Asset management company Legg Mason, Inc. (LM) Thursday reported profit for the second quarter of fiscal 2010 compared to loss in the same period last year, reflecting lower expenses, despite a 32% decline in revenues.
For the quarter, net income attributable to the company was $45.77 million or $0.30 per share as against a net loss of $108.74 million or $0.77 per share reported in the previous-year period. Legg Mason noted that the quarter's results included transaction costs with regard to equity unit exchange of $22 million, which were partially offset by ongoing interest savings from exchange of $15 million per quarter.
On average, 14 analysts polled by Thomson Reuters expected the company to earn $0.21 per share for the quarter. Analysts' estimates typically exclude special items.
Total operating revenues for the quarter plunged to $659.90 million from $966.14 million in the second quarter of fiscal 2009. Legg Mason attributed the decrease in revenues to decline in fees earned due to lower average assets under management and changes in mix of the company's Assets Under Management, or AUM, to lower average fee assets. Analysts expected the company to generate revenues of $651.85 million during the quarter.
Investment advisory fees from separate accounts were $206.97 million compared with $283.12 million, fees from funds slumped to $347.37 million from $540.83 million a year ago. Distribution and service fees for the period dropped to $94.62 million from $135.80 million, other fees were $1.37 million versus $2.96 million in the last-year period. However, performance fees for the quarter surged to $9.57 million from $3.44 million in the 2009-year period.
During the quarter, interest income plunged to $1.74 million from $21.03 million, interest expense incurred were $28.57 million compared with $45.83 million in the 2009-year period.
For the quarter, the Baltimore, Maryland-based company had a fund support of $5.61 million as against an expense of $324.64 million in year-ago period. Other income for the period was $18.32 million versus an expenses of $38.65 million in the comparable period prior year.
Total operating expenses incurred by Legg Mason plummeted to $582.01 million from $745.92 million in the prior-year period, reflecting lower distribution and servicing fees on a lower asset base, decreased variable compensation, and cost saving measures that resulted in decreases in compensation, communications and technology and other operating expenses. Operating margins for the quarter were 12% as compared to 23% in the last year quarter.
Commenting on the results, Chairman and chief executive officer Mark Fetting said, "In both our Americas and International centralized distribution channels, stronger gross sales and moderating outflows have contributed to our improving net flows."
At the end of the period, the company's AUM were $702.7 billion, down 17% from $841.9 billion at September 30, 2008. As adjusted, cash income at September 30, 2009 was $90.0 million or $0.59 per share as against $140.2 million or $0.99 per share a year ago.
For the six-month period, net profit attributable to Legg Mason was $95.83 million or $0.64 per share as against a net loss of $144.86 million or $1.03 per share in the same period last year. Half-yearly, total operating revenues slumped to $1.27 billion from $2.02 billion in the previous year.
LM is currently trading at $31.31 per share, down 1.26%, on the New York Stock Exchange.
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