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Legg Mason earns $86.3 million for second quarter

Legg Mason Inc., which continues to struggle with money flowing out of its stock funds, reported Friday it earned $86.3 million in the second quarter ended Sept. 30, a 6.8 percent increase over a year ago.

On a per-share basis, the Baltimore-based money manager earned 70 cents in the quarter, compared with 60 cents the year before. That was well above analysts' expectations of 62 cents per share, said Christopher Harris, a senior analyst with Wells Fargo Securities, in a research note.

Legg's shares rose $1.04 to close at $37.91 per share for the day.

"It was somewhat of a mixed bag, but certainly tilted more positively" said Macrae Sykes, an analyst with Gabelli & Co. in Rye, N.Y.

The disappointing news was the $4 billion that investors pulled out of Legg's stock funds in the past three months, Sykes said. But Legg showed positive signs of managing its expenses, he added.

Total operating revenue reached $669.9 million for the quarter, up 5 percent from the year before.

Legg has struggled for years to stem the outflow of money out from its funds, a factor that contributed to the resignation a year ago of CEO and chairman Mark Fetting.

As of September, assets under management totaled $656 billion, up from $644.5 billion in June. Much of that increase reflected $14.2 billion in market gains. Despite investors pulling money out of stock funds, net inflows reached $300 million in bond funds and $2.3 billion in money market funds in the past three months.

"I don't think we were alone with the outflow picture," said CEO Joseph A. Sullivan, who replaced Fetting on an interim basis last fall before being named permanently earlier this year. "It was a challenging quarter for a lot of firms."

In the past year, Sullivan said, Legg has focused on big steps it can take to reduce costs, such as consolidating space. Legg will continue to look for ways to operate efficiently, but the next fiscal year, starting in April, will emphasize growth, he said.

The CEO said he has enjoyed his first year at the helm.

"It's not easy. It's been challenging. There is a lot of work to it," Sullivan said. "This company has achieved a lot in the past year," which in turn has raised the spirits and enthusiasm within Legg, he said.

eileen.ambrose@baltsun.com

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