NEW YORK, Jul 28, 2010 (BUSINESS WIRE) -- Lazard Ltd (NYSE: LAZ) today announced financial results for the second quarter and first half ended June 30, 2010. Net income on a fully exchanged basis was $53.0 million, or $0.39 per share (diluted), for the second quarter of 2010, compared to net income of $43.1 million, or $0.34 per share (diluted), for the second quarter of 2009. Net income on a fully exchanged basis was $114.5 million, or $0.84 per share (diluted) for the first half of 2010, compared to $13.5 million, or $0.11 per share (diluted), for the first half of 2009, excluding in each period pre-tax special charges in the first quarter of the applicable year^(c)(f).

Net income, on a U.S. GAAP basis, which is before exchange of exchangeable interests, was $44.6 million, or $0.39 per share (diluted), for the second quarter of 2010, compared to net income of $28.2 million, or $0.34 per share (diluted), for the second quarter of 2009. Net income, on a U.S. GAAP basis, which includes the first-quarter special charges in the 2010 and 2009 periods, was $11.0 million, or $0.10 per share (diluted), for the first half of 2010, compared to a net loss of $(25.3) million, or $(0.36) per share, for the first half of 2009.

A reconciliation of the U.S. GAAP results to the adjusted results is presented on page 12 of this release.

Lazard believes that results assuming full exchange of outstanding exchangeable interests and excluding special charges provide the most meaningful basis for comparison among present, historical and future periods.

Operating Revenue and Operating Income

Operating revenue for the second quarter of 2010 increased 10% to $438.4 million, compared to $398.8 million for the second quarter of 2009. Operating income increased 18% to $67.1 million for the 2010 second quarter, compared to operating income of $56.9 million for the second quarter of 2009.

Operating revenue increased 33% to $895.3 million for the first half of 2010, compared to operating revenue of $671.8 million for the first half of 2009. Operating income increased over 400% to $144.5 million for the first half of 2010, compared to operating income of $28.7 million for the first half of 2009, excluding special charges in both periods.

The Company's quarterly revenue and profits can fluctuate materially depending on the number, size and timing of completed transactions on which it advised, as well as seasonality and other factors. Accordingly, the revenue and profits in any particular quarter may not be indicative of future results. As such, Lazard management believes that annual results are the most meaningful.

Comments

"Our Financial Advisory and Asset Management businesses both reported record first-half revenues, with thirty-six percent growth, as we continue to experience a gradual but uneven upturn in the cycle," said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. "We continue to show growth and gain market share in M&A and Strategic Advisory, and our Asset Management professionals continue to attract net inflows against a backdrop of a volatile economic climate."

"Lazard's performance in this quarter and year-to-date underscores the power of Lazard's advice-driven, intellectual capital model in a climate marked by uneven economic recovery, aftershocks from the financial crisis and shifting flows of investment capital between developed and developing markets," said Mr. Jacobs. "In this new environment, companies, government bodies and investors demand independent advice, with a geographic perspective, deep understanding of capital structure, informed research, and knowledge of global economic conditions. Lazard, through its Financial Advisory and Asset Management businesses, is the only global independent firm positioned to meet that need."

"We remain focused on containing discretionary spending while investing in our businesses," said Michael J. Castellano, Chief Financial Officer of Lazard. "For the first half of the year, operating revenue increased 33% while compensation and non-compensation expenses increased 22% and 14%, respectively."

Revenue

Core Operating Business

Lazard's core operating business includes its Financial Advisory and Asset Management businesses. Core operating business revenue increased 13% to $432.9 million for the second quarter of 2010, compared to $384.7 million for the second quarter of 2009, and increased 36% to $885.7 million for the first half of 2010, compared to $651.1 million for the first half of 2009.

Financial Advisory

Financial Advisory operating revenue decreased 3% to $245.7 million for the second quarter of 2010, compared to $253.1 million for the second quarter of 2009, and increased 24% to a record of $514.7 million for the first half of 2010, compared to $416.6 million for the first half of 2009.

Lazard's Financial Advisory business of M&A and Strategic Advisory, Restructuring, and Capital Markets and Other Advisory encompasses general strategic and transaction-specific advice to public and private companies, governments and other parties, and includes various corporate finance advisory services. Some of our assignments and, therefore, related revenue, are not reflected in publicly available statistical information.

M&A and Strategic Advisory

M&A and Strategic Advisory operating revenue was $145.9 million for the second quarter of 2010, compared to $134.9 million for the second quarter of 2009. M&A and Strategic Advisory operating revenue was $293.4 million for the first half of 2010, compared to $231.3 million for the first half of 2009. M&A and Strategic Advisory operating revenue generally does not include M&A fees for the sale of distressed assets, which are recognized in Restructuring operating revenue. Strategic Advisory also includes our sovereign advisory work.

Among the publicly announced M&A transactions completed during the second quarter of 2010 on which Lazard advised were the following:

• AREVA's EUR 4.1 billion sale of its transmission and distribution business to Alstom and Schneider Electric
• OSI Pharmaceuticals' $4.0 billion sale to Astellas Pharma
• Cisco's NOK 19.0 billion acquisition of Tandberg
• Royal Bank of Scotland's $1.7 billion sale of RBS Sempra Commodities' Metals, Oil and European Energy business lines to J.P. Morgan
• CNX Gas's (Special Committee) $967 million sale to CONSOL Energy
• Protection One's $828 million sale to GTCR
• GlaxoSmithKline Argentina's $253 million acquisition of Laboratorios Phoenix
• Buy.com's $250 million sale to Rakuten
• Al Fayed Family Trust's sale of the Harrods Group to Qatar Holding
• Accor's demerger of its Hotels and Prepaid Services businesses
• Société Nationale d'Investissement's (SNI) acquisition of the remaining 50% stake of Omnium Nord Africain and COPROPAR's concurrent acquisition of the remaining 40% stake in SNI

Among the pending, publicly announced M&A transactions on which Lazard advised in the second quarter, continued to advise, or completed since June 30, 2010, are the following:

• BHP Billiton's $58.0 billion Western Australian iron ore production joint venture with Rio Tinto
• Qwest's $22.4 billion merger with CenturyLink
• Coca-Cola Enterprises' $14.4 billion sale of its North American Operations to The Coca-Cola Company and related transactions
• Newcrest Mining's A$9.5 billion acquisition of Lihir Gold
• SSL International in the £2.5 billion recommended cash offer by Reckitt Benckiser to acquire SSL
• BASF's EUR 3.1 billion acquisition of Cognis
• Deutsche Bahn's £2.6bn bid for Arriva
• Abraxis BioScience's $2.9 billion sale to Celgene
• Healthscope's A$2.7 billion sale to a private equity consortium
• CSR's A$1.75 billion sale of Sucrogen to Wilmar International
• Honeywell's $1.4 billion acquisition of Sperian Protection
• NII Holdings' $1.4 billion sale of a 30% stake in Nextel Mexico to Grupo Televisa
• Vedanta Resources' $1.3 billion acquisition of the zinc assets of Anglo American
• Asda Stores' $1.1 billion acquisition of Netto Foodstores
• BSS Group in the £557.6 million recommended offer for BSS by Travis Perkins
• Silpada Designs' $650 million sale to Avon
• Micrus Endovascular's $480 million sale to Johnson & Johnson
• Continental Airlines' merger of equals with UAL Corporation
• Danone's merger of its Fresh Dairy Products businesses in the CIS area with Unimilk
• Pirelli & C. Real Estate on the spin-off of Pirelli RE from the Pirelli Group
• Österreichische Volksbanken's sale of Europolis to CA Immobilien Anlagen AG
• Caja Madrid's proposed integration with Bancaja, Caja Insular de Canarias, Caixa Laietana, Caja Ávila, Caja Segovia and Caja Rioja, forming Spain's largest savings bank
• France Telecom's and Orascom Telecom's agreement on Mobinil and ECMS
• Veolia Environnement in the merger of its Veolia Transport division with Transdev

Publicly announced sovereign and government advisory assignments that occurred during or since the 2010 second quarter include such recent assignments as advising the Republic of Côte d'Ivoire on its bond exchange offer, Greece for general financial advice, the US Treasury with respect to General Motors, including its potential IPO, and the Islamic Republic of Mauritania on various strategic sovereign financial issues.

Restructuring

Restructuring operating revenue was $79.9 million for the second quarter of 2010, compared to $93.2 million for the second quarter of 2009. The decrease was due primarily to a reduction in retainer fees earned related to a decrease in the number of active assignments in the second quarter of 2010, compared to the second quarter of 2009, consistent with the industry trend. Restructuring operating revenue was $180.1 million for the first half of 2010, compared to $154.2 million for the first half of 2009. The increase in the first half of 2010 was due primarily to an increase in completion fees earned, which more than offset a decrease in retainer fees. Restructuring operating revenue reflects continued restructuring advisory activity in the US and Europe, although the number and value of corporate defaults has decreased during the first half of 2010 compared to the first half of 2009.

Over the past decade, Lazard's global restructuring team, paired with its M&A industry specialist bankers, has advised on more than 450 restructurings worldwide, with an aggregate value over $1 trillion. The firm is recognized as having the world's leading restructuring advisory group.

Completed second-quarter 2010 Restructuring assignments include Cooper-Standard, LyondellBasell, Six Flags, Twin River Casino, Smurfit-Stone Container, Crescent Resources and Citadel Broadcasting in connection with their Chapter 11 filings, as well as Gala Coral Group, Grupo Reyal Urbis, TAS Group, Technicolor's (formerly Thomson) US noteholders, Trident Resources and Xerium Technologies in connection with their debt restructurings.

Notable Chapter 11 bankruptcies, on which Lazard advised debtors or creditors during or since the second quarter of 2010, are:

• Building Materials: U.S. Concrete
• Chemicals: Chemtura
• Gaming, Entertainment and Hospitality: Station Casinos, Trump Entertainment Resorts
• Healthcare: Chem Rx
• Paper and Packaging: AbitibiBowater, White Birch Paper Company
• Professional/Financial Services: Lehman Brothers
• Real Estate/Property Development: Capmark Financial, Extended Stay Hotels
• Technology/Media/Telecom: MIG Inc., Nortel, Tribune Co.

Among other publicly announced restructuring and debt advisory assignments on which Lazard has advised during or since the second quarter of 2010, are:

• Air Mauritius on the restructuring of its jet fuel hedging portfolio
• Belvédère - advising the FRN noteholder committee
• Chargeurs on its debt maturity rescheduling and convertible bonds issuance
• EEMS on its debt restructuring
• Frans Bonhomme on its covenant reset
• Highstreet - advising certain Highstreet investors on Karstadt's restructuring
• HP Pelzer Group on its sale and refinancing
• iStar Financial on its debt and capital structure matters
• Italtel on its debt restructuring
• Jost on its debt restructuring
• LNR Property Corp. on its recapitalization
• Lucchini on the refinancing of its current indebtedness
• Polaris World on its debt refinancing
• Satmex on balance sheet restructuring and satellite financing
• Voyage Group in the renegotiation of its senior credit facilities
• Wheelabrator Allevard on its debt restructuring

Capital Markets and Other Advisory

Capital Markets and Other Advisory operating revenue was $19.9 million and $41.2 million for the second quarter and first half of 2010, respectively, compared to $25.0 million and $31.1 million for the respective periods in 2009. The decrease in the second quarter revenue was due primarily to a decrease in underwriting for public offerings, partially offset by an increase in the number and value of fund closings by our Private Fund Advisory Group.

Assignments in the second quarter of 2010 included advising on:

• IPOs: CBOE Holdings, Inc., Metals USA Holdings Corp., Niska Gas Storage Partners
• Follow-on offerings: Alphatec Holdings, Inc., BlackRock Kelso Capital Corporation, STR Holdings, Inc.
• PIPEs, Registered Directs, Underwritten Registered Directs and Private Placements as well as other Convertible and Capital Markets transactions: Anadys Pharmaceuticals, Inc., AspenBio Pharma, Inc., Discovery Labs, FuelCell Energy, Gasco Energy, Inc., NGAS Resources, Inc., Sequenom

Asset Management

Asset Management operating revenue increased 42% to a record $187.2 million for the second quarter of 2010, compared to $131.6 million for the 2009 second quarter. Asset Management operating revenue increased 58% to a record $370.9 million for the first half of 2010, compared to $234.5 million for the first half of 2009.

Assets Under Management at June 30, 2010, were $123.5 billion, representing a 26% increase over Assets Under Management of $98.0 billion at June 30, 2009, and a 9% decrease compared to Assets Under Management of $135.0 billion at March 31, 2010. Assets Under Management were primarily impacted in the second quarter by adverse market and foreign exchange movements. Net inflows were $2.1 billion in the 2010 second quarter and $5.0 billion in the 2010 first half.

Average Assets Under Management were $129.2 billion for the second quarter of 2010, representing a 44% increase over average Assets Under Management of $89.6 billion for the second quarter of 2009. Average Assets Under Management were $129.3 billion for the first half of 2010, a 44% increase, compared to $90.1 billion for the first half of 2009.

Management fees increased 56% to $167.0 million for the second quarter of 2010, compared to $107.1 million for the 2009 second quarter, and increased 64% to $328.8 million for the first half of 2010, compared to $200.6 million for the first half of 2009.

Incentive fees, primarily related to traditional long-only investment strategies, were $12.6 million and $26.4 million for the second quarter and first half of 2010, respectively, compared to $13.2 million and $18.6 million for the comparable periods in 2009. Incentive fees are recorded on the measurement date, which for most of our alternative strategies that are subject to incentive fees occurs in the fourth quarter.

Other Asset Management operating revenue was $7.6 million and $15.7 million for the second quarter and first half of 2010, respectively, compared to $11.3 million and $15.3 million for the comparable periods in 2009.

Our Asset Management business provides investment management and advisory services to governments, institutions, financial intermediaries, private clients and investment vehicles around the world. Our goal in our Asset Management business is to produce superior risk-adjusted investment returns and provide investment solutions customized for our clients. Asset Management includes the management of equity and fixed income securities as well as alternative investment and private equity funds.

Expenses

Compensation and Benefits

Compensation and benefits expense includes base salaries and benefits, amortization of deferred incentive awards and an accrual for estimated year-end discretionary cash incentive compensation. The expense was $263.0 million and $239.3 million for the second quarters of 2010 and 2009, respectively. The expense was $538.5 million and $442.8 million for the first half of 2010 and 2009, respectively, excluding the 2010 first quarter special charge. While operating revenue increased 33% for the first half of 2010, compensation and benefits expense increased 22%, compared to the same 2009 period.

The ratio of compensation and benefits expense to operating revenue, excluding the 2010 first-quarter special charge, was 60.0% for the second quarters of 2010 and 2009, and was 60.2% and 65.9% for the first halves of 2010 and 2009, respectively. The reduction in the compensation ratio for the first half of 2010 is due primarily to execution on our previously announced goals to grow annual compensation expense at a slower rate than operating revenues, and to achieve over the cycle compensation levels on average consistent with the targets established at the time we went public in 2005.

Non-Compensation

The ratio of non-compensation expense to operating revenue, excluding amortization of intangibles related to acquisitions, was 19.9% and 19.1% for the second quarter and first half of 2010, respectively, compared to 19.8% and 22.6% for the respective 2009 periods. Total non-compensation expense increased 12% to $89.0 million for the second quarter of 2010 and increased 14% to $174.2 million for the first half of 2010, compared to $79.4 million and $152.5 million for the respective periods in 2009, including amortization of intangibles related to acquisitions of $1.8 million and $3.5 million in the respective 2010 periods and $0.3 million and $0.7 million in the respective 2009 periods. Other factors contributing to the second-quarter and first-half 2010 increases include higher business development expenses for travel and market related data and fund administration expenses related to the increased level of business activity and assets under management, and partially offset by lower professional fees.

The percentage of non-compensation expenses to operating revenue can vary from quarter to quarter due to quarterly fluctuation in revenues, among other things. Accordingly, the results in a particular quarter may not be indicative of future results. Lazard management believes that annual results are the most meaningful basis for comparison.

Provision for Income Taxes

The provision for income taxes, on a fully exchanged basis, was $13.5 million and $27.2 million for the second quarter and first half of 2010, respectively, compared to $13.5 million and $16.1 million for the second quarter and first half of 2009, excluding the effects of special charges in each period. The effective tax rate on the same basis was 20.3% and 19.2% for the second quarter and first half of 2010, respectively, exclusive of noncontrolling interests.

Noncontrolling interests

Net income attributable to noncontrolling interests, on a fully exchanged basis, amounted to $0.5 million and $2.8 million for the second quarter and first half of 2010, respectively, compared to $0.3 million and a net loss of $0.8 million for the respective periods of 2009. Noncontrolling interests, on a fully exchanged basis, principally represents interests that the Company is deemed to control but not own in (i) various LAM-related general partnerships and (ii) in Edgewater management vehicles acquired during the third quarter of 2009.

Liquidity, Capital Resources and Other Items

Lazard continues to maintain a strong liquidity position with over $1 billion in cash, US Government and agency securities, and marketable equity securities at June 30, 2010.

At June 30, 2010, total stockholders' equity related to Lazard's interests was $430.6 million, which includes negative adjustments to total Accumulated Other Comprehensive Loss during the first half of 2010, due primarily to net negative foreign currency translation adjustments of $51.9 million.

During the second quarter of 2010, Lazard repurchased 687.3 thousand shares of Class A common stock, at an aggregate cost of $21.8 million. Lazard's remaining share repurchase authorization at June 30, 2010, was $177.3 million.

During the second quarter of 2010, Lazard repurchased $10.0 million principal amount of its senior notes due in 2015 and recognized an aggregate loss of $0.4 million.

Non-GAAP Information

Lazard discloses certain non-GAAP financial information, which management believes provides the most meaningful basis for comparison among present, historical and future periods. The following are non-GAAP measures used in the accompanying financial information:

• Net income (loss) attributable to Lazard Ltd, assuming full exchange of exchangeable interests (or fully exchanged basis) and excluding special charges
• Net income (loss) assuming full exchange of exchangeable interests (or fully exchanged basis) and excluding special charges
• Core operating business revenue
• Operating revenue
• Operating income, excluding special charges
• Compensation and benefits, excluding special charges
• Noncontrolling interests assuming full exchange of exchangeable interests
• Weighted average shares outstanding, assuming full exchange of exchangeable interests and excluding special charges
• Net income (loss) per share, assuming full exchange of exchangeable interests and excluding special charges
• Provision for income taxes on a fully exchanged basis
• Net income (loss) attributable to LAZ-MD
• Net income (loss) attributable to other noncontrolling interests

Additional financial, statistical and business-related information is included in a financial supplement. This earnings release, the financial supplement and selected transaction information will be available today on our website at www.lazard.com.

Lazard, one of the world's preeminent financial advisory and asset management firms, operates from 40 cities across 26 countries in North America, Europe, Asia, Australia, Central and South America. With origins dating back 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.

Conference Call

Lazard plans to host a conference call to discuss the company's financial results for the second quarter and first half of 2010 today at 10:00 a.m. EDT. Kenneth M. Jacobs, Chairman and Chief Executive Officer, and Michael J. Castellano, Chief Financial Officer, will host the call.

The conference call can be accessed via a live audio web cast available through Lazard's Investor Relations website at www.lazard.com, or by dialing 1 877-681-3373 (U.S. and Canada) or +1 719-325-4919 (outside of the U.S. and Canada), 15 minutes prior to the start of the conference call.

A replay of the conference call will be available beginning at 1:00 p.m. EDT today, through August 11, 2010, 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 9141991.

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", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" 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 belief regarding future results, many of which, by their nature, are inherently uncertain and outside of our control. 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:

• A decline in general economic conditions or the global financial markets;
• 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.

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. Monthly updates of these funds will be posted to the Lazard Asset Management website (www.lazardnet.com) on the third business day following the end of each month. Investors can link to Lazard and its operating company websites through www.lazard.com.

LAZ-G

SOURCE: Lazard Ltd

Lazard Ltd
Media:
Judi Frost Mackey, +1 212-632-1428
judi.mackey@lazard.com
or
Richard Creswell, +44 207 187 2305
richard.creswell@lazard.com
or
Investors:
Michael J. Castellano, +1 212-632-8262
Chief Financial Officer
or
Investor Relations, +1 212-632-2685 / 1 877-266-8601 (US only)
investorrelations@lazard.com

Copyright Business Wire 2010