 443,989 | $ | 291,818 | ||||||||||||
Plus (less): | ||||||||||||||||||||||
Interest expense, net of accretion and amortization | ||||||||||||||||||||||
of debt discounts and premiums | 28,259 | 29,341 | 28,503 | 86,956 | 85,176 | |||||||||||||||||
Current tax expense (benefit) | (1,218 | ) | 9,975 | 8,823 | 17,635 | 24,557 | ||||||||||||||||
Net change in assets and liabilities | (170,384 | ) | (69,426 | ) | 27,338 | (24,794 | ) | 97,672 | ||||||||||||||
Net change in assets and liabilities | ||||||||||||||||||||||
of consolidated investment vehicles | 60,158 | (84,704 | ) | 20,023 | (9,966 | ) | 51,223 | |||||||||||||||
Net income attributable to noncontrolling interests | (10,498 | ) | (8,270 | ) | (19,324 | ) | (31,043 | ) | (43,901 | ) | ||||||||||||
Net gains (losses) and earnings on investments | 21,367 | 8,336 | (4,163 | ) | 36,495 | 2,874 | ||||||||||||||||
Net gains (losses) on consolidated investment vehicles | 2,369 | (3,998 | ) | 8,225 | 1,954 | 11,316 | ||||||||||||||||
Other | (68 | ) | 153 | 663 | (289 | ) | 934 | |||||||||||||||
Adjusted EBITDA | $ | 186,576 | $ | 170,975 | $ | 187,000 | $ | 520,937 | $ | 521,669 | ||||||||||||
(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: | December 2018 | September 2018 | June 2018 | March 2018 | December 2017 | ||||||||||||||||||||||||
Equity | $ | 181.0 | $ | 214.5 | $ | 206.4 | $ | 203.0 | $ | 207.6 | |||||||||||||||||||
Fixed Income | 406.6 | 411.0 | 412.3 | 422.3 | 420.1 | ||||||||||||||||||||||||
Alternative | 66.3 | 67.4 | 66.4 | 66.1 | 66.3 | ||||||||||||||||||||||||
Long-Term Assets | 653.9 | 692.9 | 685.1 | 691.4 | 694.0 | ||||||||||||||||||||||||
Liquidity | 73.3 | 62.5 | 59.5 | 62.7 | 73.2 | ||||||||||||||||||||||||
Total | $ | 727.2 | $ | 755.4 | $ | 744.6 | $ | 754.1 | $ | 767.2 | |||||||||||||||||||
Quarters Ended | Nine Months Ended | ||||||||||||||||||||||||||||
By asset class (average): | December 2018 | September 2018 | June 2018 | March 2018 | December 2017 | December 2018 | December 2017 | ||||||||||||||||||||||
Equity | $ | 198.2 | $ | 212.2 | $ | 205.0 | $ | 208.8 | $ | 204.7 | $ | 204.1 | $ | 197.9 | |||||||||||||||
Fixed Income | 407.4 | 411.4 | 416.7 | 422.2 | 414.8 | 411.9 | 408.7 | ||||||||||||||||||||||
Alternative | 66.8 | 66.4 | 66.0 | 66.1 | 65.8 | 66.3 | 66.4 | ||||||||||||||||||||||
Long-Term Assets | 672.4 | 690.0 | 687.7 | 697.1 | 685.3 | 682.3 | 673.0 | ||||||||||||||||||||||
Liquidity | 66.9 | 60.2 | 61.8 | 69.8 | 74.6 | 63.3 | 77.6 | ||||||||||||||||||||||
Total | $ | 739.3 | $ | 750.2 | $ | 749.5 | $ | 766.9 | $ | 759.9 | $ | 745.6 | $ | 750.6 | |||||||||||||||
Component Changes in Assets Under Management | |||||||||||||||||||||||||||||
Quarters Ended | Nine Months Ended | ||||||||||||||||||||||||||||
December 2018 | September 2018 | June 2018 | March 2018 | December 2017 | December 2018 | December 2017 | |||||||||||||||||||||||
Beginning of period | $ | 755.4 | $ | 744.6 | $ | 754.1 | $ | 767.2 | $ | 754.4 | $ | 754.1 | $ | 728.4 | |||||||||||||||
Net client cash flows: | |||||||||||||||||||||||||||||
Equity | (3.3 | ) | (1.1 | ) | (2.2 | ) | (2.1 | ) | (3.2 | ) | (6.6 | ) | (4.6 | ) | |||||||||||||||
Fixed Income | (5.1 | ) | (0.5 | ) | 1.3 | 2.8 | 5.4 | (4.3 | ) | 6.6 | |||||||||||||||||||
Alternative | (0.1 | ) | 0.6 | — | 0.5 | — | 0.6 | (1.5 | ) | ||||||||||||||||||||
Long-Term flows | (8.5 | ) | (1.0 | ) | (0.9 | ) | 1.2 | 2.2 | (10.3 | ) | 0.5 | ||||||||||||||||||
Liquidity | 10.5 | 3.0 | (2.9 | ) | (10.7 | ) | (2.3 | ) | 10.4 | (13.6 | ) | ||||||||||||||||||
Total net client cash flows | 2.0 | 2.0 | (3.8 | ) | (9.5 | ) | (0.1 | ) | 0.1 | (13.1 | ) | ||||||||||||||||||
Realizations(1) | (0.2 | ) | (0.2 | ) | (0.3 | ) | (0.5 | ) | (0.3 | ) | (0.7 | ) | (2.2 | ) | |||||||||||||||
Market performance and other | (30.0 | ) | 11.0 | 1.1 | (6.0 | ) | 13.5 | (17.8 | ) | 51.8 | |||||||||||||||||||
Impact of foreign exchange | — | (2.0 | ) | (6.5 | ) | 2.9 | (0.4 | ) | (8.5 | ) | 2.5 | ||||||||||||||||||
Acquisitions (disposition), net | — | — | — | — | 0.1 | — | (0.2 | ) | |||||||||||||||||||||
End of period | $ | 727.2 | $ | 755.4 | $ | 744.6 | $ | 754.1 | $ | 767.2 | $ | 727.2 | $ | 767.2 | |||||||||||||||
(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. |