NEW YORK, Oct 27, 2010 (BUSINESS WIRE) -- Lazard Ltd (NYSE: LAZ) today announced financial results for the third quarter and first nine months ended September 30, 2010. Net income on a fully exchanged basis was $62.2 million, or $0.46 per share (diluted), for the third quarter of 2010, compared to a net income of $52.5 million, or $0.41 per share (diluted), for the third quarter of 2009. Net income on a fully exchanged basis was $176.6 million, or $1.30 per share (diluted), for the first nine months of 2010, compared to $65.9 million, or $0.53 per share (diluted) for the first nine months of 2009, excluding in each period special charges in the first quarter of the applicable year.^(c)(e)

Net income, on a U.S. GAAP basis, which is before exchange of exchangeable interests, was $64.1 million, or $0.51 per share (diluted), for the third quarter of 2010, compared to a net income of $37.4 million, or $0.41 per share (diluted), for the third 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 $75.1 million, or $0.58 per share (diluted), for the first nine months of 2010, compared to net income of $12.1 million, or $0.16 per share (diluted), for the first nine months 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 third quarter of 2010 increased 10% to $473.2 million, compared to $431.5 million for the third quarter of 2009. Operating income increased 9% to $79.5 million for the 2010 third quarter, compared to operating income of $73.2 million for the third quarter of 2009.

Operating revenue increased 24% to $1,368.4 million for the 2010 first nine months, compared to $1,103.2 million for the first nine months of 2009. Operating income increased 120% to $224.0 million for the 2010 first nine months, compared to operating income of $101.9 million for the first nine months 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 core business, which consists of Financial Advisory and Asset Management, reported record revenue for the first nine months," said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. "We grew nearly thirty percent in M&A and Strategic Advisory, and Asset Management achieved a record in assets under management, against a backdrop of a gradual but uneven upturn in the cycle. We are continuing to invest in our businesses by making strategic senior level hires worldwide."

"Lazard's performance in this quarter and year-to-date underscores the power of our firm'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. "

"Our fundamentals and financial position remain strong. We continue to generate significant cash flow and we remain focused on containing discretionary spending while investing in our businesses for future growth," said Michael J. Castellano, Chief Financial Officer of Lazard. "Our previously stated goal is to grow annual compensation expense at a slower rate than revenues. We have achieved that goal for the first nine months of 2010."

Revenue

Core Operating Business

Lazard's core operating business includes its Financial Advisory and Asset Management businesses. Core operating business revenue increased 11% to $462.4 million for the 2010 third quarter, compared to $417.5 million for the third quarter of 2009. Core operating business revenue increased 26% to a nine-month record of $1,348.1 million in 2010, compared to $1,068.6 million for the first nine months of 2009.

Financial Advisory

Financial Advisory operating revenue decreased 2% to $254.4 million for the third quarter of 2010, compared to $260.2 million for the third quarter of 2009, and increased 4% compared to $245.7 million for the second quarter of 2010. Third quarter 2010 revenue from M&A and Strategic Advisory, Capital Markets and Other Advisory in the aggregate increased $47.3 million, or 34%, compared to third quarter 2009 revenue and increased $22.6 million, or 14%, compared to second quarter 2010 revenue, while third quarter 2010 revenue from Restructuring decreased $53.1 million, or 45%, compared to third quarter 2009 revenue and decreased $13.9 million, or 17%, compared to second quarter 2010 revenue.

Financial Advisory operating revenue increased 14% to $769.1 million for the first nine months of 2010, compared to $676.8 million for the first nine months of 2009. The nine-month 2010 revenue was positively impacted by an aggregate revenue increase of $119.5 million, or 30%, from M&A and Strategic Advisory, Capital Markets and Other Advisory, partially offset by a $27.2 million, or 10%, decrease in Restructuring revenue.

M&A and Strategic Advisory

M&A and Strategic Advisory operating revenue increased 29% to $160.7 million for the third quarter of 2010, compared to $124.7 million for the third quarter of 2009, and increased 10% compared to $145.9 million for the second quarter of 2010. For the first nine months of 2010, M&A and Strategic Advisory operating revenue increased 28% to $454.1 million, compared to $356.0 million for the first nine months 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 third quarter of 2010 on which Lazard advised were the following:

• Coca-Cola Enterprises in transactions valued at $14.4 billion with The Coca-Cola Company, including the sale of its North American operations
• Newcrest Mining's A$9.5 billion acquisition of Lihir Gold
• Deutsche Bahn's £2.6bn acquisition of Arriva
• Healthscope's A$2.7 billion sale to a private equity consortium
• Honeywell's $1.4 billion acquisition of Sperian Protection
• The Carlyle Group's EUR 480 million acquisition of B&B Hotels
• Silpada Designs' $650 million sale to Avon
• Micrus Endovascular's $480 million sale to Johnson & Johnson
• Alaven Pharmaceutical's $350 million sale to Meda
• DeCrane Aerospace's $280 million sale of its Cabin Management business to Goodrich
• Continental Airlines' merger of equals with UAL Corporation
• ITT's $235 million sale of its CAS SETA services business to Wyle
• France Telecom's and Orascom Telecom's agreement on Mobinil and ECMS
• PAIG Investments' sale of Sell GmbH to Zodiac Aerospace
• Creative Artists Agency in the sale of a non-controlling interest to TPG

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

• Weather Investments' $21 billion combination with VimpelCom to create a new global telecom group
• Qwest's $22.4 billion merger with CenturyLink
• Northeast Utilities' $17.5 billion merger of equals with NSTAR
• BASF's EUR 3.1 billion acquisition of Cognis
• SSL International in the £2.5 billion recommended cash offer by Reckitt Benckiser to acquire SSL
• 3G Capital's $4.0 billion acquisition of Burger King Holdings
• Caisse des Dépôts' and the French State's EUR 2.7 billion investment in La Poste
• Lazard Real Estate Partners' $3.1 billion sale of Atria Senior Living's real estate assets to Ventas
• Abraxis BioScience's $2.9 billion sale to Celgene
• Crucell N.V.'s (Supervisory Board) EUR 1.75 billion recommended cash tender offer by Johnson & Johnson
• CSR's A$1.75 billion sale of Sucrogen to Wilmar International
• Vedanta Resources' $1.3 billion acquisition of the zinc assets of Anglo American
• Endo Pharmaceuticals' $1.2 billion acquisition of Qualitest Pharmaceuticals and its $144 million acquisition of Penwest Pharmaceuticals
• Asda Stores' $1.1 billion acquisition of Netto Foodstores
• BSS Group in the £557.6 million recommended offer for BSS by Travis Perkins
• Oil States International's $681 million acquisition of The MAC Services Group
• MSA's $280 million acquisition of General Monitors
• Actividades de Construcción y Servicios' announced tender offer to acquire shares in Hochtief
• 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
• 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 third quarter include advising the PNG State Holding Company on financing and a potential strategic partnership in a gas upstream development project and a midstream LNG project in Papua New Guinea. We also continue to advise the Republic of Côte d'Ivoire on its debt restructuring, 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 decreased 45% to $66.0 million for the third quarter of 2010, compared to $119.1 million for the third quarter of 2009, and decreased 17% compared to $79.9 million for the second quarter of 2010. Restructuring operating revenue decreased 10% to $246.1 million for the first nine months of 2010, compared to $273.3 million for the first nine months of 2009. Restructuring operating revenue reflects continued restructuring advisory activity in the US and Europe.

The decrease in the third quarter of 2010, compared to both the third quarter of 2009 and the second quarter of 2010, was due primarily to a decrease in completion fees and retainer fees earned, related to the continuing decline of the number and value of corporate defaults since the peak in early 2009. The decrease in the first nine months of 2010 was due primarily to a decrease in retainer fees, partially offset by increased completion fees.

Completed Restructuring assignments during the third quarter of 2010 include: U.S. Concrete and Trump Entertainment Resorts in connection with their Chapter 11 proceedings; BTA Bank JSC and Italtel in their debt restructurings; Highstreet investors on Karstadt's restructuring; Voyage Group in the renegotiation of its senior credit facilities; EEMS on the renegotiation of its debt and sale of its Singapore unit to ASE Taiwan; and LNR Property Corp. on its recapitalization.

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

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

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

• Alinta Energy on its debt restructuring
• Belvédère - advising the FRN noteholder committee
• Frans Bonhomme on its covenant reset
• iStar Financial on its debt and capital structure matters
• Local InSight Media on its debt restructuring
• Jost on its debt restructuring
• Lucchini on the refinancing of its current indebtedness
• Satmex on balance sheet restructuring and satellite financing
• Sacyr Vallehermoso on the refinancing of its real estate unit Vallehermoso
• Värde Partners in its acquisition of debt and equity in Crest Nicholson
• Wheelabrator Allevard on its debt restructuring

Capital Markets and Other Advisory

Capital Markets and Other Advisory operating revenue increased 69% to $27.8 million for the third quarter of 2010, compared to $16.4 million for the third quarter of 2009. Capital Markets and Other Advisory operating revenue increased 45% to $69.0 million for the first nine months of 2010, compared to $47.5 million for the first nine months of 2009. The increase in the third-quarter and nine-month revenue was due primarily to growth in the number and value of fund closings by our Private Fund Advisory Group, partially offset by a decrease in underwriting for public offerings.

Capital Markets and Other Advisory assignments in the third quarter of 2010 included advising on:

• IPOs: IntraLinks Holdings and NuPathe
• PIPEs, Registered Directs, Underwritten Registered Directs and Private Placements as well as other Convertible and Capital Markets transactions: MAP Pharmaceuticals, Pacific Ethanol, PDL BioPharma

Asset Management

Asset Management operating revenue increased 32% to a record $208.0 million for the third quarter of 2010, compared to $157.3 million for the 2009 third quarter. Asset Management operating revenue increased 48% to a record $578.9 million for the first nine months of 2010, compared to $391.8 million for the first nine months of 2009.

Assets Under Management at September 30, 2010, were $143.6 billion, representing a 19% increase over Assets Under Management of $120.2 billion at September 30, 2009, and a 16% increase compared to Assets Under Management of $123.5 billion at June 30, 2010. Assets Under Management were primarily impacted in the third quarter by positive market and foreign exchange movements. Net inflows were $1.1 billion in the 2010 third quarter and $6.2 billion in the 2010 first nine months.

Average Assets Under Management were $133.5 billion for the third quarter of 2010, representing a 22% increase over average Assets Under Management of $109.1 billion for the third quarter of 2009. Average Assets Under Management were $132.9 billion for the first nine months of 2010, a 36% increase, compared to $97.6 billion for the first nine months of 2009.

Management fees increased 38% to a record $184.0 million for the third quarter of 2010, compared to $133.4 million for the 2009 third quarter, and increased 54% to a record $512.8 million for the first nine months of 2010, compared to $334.0 million for the first nine months of 2009.

Incentive fees, primarily related to traditional long-only investment strategies, were $15.5 million and $41.9 million for the third quarter and first nine months of 2010, respectively, compared to $15.2 million and $33.8 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.

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 $282.5 million and $250.9 million for the third quarters of 2010 and 2009, respectively. The expense was $821.1 million and $693.7 million for the first nine months of 2010 and 2009, respectively, excluding the 2010 first-quarter special charge. While operating revenue increased 24% for the first nine months of 2010, compensation and benefits expense increased 18%, compared to the same 2009 period.

The ratio of compensation and benefits expense to operating revenue was 59.7% for the third quarter of 2010 compared to 58.2% for the same 2009 period, and was 60.0% and 62.9% for the first nine months of 2010 and 2009, respectively, excluding the 2010 first-quarter special charge. The reduction in the compensation ratio for the first nine months 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 18.9% and 19.0% for the third quarter and first nine months of 2010, respectively, compared to 19.8% and 21.5% for the respective 2009 periods. Total non-compensation expense increased 4% to $91.2 million for the third quarter of 2010 and increased 11% to $265.4 million for the first nine months of 2010, compared to $87.6 million and $240.1 million for the respective periods in 2009, including amortization of intangibles related to acquisitions of $1.7 million and $5.3 million in the respective 2010 periods and $2.0 million and $2.7 million in the respective 2009 periods. Factors contributing to the third-quarter and first-nine-months 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 $17.2 million and $44.4 million for the third quarter and first nine months of 2010, respectively, compared to $18.6 million and $34.7 million for the third quarter and first nine months of 2009, respectively, excluding the effects of special charges in each period. The effective tax rate on the same basis was 21.7% and 20.1% for the third quarter and first nine months of 2010, respectively, exclusive of noncontrolling interests.

Noncontrolling interests

Net income attributable to noncontrolling interests, on a fully exchanged basis, amounted to $0.1 million and $2.9 million for the third quarter and first nine months of 2010, respectively, compared to $2.0 million and $1.2 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 September 30, 2010.
• At September 30, 2010, total stockholders' equity related to Lazard's interests was $488.6 million.
• During the third quarter of 2010, current and former Lazard Managing Directors who held LAZ-MD Holdings exchangeable interests and/or Class A common stock (the "Selling Shareholders") sold 7.4 million shares of Lazard Ltd Class A common stock in a public offering. Lazard did not receive any proceeds from such sales.
• During the third quarter of 2010, Lazard separately repurchased 2.75 million shares of Class A common stock and 167,286 exchangeable interests at an aggregate cost of $88.7 million, the majority of which were in separate transactions with the Selling Shareholders. Lazard's remaining share repurchase authorization at September 30, 2010, was $88.6 million.
• At September 30, 2010, current and former Lazard Managing Directors and employees now own 32% of Lazard Ltd, assuming full vesting of their deferred equity-based incentive awards and including exchangeable interests and Class A shares that they own.

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 41 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.

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
or 1-877-266-8601 (U.S. only)
investorrelations@lazard.com

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