This is a summary of the first quarter fiscal 2009 earnings call conducted by Legg Mason Inc. (LM) on July 25, 2008
Management:
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Chief Executive Officer and President: Mark R. Fetting
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Sr. VP, Chief Financial Officer and Treasurer: Charles J. Daley
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President, Pfizer Global Research & Development: Martin Mackay
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Sr. VP, Head of Corporate Marketing and Communications: Timothy F. Munoz
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Sr. VP: F. Barry Bilson
Key Investors Issues:
- Revenue was $1.05 billion, down 13% from $1.21 billion in 2007.
- The company reported a net loss of $31.3 million, or 22 cents per diluted share.
- Cash income was $8.0 million, compared to cash income of $238.9 million in the prior year.
First Quarter Highlights:
Operating revenues were $1,054 billion, a decrease of 13% compared with $1,069 billion in the year-ago quarter as investment advisory fees totalled $896.378 million, down from $1.013 billion in 2007.
- Distribution and service fees were $153.499 million compared to $183.498 million of the prior year period.
- Other revenues totalled $4.154 million compared to $9.859 million same period this year.
- The firm realised a net loss of $31.27 million or 22 cents, down from a profit of $191 million or $1.34 a share in the prior year due to previously announced support for money market funds.
- Total operating expenses were $825,084 million as of this year quarter of $913,805 million.
- Operating income was $228,947 million compared to $292,163 million in the prior year.
Cash equivalents, repurchase agreements and cash restricted for collateral purposes, was $4.1 billion.
- Total debt was $3.9 billion and stockholders’ equity was $6.5 billion.
- Subsequent to quarter end, the Company repaid $425 million of Senior Notes which were due
July 2, 2008.
- Cash earnings as adjusted from $1.15 which is and 30% of the prior year.
Assets under management totaled $923 billion for the quarter of 7%, against prior year.
- AUM decreased to $922.8 billion at June 30, 2008, down $69.6 billion, or 7%, from June 30, prior year.
- Average AUM during the quarter was $949 billion, compared to $985 billion in the prior year
- Fixed income outflows of $10.9 billion more than the $7.2 billion to prior quarter.
- Liquidity for the quarter was a positive $4.1 billion.
Business Developments:
- The Company announced the roll-out of a new family of target date funds that will provide an innovative solution to the retirement challenge facing both 401(k) plan sponsors and individual investors.
- The Legg Mason Target Date Funds feature a new approach that combines income and long-term capital appreciation, together with investments in real estate and exchange-traded funds, to seek the highest total return.
- The introduction of a new portable alpha product, plus new structured credit, emerging market debt and global opportunity funds from Western Asset.
The launch of a new Global 130/30 product from Batterymarch will bring the firm’s expertise in quantitative and long-short strategies to the global arena.
- It created a white-label product group that provides a new revenue stream for Permal, offering its leading fund-of-hedge fund strategies to global banks and wealth managers.
- Legg Mason also announced the launch of Global Currents Investment Management, a new investment subsidiary specializing in global equities.
- The creation of the Legg Mason Global Equities Group recognizes the importance of global equities as a growing asset class and the Company’s commitment to participate fully in this high opportunity business sector, serving institutions, individual and high net worth investors.
Outlook Fiscal 2009:
- Legg Mason is focused on growing the business as it works through these issues and through market conditions.
- Strictly focused on expanding its open architecture distribution partnerships both in the U.S. and internationally and launching products as appropriate.
Key questions and answers for the first quarter fiscal 2009 earnings call, conducted by Legg Mason Inc. (LM) on July 25, 2008
Prashant Bhatia:
The cost to support the western money funds has been about $875 million, how much of that $875 million can end up paying back the Legg Mason shareholder, over time?
