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Lazard Ltd Reports Third-Quarter and Nine-Month 2015 Results

October 22, 2015 6:50 AM

NEW YORK--(BUSINESS WIRE)-- Lazard Ltd (NYSE: LAZ):

Highlights

($ in millions, except

per share data and AUM)

Quarter Ended

September 30,

Nine Months Ended

September 30,

2015

2014

%’15-’14

2015

2014

%’15-’14

As Adjusted1,2

Operating revenue $594 $583 2% $1,782 $1,694 5%
Financial Advisory $331 $291 14% $949 $847 12%
Asset Management $262 $288 (9)% $823 $836 (2)%
Net income $124 $89 40% $357 $255 40%
Diluted net income per share $0.93 $0.67 39% $2.68 $1.91 40%

U.S. GAAP

Net income $399 $89 NM $829 $255 NM
Diluted net income per share $2.99 $0.67 NM $6.22 $1.91 NM

Supplemental Data

Quarter-end AUM ($ in billions) $183 $198 (8)%
Average AUM ($ in billions) $192 $203 (5)% $198 $196 1%
Note: Endnotes are on page 12 of this release. A reconciliation of adjusted GAAP to U.S. GAAP is on page 19.

Lazard Ltd (NYSE: LAZ) today reported record third-quarter operating revenue1 of $594 million, and net income, as adjusted1, of $124 million for the quarter ended September 30, 2015. Net income per share, as adjusted1, was $0.93 (diluted) for the quarter, excluding one-time benefits2, compared to $0.67 (diluted) for the 2014 third quarter. Pre-tax income per share (diluted), as adjusted1, was 33% higher than the third quarter of 2014.

Record first nine-month 2015 operating revenue1 of $1,782 million resulted in net income, as adjusted1, of $357 million, or $2.68 per share (diluted), excluding one-time benefits and charges2.

Third-quarter 2015 net income on a U.S. GAAP basis was $399 million, or $2.99 per share (diluted), including the third-quarter net benefit. First nine-month 2015 net income on a U.S. GAAP basis was $829 million, or $6.22 per share (diluted), including one-time benefits and charges2. A reconciliation of our U.S. GAAP results to the adjusted results is presented on page 19 of this press release.

“Record operating revenue for both the third quarter and first nine months in an uneven macroeconomic environment underscores the power of Lazard’s model and the strengths that differentiate our business,” said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard.

“In Financial Advisory we are advising business and government leaders on their most important strategic matters, including transformational, complex and cross-border transactions,” said Mr. Jacobs. “Asset Management’s resilience in volatile capital markets reflects our primarily institutional global client base and the diversity of our investment platforms.”

“We are maintaining our discipline on costs and capital management,” said Matthieu Bucaille, Chief Financial Officer of Lazard. “We remain focused on profitable revenue growth, investment in our businesses and the return of capital to shareholders.”

OPERATING REVENUE

Financial Advisory

In the text portion of this press release, we present our Financial Advisory results as Strategic Advisory and Restructuring. Strategic Advisory includes 1) M&A and Other Advisory (Other includes Capital Advisory and Sovereign Advisory) and 2) Capital Raising (includes Capital Markets Advisory and Private Fund Advisory).

Third Quarter

Financial Advisory operating revenue was $331 million for the third quarter of 2015, 14% higher than the third quarter of 2014.

Strategic Advisory operating revenue was $305 million for the third quarter of 2015, 18% higher than the third quarter of 2014, primarily driven by a 19% increase in M&A and Other Advisory revenue.

During the third quarter of 2015, Lazard remained engaged in highly visible, complex M&A transactions and other advisory assignments, including cross-border transactions, spin-offs, distressed asset sales, capital advisory and sovereign advisory in the Americas, Europe, Africa, Asia and Australia.

Among the major M&A transactions or assignments that were completed during the third quarter of 2015 were the following (clients are in italics): Heinz’s combination with Kraft Foods, valuing the new entity at $115 billion; AT&T’s $67.1 billion acquisition of DIRECTV; RockTenn’s $21.0 billion merger with MeadWestvaco; Pfizer’s $17.0 billion acquisition of Hospira; NiSource’s $13.1 billion spin-off of Columbia Pipeline Group; Capgemini’s $4.0 billion acquisition of IGATE; and D.E Master Blenders in its combination with Mondelēz International’s coffee business to create Jacobs Douwe Egberts.

In Capital Advisory, we continued to provide advice regarding balance sheet issues to public and private clients globally, including: Worldpay on its £2.2 billion IPO; SandRidge Energy’s $925 million of exchange and repurchase transactions of senior unsecured notes for senior unsecured convertible notes and cash; and Clayton, Dubilier & Rice and SSA Investments on the £408 million secondary disposal of a stake in B&M European Value Retail.

Our Sovereign Advisory business remained active worldwide, including assignments in Austria, Greece, Slovenia and Ukraine, as well as countries in Africa and Central America.

Restructuring operating revenue was $26 million for the third quarter of 2015, compared to $32 million for the third quarter of 2014, and was generally in line with the industry-wide low level of corporate restructuring activity. During and since the third quarter of 2015, we have been engaged in a broad range of highly visible and complex restructuring and debt advisory assignments, including a growing number in the energy sector, as well as assignments for RadioShack, Standard Register, Target Canada and creditors of Torm. Lazard is the global leader in announced restructurings for the first nine months of 2015. (Source: Thomson Reuters)

Please see a more complete list of Strategic Advisory transactions on which Lazard advised in the 2015 third quarter, or continued to advise or completed since September 30, 2015, as well as Capital Advisory, Sovereign Advisory and Restructuring assignments, on pages 8 - 11 of this release.

First Nine Months

Financial Advisory operating revenue was a record $949 million for the first nine months of 2015, 12% higher than the first nine months of 2014.

Strategic Advisory operating revenue was a record $874 million for the first nine months of 2015, 14% higher than the first nine months of 2014, primarily driven by a 15% increase in M&A and Other Advisory revenue. M&A and Other Advisory revenue was a record $822 million for the first nine months of 2015.

Lazard advised or continues to advise on a number of significant and complex M&A transactions announced year to date, including: Anheuser-Busch InBev’s $106 billion possible recommended offer for SABMiller; The Williams Companies in its $37.7 billion combination with Energy Transfer Equity; Aetna’s $37.0 billion acquisition of Humana; Iberdrola in the $17.9 billion combination of Iberdrola USA and UIL; and Coca-Cola Enterprises’ three-way merger to form Coca-Cola European Partners.

Restructuring operating revenue was $75 million for the first nine months of 2015, 10% lower than the first nine months of 2014.

Asset Management

Third Quarter

Asset Management operating revenue was $262 million for the third quarter of 2015, 9% lower than the third quarter of 2014.

Management fees were $248 million for the third quarter of 2015, 6% lower than the third quarter of 2014, and 4% lower than the second quarter of 2015, primarily reflecting changes in average assets under management (AUM). Incentive fees during the period were $3 million, compared to $12 million in the third quarter of 2014.

Average AUM was $192 billion for the third quarter of 2015, 5% lower than average AUM for the third quarter of 2014, and 5% lower than the second quarter of 2015.

AUM as of September 30, 2015, was $183 billion, an 8% decrease from September 30, 2014. AUM decreased 10% from June 30, 2015, primarily driven by market depreciation and the impact of foreign exchange movement. Net inflows of $201 million were primarily driven by strategies in global and multi-regional equities as well as emerging market debt.

First Nine Months

Asset Management operating revenue was $823 million for the first nine months of 2015, 2% lower than the first nine months of 2014.

Management fees were $759 million for the first nine months of 2015, approximately even with the first nine months of 2014. Incentive fees were $16 million for the first nine months of 2015, compared to $38 million for the first nine months of 2014.

Average AUM for the first nine months of 2015 was $198 billion, 1% higher than average AUM for the first nine months of 2014. Net inflows were $2.8 billion for the first nine months of 2015.

OPERATING EXPENSES

Compensation and Benefits

In managing compensation and benefits expense, we focus on annual awarded compensation (cash compensation and benefits plus deferred incentive compensation with respect to the applicable year, net of estimated future forfeitures and excluding charges). We believe annual awarded compensation reflects the actual annual compensation cost more accurately than the GAAP measure of compensation cost, which includes applicable-year cash compensation and the amortization of deferred incentive compensation principally attributable to previous years’ deferred compensation. We believe that by managing our business using awarded compensation with a consistent deferral policy, we can better manage our compensation costs, increase our flexibility in the future and build shareholder value over time.

For the third quarter of 2015, we accrued compensation expense at an adjusted GAAP compensation ratio of 55.6%. This resulted in $331 million of adjusted GAAP compensation and benefits expense1, 4% lower than the third quarter of 2014.

For the first nine months of 2015, we accrued compensation expense at an adjusted GAAP compensation ratio of 55.6%. This resulted in $991 million of adjusted GAAP compensation and benefits expense1, 1% lower than the first nine months of 2014.

The adjusted GAAP compensation ratio of 55.6% for both the third quarter and first nine months of 2015 was consistent with the full-year 2014 ratio and compared to 58.8% for the third quarter and first nine months of 2014.

Our goal remains to grow awarded compensation expense at a slower rate than revenue growth, and to achieve a compensation-to-operating revenue ratio over the cycle in the mid- to high-50s percentage range on both an awarded and adjusted GAAP basis, with consistent deferral policies.

Non-Compensation Expense

For the third quarter of 2015, adjusted non-compensation expense1 was $102 million, 7% lower than the third quarter of 2014. The ratio of non-compensation expense to operating revenue was 17.2% in the third quarter of 2015, compared to 18.8% in the third quarter of 2014.

For the first nine months of 2015, adjusted non-compensation expense1 was $318 million, 2% lower than the first nine months of 2014. The ratio of non-compensation expense to operating revenue was 17.9% for the first nine months of 2015, compared to 19.1% for the first nine months of 2014.

Our goal remains to achieve a non-compensation expense-to-revenue ratio over the cycle of 16% to 20%.

TAXES

The provision for taxes, on an adjusted basis1, was $25 million for the third quarter and $77 million for the first nine months of 2015. The effective tax rate on the same basis was 16.9% for the third quarter and 17.7% for the first nine months of 2015, compared to 21.0% and 20.9% for the respective 2014 periods.4

CAPITAL MANAGEMENT AND BALANCE SHEET

Our primary capital management goals include managing debt, and returning capital to shareholders through dividends and share repurchases.

For the third quarter of 2015, Lazard returned $88 million to shareholders, which included: $44 million in dividends; $41 million in share repurchases of our Class A common stock; and $3 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

For the first nine months of 2015, Lazard returned $511 million to shareholders, which included: $247 million in dividends; $159 million in share repurchases of our Class A common stock; and $105 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

As of September 30, 2015, we had repurchased 3.1 million shares at an average price of $50.76 per share during the year. In line with our objectives, these repurchases have more than offset the potential dilution from our 2014 year-end equity-based compensation awards (net of estimated forfeitures and tax withholding to be paid in cash in lieu of share issuances), which were granted at an average price of $50.60 per share. As of September 30, 2015, our remaining share repurchase authorization was $119 million.

On October 21, 2015, Lazard declared a quarterly dividend of $0.35 per share on its outstanding common stock. The dividend is payable on November 13, 2015, to stockholders of record on November 2, 2015.

Lazard’s financial position remains strong. As of September 30, 2015, our cash and cash equivalents were $860 million, and stockholders’ equity related to Lazard’s interests was $1,155 million.

***

CONFERENCE CALL

Lazard will host a conference call at 8:00 a.m. EDT on Thursday, October 22, 2015, to discuss the company’s financial results for the third quarter and first nine months of 2015. The conference call can be accessed via a live audio webcast available through Lazard’s Investor Relations website at www.lazard.com, or by dialing 1 (800) 500-6404 (U.S. and Canada) or +1 (719) 325-2334 (outside of the U.S. and Canada), 15 minutes prior to the start of the call.

A replay of the conference call will be available by 10:00 a.m. EDT on Thursday, October 22, 2015, via the Lazard Investor Relations website, or by dialing 1 (888) 203-1112 (U.S. and Canada) or +1 (719) 457-0820 (outside of the U.S. and Canada). The replay access code is 2484598.

ABOUT LAZARD

Lazard, one of the world's preeminent financial advisory and asset management firms, operates from 43 cities across 27 countries in North America, Europe, Asia, Australia, Central and South America. With origins dating to 1848, the firm provides advice on mergers and acquisitions, strategic matters, restructuring and capital structure, capital raising and corporate finance, as well as asset management services to corporations, partnerships, institutions, governments and individuals. For more information on Lazard, please visit www.lazard.com.

***

Cautionary Note Regarding Forward-Looking Statements:

This press release contains “forward-looking statements.” In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “could”, “would”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “target,” “goal”, or “continue”, and the negative of these terms and other comparable terminology. These forward-looking statements are not historical facts but instead represent only our expectations regarding future results or events, many of which, by their nature, are inherently uncertain and outside of our control. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements.

These factors include, but are not limited to, those discussed in our Annual Report on Form 10-K under Item 1A “Risk Factors,” and also disclosed from time to time in our reports on Forms 10-Q and 8-K, including the following:

Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this release to conform our prior statements to actual results or revised expectations and we do not intend to do so.

Lazard Ltd is committed to providing timely and accurate information to the investing public, consistent with our legal and regulatory obligations. To that end, Lazard and its operating companies use their websites to convey information about their businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information, and the posting of updates of assets under management in various hedge funds and mutual funds and other investment products managed by Lazard Asset Management LLC and its subsidiaries. Investors can link to Lazard and its operating company websites through www.lazard.com.

***

FINANCIAL ADVISORY ASSIGNMENTS

Mergers and Acquisitions (Completed in the third quarter of 2015)

Among the large, publicly announced M&A Advisory transactions or assignments completed during the third quarter of 2015 on which Lazard advised were the following:

Mergers and Acquisitions (Announced)

Among the ongoing, large, publicly announced M&A transactions and assignments on which Lazard advised during or since the 2015 third quarter, or completed since September 30, 2015, are the following:

* Transaction completed since September 30, 2015

Capital Advisory

Among the publicly announced Capital Advisory transactions or assignments on which Lazard completed or advised during or since the third quarter of 2015, were the following:

Sovereign Advisory

Among the publicly announced Sovereign Advisory assignments on which Lazard completed or advised during or since the third quarter of 2015, were the following:

Restructuring and Debt Advisory Assignments

Restructuring and debtor or creditor advisory assignments completed during the third quarter of 2015 on which Lazard advised include: Chassix in connection with its Chapter 11 restructuring; a group of funds on the restructuring of Grupo Empresarial San José; Nuovo Trasporto Viaggiatori on its refinancing and equity injection; RadioShack and Standard Register in connection with their Section 363 asset sales; Target Canada on the disposition of its real estate assets in its Canadian insolvency proceedings; and creditors of Torm in negotiations to address the company’s long term capital structure.

Notable Chapter 11 or similar bankruptcies, on which Lazard advised debtors or creditors, or related parties, during or since the third quarter of 2015, are the following:

Among other publicly announced restructuring and debt advisory assignments on which Lazard has advised debtors or creditors during or since the third quarter of 2015, are the following:

* Assignment completed since September 30, 2015

***

ENDNOTES

1 A non-U.S. GAAP measure. See attached financial schedules and related notes for a detailed explanation of adjustments to corresponding U.S. GAAP results. We believe that presenting our results on an adjusted basis, in addition to the U.S. GAAP results, is the most meaningful and useful way to compare our operating results across periods.

2 Benefits and charges in the first nine months of 2015 include the following:

3 In the first nine months of 2015, Lazard returned $511 million to shareholders, which included: $247 million in dividends; $159 million in share repurchases of our Class A common stock; and $105 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.

4 The provision for taxes, on an adjusted basis, no longer includes any accruals for the Tax Receivable Agreement (TRA), due to the release of the valuation allowance for deferred tax assets and the related recognition of a liability for our TRA obligation in the second quarter of 2015.

LAZ-EPE

LAZARD LTD
SELECTED SUMMARY FINANCIAL INFORMATION (a)
(Non-GAAP - unaudited)
Three Months Ended % Change From
September 30, June 30, September 30,

June 30,

September 30,
($ in thousands, except per share data) 2015 2015 2014

2015

2014
Revenues:
Financial Advisory
M&A and Other Advisory $288,109 $273,150 $241,213 5% 19%
Capital Raising 16,932 17,293 17,842 (2%) (5%)
Strategic Advisory 305,041 290,443 259,055 5% 18%
Restructuring 25,791 25,941 32,034 (1%) (19%)
Total 330,832 316,384 291,089 5% 14%
Asset Management
Management fees 248,143 258,401 262,992 (4%) (6%)
Incentive fees 2,705 6,978 11,801 (61%) (77%)
Other 10,743 24,672 13,146 (56%) (18%)
Total 261,591 290,051 287,939 (10%) (9%)
Corporate 1,844 196 4,126 NM (55%)
Operating revenue (b) $594,267 $606,631 $583,154 (2%) 2%
Expenses:
Compensation and benefits expense (c) $330,554 $337,429 $343,046 (2%) (4%)
Ratio of compensation to operating revenue 55.6% 55.6% 58.8%
Non-compensation expense (d) $102,321 $109,592 $109,473 (7%) (7%)
Ratio of non-compensation to operating revenue 17.2% 18.1% 18.8%
Earnings:
Earnings from operations (e) $161,392 $159,610 $130,635 1% 24%
Operating margin (f) 27.2% 26.3% 22.4%
Net income (g) $124,131 $130,260 $88,856 (5%) 40%
Diluted net income per share $0.93 $0.98 $0.67 (5%) 39%
Diluted weighted average shares 133,115,419 132,806,045 133,566,684 0% (0%)
Effective tax rate (h) 16.9% 11.6% 21.0%

This presentation includes non-U.S. GAAP ("non-GAAP") measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Reconciliation of U.S. GAAP to Selected Summary Financial Information and Notes to Financial Schedules.

LAZARD LTD
SELECTED SUMMARY FINANCIAL INFORMATION (a)
(Non-GAAP - unaudited)
Nine Months Ended September 30,
($ in thousands, except per share data) 2015 2014 % Change
Revenues:
Financial Advisory
M&A and Other Advisory $822,063 $713,670 15%
Capital Raising 51,809 50,632 2%
Strategic Advisory 873,872 764,302 14%
Restructuring 74,878 83,052 (10%)
Total 948,750 847,354 12%
Asset Management
Management fees 758,631 760,022 (0%)
Incentive fees 15,966 37,953 (58%)
Other 48,122 37,920 27%
Total 822,719 835,895 (2%)
Corporate 10,385 11,166 (7%)
Operating revenue (b) $1,781,854 $1,694,415 5%
Expenses:
Compensation and benefits expense (c) $991,132 $996,757 (1%)
Ratio of compensation to operating revenue 55.6% 58.8%
Non-compensation expense (d) $318,347 $323,953 (2%)
Ratio of non-compensation to operating revenue 17.9% 19.1%
Earnings:
Earnings from operations (e) $472,375 $373,705 26%
Operating margin (f) 26.5% 22.1%
Net income (g) $357,425 $255,497 40%
Diluted net income per share $2.68 $1.91 40%
Diluted weighted average shares 133,219,137 133,722,776 (0%)
Effective tax rate (h) 17.7% 20.9%

This presentation includes non-U.S. GAAP ("non-GAAP") measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Reconciliation of U.S. GAAP to Selected Summary Financial Information and Notes to Financial Schedules.

LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(U.S. GAAP)
Three Months Ended % Change From
September 30, June 30, September 30,

June 30,

September 30,
($ in thousands, except per share data) 2015 2015 2014

2015

2014
Total revenue $585,316 $620,589 $581,723 (6%) 1%
Interest expense (11,798) (11,497) (15,512)
Net revenue 573,518 609,092 566,211 (6%) 1%
Operating expenses:
Compensation and benefits 319,565 336,719 338,612 (5%) (6%)
Occupancy and equipment 26,278 27,272 29,400
Marketing and business development 18,244 18,324 19,127
Technology and information services 22,923 23,034 23,025
Professional services 10,758 13,883 11,184
Fund administration and outsourced services 14,367 17,493 17,034
Amortization of intangible assets related to acquisitions 511 1,857 4,020
Other 10,920 9,938 10,273
Subtotal 104,001 111,801 114,063 (7%) (9%)
Provision (benefit) pursuant to tax receivable agreement (420,792) 961,948 (176)
Operating expenses 2,774 1,410,468 452,499 NM NM
Operating income (loss) 570,744 (801,376) 113,712 NM NM
Provision (benefit) for income taxes 170,954 (1,176,531) 23,792 NM NM
Net income 399,790 375,155 89,920 7% NM
Net income attributable to noncontrolling interests 1,269 1,042 1,061
Net income attributable to Lazard Ltd $398,521 $374,113 $88,859 7% NM
Attributable to Lazard Ltd Common Stockholders:
Weighted average shares outstanding:
Basic 125,925,006 126,212,645 122,206,914 (0%) 3%
Diluted 133,115,419 132,806,045 133,566,684 0% (0%)
Net income per share:
Basic $3.16 $2.96 $0.73 7% NM
Diluted $2.99 $2.82 $0.67 6% NM
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(U.S. GAAP)
Nine Months Ended
September 30, September 30,
($ in thousands, except per share data) 2015 2014 % Change
Total revenue $1,799,790 $1,713,681 5%
Interest expense (39,431 ) (47,174 )
Net revenue 1,760,359 1,666,507 6%
Operating expenses:
Compensation and benefits 984,786 1,006,101 (2%)
Occupancy and equipment 80,889 86,079
Marketing and business development 55,758 59,254
Technology and information services 68,850 68,466
Professional services 36,100 32,895
Fund administration and outsourced services 48,008 48,490
Amortization of intangible assets related to acquisitions 3,401 5,946
Other 90,845 30,340
Subtotal 383,851 331,470 16%
Provision pursuant to tax receivable agreement 547,691 9,064
Operating expenses 1,916,328 1,346,635 42%
Operating income (loss) (155,969 ) 319,872 NM
Provision (benefit) for income taxes (993,560 ) 58,614 NM
Net income 837,591 261,258 NM
Net income attributable to noncontrolling interests 9,004 6,365
Net income attributable to Lazard Ltd $828,587 $254,893 NM
Attributable to Lazard Ltd Common Stockholders:
Weighted average shares outstanding:
Basic 125,264,447 122,366,632 2%
Diluted 133,219,137 133,722,776 (0%)
Net income per share:
Basic $6.61 $2.08 NM
Diluted $6.22 $1.91 NM
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
(U.S. GAAP)
September 30, December 31,
($ in thousands) 2015 2014

ASSETS

Cash and cash equivalents $859,984 $1,066,580
Deposits with banks and short-term investments 276,585 207,760
Cash deposited with clearing organizations and other segregated cash 34,859 43,290
Receivables 502,409 557,596
Investments 575,204 620,352
Goodwill and other intangible assets 325,624 347,438
Deferred tax assets 1,113,060 59,041
Other assets 460,312 430,179
Total Assets $4,148,037 $3,332,236

LIABILITIES & STOCKHOLDERS' EQUITY

Liabilities
Deposits and other customer payables $399,824 $316,601
Accrued compensation and benefits 455,966 606,290
Senior debt 998,350 1,048,350
Tax receivable agreement obligation 523,907 19,577
Other liabilities 558,117 571,361
Total liabilities 2,936,164 2,562,179
Commitments and contingencies
Stockholders' equity
Preferred stock, par value $.01 per share - -
Common stock, par value $.01 per share 1,298 1,298
Additional paid-in capital 569,535 702,800
Retained earnings 1,014,145 464,655
Accumulated other comprehensive loss, net of tax (252,525 ) (200,766 )
Subtotal 1,332,453 967,987
Class A common stock held by subsidiaries, at cost (177,798 ) (261,243 )
Total Lazard Ltd stockholders' equity 1,154,655 706,744
Noncontrolling interests 57,218 63,313
Total stockholders' equity 1,211,873 770,057
Total liabilities and stockholders' equity $4,148,037 $3,332,236
LAZARD LTD
ASSETS UNDER MANAGEMENT ("AUM")
(unaudited)
($ in millions)
As of Variance
September 30,

June 30,

December 31,
2015

2015

2014 Qtr to Qtr YTD
Equity:
Emerging Markets $37,663 $47,850 $48,459 (21.3%) (22.3%)
Global 30,143 32,901 33,982 (8.4%) (11.3%)
Local 29,622 33,231 31,684 (10.9%) (6.5%)
Multi-Regional 49,364 52,420 46,787 (5.8%) 5.5%
Total Equity 146,792 166,402 160,912 (11.8%) (8.8%)
Fixed Income:
Emerging Markets 14,920 15,668 14,227 (4.8%) 4.9%
Global 4,200 3,946 3,771 6.4% 11.4%
Local 3,846 3,982 3,676 (3.4%) 4.6%
Multi-Regional 8,478 8,917 9,436 (4.9%) (10.2%)
Total Fixed Income 31,444 32,513 31,110 (3.3%) 1.1%
Alternative Investments 3,325 3,123 3,799 6.5% (12.5%)
Private Equity 858 926 1,091 (7.3%) (21.4%)
Cash Management 203 122 191 66.4% 6.3%
Total AUM $182,622 $203,086 $197,103 (10.1%) (7.3%)
Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015

2014

AUM - Beginning of Period $203,086 $204,525 $197,103 $186,924
Net Flows 201 2,601 2,790 8,158
Market and foreign exchange

appreciation (depreciation)

(20,665 ) (9,537 )

(17,271

)

2,507
AUM - End of Period $182,622 $197,589 $182,622 $197,589
Average AUM $192,026 $202,842 $198,085 $195,815
% Change in average AUM (5.3 %) 1.2%

Note: Average AUM generally represents the average of the monthly ending AUM balances for the period.

LAZARD LTD
RECONCILIATION OF U.S. GAAP TO SELECTED SUMMARY FINANCIAL INFORMATION (a)
(unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
($ in thousands, except per share data) 2015 2015 2014 2015 2014
Operating Revenue
Net revenue - U.S. GAAP Basis $573,518 $609,092 $566,211 $1,760,359 $1,666,507
Adjustments:
Revenue related to noncontrolling interests (i) (2,995 ) (3,588 ) (4,032 ) (15,317 ) (12,810 )
(Gains) losses related to Lazard Fund Interests ("LFI") and other similar arrangements 12,145 1,894 5,528 9,903 (6,004 )
Private Equity revenue adjustment (j) - (12,203 ) - (12,203 ) -
Interest expense 11,599 11,436 15,447 39,112 46,722
Operating revenue, as adjusted (b) $594,267 $606,631 $583,154 $1,781,854 $1,694,415
Compensation & Benefits Expense
Compensation & benefits expense - U.S. GAAP Basis $319,565 $336,719 $338,612 $984,786 $1,006,101
Adjustments:
(Charges) credits pertaining to LFI and other similar arrangements 12,145 1,894 5,528 9,903 (6,004 )
Compensation related to noncontrolling interests (i) (1,156 ) (1,184 ) (1,094 ) (3,557 ) (3,340 )
Compensation & benefits expense, as adjusted (c) $330,554 $337,429 $343,046 $991,132 $996,757
Non-Compensation Expense
Non-compensation expense - Subtotal - U.S. GAAP Basis $104,001 $111,801 $114,063 $383,851 $331,470
Adjustments:
Charges pertaining to Senior Debt refinancing (k) - - - (60,219 ) -
Expense related to partial extinguishment of TRA obligation (l) (759 ) - - (759 ) -
Amortization of intangible assets related to acquisitions (511 ) (1,857 ) (4,020 ) (3,401 ) (5,946 )
Non-compensation expense related to noncontrolling interests (i) (410 ) (352 ) (570 ) (1,125 ) (1,571 )
Non-compensation expense, as adjusted (d) $102,321 $109,592 $109,473 $318,347 $323,953
Pre-Tax Income and Earnings From Operations
Operating Income (loss) - U.S. GAAP Basis $570,744 ($801,376 ) $113,712 ($155,969 ) $319,872
Adjustments:
Gain on partial extinguishment of TRA obligation (l) (420,035 ) - - (420,035 ) -
Accrual of tax receivable agreement obligation ("TRA") - 961,948 (176 ) 968,483 9,064
Charges pertaining to Senior Debt refinancing (k) - - - 62,874 -
Private Equity revenue adjustment (j) - (12,203 ) - (12,203 ) -
Net income related to noncontrolling interests (i) (1,269 ) (1,042 ) (1,060 ) (9,004 ) (5,733 )
Pre-tax income, as adjusted 149,440 147,327 112,476 434,146 323,203
Interest expense 11,599 11,436 15,447 36,457 46,722
Amortization of intangible assets related to acquisitions (LAZ only) 353 847 2,712 1,772 3,780
Earnings from operations, as adjusted (e) $161,392 $159,610 $130,635 $472,375 $373,705
Net Income attributable to Lazard Ltd
Net income attributable to Lazard Ltd - U.S. GAAP Basis $398,521 $374,113 $88,859 $828,587 $254,893
Adjustments:
Gain on partial extinguishment of TRA obligation (net of tax) (l) (259,256 ) - - (259,256 ) -
Charges pertaining to Senior Debt refinancing (k) - - - 62,874 -
Private Equity revenue adjustment (j) - (12,203 ) - (12,203 ) -
Recognition of deferred tax assets (net of TRA accrual) (m) (17,862 ) (236,736 ) - (254,598 ) -
Tax expense (benefit) allocated to adjustments 2,728 5,086 - (7,979 ) (27 )
Full exchange of exchangeable interests (n) - - (3 ) - 631
Net income, as adjusted (g) $124,131 $130,260 $88,856 $357,425 $255,497
Diluted net income per share:
U.S. GAAP Basis $2.99 $2.82 $0.67 $6.22 $1.91
Non-GAAP Basis, as adjusted $0.93 $0.98 $0.67 $2.68 $1.91
Diluted pre-tax income per share, as adjusted: $1.12 $1.11 $0.84 $3.26 $2.42

This presentation includes non-U.S. GAAP ("non-GAAP") measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to comparable U.S. GAAP measures, see Notes to Financial Schedules.

LAZARD LTD
Notes to Financial Schedules
(a) Selected Summary Financial Information are non-U.S. GAAP ("non-GAAP") measures. Lazard believes that presenting results and measures on an adjusted basis in conjunction with U.S. GAAP measures provides the most meaningful basis for comparison of its operating results across periods.
(b) A non-GAAP measure which excludes (i) revenue related to non-controlling interests (see (i) below), (ii) (gains)/losses related to the changes in the fair value of investments held in connection with Lazard Fund Interests and other similar deferred compensation arrangements for which a corresponding equal amount is excluded from compensation & benefits expense, (iii) for the three month period ended June 30, 2015 and the nine month period ended September 30, 2015, private equity carried interest reduction (see (j) below), (iv) interest expense primarily related to corporate financing activities, and (v) for the nine month period ended September 30, 2015, excess interest expense pertaining to Senior Debt refinancing (see (k) below).
(c) A non-GAAP measure which excludes (i) (charges)/credits related to the changes in the fair value of the compensation liability recorded in connection with Lazard Fund Interests and other similar deferred compensation arrangements, and (ii) compensation and benefits related to noncontrolling interests (see (i) below).
(d) A non-GAAP measure which excludes (i) for the nine month period ended September 30, 2015, charges pertaining to Senior Debt refinancing (see (k) below), (ii) amortization of intangible assets related to acquisitions, (iii) expenses related to noncontrolling interests, and (iv) for the three and nine month periods ended September 30, 2015, expenses related to partial extinguishment of TRA obligation (see (l) below).
(e) A non-GAAP measure which excludes (i) for the nine month period ended September 30, 2015, charges pertaining to Senior Debt refinancing (see (k) below), (ii) revenue and expenses related to noncontrolling interests (see (i) below), (iii) interest expense primarily related to corporate financing activities, (iv) amortization of intangible assets related to acquisitions, (v) for the three month period ended June 30, 2015 and the nine month period ended September 30, 2015, private equity carried interest reduction (see (j) below), (vi) a provision pursuant to the tax receivable agreement ("TRA"), and (vii) for the three and nine month periods ended September 30, 2015, gain related to partial extinguishment of TRA obligation (see (l) below).
(f) Represents earnings from operations as a percentage of operating revenue, and is a non-GAAP measure.
(g) A non-GAAP measure which is adjusted to reflect the full conversion of outstanding exchangeable interests held by members of LAZ-MD Holdings for the three and nine month periods ended September 30, 2014 and excludes (i) for the nine month period ended September 30, 2015, charges pertaining to Senior Debt refinancing, net of tax benefits (see (k) below), (ii) for the three month period ended June 30, 2015 and the nine month period ended September 30, 2015, private equity carried interest reduction, net of tax impact (see (j) below), (iii) for the three month period ended June 30, 2015 and the nine month period ended September 30, 2015, a release of deferred tax valuation allowance, net of the related provision for TRA (see (m) below), and (iv) for the three and nine month periods ended September 30, 2015, gain related to partial extinguishment of TRA obligation (see (l) below).
(h) Effective tax rate is a non-GAAP measure based upon the U.S. GAAP rate with adjustments for the tax applicable to the non-GAAP adjustments to operating income, generally based upon the effective marginal tax rate in the applicable jurisdiction of the adjustments. The computation is based on a quotient, the numerator of which is the provision for income taxes of $25,311, $17,067 and $23,621 for the three month periods ended September 30, 2015, June 30, 2015, and September 30, 2014, respectively, $76,723 and $67,706 for the nine month periods ended September 30, 2015 and 2014, respectively, and the denominator of which is pre-tax income of $149,442, $147,327 and $112,476 for the three month periods ended September 30, 2015, June 30, 2015 and September 30, 2014, respectively, $434,148 and $323,203 for the nine month periods ended September 30, 2015 and 2014, respectively. The numerator also included a provision pursuant to the tax receivable agreement ("TRA") prior to the quarter ended June 30, 2015 (see (e) above) and for the three month period ended June 30, 2015 and the nine month period ended September 30, 2015, excludes a release of deferred tax valuation allowance (see (l) and (m) below).
(i) Noncontrolling interests include revenue and expenses principally related to Edgewater, and is a non-GAAP measure.
(j) Revenue relating to the Company's disposal of the Australian private equity business is adjusted for the recognition of an obligation, which was previously recognized for U.S. GAAP.
(k) Represents charges related to the extinguishment of $450 million of the Company's 6.85% Senior Notes maturing in June 2017 and the issuance of $400 million of 3.75% notes maturing in February 2025. The charges include a pre-tax loss on the extinguishment of $60.2 million and excess interest expense of $2.7 million (due to the delay between the issuance of the 2025 notes and the settlement of the 2017 notes).
(l) In July of 2015 the Company extinguished approximately 47% of the outstanding TRA obligation. Accordingly, for the three and nine month periods ended September 30, 2015, the Company recorded a pre-tax gain of $420 million and a related tax expense of $161 million.
(m) Represents the recognition of deferred tax assets of $1,217 million, net of the accrual of $962 million for the tax receivable agreement.
(n) Represents a reversal of noncontrolling interests related to LAZ-MD Holdings’ ownership of Lazard Group common membership interests and an adjustment for Lazard Ltd entity-level taxes to affect a full exchange of interests and excluding the adjustments noted in (g) above.
NM Not meaningful

Lazard Ltd

Media Contact:

Judi Frost Mackey, +1 212-632-1428

[email protected]

or

Investor Contact:

Armand Sadoughi, +1 212-632-6358

[email protected]

Source: Lazard Ltd

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