Date of Report (Date of earliest event reported) | August 1, 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 August 1, 2019, Legg Mason, Inc. announced its results of operations for the quarter ended June 30, 2019. 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 August 1, 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: August 1, 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 |
• | Includes Strategic Restructuring Charges of $32.9 Million, or $0.27 per Diluted Share |
Quarters Ended | ||||||||||||
Financial Results | Jun | Mar | Jun | |||||||||
(Amounts in millions, except per share amounts) | 2019 | 2019 | 2018 | |||||||||
Operating Revenues | $ | 705.4 | $ | 692.6 | $ | 747.9 | ||||||
Operating Expenses | 621.4 | 614.5 | 622.2 | |||||||||
Operating Income | 83.9 | 78.1 | 125.7 | |||||||||
Net Income1 | 45.4 | 49.5 | 66.1 | |||||||||
Net Income Per Share - Diluted1 | 0.51 | 0.56 | 0.75 | |||||||||
Adjusted Net Income2 | $ | 67.0 | $ | 59.8 | $ | 74.5 | ||||||
Adjusted Earnings Per Share - Diluted2 | 0.75 | 0.67 | 0.84 | |||||||||
(1) Net Income Attributable to Legg Mason, Inc. | ||||||||||||
(2) See "Use of Supplemental Non-GAAP Financial Information". |
Quarter Ended June 30, 2019 | |||||||||||
Assets Under Management ($ in billions) | AUM | Flows | Operating Revenue Yield 1 | ||||||||
Equity | $ | 205.6 | $ | (3.6 | ) | 58 bps | |||||
Fixed Income | 438.0 | 3.9 | 26 bps | ||||||||
Alternative | 70.1 | 0.8 | 2 | 60 bps | |||||||
Long-Term Assets | 713.7 | 1.1 | |||||||||
Liquidity | 66.5 | (1.6 | ) | 14 bps | |||||||
Total | $ | 780.2 | $ | (0.5 | ) | 37 bps | |||||
(1) Operating revenue yield equals total operating revenues less performance fees divided by average AUM | |||||||||||
(2) Excludes realizations of $0.4 billion |
Quarterly Performance | |||||||||||
1-Year | 3-Year | 5-Year | 10-Year | ||||||||
% of Strategy AUM beating Benchmark3 | 70% | 78% | 79% | 85% | |||||||
% of Long-Term U.S. Fund Assets Beating Lipper Category Average | 72% | 66% | 72% | 68% | |||||||
(3) See “Supplemental Data Regarding Quarterly Performance.” |
• | Strategic restructuring costs of $32.9 million, or $0.27 per diluted share. |
• | Affiliate charges of $1.2 million, or $0.01 per diluted share. |
• | Contingent consideration credit adjustment of $1.2 million, or $0.01 per diluted share. |
• | Strategic restructuring costs 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. |
• | An increase in separate account and fund advisory fee revenues of $24.7 million, or 4%, reflecting higher average AUM and one additional day in the quarter. |
• | This was partially offset by a $9.5 million decrease in performance fees, of which $5.6 million were non-pass through. |
• | Higher compensation of $24.2 million driven by a $28.7 million increase in strategic restructuring costs as well as increased revenues, partially offset by a smaller gain in the market value of deferred compensation and seed investments of $7.0 million, with an offset in non-operating income, as compared to a gain of $16.0 million in the prior quarter. |
• | A decrease in occupancy expenses of $3.3 million due to strategic restructuring costs in the prior quarter. |
• | A decrease in other expenses of $14.8 million largely due to the impact of savings related to the strategic restructuring, lower seasonal expenses and lower strategic restructuring costs. |
• | Gains on Corporate investments, not offset in compensation, were $3.1 million compared with gains of $10.2 million in the prior quarter. |
• | Gains on funded deferred compensation and seed investments, as described above. |
• | A $10.1 million gain associated with the consolidation of sponsored investment vehicles compared to a $4.5 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. |
• | Strategic restructuring costs of $32.9 million, or $0.27 per diluted share. |
• | Affiliate charges of $1.2 million, or $0.01 per diluted share. |
• | Contingent consideration credit adjustment of $1.2 million, or $0.01 per diluted share. |
• | A decrease in fund advisory fee revenues of $16.2 million, principally due to lower operating revenue yields. |
• | Decreases in both pass through performance fees of $11.6 million and non-pass through performance fees of $5.6 million. |
• | Compensation and benefits increased by 5%, primarily due to $28.7 million in strategic restructuring costs. Excluding the strategic restructuring costs, compensation and benefits were down 3%, primarily due to lower operating revenues. |
• | Other expenses decreased by 6% despite $3.7 million in strategic restructuring costs. The lower other expenses were due in part to $6.0 million in savings related to the strategic restructuring program. |
• | A $7.0 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 gain of $1.3 million in the prior year quarter. |
• | Gains on corporate investments, not offset in compensation, were $3.1 million compared with gains of $5.8 million in the prior year quarter. |
• | Gains on funded deferred compensation and seed investments as described above. |
• | A $10.1 million gain associated with the consolidation of sponsored investment vehicles, as compared to an $3.7 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. |
• | On July 15, 2019, Legg Mason repaid $250 million in Senior Notes. |
• | On July 5, 2019, Legg Mason announced a strategic minority investment in Embark Group, a UK retirement solutions provider. |
• | On June 11, 2019, Legg Mason and Corporación Actinver announced a strategic alliance that will allow Actinver to manage and make available to its clients in Mexico funds using investment advice provided by Legg Mason affiliated asset managers. |
• | On May 21, 2019, Legg Mason announced that it appointed Nelson Peltz and Ed Garden of Trian Fund Management, L.P. ("Trian Partners") to the Company's Board of Directors, effective immediately. |
• | On May 20, 2019, The U.S. Securities and Exchange Commission (SEC) granted exemptive relief for Precidian's non-transparent exchange-traded fund (ETF) intellectual property, ActiveShares®. |
At June 30, 2019: | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
% of Strategy AUM beating Benchmark | |||||||||||
Fixed Income | 69% | 89% | 84% | 96% | |||||||
Equity | 61% | 56% | 48% | 52% | |||||||
Alternatives | 98% | 84% | 98% | 99% | |||||||
At June 30, 2019: | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
% of Long-Term U.S. Fund Assets Beating Lipper Category Average | |||||||||||
Fixed Income | 73% | 81% | 73% | 84% | |||||||
Equity | 72% | 51% | 72% | 50% | |||||||
Alternatives (performance relates to only 3 funds) | 18% | 24% | 0% | 87% | |||||||
LEGG MASON, INC. AND SUBSIDIARIES | |||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
(Amounts in thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Quarters Ended | |||||||||||||||
June | March | June | |||||||||||||
2019 | 2019 | 2018 | |||||||||||||
Operating Revenues: | |||||||||||||||
Investment advisory fees: | |||||||||||||||
Separate accounts | $ | 260,441 | $ | 251,234 | $ | 259,895 | |||||||||
Funds | 366,812 | 351,312 | 383,564 | ||||||||||||
Performance fees | 6,861 | 16,371 | 24,036 | ||||||||||||
Distribution and service fees | 69,937 | 72,518 | 79,190 | ||||||||||||
Other | 1,309 | 1,170 | 1,220 | ||||||||||||
Total operating revenues | 705,360 | 692,605 | 747,905 | ||||||||||||
Operating Expenses: | |||||||||||||||
Compensation and benefits | 379,828 | 355,640 | 361,568 | ||||||||||||
Distribution and servicing | 103,906 | 99,317 | 116,592 | ||||||||||||
Communications and technology | 55,274 | 57,245 | 56,740 | ||||||||||||
Occupancy | 25,624 | 28,963 | 24,904 | ||||||||||||
Amortization of intangible assets | 5,457 | 6,033 | 6,180 | ||||||||||||
Contingent consideration fair value adjustments | (1,165 | ) | — | 426 | |||||||||||
Other | 52,501 | 67,282 | 55,819 | ||||||||||||
Total operating expenses | 621,425 | 614,480 | 622,229 | ||||||||||||
Operating Income | 83,935 | 78,125 | 125,676 | ||||||||||||
Non-Operating Income (Expense): | |||||||||||||||
Interest income | 4,005 | 4,184 | 2,446 | ||||||||||||
Interest expense | (28,483 | ) | (28,794 | ) | (29,917 | ) | |||||||||
Other income (expense), net | 10,599 | 24,286 | 7,252 | ||||||||||||
Non-operating income (expense) of | |||||||||||||||
consolidated investment vehicles, net | 9,561 | (2,519 | ) | 3,583 | |||||||||||
Total non-operating income (expense) | (4,318 | ) | (2,843 | ) | (16,636 | ) | |||||||||
Income Before Income Tax Provision | 79,617 | 75,282 | 109,040 | ||||||||||||
Income tax provision | 18,048 | 20,396 | 30,675 | ||||||||||||
Net Income | 61,569 | 54,886 | 78,365 | ||||||||||||
Less: Net income attributable | |||||||||||||||
to noncontrolling interests | 16,219 | 5,399 | 12,275 | ||||||||||||
Net Income Attributable to Legg | |||||||||||||||
Mason, Inc. | $ | 45,350 | $ | 49,487 | $ | 66,090 | |||||||||
(Continued) |
LEGG MASON, INC. AND SUBSIDIARIES | |||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME, CONTINUED | |||||||||||||||
(Amounts in thousands, except per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Quarters Ended | |||||||||||||||
June | March | June | |||||||||||||
2019 | 2019 | 2018 | |||||||||||||
Net Income Attributable to Legg Mason, Inc. | $ | 45,350 | $ | 49,487 | $ | 66,090 | |||||||||
Less: Earnings (distributed and undistributed) | |||||||||||||||
allocated to participating securities (1) | 1,510 | 1,703 | 2,324 | ||||||||||||
Net Income (Distributed and Undistributed) | |||||||||||||||
Allocated to Shareholders (Excluding | |||||||||||||||
Participating Securities) | $ | 43,840 | $ | 47,784 | $ | 63,766 | |||||||||
Net Income per Share Attributable to | |||||||||||||||
Legg Mason, Inc. Shareholders: | |||||||||||||||
Basic | $ | 0.51 | $ | 0.56 | $ | 0.75 | |||||||||
Diluted | $ | 0.51 | $ | 0.56 | $ | 0.75 | |||||||||
Weighted-Average Number of Shares | |||||||||||||||
Outstanding: | |||||||||||||||
Basic | 86,297 | 85,552 | 85,120 | ||||||||||||
Diluted | 86,494 | 85,613 | 85,491 | ||||||||||||
(1) | Participating securities excluded from weighted-average number of shares outstanding were 2,852, 3,055, and 3,053 for the quarters ended June 2019, March 2019, and June 2018, respectively. | ||||||||||||||
Quarters Ended | |||||||||||||||
June | March | ||||||||||||||
Strategic Restructuring effective January 1, 2019 | 2019 | 2019 | |||||||||||||
Strategic restructuring cost savings: | |||||||||||||||
Compensation | $ | 2,850 | $ | 1,663 | |||||||||||
Occupancy | 240 | 300 | |||||||||||||
Other | 6,894 | 1,642 | |||||||||||||
Total strategic restructuring cost savings | $ | 9,984 | $ | 3,605 | |||||||||||
Strategic restructuring costs: | |||||||||||||||
Compensation and benefits | $ | 28,694 | $ | — | |||||||||||
Occupancy | — | 2,848 | |||||||||||||
Other | 4,204 | 6,504 | |||||||||||||
Total strategic restructuring costs | $ | 32,898 | $ | 9,352 | |||||||||||
LEGG MASON, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||
CONSOLIDATING STATEMENTS OF INCOME | ||||||||||||||||||||||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||||||
Quarters Ended | ||||||||||||||||||||||||||||||||||||||
June 2019 | March 2019 | June 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 | $ | 705,485 | $ | (125 | ) | $ | 705,360 | $ | 692,743 | $ | (138 | ) | $ | 692,605 | $ | 748,108 | $ | (203 | ) | $ | 747,905 | |||||||||||||||||
Total operating expenses | 621,291 | 134 | 621,425 | 614,361 | 119 | 614,480 | 621,816 | 413 | 622,229 | |||||||||||||||||||||||||||||
Operating Income (Loss) | 84,194 | (259 | ) | 83,935 | 78,382 | (257 | ) | 78,125 | 126,292 | (616 | ) | 125,676 | ||||||||||||||||||||||||||
Non-operating income (expense) | (11,054 | ) | 6,736 | (4,318 | ) | (2,840 | ) | (3 | ) | (2,843 | ) | (19,784 | ) | 3,148 | (16,636 | ) | ||||||||||||||||||||||
Income (Loss) Before Income Tax Provision | 73,140 | 6,477 | 79,617 | 75,542 | (260 | ) | 75,282 | 106,508 | 2,532 | 109,040 | ||||||||||||||||||||||||||||
Income tax provision | 18,048 | — | 18,048 | 20,396 | — | 20,396 | 30,675 | — | 30,675 | |||||||||||||||||||||||||||||
Net Income (Loss) | 55,092 | 6,477 | 61,569 | 55,146 | (260 | ) | 54,886 | 75,833 | 2,532 | 78,365 | ||||||||||||||||||||||||||||
Less: Net income (loss) attributable | ||||||||||||||||||||||||||||||||||||||
to noncontrolling interests | 9,742 | 6,477 | 16,219 | 5,659 | (260 | ) | 5,399 | 9,743 | 2,532 | 12,275 | ||||||||||||||||||||||||||||
Net Income Attributable to Legg Mason, Inc. | $ | 45,350 | $ | — | $ | 45,350 | $ | 49,487 | $ | — | $ | 49,487 | $ | 66,090 | $ | — | $ | 66,090 | ||||||||||||||||||||
(1) Other represents consolidated sponsored investment products that are not designated as CIVs |
LEGG MASON, INC. AND SUBSIDIARIES | |||||||||||||||||
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION | |||||||||||||||||
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO LEGG MASON, INC. TO ADJUSTED NET INCOME AND | |||||||||||||||||
RECONCILIATION OF NET INCOME PER DILUTED SHARE ATTRIBUTABLE TO LEGG MASON, INC. SHAREHOLDERS TO | |||||||||||||||||
ADJUSTED EARNINGS PER DILUTED SHARE(1) | |||||||||||||||||
(Amounts in thousands, except per share amounts) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Quarters ended | |||||||||||||||||
June | March | June | |||||||||||||||
2019 | 2019 | 2018 | |||||||||||||||
Net Income Attributable to Legg Mason, Inc. | $ | 45,350 | $ | 49,487 | $ | 66,090 | |||||||||||
Plus (less): | |||||||||||||||||
Restructuring costs: | |||||||||||||||||
Strategic restructuring and other corporate initiatives | 32,898 | 9,352 | 2,775 | ||||||||||||||
Affiliate charges | 1,203 | 7,526 | — | ||||||||||||||
Amortization of intangible assets | 5,457 | 6,033 | 6,180 | ||||||||||||||
Gains and losses on seed and other investments | |||||||||||||||||
not offset by compensation or hedges | (6,411 | ) | (5,763 | ) | (6,415 | ) | |||||||||||
Acquisition and transition-related costs | — | 998 | 1,468 | ||||||||||||||
Contingent consideration fair value adjustments | (1,165 | ) | — | 426 | |||||||||||||
Charges related to significant regulatory matters | — | — | 4,000 | ||||||||||||||
Income tax adjustments:(2) | |||||||||||||||||
Impacts of non-GAAP adjustments | (8,635 | ) | (4,718 | ) | (1,042 | ) | |||||||||||
Other tax items | (1,700 | ) | (3,115 | ) | 1,045 | ||||||||||||
Adjusted Net Income | $ | 66,997 | $ | 59,800 | $ | 74,527 | |||||||||||
Net Income Per Diluted Share Attributable to | |||||||||||||||||
Legg Mason, Inc. Shareholders | $ | 0.51 | $ | 0.56 | $ | 0.75 | |||||||||||
Plus (less), net of tax impacts: | |||||||||||||||||
Restructuring costs: | |||||||||||||||||
Strategic restructuring and other corporate initiatives | 0.27 | 0.08 | 0.02 | ||||||||||||||
Affiliate charges | 0.01 | 0.06 | — | ||||||||||||||
Amortization of intangible assets | 0.04 | 0.05 | 0.05 | ||||||||||||||
Gains and losses on seed and other investments | |||||||||||||||||
not offset by compensation or hedges | (0.05 | ) | (0.05 | ) | (0.05 | ) | |||||||||||
Acquisition and transition-related costs | — | 0.01 | 0.01 | ||||||||||||||
Contingent consideration fair value adjustments | (0.01 | ) | — | — | |||||||||||||
Charges related to significant regulatory matters | — | — | 0.05 | ||||||||||||||
Other tax items | (0.02 | ) | (0.04 | ) | 0.01 | ||||||||||||
Adjusted Earnings per Diluted Share | $ | 0.75 | $ | 0.67 | $ | 0.84 | |||||||||||
(1) See explanations for "Use of Supplemental Non-GAAP Financial Information." | |||||||||||||||||
(2) The non-GAAP effective tax rates for the quarters ended June 30, 2019, March 31, 2019 and June 30, 2018 were 27.0%, | |||||||||||||||||
29.5% and 26.7%, respectively. |
LEGG MASON, INC. AND SUBSIDIARIES | |||||||||||||||
SUPPLEMENTAL DATA | |||||||||||||||
RECONCILIATION OF ADJUSTED OPERATING MARGIN (1) | |||||||||||||||
(Amounts in thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Quarters Ended | |||||||||||||||
June | March | June | |||||||||||||
2019 | 2019 | 2018 | |||||||||||||
Operating Revenues, GAAP basis | $ | 705,360 | $ | 692,605 | $ | 747,905 | |||||||||
Plus (less): | |||||||||||||||
Pass-through performance fees | (1,030 | ) | (4,986 | ) | (12,620 | ) | |||||||||
Operating revenues eliminated upon | |||||||||||||||
consolidation of investment vehicles | 125 | 138 | 203 | ||||||||||||
Distribution and servicing expense excluding | |||||||||||||||
consolidated investment vehicles | (103,887 | ) | (99,299 | ) | (116,558 | ) | |||||||||
Adjusted Operating Revenues | $ | 600,568 | $ | 588,458 | $ | 618,930 | |||||||||
Operating Income, GAAP basis | $ | 83,935 | $ | 78,125 | $ | 125,676 | |||||||||
Plus (less): | |||||||||||||||
Restructuring costs: | |||||||||||||||
Strategic restructuring and other corporate initiatives | 32,898 | 9,352 | 2,775 | ||||||||||||
Affiliate charges | 1,203 | 9,289 | — | ||||||||||||
Amortization of intangible assets | 5,457 | 6,033 | 6,180 | ||||||||||||
Gains (losses) on deferred compensation | |||||||||||||||
and seed investments, net | 7,014 | 16,006 | 1,272 | ||||||||||||
Acquisition and transition-related costs | — | 1,217 | 1,468 | ||||||||||||
Contingent consideration fair value adjustments | (1,165 | ) | — | 426 | |||||||||||
Charges related to significant regulatory matters | — | — | 4,000 | ||||||||||||
Operating loss of consolidated investment | |||||||||||||||
vehicles, net | 259 | 257 | 616 | ||||||||||||
Adjusted Operating Income | $ | 129,601 | $ | 120,279 | $ | 142,413 | |||||||||
Operating Margin, GAAP basis | 11.9 | % | 11.3 | % | 16.8 | % | |||||||||
Adjusted Operating Margin | 21.6 | 20.4 | 23.0 | ||||||||||||
(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 | |||||||||||||||
June | March | June | |||||||||||||
2019 | 2019 | 2018 | |||||||||||||
Cash provided by (used in) operating activities, GAAP basis | $ | (187,577 | ) | $ | 116,877 | $ | (102,170 | ) | |||||||
Plus (less): | |||||||||||||||
Interest expense, net of accretion and amortization | |||||||||||||||
of debt discounts and premiums | 28,375 | 28,328 | 29,356 | ||||||||||||
Current tax expense (benefit) | (4,246 | ) | 9,081 | 8,878 | |||||||||||
Net change in assets and liabilities | 303,077 | (27,724 | ) | 215,016 | |||||||||||
Net change in assets and liabilities | |||||||||||||||
of consolidated investment vehicles | (13,012 | ) | (7,701 | ) | 14,580 | ||||||||||
Net income attributable to noncontrolling interests | (16,219 | ) | (5,399 | ) | (12,275 | ) | |||||||||
Net gains (losses) and earnings on investments | 6,748 | (8,790 | ) | 6,792 | |||||||||||
Net gains (losses) on consolidated investment vehicles | 9,561 | (2,519 | ) | 3,583 | |||||||||||
Other | (343 | ) | (866 | ) | (374 | ) | |||||||||
Adjusted EBITDA | $ | 126,364 | $ | 101,287 | $ | 163,386 | |||||||||
(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: | June 2019 | March 2019 | December 2018 | September 2018 | June 2018 | |||||||||||||||||
Equity | $ | 205.6 | $ | 202.0 | $ | 181.0 | $ | 214.5 | $ | 206.4 | ||||||||||||
Fixed Income | 438.0 | 419.6 | 406.6 | 411.0 | 412.3 | |||||||||||||||||
Alternative | 70.1 | 68.6 | 66.3 | 67.4 | 66.4 | |||||||||||||||||
Long-Term Assets | 713.7 | 690.2 | 653.9 | 692.9 | 685.1 | |||||||||||||||||
Liquidity | 66.5 | 67.8 | 73.3 | 62.5 | 59.5 | |||||||||||||||||
Total | $ | 780.2 | $ | 758.0 | $ | 727.2 | $ | 755.4 | $ | 744.6 | ||||||||||||
Quarters Ended | ||||||||||||||||||||||
By asset class (average): | June 2019 | March 2019 | December 2018 | September 2018 | June 2018 | |||||||||||||||||
Equity | $ | 202.7 | $ | 195.4 | $ | 198.2 | $ | 212.2 | $ | 205.0 | ||||||||||||
Fixed Income | 427.0 | 413.7 | 407.4 | 411.4 | 416.7 | |||||||||||||||||
Alternative | 69.3 | 67.0 | 66.8 | 66.4 | 66.0 | |||||||||||||||||
Long-Term Assets | 699.0 | 676.1 | 672.4 | 690.0 | 687.7 | |||||||||||||||||
Liquidity | 66.9 | 72.6 | 66.9 | 60.2 | 61.8 | |||||||||||||||||
Total | $ | 765.9 | $ | 748.7 | $ | 739.3 | $ | 750.2 | $ | 749.5 | ||||||||||||
Component Changes in Assets Under Management | ||||||||||||||||||||||
Quarters Ended | ||||||||||||||||||||||
June 2019 | March 2019 | December 2018 | September 2018 | June 2018 | ||||||||||||||||||
Beginning of period | $ | 758.0 | $ | 727.2 | $ | 755.4 | $ | 744.6 | $ | 754.1 | ||||||||||||
Net client cash flows: | ||||||||||||||||||||||
Equity | (3.6 | ) | (1.0 | ) | (3.3 | ) | (1.1 | ) | (2.2 | ) | ||||||||||||
Fixed Income | 3.9 | 0.1 | (5.1 | ) | (0.5 | ) | 1.3 | |||||||||||||||
Alternative | 0.8 | 0.9 | (0.1 | ) | 0.6 | — | ||||||||||||||||
Long-Term flows | 1.1 | — | (8.5 | ) | (1.0 | ) | (0.9 | ) | ||||||||||||||
Liquidity | (1.6 | ) | (8.1 | ) | 10.5 | 3.0 | (2.9 | ) | ||||||||||||||
Total net client cash flows | (0.5 | ) | (8.1 | ) | 2.0 | 2.0 | (3.8 | ) | ||||||||||||||
Realizations(1) | (0.4 | ) | (0.3 | ) | (0.2 | ) | (0.2 | ) | (0.3 | ) | ||||||||||||
Market performance and other | 21.9 | 39.1 | (30.0 | ) | 11.0 | 1.1 | ||||||||||||||||
Impact of foreign exchange | 0.6 | 0.1 | — | (2.0 | ) | (6.5 | ) | |||||||||||||||
Acquisition | 0.6 | — | — | — | — | |||||||||||||||||
End of period | $ | 780.2 | $ | 758.0 | $ | 727.2 | $ | 755.4 | $ | 744.6 | ||||||||||||
(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). |
• | Restructuring costs, including: |
◦ | Corporate charges related to the ongoing strategic restructuring and other cost saving and business initiatives, including severance, lease and other costs; and |
◦ | Affiliate charges, including affiliate restructuring and severance costs, and certain one-time charges arising from the issuance of management equity plan awards |
• | Amortization of intangible assets |
• | Gains and losses on seed and other investments that are not offset by compensation or hedges |
• | Acquisition expenses and transition-related costs for integration activities, including certain related professional fees and costs associated with the transition and acquisition of acquired businesses |
• | Impairments of intangible assets |
• | Contingent consideration fair value adjustments |
• | Charges (credits) related to significant litigation or regulatory matters |
• | Income tax expense (benefit) adjustments to provide an effective non-GAAP tax rate commensurate with our expected annual pre-tax Adjusted Net Income, including: |
◦ | The impact on income tax expense (benefit) of the above non-GAAP adjustments; and |
◦ | Other tax items, including deferred tax asset and liability adjustments associated with statutory rate changes, the impact of other aspects of recent U.S. tax reform, and shortfalls (and windfalls) associated with stock-based compensation |
• | Include: |
◦ | Net investment advisory fees eliminated upon consolidation of investment vehicles |
• | Exclude: |
◦ | 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 |
◦ | Performance fees that are passed through as compensation expense or net income (loss) attributable to noncontrolling interests |
• | Restructuring costs, including: |
◦ | Corporate charges related to the ongoing strategic restructuring and other cost saving and business initiatives, including severance, lease and other costs; and |
◦ | Affiliate charges, including affiliate restructuring and severance costs, and certain one-time charges arising from the issuance of management equity plan awards |
• | Amortization of intangible assets |
• | The impact on compensation expense of: |
◦ | Gains and losses on investments made to fund deferred compensation plans |
◦ | Gains and losses on seed capital investments by our affiliates under revenue sharing arrangements |
• | Acquisition expenses and transition-related costs for integration activities, including certain related professional fees and costs associated with the transition and acquisition of acquired businesses |
• | Impairments of intangible assets |
• | Contingent consideration fair value adjustments |
• | Charges (credits) related to significant regulatory matters |
• | Income (loss) of consolidated investment vehicles |
• | Interest expense, net of accretion and amortization of debt discounts and premiums |
• | Current income tax expense (benefit) |
• | Net change in assets and liabilities, which aligns with the Consolidated Statements of Cash Flows |
• | Net (income) loss attributable to noncontrolling interests |
• | Net gains (losses) and earnings on investments |
• | Net gains (losses) on consolidated investment vehicles |
• | Other |
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