This excerpt taken from the LM 8-K filed Jan 28, 2009.
Assets Under Management of $698 Billion
Baltimore, Maryland January 28, 2009 Legg Mason, Inc. (NYSE: LM) today reported its operating results for the third quarter of fiscal year 2009, which ended December 31, 2008. For the quarter, revenue was $720.0 million, down 39% from $1.2 billion in the third quarter of fiscal 2008. The Company reported a net loss of $1.5 billion, or $10.55 per diluted share, compared to net income of $154.6 million, or $1.07 per diluted share, in the third quarter of fiscal 2008 and compared to a net loss of $103.8 million, or $0.74 per diluted share, in the quarter ended September 30, 2008.
The third quarter net loss resulted primarily from four events:
There were non-cash goodwill and intangible asset impairment charges (described herein as intangible impairment) in the Wealth Management division of $1.2 billion, representing $850.7 million net of income taxes, or $6.03 per diluted share. The charges resulted both from the impact of current market conditions on valuation metrics and from substantial declines in the assets managed by and earnings contribution of the division.
Due to the Companys continued efforts to reduce its Structured Investment Vehicle (SIV) exposure, it incurred a loss of $842.1 million, representing $512.4 million net of operating expense reductions and income taxes, or $3.63 per diluted share, as a result of the previously announced sale of the Axon Financial SIV securities in December 2008. The sale reduced the total exposure of the Company and its money market funds to all SIVs by 43%. Total exposure to SIVs remaining in the money market funds has declined from approximately $10 billion in October 2007 to $1.4 billion, through systematic reduction of positions.
Additional support for liquidity funds in the quarter, together with reduced prices on previously supported SIV and other similar conduit securities, resulted in an aggregate charge of $243.2 million, representing $150.2 million net of operating expense reductions and income taxes, or $1.07 per diluted share. The Company supported seven funds through existing Capital Support Agreements (CSAs) and two new CSAs and also renewed a total return swap agreement with a major bank.
During the quarter, a major investment bank, which had declared bankruptcy, defaulted on a sublease with the Company. As a result, a charge of $36.1 million, representing $22.0 million net of income taxes, or $0.16 per diluted share, was recorded to reflect the anticipated lost sublease income over the remainder of the lease period.
Assets Under Management (AUM) were $698.2 billion, down 17% from $841.9 billion at September 30, 2008, reflecting net client outflows and market declines. AUM were down 30% from $998.5 billion at December 31, 2007.