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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)
January 24, 2018


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 January 24, 2018, Legg Mason, Inc. announced its results of operations for the quarter ended December 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 January 24, 2018








SIGNATURES

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:  January 24, 2018
By:
/s/ Thomas C. Merchant
 
 
 
Thomas C. Merchant
 
 
 
Executive Vice President and General Counsel






LEGG MASON, INC.
EXHIBIT INDEX

Exhibit No.
     
Subject Matter
                                                          
 
 
 
99
     









(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
News Release
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FOR IMMEDIATE RELEASE        
 
Investor Relations:
 
 
Media:
 
Alan Magleby
 
 
Mary Athridge
 
410-454-5246
 
 
212-805-6035
 
 
 
 

LEGG MASON REPORTS RESULTS FOR THIRD FISCAL QUARTER

--
Third Quarter Net Income of $149.2 Million, or $1.58 per Diluted Share, Including:
Tax Benefit of $213.7 Million, or $2.27 per Diluted Share Related to the New Tax Law
Non-Cash 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
-- Assets Under Management of $767.2 Billion     
-- Long-term Net Inflows of $2.2 Billion for the Quarter


Baltimore, Maryland - January 24, 2018 - Legg Mason, Inc. (NYSE: LM) today reported its operating results for the third fiscal quarter ended December 31, 2017.
 
 
 
 
 
Quarters Ended
 
Nine Months Ended
Financial Results
Dec
 
Sep
 
Dec
 
Dec
 
Dec
(Amounts in millions, except per share amounts)
2017
 
2017
 
2016
 
2017
 
2016
Operating Revenues
$
793.1

 
$
768.3

 
$
715.2

 
$
2,355.3

 
$
2,163.8

Operating Expenses
820.4

 
623.9

 
604.1

 
2,131.0

 
1,851.4

Operating Income (Loss)
(27.3
)
 
144.4

 
111.2

 
224.3

 
312.4

Net Income1
149.2

 
75.7

 
51.4

 
275.8

 
151.3

Net Income Per Share - Diluted1
1.58

 
0.78

 
0.50

 
2.86

 
1.43

 
 
 
 
 
 
 
 
 
 
Assets Under Management2
 
 
 
 
 
 
 
 
 
(Amounts in billions)
 
 
 
 
 
 
 
 
 
End of Period Assets Under Management
$
767.2

 
$
754.4

 
$
710.4

 
$
767.2

 
$
710.4

Average Assets Under Management
759.9

 
750.3

 
716.7

 
750.6

 
719.7

 
 
 
 
 
 
 
 
 
 
(1) Net Income Attributable to Legg Mason, Inc.
(2) December 2016 Assets Under Management ("AUM") excludes $13.7 billion of separately managed account assets which were classified as Assets Under Advisement and reported as AUM effective April 1, 2017

Joseph A. Sullivan, Chairman and CEO of Legg Mason said, “Legg Mason’s fiscal third quarter included strong core results driven by robust performance and advisory fees, and a keen focus on expense management.
 
“Long-term inflows of $2.2 billion were driven by fixed income inflows, partially offset by equity outflows. Alternative flows were flat for the period.  Legg Mason’s adjusted operating margin3 was over 27%, the highest in nearly 10 years.  And finally, Global Distribution had another quarter of net positive flows with strong persistency of assets. 
 
“Stepping back from the quarter, we are pleased that expanding client choice is positioning us to create better outcomes for clients while creating more diversification, resiliency and better long-term returns for shareholders.“ 

(3) See "Use of Supplemental Non-GAAP Financial Information."

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1

News Release
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Assets Under Management of $767.2 Billion

Assets Under Management were $767.2 billion at December 31, 2017 compared with $754.4 billion at September 30, 2017, resulting from $13.5 billion in positive market performance and other, $2.2 billion in long-term inflows and $0.1 billion in acquisitions, partially offset by liquidity outflows of $2.3 billion, negative foreign exchange of $0.4 billion and realizations of $0.3 billion.

 
 
 
 
 
 
 
 
 
 
Quarter Ended December 31, 2017
 
 
Assets Under Management
AUM
(in billions)
 
Flows
(in billions)
 
Operating Revenue Yield 1
 
 
Equity
$
207.6

 
$
(3.2
)
 
61 bps
 
 
Fixed Income
420.1

 
5.4

 
27 bps
 
 
Alternative
66.3

 

2 
64 bps
 
 
Long-Term Assets
694.0

 
2.2

 
 
 
 
Liquidity
73.2

 
(2.3
)
 
 14 bps
 
 
Total
$
767.2

 
$
(0.1
)
 
  38 bps
 
 
 
 
 
 
 
 
 
 
(1) Operating revenue yield equals total operating revenues less performance fees divided by average AUM
 
 
(2) Excludes realizations of $0.3 billion
 


At December 31, 2017, fixed income represented 55% of AUM, while equity represented 27%, alternative represented 9% and liquidity represented 9%.

By geography, 69% of AUM was from clients domiciled in the United States and 31% from non-US domiciled clients.

Average AUM during the quarter was $759.9 billion compared to $750.3 billion in the prior quarter and $716.7 billion in the third quarter of fiscal year 2017. Average long-term AUM was $685.3 billion compared to $675.1 billion in the prior quarter and $625.8 billion in the third quarter of fiscal year 2017.

 
 
 
 
 
 
 
 
 
 
 
 
 
Quarterly Performance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2017:
 
1-Year
 
3-Year
 
5-Year
 
10-Year
 
 
% of Strategy AUM beating Benchmark4
 
74%
 
75%
 
75%
 
87%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Long-Term U.S. Fund Assets Beating Lipper Category Average
 
 
 
 
 
 
 
 
 
 
 
Fixed Income
 
81%
 
76%
 
78%
 
89%
 
 
 
Equity
 
35%
 
50%
 
45%
 
66%
 
 
 
Alternatives (performance relates to only 3 funds)
 
16%
 
93%
 
100%
 
n/a
 
 
 
Total U.S. Fund Assets
 
56%
 
62%
 
61%
 
76%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4) See “Supplemental Data Regarding Quarterly Performance.”

 
 
 
 
 
 
 
 
 


Of Legg Mason’s long-term U.S. mutual fund assets, 49% were in funds rated 4 or 5 stars by Morningstar

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2

News Release
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Operating Results - Comparison to the Second Quarter of Fiscal Year 2018

Net income was $149.2 million, or $1.58 per diluted share, compared to net income of $75.7 million, or $0.78 per diluted share, in the second quarter of fiscal year 2018. In addition to the net impact of the factors listed below, the increased earnings were driven by higher average AUM and higher non-pass through performance fees.
This quarter's results included:
One-time non-cash tax benefit of $213.7 million, or $2.27 per diluted share, related to the new tax law.
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.
The prior quarter's results included:
Severance charges of $1.7 million, or $0.01 per diluted share.
EnTrustPermal acquisition and transition-related costs of $1.4 million, or $0.01 per diluted share.
Year-to-date annualization tax benefit of $1.2 million, or $0.01 per diluted share.

Operating revenues of $793.1 million were up 3% compared to $768.3 million in the prior quarter reflecting:
An increase in non-pass through performance fees of $28.0 million, which more than offset a decrease in pass through performance fees of $9.9 million.
Excluding performance fees, operating revenues increased 1% due to higher average long-term AUM.

Operating expenses were $820.4 million compared to $623.9 million in the prior quarter, but excluding the non-cash impairment charge of $195.0 million, expenses were up less than 1%, reflecting:
Lower compensation of $5.9 million driven by the decrease in Clarion pass through performance fees.
Increases in Communications & Technology expenses and Other Expenses of $2.9 million and $3.3 million, respectively.
A $4.3 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, as compared to a $4.8 million gain in the prior quarter.

Non-operating expense was $13.5 million, as compared to $18.1 million in the prior quarter reflecting:
Gains on corporate investments, not offset in compensation, were $1.5 million compared with gains of $2.4 million in the prior quarter.
Gains on funded deferred compensation and seed investments, as described above.
A $7.9 million gain associated with the consolidation of sponsored investment vehicles compared to a $2.1 million gain 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 (3.4%) compared to 18.8% in the prior quarter, reflecting the impact of the non-cash impairment charge of $195.0 million. Operating margin, as adjusted5, was 27.2%, as compared to 24.9% in the prior quarter.

Net income attributable to noncontrolling interests, excluding consolidated investment vehicles, was $13.6 million compared to $10.4 million in the prior quarter, principally related to Clarion, EnTrustPermal, RARE and Royce.



(5) See "Use of Supplemental Non-GAAP Financial Information."

Brandywine Global | Clarion Partners | ClearBridge Investments | EnTrustPermal | Martin Currie | QS Investors | RARE Infrastructure | Royce & Associates | Western Asset
3

News Release
391879775_imageleggmason.jpg

Operating Results - Comparison to the Third Quarter of Fiscal Year 2017
 
Net income was $149.2 million, or $1.58 per diluted share, compared to net income of $51.4 million, or $0.50 per diluted share, in the third quarter of fiscal year 2017. In addition to the factors listed below, the increased earnings were driven by higher average long-term AUM and higher non-pass through performance fees.
This quarter's results included:
One-time non-cash tax benefit of $213.7 million, or $2.27 per diluted share, related to the new tax law.
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.
The prior year quarter's results included:
Non-cash impairment charges of $35.0 million, or $0.25 per diluted share.
A credit of $14.5 million, or $0.10 per diluted share, related to contingent consideration fair value adjustments.
A gain of $4.0 million, or $0.03 per diluted share, on the sale of Legg Mason Poland.
EnTrustPermal acquisition and transition-related costs of $3.0 million, or $0.02 per diluted share.
Operating revenues of $793.1 million were up 11% compared with $715.2 million in the prior year quarter reflecting:
Increases principally due to higher average long-term AUM.
An increase in non-pass through performance fees of $28.3 million, and an increase in pass through performance fees of $7.7 million.

Operating expenses of $820.4 million were up 36% compared with $604.1 million in the prior year quarter reflecting:
A non-cash impairment charge related to an intangible asset of $195.0 million, compared with non-cash impairment charges of $35.0 million in the prior year quarter.
Increased compensation, related to increased revenues driven by higher average long-term AUM and performance fees.
Acquisition and transition-related charges of $1.3 million, as compared with $3.0 million in the prior year.
The prior year quarter included a contingent consideration credit adjustment of $14.5 million.
A $4.3 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 $1.5 million in the prior year quarter.

Non-operating expense was $13.5 million, compared to $20.2 million in the prior year quarter reflecting:
A $4.0 million gain on the sale of Legg Mason Poland in the prior year quarter.
Gains on corporate investments, not offset in compensation, were $1.5 million compared with gains of $1.3 million in the prior year quarter.
Gains on funded deferred compensation and seed investments, as described above.
A $7.9 million gain associated with the consolidation of sponsored investment vehicles, as compared to an $0.8 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.

Operating margin was (3.4%) as compared to 15.5% in the prior year quarter reflecting the impact of the non-cash impairment charge of $195.0 million. Operating margin, as adjusted, was 27.2%, as compared to 23.9% in the prior year quarter.

Net income attributable to noncontrolling interests, excluding consolidated investment vehicles, was $13.6 million, compared to $13.1 million in the prior year quarter, principally related to Clarion, EnTrustPermal, RARE and Royce.






Brandywine Global | Clarion Partners | ClearBridge Investments | EnTrustPermal | Martin Currie | QS Investors | RARE Infrastructure | Royce & Associates | Western Asset
4

News Release
391879775_imageleggmason.jpg

Quarterly Business Developments and Recent Announcements
Morningstar Inc. announced nominees for the U.S. Fixed Income Manager of the Year, which included David Hoffman, Stephen Smith, John McIntyre, and Anujeet Sareen for Brandywine Global's, Global Opportunities Bond Fund (GOBSX) and Western Asset's Ken Leech and team for the Western Asset Core Plus Bond Fund (WACPX).
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 2017.
Legg Mason was ranked #73 overall and #3 among 30 Capital Markets companies in the Forbes/Just Capital, Just 100 annual ranking.
RARE Infrastructure was named 2017 Listed Infrastructure Manager of the Year by Professional Pensions, a leading financial publication in the UK.
Western Asset was ranked #1 in four out of seven categories in Chief Investment Officers' fifth annual ranking of liability driven investment (LDI) providers. Western was the top-ranked provider in the following categories: Responsiveness, Timely Reporting, Knowledge Sharing and Accessibility to Investment Team.
On November 28, 2017, Legg Mason announced that Michelle Goldberg, a venture capital investor, and Alison Quirk, a financial services industry senior executive, were appointed to its Board of Directors, effective immediately.
On December 22, 2017, Legg Mason repurchased all of the shares of the Company's common stock beneficially owned by Shanda Asset Management Investment Limited ("Shanda") in a private transaction.

Balance Sheet
At December 31, 2017, Legg Mason’s cash position was $680 million.  Total debt was $2.5 billion and stockholders' equity was $3.8 billion.  The ratio of total debt to total capital was 39%, an increase from 36% in the prior quarter.  Seed investments totaled $271 million.

In the third fiscal quarter, the Company retired $299 million, or 7.5 million shares.  The net impact of the share activity reduced the weighted average shares by 1.5 million. These repurchases included 5.6 million shares that the Company repurchased from Shanda in a private transaction funded by a draw on its revolver.

Conference Call to Discuss Results
A conference call to discuss the Company's results, hosted by Joseph A. Sullivan, will be held at 5:00 p.m. EST today. The call will be open to the general public. Interested participants should access the call by dialing 1-800-447-0521 (or for international calls 1-847-413-3238), confirmation number 46274803, at least 10 minutes prior to the scheduled start to ensure connection. A live, listen-only webcast will also be available via the Investor Relations section of www.leggmason.com.
The presentation slides that will be reviewed during the discussion of the conference call will be available on the Investor Relations section of the Legg Mason website shortly after the release of the financial results.
A replay of the live broadcast will be available on the Legg Mason website, www.leggmason.com, in the Investor Relations section, or by dialing 1-888-843-7419 (or for international calls 1-630-652-3042), enter pass code 46274803# when prompted. Please note that the replay will be available beginning at 8:00 p.m. EST on Wednesday, January 24, 2018, and ending at 11:59 p.m. EST on Wednesday, February 7, 2018.

About Legg Mason
Guided by a mission of Investing to Improve LivesTM, Legg Mason helps investors globally achieve better financial outcomes by expanding choice across investment strategies, vehicles and investor access through independent investment managers with diverse expertise in equity, fixed income, alternative and liquidity investments.  Legg Mason’s assets under management are $767 billion as of December 31, 2017.  To learn more, visit our web site, our newsroom, or follow us on LinkedIn, Twitter, or Facebook.
This release contains forward-looking statements subject to risks, uncertainties and other factors that may cause actual results to differ materially. For a discussion of these risks and uncertainties, see "Risk Factors" and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Legg Mason's Annual report on Form 10-K for the fiscal year ended March 31, 2017 and in the Company’s quarterly reports on Form 10-Q.


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5

News Release
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Supplemental Data Regarding Quarterly Performance

Strategy Performance
For purposes of investment performance comparisons, strategies are an aggregation of discretionary portfolios (separate accounts, investment funds, and other products) into a single group that represents a particular investment objective. In the case of separate accounts, the investment performance of the account is based upon the performance of the strategy to which the account has been assigned. Each of our asset managers has its own specific guidelines for including portfolios in their strategies. For those managers which manage both separate accounts and investment funds in the same strategy, the performance comparison for all of the assets is based upon the performance of the separate account.

Approximately eighty-seven percent of total AUM is included in strategy AUM as of December 31, 2017, although not all strategies have three-, five-, and ten-year histories. Total strategy AUM includes liquidity assets. Certain assets are not included in reported performance comparisons. These include: accounts that are not managed in accordance with the guidelines outlined above; accounts in strategies not marketed to potential clients; accounts that have not yet been assigned to a strategy; and certain smaller products at some of our affiliates.

Past performance is not indicative of future results.  For AUM included in institutional and retail separate accounts and investment funds managed in the same strategy as separate accounts, performance comparisons are based on gross-of-fee performance. For investment funds which are not managed in a separate account format, performance comparisons are based on net-of-fee performance. Funds-of-hedge funds generally do not have specified benchmarks. For purposes of this comparison, performance of those products is net of fees, and is compared to the relevant HFRX index. These performance comparisons do not reflect the actual performance of any specific separate account or investment fund; individual separate account and investment fund performance may differ. The information in this presentation is provided solely for use regarding this presentation, and is not directed toward existing or potential clients of Legg Mason.




Long-term US Fund Assets Beating Lipper Category Average
Long-term US fund assets include open-end, closed-end, and variable annuity funds. These performance comparisons do not reflect the actual performance of any specific fund; individual fund performance may differ. Past performance is not a guarantee of future results. Source: Lipper Inc.

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LEGG MASON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
Nine Months Ended
 
 
 
 
December
 
September
 
December
 
December
 
December
 
 
 
 
2017
 
2017
 
2016
 
2017
 
2016
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
Investment advisory fees:
 
 
 
 
 
 
 
 
 
 
 
Separate accounts (1)
$
255,696

 
$
253,128

 
$
231,922

 
$
758,870

 
$
692,103

 
 
Funds
395,370

 
393,035

 
368,962

 
1,170,633

 
1,109,504

 
 
Performance fees
58,926

 
40,821

 
22,913

 
181,284

 
82,342

 
Distribution and service fees (1)
81,463

 
80,668

 
90,195

 
241,037

 
276,122

 
Other
1,635

 
686

 
1,249

 
3,446

 
3,705

 
 
 
Total operating revenues
793,090

 
768,338

 
715,241

 
2,355,270

 
2,163,776

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses: (2)
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
362,071

 
367,951

 
327,862

 
1,143,329

 
1,054,817

 
Distribution and servicing
124,254

 
123,634

 
123,191

 
370,237

 
376,722

 
Communications and technology
54,239

 
51,299

 
52,630

 
155,841

 
156,643

 
Occupancy
24,982

 
25,171

 
23,537

 
74,561

 
87,237

 
Amortization of intangible assets
6,071

 
6,082

 
7,277

 
18,492

 
19,251

 
Impairment of intangible assets
195,000

 

 
35,000

 
229,000

 
35,000

 
Contingent consideration fair value adjustments
739

 

 
(14,500
)
 
(15,811
)
 
(39,500
)
 
Other
53,067

 
49,782

 
49,078

 
155,330

 
161,252

 
 
 
Total operating expenses
820,423

 
623,919

 
604,075

 
2,130,979

 
1,851,422

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income (Loss)
(27,333
)
 
144,419

 
111,166

 
224,291

 
312,354

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Operating Income (Expense):
 
 
 
 
 
 
 
 
 
 
Interest income
1,827

 
1,572

 
1,713

 
4,867

 
5,106

 
Interest expense
(29,088
)
 
(29,077
)
 
(29,495
)
 
(87,431
)
 
(81,985
)
 
Other income, net
5,519

 
7,289

 
6,126

 
24,196

 
22,686

 
Non-operating income of
 
 
 
 
 
 
 
 
 
 
 
consolidated investment vehicles, net
8,225

 
2,094

 
1,458

 
11,316

 
9,892

 
 
 
Total non-operating income (expense)
(13,517
)
 
(18,122
)
 
(20,198
)
 
(47,052
)
 
(44,301
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (Loss) Before Income Tax Provision
 
 
 
 
 
 
 
 
 
 
(Benefit)
(40,850
)
 
126,297

 
90,968

 
177,239

 
268,053

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax provision (benefit)
(209,396
)
 
38,673

 
26,441

 
(142,468
)
 
71,654

 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
168,546

 
87,624

 
64,527

 
319,707

 
196,399

 
Less: Net income attributable
 
 
 
 
 
 
 
 
 
 
 
 to noncontrolling interests
19,324

 
11,960

 
13,088

 
43,901

 
45,067

 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income Attributable to Legg Mason, Inc.
$
149,222

 
$
75,664

 
$
51,439

 
$
275,806

 
$
151,332

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) For the quarters ended December 31, 2017, September 30, 2017 and June 30, 2017, separate accounts advisory fees include $15.2 million, $13.8 million and $12.4 million, respectively, of revenue relating to retail separately managed accounts for which revenues were previously classified as Distribution and service fees. See note 2 on page 12.
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Operating expenses include acquisition and transition-related costs related to business combinations.
 
 
Acquisition and transition-related costs:
 
 
 
 
 
 
 
 
 
 
 
Compensation
$
1,099

 
$
1,115

 
$
3,763

 
$
4,578

 
$
40,770

 
 
Occupancy
72

 
(23
)
 
(962
)
 
170

 
13,217

 
 
Other
141

 
266

 
222

 
484

 
18,997

 
 
 
Total acquisition and transition-related costs
$
1,312

 
$
1,358

 
$
3,023

 
$
5,232

 
$
72,984


7


LEGG MASON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME, CONTINUED
(Amounts in thousands, except per share amounts)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
Nine Months Ended
 
 
 
 
December
 
September
 
December
 
December
 
December
 
 
 
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income Attributable to Legg Mason, Inc.
$
149,222

 
$
75,664

 
$
51,439

 
$
275,806

 
$
151,332

 
 
 
 
 
 
 
 
 
 
 
 
Less: Earnings (distributed and undistributed)
 
 
 
 
 
 
 
 
 
 
 
allocated to participating securities (1)
5,347

 
2,687

 
1,706

 
9,639

 
4,874

 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income (Distributed and Undistributed)
 
 
 
 
 
 
 
 
 
 
Allocated to Shareholders (Excluding
 
 
 
 
 
 
 
 
 
 
Participating Securities)
$
143,875

 
$
72,977

 
$
49,733

 
$
266,167

 
$
146,458

 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income per Share Attributable to
 
 
 
 
 
 
 
 
 
 
Legg Mason, Inc. Shareholders:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.59

 
$
0.78

 
$
0.50

 
$
2.87

 
$
1.44

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted
$
1.58

 
$
0.78

 
$
0.50

 
$
2.86

 
$
1.43

 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-Average Number of Shares
 
 
 
 
 
 
 
 
 
 
Outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
Basic
90,377

 
93,087

 
99,403

 
92,770

 
101,897

 
 
 
Diluted
90,833

 
93,496

 
99,568

 
93,199

 
102,102

 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Participating securities excluded from weighted-average number of shares outstanding were 3,357, 3,417, and 3,404 for the quarters ended December 2017, September 2017, and December 2016, respectively, and 3,322 and 3,329 for the nine months ended December 2017 and December 2016, respectively.


8


LEGG MASON, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF INCOME
(Amounts in thousands)
(Unaudited)
 
 
 
 
Quarters Ended
 
 
 
 
December 2017
 
September 2017
 
December 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 and Other (1)
 
Consolidated Investment Vehicles and Other (1)
 
Consolidated Totals
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total operating revenues
$
793,373

 
$
(283
)
 
$
793,090

$
768,361

 
$
(23
)
 
$
768,338

$
715,601

 
$
(360
)
 
$
715,241

Total operating expenses
819,984

 
439

 
820,423

623,814

 
105

 
623,919

604,075

 

 
604,075

Operating Income (Loss)
(26,611
)
 
(722
)
 
(27,333
)
144,547

 
(128
)
 
144,419

111,526

 
(360
)
 
111,166

Non-operating income (expense)
(19,970
)
 
6,453

 
(13,517
)
(19,794
)
 
1,672

 
(18,122
)
(20,545
)
 
347

 
(20,198
)
Income (Loss) Before Income Tax Provision (Benefit)
(46,581
)
 
5,731

 
(40,850
)
124,753

 
1,544

 
126,297

90,981

 
(13
)
 
90,968

Income tax provision (benefit)
(209,396
)
 

 
(209,396
)
38,673

 

 
38,673

26,441

 

 
26,441

Net Income
162,815

 
5,731

 
168,546

86,080

 
1,544

 
87,624

64,540

 
(13
)
 
64,527

Less: Net income (loss) attributable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 to noncontrolling interests
13,593

 
5,731

 
19,324

10,416

 
1,544

 
11,960

13,101

 
(13
)
 
13,088

Net Income Attributable to Legg Mason, Inc.
$
149,222

 
$

 
$
149,222

$
75,664

 
$

 
$
75,664

$
51,439

 
$

 
$
51,439

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
 
 
 
 
 
 
 
 
 
December 2017
 
December 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total operating revenues
$
2,355,620

 
$
(350
)
 
$
2,355,270

$
2,164,162

 
$
(386
)
 
$
2,163,776

 
 
 
 
 
Total operating expenses
2,130,412

 
567

 
2,130,979

1,851,199

 
223

 
1,851,422

 
 
 
 
 
Operating Income (Loss)
225,208

 
(917
)
 
224,291

312,963

 
(609
)
 
312,354

 
 
 
 
 
Non-operating income (expense)
(55,892
)
 
8,840

 
(47,052
)
(53,063
)
 
8,762

 
(44,301
)
 
 
 
 
 
Income Before Income Tax Provision (Benefit)
169,316

 
7,923

 
177,239

259,900

 
8,153

 
268,053

 
 
 
 
 
Income tax provision (benefit)
(142,468
)
 

 
(142,468
)
71,654

 

 
71,654

 
 
 
 
 
Net Income
311,784

 
7,923

 
319,707

188,246

 
8,153

 
196,399

 
 
 
 
 
Less: Net income attributable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 to noncontrolling interests
35,978

 
7,923

 
43,901

36,914

 
8,153

 
45,067

 
 
 
 
 
Net Income Attributable to Legg Mason, Inc.
$
275,806

 
$

 
$
275,806

$
151,332

 
$

 
$
151,332

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Other represents consolidated sponsored investment products that are not designated as CIVs
 
 
 
 
 
 


9


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
 
 
 
 
 
2017
 
2017
 
2016
 
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues, GAAP basis
$
793,090

 
$
768,338

 
$
715,241

 
 
$
2,355,270

 
$
2,163,776

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Plus (less):
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass-through performance fees
(9,970
)
 
(19,874
)
 
(2,250
)
 
 
(95,275
)
 
(52,681
)
 
 
 
Operating revenues eliminated upon
 
 
 
 
 
 
 
 
 
 
 
 
 
 
consolidation of investment vehicles
283

 
23

 
360

 
 
350

 
386

 
 
 
Distribution and servicing expense excluding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
consolidated investment vehicles
(124,071
)
 
(123,578
)
 
(123,326
)
 
 
(369,998
)
 
(376,722
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues, as Adjusted
$
659,332

 
$
624,909

 
$
590,025

 
 
$
1,890,347

 
$
1,734,759

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income (Loss), GAAP basis
$
(27,333
)
 
$
144,419

 
$
111,166

 
 
$
224,291

 
$
312,354

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Plus (less):
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains on deferred compensation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
and seed investments, net
4,333

 
4,824

 
1,474

 
 
14,585

 
9,072

 
 
 
Impairment of intangible assets
195,000

 

 
35,000

 
 
229,000

 
35,000

 
 
 
Amortization of intangible assets
6,071

 
6,082

 
7,277

 
 
18,492

 
19,251

 
 
 
Contingent consideration fair value adjustments
739

 

 
(14,500
)
 
 
(15,811
)
 
(39,500
)
 
 
 
Operating loss of consolidated investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
vehicles, net
722

 
128

 
360

 
 
917

 
609

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income, as Adjusted
$
179,532

 
$
155,453

 
$
140,777

 
 
$
471,474

 
$
336,786

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Margin, GAAP basis
(3.4
)
%
18.8

%
15.5

%
 
9.5

%
14.4

%
Operating Margin, as Adjusted
27.2

 
24.9

 
23.9

 
 
24.9

 
19.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) See explanations for "Use of Supplemental Non-GAAP Financial Information."
 

10


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
 
 
 
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities, GAAP basis
$
117,323

 
$
289,329

 
$
209,102

 
$
293,072

 
$
346,961

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Plus (less):
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net of accretion and amortization
 
 
 
 
 
 
 
 
 
 
 
 
of debt discounts and premiums
28,503

 
28,343

 
28,534

 
85,176

 
78,927

 
 
Current tax expense
8,823

 
9,662

 
(2,981
)
 
24,557

 
11,925

 
 
Net change in assets and liabilities
25,077

 
(145,656
)
 
(108,242
)
 
92,744

 
21,346

 
 
Net change in assets and liabilities
 
 
 
 
 
 
 
 
 
 
 
 
of consolidated investment vehicles
21,873

 
1,235

 
43,732

 
54,897

 
(15,041
)
 
 
Net income attributable to noncontrolling interests
(19,324
)
 
(11,960
)
 
(13,088
)
 
(43,901
)
 
(45,067
)
 
 
Net gains (losses) and earnings on investments
(4,163
)
 
1,491

 
2,432

 
2,874

 
(959
)
 
 
Net gains on consolidated investment vehicles
8,225

 
2,094

 
1,458

 
11,316

 
9,892

 
 
Other
663

 
194

 
(638
)
 
934

 
(1,137
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
187,000

 
$
174,732

 
$
160,309

 
$
521,669

 
$
406,847

 
 
 
 
 
 
 
 
 
 
 
 
 
(1) 
See explanations for "Use of Supplemental Non-GAAP Financial Information."


11


LEGG MASON, INC. AND SUBSIDIARIES
(Amounts in billions)
(Unaudited)
Assets Under Management
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
 
 
 
By asset class:
December 2017
 
September 2017
 
June 2017
 
March 2017
 
December 2016
 
 
 
 
 
Equity
$
207.6

 
$
201.2

 
$
196.2

 
$
179.8

 
$
169.0

 
 
 
 
 
Fixed Income
420.1

 
411.9

 
403.6

 
394.3

 
381.1

 
 
 
 
 
Alternative
66.3

 
65.8

 
66.5

 
67.9

 
71.5

 
 
 
 
 
 
Long-Term Assets
694.0

 
678.9

 
666.3

 
642.0

 
621.6

 
 
 
 
 
Liquidity
73.2

 
75.5

 
74.9

 
86.4

 
88.8

 
 
 
 
 
 
Total
$
767.2

 
$
754.4

 
$
741.2

 
$
728.4

 
$
710.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
Nine Months Ended
By asset class (average):
December 2017
 
September 2017
 
June 2017
 
March 2017
 
December 2016
 
December 2017
 
December 2016
 
Equity
$
204.7

 
$
198.9

 
$
190.6

 
$
174.2

 
$
166.7

 
$
197.9

 
$
165.1

 
Fixed Income
414.8

 
410.2

 
400.7

 
388.1

 
387.8

 
408.7

 
385.2

 
Alternative
65.8

 
66.0

 
67.4

 
70.4

 
71.3

 
66.4

 
66.0

 
 
Long-Term Assets
685.3

 
675.1

 
658.7

 
632.7

 
625.8

 
673.0

 
616.3

 
Liquidity
74.6

 
75.2

 
81.6

 
86.2

 
90.9

 
77.6

 
103.4

 
 
Total
$
759.9

 
$
750.3

 
$
740.3

 
$
718.9

 
$
716.7

 
$
750.6

 
$
719.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Component Changes in Assets Under Management
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
Nine Months Ended
 
 
 
December 2017
 
September 2017
 
June 2017
 
March 2017
 
December 2016
 
December 2017
 
December 2016
Beginning of period
$
754.4

 
$
741.2

 
$
728.4

 
$
710.4

 
$
732.9

 
$
728.4

 
$
669.6

Net client cash flows:
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
(3.2
)
 
(2.4
)
 
1.0

 
3.1

 
(3.7
)
 
(4.6
)
 
(8.4
)
Fixed Income
5.4

 
0.9

 
0.3

 
3.5

 
0.5

 
6.6

 
7.3

Alternative

 
(0.7
)
 
(0.8
)
 
(2.7
)
 
(0.8
)
 
(1.5
)
 
(4.4
)
Long-Term flows
2.2

 
(2.2
)
 
0.5

 
3.9

 
(4.0
)
 
0.5

 
(5.5
)
Liquidity
(2.3
)
 
0.2

 
(11.5
)
 
(3.1
)
 
(6.9
)
 
(13.6
)
 
(24.2
)
Total net client cash flows
(0.1
)
 
(2.0
)
 
(11.0
)
 
0.8

 
(10.9
)
 
(13.1
)
 
(29.7
)
Realizations(1)
(0.3
)
 
(0.5
)
 
(1.3
)
 

 

 
(2.2
)
 

Market performance and other(2)
13.5

 
13.5

 
24.7

 
17.1

 
(2.3
)
 
51.8

 
25.7

Impact of foreign exchange
(0.4
)
 
2.2

 
0.7

 
4.0

 
(8.4
)
 
2.5

 
(5.4
)
Acquisitions (disposition), net
0.1

 

 
(0.3
)
 
(3.9
)
 
(0.9
)
 
(0.2
)
 
50.2

End of period
$
767.2

 
$
754.4

 
$
741.2

 
$
728.4

 
$
710.4

 
$
767.2

 
$
710.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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). Realizations of $0.2 billion, $0.4 billion, $0.4 billion, and $0.3 billion were included in net client cash flows for the quarters ended March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016, respectively.
(2) For the quarter ended June 30, 2017, Other includes a reclass, effective April 1, 2017, of $16.0 billion of certain assets which were previously included in Assets Under Advisement to Assets Under Management, specifically retail separately managed account programs that operate and have fee rates comparable to programs managed on a fully discretionary basis. These Assets Under Advisement as of the quarters ended March 31, 2017, December 31, 2016, and September 30, 2016 were $16.0 billion, $13.7 billion, and $12.8 billion, respectively. The quarter ended September 30, 2017 includes a reclassification of $1.0 billion from long-term net client cash flows to Market performance and other related to this AUM. For the quarter ended June 30, 2017, Other also includes a $3.7 billion reconciliation to previously reported amounts.
(3) Due to effects of rounding, the sum of the quarterly results may differ immaterially from the year-to-date results.

12

News Release
391879775_imageleggmason.jpg

Use of Supplemental Non-GAAP Financial Information

As supplemental information, we are providing a performance measure for "Operating Margin, as Adjusted" and a liquidity measure for "Adjusted EBITDA", each of which are based on methodologies other than generally accepted accounting principles ("non-GAAP"). Our management uses these measures as benchmarks in evaluating and comparing our period-to-period operating performance and liquidity.

Operating Margin, as Adjusted
We calculate “Operating Margin, as Adjusted,” by dividing (i) Operating Income, adjusted to exclude the impact on compensation expense of gains or losses on investments made to fund deferred compensation plans, the impact on compensation expense of gains or losses on seed capital investments by our affiliates under revenue sharing agreements, amortization related to intangible assets, income (loss) of consolidated investment vehicles, the impact of fair value adjustments of contingent consideration liabilities, if any, and impairment charges by (ii) our operating revenues, adjusted to add back net investment advisory fees eliminated upon consolidation of investment vehicles, less distribution and servicing expenses which we use as an approximate measure of revenues that are passed through to third parties, and less performance fees that are passed through as compensation expenses or net income (loss) attributable to non-controlling interests, which we refer to as “Operating Revenues, as Adjusted”.  The deferred compensation items are removed from Operating Income in the calculation because they are offset by an equal amount in Non-operating income (expense), and thus have no impact on Net Income Attributable to Legg Mason, Inc.  We adjust for the impact of amortization of management contract assets and the impact of fair value adjustments of contingent consideration liabilities, if any, which arise from acquisitions to reflect the fact that these items distort comparison of our operating results with results of other asset management firms that have not engaged in significant acquisitions. Impairment charges and income (loss) of consolidated investment vehicles are removed from Operating Income in the calculation because these items are not reflective of our core asset management operations. We use Operating Revenues, as Adjusted in the calculation to show the operating margin without 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, although distribution and servicing expenses may include commissions paid in connection with the launching of closed-end funds for which there is no corresponding revenue in the period. We also use Operating Revenues, as Adjusted in the calculation to show the operating margin without performance fees, which are passed through as compensation expense or net income (loss) attributable to non-controlling interests per the terms of certain more recent acquisitions. Operating Revenues as adjusted also include our advisory revenues we receive from consolidated investment vehicles that are eliminated in consolidation under GAAP.

We believe that Operating Margin, as Adjusted, is a useful measure of our performance because it provides a measure of our core business activities. It excludes items that have no impact on Net Income Attributable to Legg Mason, Inc. and indicates what our operating margin would have been without the 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 non-controlling interests per the terms of certain more recent acquisitions, amortization related to intangible assets, changes in the fair value of contingent consideration liabilities, if any, impairment charges, and the impact of the consolidation of certain investment vehicles described above. The consolidation of these investment vehicles does not have an impact on Net Income Attributable to Legg Mason, Inc.  This measure is provided in addition to our operating margin calculated under GAAP, but is not a substitute for calculations of margins under GAAP and may not be comparable to non-GAAP performance measures, including measures of adjusted margins of other companies.

Adjusted EBITDA
We define Adjusted EBITDA as cash provided by (used in) operating activities plus (minus) interest expense, net of accretion and amortization of debt discounts and premiums, current income tax expense (benefit), the net change in assets and liabilities, net (income) loss attributable to noncontrolling interests, net gains (losses) and earnings on investments, net gains (losses) on consolidated investment vehicles, and other. The net change in assets and liabilities adjustment aligns with the Consolidated Statements of Cash Flows. Adjusted EBITDA is not reduced by equity-based compensation expense, including management equity plan non-cash issuance-related charges. Most management equity plan units may be put to or called by Legg Mason for cash payment, although their terms do not require this to occur.


Brandywine Global | Clarion Partners | ClearBridge Investments | EnTrustPermal | Martin Currie | QS Investors | RARE Infrastructure | Royce & Associates | Western Asset
13

News Release
391879775_imageleggmason.jpg

We believe that this measure is useful to investors and us as it provides additional information with regard to our ability to meet working capital requirements, service our debt, and return capital to our shareholders. This measure is provided in addition to Cash provided by operating activities and may not be comparable to non-GAAP performance measures or liquidity measures of other companies, including their measures of EBITDA or Adjusted EBITDA. Further, this measure is not to be confused with Net Income, Cash provided by operating activities, or other measures of earnings or cash flows under GAAP, and are provided as a supplement to, and not in replacement of, GAAP measures.

We have previously disclosed Adjusted EBITDA 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.

Brandywine Global | Clarion Partners | ClearBridge Investments | EnTrustPermal | Martin Currie | QS Investors | RARE Infrastructure | Royce & Associates | Western Asset
14
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Section 3: EX-99.1 (EXHIBIT 99.1 PDF)

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