The fourth quarter net loss resulted from two non-cash charges: 1) previously announced support for money market funds, totaling $291.0 million after tax and compensation related adjustments, or $2.06 per diluted share; 2) a charge of $94.8 million after tax, or $0.66 per diluted share, for a reduction in the value of acquired management contracts held by a Wealth Management subsidiary since the time of its acquisition by Legg Mason. Cash income, as adjusted, for these non-cash charges was $178.5 million for the quarter, or $1.25 per diluted share, down 20% and 19%, respectively, from cash income, as adjusted, in the fourth quarter of fiscal 2007.
For the full fiscal year 2008, the Company achieved record revenues of $4.63 billion, up 7% from $4.34 billion in fiscal 2007. Net income for fiscal 2008 was $267.6 million, or $1.86 per diluted share, representing a decrease of 59% and 58%, respectively, from fiscal 2007 results. Cash income, as adjusted, for the year was $877.0 million, or $6.09 per diluted share, both representing an increase of 4% from fiscal 2007.
Assets Under Management ("AUM") at the end of fiscal 2008 were $950.1 billion, down 5% from $998.5 billion at December 31, 2007, and down 2% from $968.5 billion at the end of fiscal 2007.
Comments on the Fourth Fiscal Quarter and Fiscal Year 2008 Results
Mark R. Fetting, President and Chief Executive Officer, said, "This past quarter was among the most difficult we have ever faced and we are disappointed with our results. We remain a fundamentally strong firm today, but we know we have work to do. We are fully focused on restoring our historically strong investment performance across the board, despite the challenges of continued market volatility and investor uncertainty.
"In the quarter just ended, we continued to provide, on a proactive basis, financial support to several of our money market funds. The non-cash charges from this support led to a net loss for the quarter. We also incurred a non-cash charge for a write-down of certain acquired management contracts. Our actions on behalf of the money market funds have been dilutive to our earnings for two consecutive quarters, but we are resolute in our view that these have been prudent and proper actions to take. We will stay vigilant going forward.
"Excluding these two non-cash charges, cash income, as adjusted, was $178.5 million for the fourth quarter. Our overall earnings power remains strong and our annual revenues of $4.63 billion in fiscal 2008 represented a record for Legg Mason. The diversification and global scale of our managers are key elements of our competitive advantage as a firm. We have major managers who are performing very well in a tough investment climate, and we are seeing growth outside the U.S., but we know that we need our U.S. equity managers to return to form, and this is a top priority."
Assets Under Management Decreased to $950 Billion
AUM decreased to $950.1 billion as of March 31, 2008, down $48.4 billion, or 5%, from $998.5 billion at December 31, 2007, primarily as a result of market depreciation of $28.5 billion in the fourth quarter and net client cash outflows of $19.2 billion. Equity outflows were $17 billion and fixed income outflows were $7 billion for the quarter, while liquidity inflows totaled $5 billion.
Average AUM during the quarter were $975 billion, compared to $1,014 billion in the third quarter of fiscal 2008 and $959 billion in the fourth quarter of fiscal 2007. At March 31, 2008, equity products represented 29% of AUM, fixed income represented 53% and liquidity represented 18%. By business division, 54% of total AUM were in Institutional, 40% in Managed Investments and 6% in Wealth Management. Assets managed for non-U.S. domiciled clients represented 34% of total AUM at March 31, 2008.
For the fiscal year 2008, total AUM declined by $18.4 billion, or 2%, from $968.5 billion at March 31, 2007. Despite the challenging markets, Western Asset, Permal and Brandywine each grew their AUM in fiscal 2008. -- www.cnxmarketlink.com
