Lazard Ltd Reports Full-Year and Fourth-Quarter 2017 Results
Record annual
of |
Record annual operating |
Entering 2018 with record |
||||
For the fourth quarter of 2017, net income, as adjusted1 and
excluding one-time charges2, was
"Our record operating performance in 2017 underscores the strength of
our business model, the power of our franchise, and the results we are
achieving for clients," said
($ in millions, except per share data and AUM) |
Year Ended |
Quarter Ended |
|||||||||||
2017 | 2016 | %'17-'16 | 2017 | 2016 | %'17-'16 | ||||||||
Net Income (loss) |
|||||||||||||
US GAAP |
|
|
(35)% |
|
|
NM | |||||||
Per share, diluted |
|
|
(35)% |
|
|
NM | |||||||
Adjusted1,2 |
|
|
22% |
|
|
(1)% | |||||||
Per share, diluted |
|
|
22% |
|
|
(1)% | |||||||
Operating Revenue1 |
|||||||||||||
Total operating revenue |
|
|
13% |
|
|
(0)% | |||||||
Financial Advisory |
|
|
7% |
|
|
(17)% | |||||||
Asset Management |
|
|
20% |
|
|
23% | |||||||
AUM ($ in billions) |
|||||||||||||
Period End |
|
|
26% | ||||||||||
Average |
|
|
16% |
|
|
22% |
Note: Endnotes are on page 7 of this release. A reconciliation to
OPERATING REVENUE
Operating revenue1 was a record
Financial Advisory
In the text portion of this press release, we present our Financial Advisory results as 1) Strategic Advisory (M&A Advisory, Capital Advisory, Sovereign Advisory, Shareholder Advisory, Capital Raising, and other advisory work for clients), and 2) Restructuring.
Full Year
Financial Advisory operating revenue was a record
Strategic Advisory operating revenue was
Lazard advised or continues to advise on a number of the largest global
M&A transactions announced in 2017, including (clients are in italics): Aetna's
Our Capital and Shareholder Advisory practices remained active globally in 2017, advising on a breadth of public and private assignments. Our Sovereign Advisory practice also remained active, advising governments, sovereign and sub-sovereign entities across developed and emerging markets.
Restructuring operating revenue was
Fourth Quarter
Financial Advisory operating revenue was
Strategic Advisory operating revenue was
Restructuring operating revenue was
Please see M&A transactions on which Lazard advised in the fourth
quarter, or continued to advise or completed since
Asset Management
In the text portion of this press release, we present our Asset Management results as 1) Management fees and other revenue, and 2) Incentive fees.
Full Year
Asset Management operating revenue was a record
Management fees and other revenue was a record
Average assets under management (AUM) for 2017 was a record
AUM as of
Fourth Quarter
Asset Management operating revenue was a record
Management fees and other revenue was a record
Average AUM for the fourth quarter of 2017 was a record
AUM as of
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.
Adjusted compensation and benefits expense1 for 2017 was
Awarded compensation expense1 for 2017 was
We take a disciplined approach to compensation, and our goal is to maintain a compensation-to-operating revenue ratio over the cycle in the mid- to high-50s percentage range on both an awarded and adjusted basis, with consistent deferral policies.
Non-Compensation Expense
Adjusted non-compensation expense1 for 2017 was
Adjusted non-compensation expense1 for the fourth quarter of
2017 was
Our goal remains to achieve an adjusted non-compensation expense-to-operating revenue ratio over the cycle of 16% to 20%.
TAXES
The provision for taxes, on an adjusted basis1, was
In the fourth quarter of 2017, as a result of the 2017 U.S. Tax Cuts and
Jobs Act, our
CAPITAL MANAGEMENT AND BALANCE SHEET
Our primary capital management goals include managing debt and returning capital to shareholders through dividends and share repurchases.
In 2017, Lazard returned
During 2017, we repurchased 7.0 million shares of our Class A common
stock for an average price of
On
Lazard's financial position remains strong. As of
***
CONFERENCE CALL
Lazard will host a conference call at
A replay of the conference call will be available by
ABOUT LAZARD
Lazard, one of the world's preeminent financial advisory and asset
management firms, operates from 43 cities across 27 countries in
***
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, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies, business plans and initiatives and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. 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 discussed from time to time in our reports on Forms 10-Q and 8-K, including the following:
- A decline in general economic conditions or the global or regional financial markets;
- A decline in our revenues, for example due to a decline in overall mergers and acquisitions (M&A) activity, our share of the M&A market or our assets under management (AUM);
- Losses caused by financial or other problems experienced by third parties;
- Losses due to unidentified or unanticipated risks;
- A lack of liquidity, i.e., ready access to funds, for use in our businesses; and
- Competitive pressure on our businesses and on our ability to retain and attract employees at current compensation levels.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. 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.
***
ENDNOTES
1 A non-
2 Fourth-quarter and full-year results for 2017 were affected primarily by the following charges:
-
In the fourth quarter of 2017, as a result of the 2017 U.S. Tax Cuts
and Jobs Act, our
U.S. GAAP provision for income taxes included a charge of approximately$420 million primarily relating to the reduction in certain deferred tax assets, with an offsetting benefit of approximately$203 million relating to the reduction in our Tax Receivable Agreement (TRA) obligation. On aU.S. GAAP basis, these items resulted in a net charge of$1.81 (diluted) per share in the quarter, and$1.64 (diluted) per share for full-year 2017. -
Fourth-quarter and full-year 2017 adjusted results exclude pre-tax
charges of (i)
$9.9 million and$25.3 million , respectively, of costs associated with the implementation of a new Enterprise Resource Planning (ERP) system, and (ii)$6.8 million and$11.4 million , respectively, of office space reorganization costs primarily relating to incremental rent expense, lease abandonment costs and an onerous lease provision. On aU.S. GAAP basis, these items collectively resulted in a net charge of$10.6 million , or$0.09 (diluted) per share, in the fourth quarter and a net charge of$23.4 million , or$0.18 (diluted) per share, for full-year 2017. -
Full-year 2017 adjusted results also exclude post-tax charges of
$6.6 million of acquisition-related items, primarily reflecting changes in fair value of contingent consideration associated with certain business acquisitions. On aU.S. GAAP basis, this resulted in a charge of$0.05 (diluted) per share for full-year 2017.
LAZ-EPE
FINANCIAL ADVISORY ASSIGNMENTS
Mergers and Acquisitions (Completed in the fourth quarter of 2017)
Among the large, publicly announced M&A Advisory transactions or assignments completed during the fourth quarter of 2017 on which Lazard advised were the following:
-
Level 3 Communications on its
$34 billion sale to CenturyLink -
Gilead's
$11.9 billion acquisition of Kite Pharma -
Paysafe's £3.0 billion recommended sale to a consortium of
funds managed or advised by
Blackstone and CVC -
Express Scripts'
$3.6 billion acquisition of eviCore healthcare -
Anheuser-Busch InBev's
$3.2 billion transition of its 54.5% stake in Coca-Cola Beverages Africa toThe Coca-Cola Company -
Blackstone andAlliance Industries Group on the$2.0 billion sale ofAlliance Automotive Group to Genuine Parts -
Blackstone in CF Corporation's$1.8 billion consortium acquisition ofFidelity & Guaranty Life -
Special Committee of the
Board of Phillips Edison Grocery Center REIT I in the company's$1.0 billion acquisition of real estate assets and the third party asset management business fromPhillips Edison Limited Partnership -
Landauer's
$770 million sale to Fortive -
Hotel Investment Partners €631 million sale toBlackstone -
Investcorp's €605 million sale of
Esmalglass toLone Star Funds -
Accella Performance Materials'
$670 million sale toCarlisle Companies -
SciClone Pharmaceuticals'
$605 million sale to a consortium led byGL Capital -
Ontario Teachers' Pension Plan's sale of a minority stake in
Busy Bees to
Temasek -
IPFS's acquisition of
Premium Assignment Corporation from SunTrust -
The Ferrero Group's acquisition of
Ferrara Candy Company - The Carlyle Group's acquisition of ADB SAFEGATE
-
IK Investment Partners' sale of Schenck Process to
Blackstone -
KKR Credit's sale of its shareholding in URSA to
Xella International -
ITS ConGlobal on its sale to
AMP Capital
Mergers and Acquisitions (Announced)
Among the ongoing, large, publicly announced M&A transactions and
assignments on which Lazard advised during or since the 2017 fourth
quarter, or completed since
-
Aetna's
$77 billion sale toCVS Health -
Altice on its
$40 billion group reorganization, including the spin-off of Altice USA and new Altice Europe structure -
Unibail-Rodamco's
$24.7 billion acquisition ofWestfield -
Sempra Energy's acquisition of an 80% ownership interest in
Oncor, valuing Oncor at
$18.8 billion -
Calpine's
$17.1 billion sale to a consortium led byEnergy Capital Partners -
Great Plains Energy's
$14 billion merger of equals with Westar Energy -
Sanofi's
$11.6 billion acquisition of Bioverativ -
Safran's €8.7 billion acquisition of
Zodiac Aerospace - Thales' €5.6 billion acquisition of Gemalto through a recommended all-cash offer
-
WGL Holdings'
$6.4 billion sale to AltaGas -
Bacardi's
$5.1 billion acquisition of Patrón Tequila -
WestRock's
$4.9 billion acquisition of KapStone - Sanofi's €3.9 billion acquisition of Ablynx
-
Hammerson's £3.4 billion recommended all-share offer for
Intu Properties -
AVEVA's
$4.7 billion combination with Schneider Electric's industrial software business -
NJJ Capital in the €3.5 billion consortium acquisition of eir - Clayton, Dubilier & Rice on their acquisition of a 40% stake in Belron, valuing Belron at €3.0 billion
-
The Ferrero Group's
$2.8 billion acquisition of Nestlé'sU.S. confectionary business -
Genworth Financial's
$2.7 billion sale to China Oceanwide -
Special Committee of the Board of Directors of
General Communication, Inc. ("GCI") in the$2.7 billion sale of GCI to Liberty Interactive -
Scotiabank's
$2.2 billion acquisition of BBVA's 68% interest in BBVA Chile - BASF's €1.6 billion acquisition of Solvay's global polyamide business
- Aldermore on the £1.1 billion recommended offer by FirstRand
-
China Southern Power Grid's
$1.3 billion acquisition of a 27.8% stake in a Chilean regulated transmission business fromBrookfield Infrastructure -
APG Group on the consortium acquisition of a €1.0 billion portfolio of infrastructure assets fromArdian -
Lone Star Funds' €1.0 billion acquisition of
Stark Group from Ferguson -
Cardinal Health's
$1.2 billion sale of itsChina business to Shanghai Pharma - Owens Corning's €900 million acquisition of Paroc
-
Google's
$1.1 billion cooperation agreement with HTC* -
VEON on the
$940 million sale of its tower business inPakistan -
AviAlliance in the €600 million 20-year extension of the
Athens International Airport Concession Agreement -
Owens & Minor's
$710 million acquisition of Halyard Health's S&IP business -
NYX Gaming Group's
CAD 775 million sale to Scientific Games* -
Republic of Serbia andBelgrade Nikola Tesla Airport in the awarding of a 25-year concession toVinci Airports , including a €501 million upfront payment -
Abengoa's
$607 million sale of a 25% stake in Atlantica Yield toAlgonquin Power & Utilities -
Liberty House Group's
$500 million binding conditional offer to acquireAluminium Dunkerque from Rio Tinto - Areva on its reorganization and recapitalization plan
- AkzoNobel on the separation of its Specialty Chemicals business
- Dover on the spin-off of its Wellsite business
-
Anheuser-Busch InBev's combination of its
Russia andUkraine businesses with those of Anadolu Efes -
Montagu Private Equity andAstorg on the sale ofSebia -
Sun Capital Partners' sale of Albéa to
PAI Partners -
PAI Partners and Sagard on the sale ofKiloutou to HLDI and HLD Europe -
Carrefour on the potential investment by
Tencent and Yonghui in Carrefour China and a strategic cooperation agreement withTencent inChina - Quala's sale of its personal care and home care brands to Unilever
-
CDPQ and Ardian's acquisition of a significant interest
in
Alvest * -
99 Taxis on its sale to
Didi Chuxing * -
Alinta Energy , and its ownerChow Tai Fook Enterprises , on the acquisition ofLoy Yang B power station* - Rhône's strategic partnership with, and sale of a 30% interest to, Eurazeo
-
The Rockefeller Family Trust on Rockefeller Financial Services' formation ofRockefeller Capital Management , in partnership with Viking Global andGregory J. Fleming
*Transaction completed since
Capital Advisory
Among the publicly announced Capital Advisory transactions or assignments on which Lazard advised during or since the fourth quarter of 2017 were the following:
- Banca Monte dei Paschi di Siena's precautionary recapitalization through an €8.1 billion capital increase and €5.5 billion disposal of a bad loan portfolio with a total GBV of €26 billion
- Pirelli on its €2.4 billion initial public offering
- DomusVi on the syndication of a €1.0 billion term loan and €130 million revolving credit facility
- Tritax Big Box REIT on its £850 million debt refinancing
-
Terveystalo on its €876 million initial public offering - TI Fluid Systems on its £407 million initial public offering
-
Via Transportation in its fund raise and strategic investment
from
Daimler -
Congruex on its alliance with
Crestview Partners - Almaviva Santé on its refinancing
-
Keys Group on its debt refinancing
Sovereign Advisory
Among the publicly announced Sovereign Advisory assignments on which Lazard advised during or since the fourth quarter of 2017 were the following:
-
The OJSC International Bank of Azerbaijan -
Southern Gas Corridor CJSC of
Azerbaijan -
Altiplano (
Bolivia ) -
The
Democratic Republic of the Congo -
The
Republic of the Congo -
The
Republic of Croatia -
Compania Nacional de Telecomunicacion (The
Republic of Ecuador ) -
Refineria del Pacifico (The
Republic of Ecuador ) -
The Federal Democratic Republic of Ethiopia -
The Gabonese Republic -
Sotrader (joint venture between the government of
Gabon andOlam International ) -
The Hellenic Republic -
The Hashemite Kingdom of
Jordan -
airBaltic (majority owned by the government of
Latvia ) -
SNIM (
The Islamic Republic of Mauritania) -
The
Republic of Mozambique -
Nama Holding (Oman ) - Oman Oil
-
The
Republic of Serbia -
Ukraine and certain sub-sovereign entities -
NJSC Naftogaz of
Ukraine -
The
Republic of Zimbabwe
Restructuring and Debt Advisory Assignments
Restructuring and debtor or creditor advisory assignments completed
during the fourth quarter of 2017 on which Lazard advised include: SunEdison
in connection with its Chapter 11 bankruptcy restructuring; and
Notable ongoing restructuring and debtor or creditor advisory
assignments on which Lazard advised during or since the fourth quarter
of 2017 include:
***
|
|||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | |||||||||||
( |
|||||||||||
Three Months Ended | % Change From | ||||||||||
|
|
|
|
|
|||||||
($ in thousands, except per share data) | 2017 | 2017 | 2016 | 2017 | 2016 | ||||||
Total revenue |
|
|
|
8% | (2%) | ||||||
Interest expense |
( |
(13,272) | (14,238) | ||||||||
Net revenue | 678,808 | 624,859 | 691,565 | 9% | (2%) | ||||||
Operating expenses: | |||||||||||
Compensation and benefits | 374,673 | 361,787 | 381,267 | 4% | (2%) | ||||||
Occupancy and equipment | 37,374 | 29,156 | 28,162 | ||||||||
Marketing and business development | 25,628 | 19,798 | 22,710 | ||||||||
Technology and information services | 34,242 | 31,373 | 26,055 | ||||||||
Professional services | 14,231 | 11,005 | 13,635 | ||||||||
Fund administration and outsourced services | 18,729 | 18,325 | 16,994 | ||||||||
Amortization and other acquisition-related costs | 4,511 | 172 | 33,410 | ||||||||
Other | 13,430 | 9,031 | 12,476 | ||||||||
Subtotal | 148,145 | 118,860 | 153,442 | 25% | (3%) | ||||||
Benefit pursuant to tax receivable agreement | (202,546) | - | - | ||||||||
Operating expenses | 320,272 | 480,647 | 534,709 | (33%) | (40%) | ||||||
Operating income | 358,536 | 144,212 | 156,856 | NM | NM | ||||||
Provision for income taxes | 441,490 | 32,742 | 27,869 | NM | NM | ||||||
Net income (loss) | (82,954) | 111,470 | 128,987 | NM | NM | ||||||
Net income attributable to noncontrolling interests | 604 | 2,260 | 1,005 | ||||||||
Net income (loss) attributable to |
( |
|
|
NM | NM | ||||||
Attributable to Lazard Ltd Common Stockholders: | |||||||||||
Weighted average shares outstanding: | |||||||||||
Basic | 119,866,860 | 121,243,598 | 123,170,333 | (1%) | (3%) | ||||||
Diluted | 119,866,860 | 132,393,664 | 132,980,861 | (9%) | (10%) | ||||||
Net income (loss) per share: | |||||||||||
Basic |
( |
|
|
NM | NM | ||||||
Diluted |
( |
|
|
NM | NM | ||||||
|
|||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | |||||||
( |
|||||||
Year Ended | |||||||
|
|
||||||
($ in thousands, except per share data) | 2017 | 2016 | % Change | ||||
Total revenue |
|
|
13% | ||||
Interest expense | (53,518) | (50,292) | |||||
Net revenue | 2,644,311 | 2,333,371 | 13% | ||||
Operating expenses: | |||||||
Compensation and benefits | 1,512,873 | 1,340,543 | 13% | ||||
Occupancy and equipment | 124,842 | 109,305 | |||||
Marketing and business development | 89,205 | 83,202 | |||||
Technology and information services | 121,671 | 97,461 | |||||
Professional services | 47,932 | 45,512 | |||||
Fund administration and outsourced services | 71,305 | 63,421 | |||||
Amortization and other acquisition-related costs | 9,514 | 35,247 | |||||
Other | 44,069 | 41,219 | |||||
Subtotal | 508,538 | 475,367 | 7% | ||||
Benefit pursuant to tax receivable agreement | (202,546) | - | |||||
Operating expenses | 1,818,865 | 1,815,910 | 0% | ||||
Operating income | 825,446 | 517,461 | 60% | ||||
Provision for income taxes | 565,599 | 123,769 | NM | ||||
Net income | 259,847 | 393,692 | (34%) | ||||
Net income attributable to noncontrolling interests | 6,264 | 5,994 | |||||
Net income attributable to |
|
|
(35%) | ||||
Attributable to Lazard Ltd Common Stockholders: | |||||||
Weighted average shares outstanding: | |||||||
Basic | 121,573,442 | 124,770,401 | (3%) | ||||
Diluted | 132,479,728 | 132,633,630 | (0%) | ||||
Net income per share: | |||||||
Basic |
|
|
(33%) | ||||
Diluted |
|
|
(35%) | ||||
|
||||
UNAUDITED CONDENSED CONSOLIDATED | ||||
STATEMENT OF FINANCIAL CONDITION | ||||
( |
||||
|
|
|||
($ in thousands) | 2017 | 2016 | ||
ASSETS |
||||
Cash and cash equivalents |
|
|
||
Deposits with banks and short-term investments | 935,431 | 419,668 | ||
Cash deposited with clearing organizations and other segregated cash | 35,539 | 29,030 | ||
Receivables | 571,616 | 638,282 | ||
Investments | 427,186 | 459,422 | ||
|
391,364 | 382,024 | ||
Deferred tax assets | 648,293 | 1,075,777 | ||
Other assets | 433,444 | 393,520 | ||
Total Assets |
|
|
||
LIABILITIES & STOCKHOLDERS' EQUITY |
||||
Liabilities | ||||
Deposits and other customer payables |
|
|
||
Accrued compensation and benefits | 593,781 | 541,588 | ||
Senior debt | 1,190,383 | 1,188,600 | ||
Tax receivable agreement obligation | 310,275 | 513,610 | ||
Other liabilities | 579,759 | 546,614 | ||
Total liabilities | 3,666,536 | 3,262,695 | ||
Commitments and contingencies | ||||
Stockholders' equity | ||||
Preferred stock, par value |
- | - | ||
Common stock, par value |
1,298 | 1,298 | ||
Additional paid-in capital | 789,452 | 688,231 | ||
Retained earnings | 1,080,413 | 1,134,186 | ||
Accumulated other comprehensive loss, net of tax | (232,562) | (314,222) | ||
Subtotal | 1,638,601 | 1,509,493 | ||
Class A common stock held by subsidiaries, at cost | (437,530) | (273,506) | ||
|
1,201,071 | 1,235,987 | ||
Noncontrolling interests | 59,102 | 57,826 | ||
Total stockholders' equity | 1,260,173 | 1,293,813 | ||
Total liabilities and stockholders' equity |
|
|
||
|
|||||||||||
SELECTED SUMMARY FINANCIAL INFORMATION (a) | |||||||||||
(Non-GAAP - unaudited) | |||||||||||
Three Months Ended | % Change From | ||||||||||
|
|
|
|
|
|||||||
($ in thousands, except per share data) | 2017 | 2017 | 2016 | 2017 | 2016 | ||||||
Revenues: | |||||||||||
Financial Advisory |
|
|
|
10% | (17%) | ||||||
Asset Management | 338,967 | 315,470 | 275,365 | 7% | 23% | ||||||
Corporate | 8,555 | 5,965 | 5,256 | 43% | 63% | ||||||
Operating revenue (b) |
|
|
|
9% | (0%) | ||||||
Expenses: | |||||||||||
Adjusted compensation and benefits expense (c) |
|
|
|
4% | (2%) | ||||||
Ratio of adjusted compensation to operating revenue | 53.8% | 56.5% | 54.9% | ||||||||
Non-compensation expense (d) |
|
|
|
15% | 10% | ||||||
Ratio of non-compensation to operating revenue | 18.5% | 17.6% | 16.8% | ||||||||
Earnings: | |||||||||||
Earnings from operations (e) |
|
|
|
16% | (3%) | ||||||
Operating margin (f) | 27.7% | 25.9% | 28.3% | ||||||||
Adjusted net income (g) |
|
|
|
32% | (1%) | ||||||
Diluted adjusted net income per share |
|
|
|
32% | (1%) | ||||||
Diluted weighted average shares | 132,696,257 | 132,393,664 | 132,980,861 | 0% | (0%) | ||||||
Effective tax rate (h) | 15.9% | 24.6% | 17.1% | ||||||||
This presentation includes non- |
|
|||||||
SELECTED SUMMARY FINANCIAL INFORMATION (a) | |||||||
(Non-GAAP - unaudited) | |||||||
Year Ended | |||||||
|
|
||||||
($ in thousands, except per share data) | 2017 | 2016 | % Change | ||||
Revenues: | |||||||
Financial Advisory | 1,387,682 | 1,301,048 | 7% | ||||
Asset Management | 1,239,661 | 1,030,711 | 20% | ||||
Corporate | 27,197 | 12,580 | NM | ||||
Operating revenue (b) |
|
|
13% | ||||
Expenses: | |||||||
Adjusted compensation and benefits expense (c) |
|
|
12% | ||||
Ratio of adjusted compensation to operating revenue | 55.8% | 56.5% | |||||
Non-compensation expense (d) |
|
|
6% | ||||
Ratio of non-compensation to operating revenue | 17.4% | 18.5% | |||||
Earnings: | |||||||
Earnings from operations (e) |
|
|
22% | ||||
Operating margin (f) | 26.8% | 25.0% | |||||
Adjusted net income (g) |
|
|
22% | ||||
Diluted adjusted net income per share |
|
|
22% | ||||
Diluted weighted average shares | 132,479,728 | 132,633,630 | (0%) | ||||
Effective tax rate (h) | 24.1% | 23.7% | |||||
This presentation includes non- |
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COMPENSATION AND BENEFITS - ANALYSIS | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
($ in millions except share price) | ||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |||||||||||||
ADJUSTED |
||||||||||||||||||||
Base salary |
|
|
|
|
|
|
|
|
||||||||||||
Benefits and other | 149.5 | 162.2 | 162.6 | 191.2 | 215.6 | 228.3 | 201.9 | 243.4 | ||||||||||||
Cash incentive compensation | 472.8 | 372.4 | 367.2 | 368.5 | 432.9 | 413.9 | 398.3 | 465.5 | ||||||||||||
Total cash compensation, benefits and other | 925.7 | 878.8 | 883.0 | 899.0 | 1,002.5 | 998.0 | 972.9 | 1,113.8 | ||||||||||||
Amortization of deferred incentive awards | 240.5 | 289.4 | 334.8 | 297.6 | 299.2 | 320.8 | 352.4 | 367.3 | ||||||||||||
Compensation and benefits - Adjusted |
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% of Operating Revenue | 58.9% | 62.0% | 61.8% | 58.8% | 55.6% | 55.4% | 56.5% | 55.8% | ||||||||||||
AWARDED BASIS | ||||||||||||||||||||
Total cash compensation and benefits (per above) |
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Deferred year-end incentive awards | 292.7 | 282.4 | 272.4 | 291.0 | 325.2 | 336.1 | 342.4 | 351.0 | ||||||||||||
Compensation and benefits before sign-on and other | ||||||||||||||||||||
special deferred incentive awards | 1,218.4 | 1,161.2 | 1,155.4 | 1,190.0 | 1,327.7 | 1,334.1 | 1,315.3 | 1,464.8 | ||||||||||||
Sign-on and other special deferred incentive awards (j) | 27.3 | 40.0 | 42.1 | 22.1 | 14.2 | 26.4 | 29.9 | 36.2 | ||||||||||||
Total Compensation and benefits - Notional | 1,245.7 | 1,201.2 | 1,197.5 | 1,212.1 | 1,341.9 | 1,360.5 | 1,345.2 | 1,501.0 | ||||||||||||
Adjustment for actual/estimated forfeitures (k) | (27.8) | (28.0) | (27.4) | (27.3) | (25.4) | (27.2) | (27.9) | (25.3) | ||||||||||||
Compensation and benefits - Awarded (l) |
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% of Operating Revenue - Awarded Basis(l) | 61.6% | 62.3% | 59.4% | 58.2% | 56.3% | 56.0% | 56.2% | 55.6% | ||||||||||||
Memo: | ||||||||||||||||||||
Total value of deferred equity-based year end | ||||||||||||||||||||
incentive awards |
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TBD | ||||||||||||
Equity-based year end awards - share equivalents ('000) | 5,775 | 6,932 | 4,929 | 4,146 | 4,329 | 7,778 | 5,395 | TBD | ||||||||||||
Price at issuance |
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TBD | ||||||||||||
Deferred compensation awards ratio (m) | 24.0% | 24.3% | 23.6% | 24.5% | 24.5% | 25.2% | 26.0% | 24.0% | ||||||||||||
Operating revenue |
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This presentation includes non- |
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ASSETS UNDER MANAGEMENT ("AUM") | |||||||||||
(unaudited) | |||||||||||
($ in millions) | |||||||||||
As of | Variance | ||||||||||
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2017 | 2017 | 2016 | Qtr to Qtr | YTD | |||||||
Equity: | |||||||||||
Emerging Markets |
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5.7% | 26.6% | ||||||
Global | 43,663 | 40,505 | 30,567 | 7.8% | 42.8% | ||||||
Local | 42,650 | 40,761 | 36,243 | 4.6% | 17.7% | ||||||
Multi-Regional | 70,696 | 67,707 | 54,668 | 4.4% | 29.3% | ||||||
Total Equity | 209,358 | 198,521 | 162,841 | 5.5% | 28.6% | ||||||
Fixed Income: | |||||||||||
Emerging Markets | 17,320 | 17,243 | 15,580 | 0.4% | 11.2% | ||||||
Global | 4,109 | 4,213 | 3,483 | (2.5%) | 18.0% | ||||||
Local | 4,497 | 4,447 | 4,245 | 1.1% | 5.9% | ||||||
Multi-Regional | 9,154 | 9,134 | 7,847 | 0.2% | 16.7% | ||||||
Total Fixed Income | 35,080 | 35,037 | 31,155 | 0.1% | 12.6% | ||||||
Alternative Investments | 2,846 | 2,668 | 2,422 | 6.7% | 17.5% | ||||||
Private Equity | 1,478 | 1,475 | 1,253 | 0.2% | 18.0% | ||||||
Cash Management | 697 | 424 | 239 | 64.4% | 191.6% | ||||||
Total AUM |
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4.8% | 26.0% | ||||||
Three Months Ended |
Year Ended |
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2017 | 2016 | 2017 | 2016 | ||||||||
AUM - Beginning of Period |
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Net Flows | 137 | (2,705) | 3,090 | 160 | |||||||
Market and foreign exchange | |||||||||||
appreciation (depreciation) |
11,197 | (4,825) | 48,459 | 11,370 | |||||||
AUM - End of Period |
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Average AUM |
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% Change in average AUM | 21.6% | 16.3% | |||||||||
Note: Average AUM generally represents the average of the monthly ending AUM balances for the period. | |||||||||||
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RECONCILIATION OF |
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(unaudited) | |||||||||||
Three Months Ended | Year Ended | ||||||||||
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($ in thousands, except per share data) | 2017 | 2017 | 2016 | 2017 | 2016 | ||||||
Operating Revenue | |||||||||||
Net revenue - |
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Adjustments: | |||||||||||
Revenue related to noncontrolling interests (n) | (3,149) | (5,039) | (8,343) | (16,228) | (20,614) | ||||||
(Gains) losses related to Lazard Fund Interests ("LFI") and other similar arrangements | (5,545) | (4,875) | 1,389 | (23,526) | (3,318) | ||||||
MBA Lazard acquisition adjustment (o) | - | - | (12,668) | - | (12,668) | ||||||
Interest expense | 12,506 | 12,380 | 13,255 | 49,983 | 47,568 | ||||||
Operating revenue, as adjusted (b) |
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Compensation and Benefits Expense | |||||||||||
Compensation and benefits expense - |
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Adjustments: | |||||||||||
(Charges) credits pertaining to LFI and other similar arrangements | (5,545) | (4,875) | 1,389 | (23,526) | (3,318) | ||||||
Compensation related to noncontrolling interests (n) | (2,201) | (2,473) | (6,791) | (8,285) | (11,900) | ||||||
Compensation and benefits expense, as adjusted (c) |
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Non-Compensation Expense | |||||||||||
Non-compensation expense - Subtotal - |
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Adjustments: | |||||||||||
Expenses associated with ERP system implementation (p) | (9,917) | (6,530) | - | (25,308) | - | ||||||
Expenses related to office space reorganization (q) | (6,781) | (1,412) | - | (11,354) | - | ||||||
Charges pertaining to Senior Debt refinancing (r) | - | - | (3,148) | - | (3,148) | ||||||
Amortization and other acquisition-related costs (s) | (4,511) | (172) | (34,777) | (9,514) | (36,614) | ||||||
Non-compensation expense related to noncontrolling interests (n) | (346) | (239) | (392) | (1,684) | (1,892) | ||||||
Non-compensation expense, as adjusted (d) |
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Pre-Tax Income and Earnings From Operations | |||||||||||
Operating Income - |
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Adjustments: | |||||||||||
Reduction of tax receivable agreement obligation ("TRA") (t) | (202,546) | - | - | (202,546) | - | ||||||
Expenses associated with ERP system implementation (p) | 9,917 | 6,530 | - | 25,308 | - | ||||||
Expenses related to office space reorganization (q) | 6,781 | 1,412 | - | 11,354 | - | ||||||
Charges pertaining to Senior Debt refinancing (r) | - | - | 3,747 | - | 3,747 | ||||||
MBA Lazard acquisition adjustment (o) | - | - | (12,668) | - | (12,668) | ||||||
Acquisition-related costs (benefits) (s) | 4,012 | (612) | 34,092 | 6,580 | 34,092 | ||||||
Net income related to noncontrolling interests (n) | (603) | (2,330) | (1,005) | (6,264) | (5,994) | ||||||
Pre-tax income, as adjusted | 176,097 | 149,212 | 181,022 | 659,878 | 536,638 | ||||||
Interest expense | 12,506 | 12,380 | 12,501 | 49,983 | 46,796 | ||||||
Amortization (LAZ only) | 500 | 787 | 685 | 2,939 | 1,867 | ||||||
Earnings from operations, as adjusted (e) |
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Net Income (loss) attributable to |
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Net income (loss) attributable to |
( |
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Adjustments: | |||||||||||
Reduction of deferred tax assets (net of TRA reduction) (t) | 216,928 | - | - | 216,928 | - | ||||||
Expenses associated with ERP system implementation (p) | 9,917 | 6,530 | - | 25,308 | - | ||||||
Expenses related to office space reorganization (q) | 6,781 | 1,412 | - | 11,354 | - | ||||||
Charges pertaining to Senior Debt refinancing (r) | - | - | 3,747 | - | 3,747 | ||||||
MBA Lazard acquisition adjustment (o) | - | - | (12,668) | - | (12,668) | ||||||
Acquisition-related costs (benefits) (s) | 4,012 | (612) | 34,092 | 6,580 | 34,092 | ||||||
Valuation Allowance for changed tax laws (u) | - | - | 12,347 | - | 12,347 | ||||||
Tax benefit allocated to adjustments | (5,973) | (4,107) | (15,519) | (13,232) | (15,519) | ||||||
Net income, as adjusted (g) |
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Diluted net income (loss) per share: | |||||||||||
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( |
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Non-GAAP Basis, as adjusted |
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This presentation includes non- |
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Notes to Financial Schedules | ||||||||||||||||||
(a) |
Selected Summary Financial Information are non- |
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(b) |
A non-GAAP measure which excludes (i) revenue related to
non-controlling interests (see (n) 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
and twelve month periods ended |
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(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 (n) below). | |||||||||||||||||
(d) |
A non-GAAP measure which excludes (i) for the three and twelve month
periods ended |
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(e) |
A non-GAAP measure which excludes (i) for the three and twelve month
periods ended |
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(f) | Represents earnings from operations as a percentage of operating revenue, and is a non-GAAP measure. | |||||||||||||||||
(g) |
A non-GAAP measure which excludes (i) for the three and twelve month
periods ended |
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(h) |
Effective tax rate is a non-GAAP measure based upon the |
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(i) |
A reconciliation of |
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Year Ended |
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($ in thousands) | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||
Compensation & benefits expense - |
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Adjustments: | ||||||||||||||||||
Charges pertaining to cost saving initiatives | - | - | (99,987) | (51,399) | - | - | - | - | ||||||||||
Charges pertaining to staff reductions | - | - | (21,754) | - | - | - | - | - | ||||||||||
(Charges) credits pertaining to LFI and other similar arrangements comp. liability | - | 3,024 | (7,557) | (14,099) | (7,326) | 3,827 | (3,318) | (23,526) | ||||||||||
Charges pertaining to Private Equity incentive compensation | - | - | - | (12,203) | - | - | - | - | ||||||||||
Acceleration of restricted stock unit vesting related to retirement policy change | (24,860) | - | - | - | - | - | - | - | ||||||||||
Compensation related to noncontrolling interests (n) | (3,098) | (3,740) | (4,040) | (4,232) | (4,567) | (4,776) | (11,900) | (8,285) | ||||||||||
Compensation & benefits expense, as adjusted |
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(j) | Special deferred incentive awards are granted outside the year end compensation process and include grants to new hires, retention awards, and performance units earned under PRSU grants. | |||||||||||||||||
(k) |
Under |
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(l) | Awarded Compensation and Benefits has been restated to eliminate the year-end foreign exchange adjustment to better align awarded compensation with revenue. The impact of the change is not material. | |||||||||||||||||
(m) | Deferred compensation awards ratio is deferred year-end incentive awards, divided by total awarded compensation excluding sign-on and other special deferred incentive awards and actual/estimated forfeitures. | |||||||||||||||||
(n) | Noncontrolling interests include revenue and expenses principally related to Edgewater, and is a non-GAAP measure. | |||||||||||||||||
(o) | In 2016 the Company incurred a gain relating to the acquisition of MBA Lazard resulting from the increase in fair value of the Company's investment in an acquiree. | |||||||||||||||||
(p) | Represents expenses associated with Enterprise Resource Planning (ERP) system implementation. | |||||||||||||||||
(q) | Represents incremental rent expense and lease abandonment costs related to office space reorganization and an onerous lease provision. | |||||||||||||||||
(r) |
In 2016 The Company incurred charges related to the extinguishment
of |
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(s) | Represents the change in fair value of the contingent consideration associated with certain business acquisitions. | |||||||||||||||||
(t) |
In 2017, as a result of the 2017 US Tax Cuts and Jobs Act, the
Company incurred a charge of approximately |
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(u) | Represents valuation allowance associated with a change in NYC UBT tax laws. | |||||||||||||||||
NM | Not meaningful | |||||||||||||||||
TBD | To be determined | |||||||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20180201005350/en/
Media:
judi.mackey@lazard.com
or
Investors:
alexandra.deignan@lazard.com
Source:
News Provided by Acquire Media