Lazard Ltd Reports Third-Quarter and Nine-Month 2011 Results

27 Oct 2011

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Highlights

Net income per share¹, on a fully exchanged and adjusted basis², of $0.39 for the third quarter of 2011, which excludes a pre-tax gain of $18.2 million related to the repurchase of its subordinated convertible promissory note; U.S. GAAP net income per share, which includes the gain, was $0.49
Core operating business revenue³ of Financial Advisory and Asset Management, increased 2% for the third quarter and 5% for the first nine months of 2011, to $470.3 million and $1,410.0 million, respectively, compared to the corresponding 2010 periods
M&A and Strategic Advisory, Capital Markets and Other Advisory revenue increased 14% to $215.5 million for the third quarter of 2011, and increased 17% to $609.6 million for the first nine months of 2011, compared to the corresponding 2010 periods, primarily driven by a 24% and 17% increase in M&A and Strategic Advisory in the third quarter and first nine months, respectively; Restructuring continued its cyclical decline with third-quarter 2011 operating revenue of $38.1 million, down 42% from the 2010 third quarter
Asset Management operating revenue increased 4% to $216.7 million and increased 17% to $678.4 million, for the third quarter and first nine months of 2011, respectively, compared to the corresponding 2010 periods; Management fees increased 9% to $200.0 million and 22% to $628.0 million, for the third quarter and first nine months of 2011, respectively, compared to the corresponding 2010 periods, with the increases driven by higher Average AUM
Assets Under Management at September 30, 2011, were $135.8 billion, a 5% decrease compared to $143.6 billion at September 30, 2010, and a 16% decrease from $161.6 billion at June 30, 2011, primarily reflecting market and foreign exchange depreciation; Net outflows were $1.1 billion for the third quarter of 2011
Compensation and benefits expense ratio⁴ was 58.7% for the first nine months of 2011, compared to 59.8% for the corresponding 2010 period
Repurchased $150 million subordinated convertible promissory note for approximately $131.8 million plus accrued interest of approximately $1.6 million

NEW YORK--(BUSINESS WIRE)-- Lazard Ltd (NYSE: LAZ) today announced financial results for the third quarter and nine months ended September 30, 2011. Net income, on a fully exchanged and adjusted basis, was $52.9 million, or $0.39 per share, which excludes a pre-tax gain of $18.2 million, related to the repurchase of its subordinated convertible promissory note, compared to net income of $62.2 million, or $0.46 per share, for the third quarter of 2010. Net income was $177.2 million or $1.30 per share for the first nine months of 2011, excluding the gain in the third quarter, compared to $176.6 million, or $1.30 per share, for the first nine months of 2010, both on a fully exchanged and adjusted basis.

Net income, on a U.S. GAAP basis, which includes the gain, was $62.7 million, or $0.49 per share, for the third quarter of 2011, compared to net income of $64.1 million, or $0.51 per share, for the third quarter of 2010. For the first nine months of 2011, net income on the same basis was $179.7 million or $1.39 per share, compared to $75.1 million or $0.58 per share for the 2010 period, which included special charges in the 2010 first quarter.

A reconciliation of the U.S. GAAP results to fully exchanged and adjusted results is presented on page 13 of this release.

Lazard believes that presenting results and measures on a fully exchanged and adjusted basis in conjunction with U.S. GAAP measures provides the most meaningful basis for comparison of its operating results across periods.

Comments

"Our solid year-to-date performance underscores the power of Lazard's advice-driven, intellectual capital model," said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. "Companies, government bodies and investors continue to demand independent advice with a geographic perspective, deep understanding of capital structure, informed research, and knowledge of global economic conditions during this uneven economic environment."

"Over the past year, we have invested strategically in both our Financial Advisory and Asset Management businesses, through hires and initiatives, to continue to grow the franchise and serve our clients worldwide," said Mr. Jacobs.

"During the third quarter, we achieved strong revenue growth in M&A and Strategic Advisory, and advised on many important and complex transactions, while our Asset Management business continued to provide our clients with superior investment solutions and performance," said Matthieu Bucaille, Chief Financial Officer of Lazard. "In addition, we have furthered our capital management efforts this quarter."

Operating Revenue and Earnings from Operations

Operating revenue⁵for the third quarter of 2011 decreased 1% to $466.5 million, compared to $473.2 million for the third quarter of 2010. For the first nine months of 2011, operating revenue increased 3% to a nine-month record of $1,415.2 million, compared to $1,368.4 million for the first nine months of 2010.

Earnings from operations⁶ decreased 11% to $91.2 million for the third quarter of 2011, compared to $102.2 million for the corresponding 2010 period. Earnings from Operations increased 1% to $292.9 million for the first nine months of 2011, compared to $290.4 million for the corresponding 2010 period. Margin from operations⁷ was 19.6% and 20.7%, respectively, for the third quarter and first nine months of 2011, compared to 21.6% and 21.2%, respectively, for the corresponding 2010 periods.

Pre-Tax Income

Pre-tax income⁸decreased 12% to $69.6 million for the 2011 third quarter compared to $79.5 million for the third quarter of 2010, and increased 4% to $232.2 million for the first nine months of 2011, compared to $224.0 million for the first nine months of 2010.

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, the performance of equity markets 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.

Core Operating Business Revenue

Lazard's core operating business includes its Financial Advisory and Asset Management businesses. Core operating business revenue increased 2% to $470.3 million for the third quarter of 2011, compared to $462.4 million for the third quarter of 2010, and increased 5% to $1,410.0 million for the first nine months of 2011, compared to $1,348.1 million for the first nine months of 2010.

FINANCIAL ADVISORY

Financial Advisory revenue was $253.6 million for the third quarter of 2011, compared to $254.4 million for the third quarter of 2010, and was $731.7 million, or a 5% decline, for the first nine months of 2011, compared to $769.1 million for the corresponding 2010 period.

Third-quarter 2011 revenue of $215.5 million from M&A and Strategic Advisory, Capital Markets and Other Advisory, in the aggregate, increased 14% compared to the corresponding third-quarter 2010 revenue of $188.4 million. Third-quarter 2011 Restructuring revenue of $38.1 million decreased 42% compared to third-quarter 2010 revenue of $66.0 million.

Revenue of $609.6 million from M&A and Strategic Advisory, Capital Markets and Other Advisory, in the aggregate, increased 17% in the first nine months of 2011, compared to $523.1 million in the corresponding 2010 period. Restructuring revenue of $122.0 million decreased 50% in the first nine months of 2011, compared to $246.1 million in the corresponding 2010 period.

M&A and Strategic Advisory

M&A and Strategic Advisory revenue increased 24% to $199.1 million for the third quarter of 2011, compared to $160.7 million for the third quarter of 2010, and increased 17% to $533.4 million for the first nine months of 2011, compared to $454.1 million for the first nine months of 2010. M&A and Strategic Advisory revenue generally does not include M&A fees for the sale of distressed assets, which are recognized in Restructuring revenue.

Among the publicly announced M&A and Strategic Advisory transactions or assignments completed during the third quarter of 2011 on which Lazard advised were the following:

Tognum's Board of Management and Supervisory Board in the €3.2 billion takeover offer by Daimler and Rolls-Royce
Bankia's €3.1 billion capital increase
Royalty Pharma's $3.6 billion debt recapitalization and $609 million acquisition of the DPP-IV patent estate and associated royalty interest from Astellas' Prosidion subsidiary
Consortium led by Clayton, Dubilier & Rice together with AXA Private Equity and Caisse de dépôt et placement du Québec in their €2.1 billion acquisition of SPIE
DISH Network's $1.4 billion acquisition of the reorganized DBSD North America and $1.4 billion acquisition of TerreStar Networks
Citadel Broadcasting's $2.5 billion sale to Cumulus Media
Landis+Gyr's $2.3 billion sale to Toshiba
EDF Energies Nouvelles in the €1.6 billion public takeover offer and subsequent squeeze-out by EDF
The Carlyle Group's £1 billion acquisition of RAC from Aviva and acquisition of Sagemcom from The Gores Group
Demag Crane's Supervisory Board in the €1 billion public takeover offer by Terex
Delhaize Group's €933 million acquisition of Delta Maxi Group
Shell's $1.3 billion sale of Stanlow Refinery to Essar Energy
The Independent Committee of the Board of Directors of Niscayah in the SEK 7.6 billion public offer by Stanley Black & Decker
Western Union's Board of Directors in its £606 million acquisition of Travelex Global Business Payments
Sodexo's €525 million acquisition of Puras do Brasil and the acquisition of Lenôtre from Accor
Gloucester Coal's A$735 million acquisition of Donaldson Coal and Monash Group
Independent Members of the Board of Directors of PRIMEDIA in its $525 million sale to TPG Capital
V.Group's $520 million sale to OMERS Private Equity
Carrefour's spin-off and stock market listing of Dia
Antin Infrastructure Partners' and RREEF Pan European Infrastructure Fund's acquisition of 90% of Grupo ACS's stake in two thermosolar plants in Spain
3i Group's acquisition of a majority stake in Action
Nestlé Health Science's acquisition of Prometheus Laboratories
Trimble Navigation's tender offer for Tekla
Department for Culture, Media and Sport's sale of Tote to Betfred
Sumitomo Metals' and Sumitomo Corporation's acquisition of Standard Steel
Special Committee of the Board of Directors of Barnes & Noble in the strategic investment made by Liberty Media

Among the ongoing, publicly announced M&A and Strategic Advisory transactions and assignments on which Lazard advised in the 2011 third quarter, continued to advise, or completed since September 30, 2011, are the following:

Medco Health Solutions in its $29 billion merger with Express Scripts
Progress Energy's $26 billion merger with Duke Energy
Northeast Utilities' $17.5 billion merger of equals with NSTAR
Google's $12.5 billion acquisition of Motorola Mobility
Skype's $8.5 billion sale to Microsoft
Nortel Networks' $4.5 billion sale of its patent portfolio to a consortium consisting of Apple, EMC, Ericsson, Microsoft, Research In Motion and Sony
The Johnson Family in the $4.3 billion sale of Diversey to Sealed Air
The Board of Directors of Pharmaceutical Product Development in its $3.9 billion sale to The Carlyle Group and Hellman & Friedman
The Royal Bank of Scotland Group's structured sale of a £1.4 billion UK commercial real estate loan portfolio to Blackstone
OPTI Canada's $2.1 billion sale to CNOOC Limited
Hertz's $1.9 billion exchange offer for Dollar Thrifty
Special Committee of the Board of Directors of 99 Cents Only Stores in its $1.6 billion sale to Ares Management, Canada Pension Plan Investment Board and Gold/Schiffer Family
Wind Telecom's $1.5 billion demerger of OTMT
Etex Group's €1 billion acquisition of Lafarge's plasterboard business in Europe and Latin America
Fluxys G's €860 million acquisition of Eni's interests in TENP and Transitgas pipelines
Scotiabank's $1 billion acquisition of a 51% equity stake in Banco Colpatria
Sberbank's $1 billion acquisition of Troika Dialog
European Goldfields' $600 million senior secured loan facility with warrants with Qatar Holding and $150 million unsecured loan notes with warrants offered to existing shareholders
Miraca's $725 million acquisition of Caris Life Sciences' anatomic pathology business
The Special Committee of the Board of Directors of Harbin Electric in its $722 million sale to Tech Full Electric Company and Tech Full Electric Acquisition
Central Vermont Public Service's $702 million sale to Gaz Métro
The Independent Non-Executive Directors of Eurasian Natural Resources Corporation on the related party transaction to acquire 75% of Shubarkol Komir JSC for a purchase price of up to $650 million
Eurazeo's €418 million investment for a 45% stake in Moncler
Tyco's plan to separate into three independent, publicly traded companies
ITT's plan to separate into three independent, publicly traded companies
BASF's joint venture with INEOS to create Styrolution
Multi-Chem's sale to Halliburton
Consolidated Precision Products' sale to Warburg Pincus
HgCapital's sale of Mondo Minerals to Advent International
Azur Pharma's merger with Jazz Pharmaceuticals

Strategic Advisory also includes our sovereign advisory work. Publicly announced sovereign and government advisory assignments that occurred during or since the first nine months of 2011 include: advising the U.S. Treasury with respect to General Motors; continuing to advise the government of Greece on general financial matters, and on its contemplated exchange and debt buyback plan; advising OPAP in its license deal with the Hellenic Republic for lotteries, sports betting games and gaming machines in Greece; advising the Gabonese Republic and the Islamic Republic of Mauritania on various strategic sovereign financial issues, the Republic of Côte d'Ivoire on the resolution of external debt arrears, SNIM on its mining joint ventures, and the PNG State Holding Company on financing and potential strategic partnerships. Other notable strategic advisory assignments include advising the National Association of Letter Carriers regarding the U.S. Postal Service.

Capital Markets and Other Advisory

Capital Markets and Other Advisory revenue of $16.4 million, decreased 41% for the third quarter of 2011, compared to $27.8 million for the third quarter of 2010, and was $76.2 million for the first nine months of 2011, a 10% increase compared to $69.0 million for the first nine months of 2010. The decrease in the third quarter was due primarily to decreased fees as a result of a lower level of fund closings by our Private Fund Advisory Group.

Capital Markets and Other Advisory assignments in the third quarter of 2011 included advising on:

IPOs: Tangoe
Follow-On Offerings: ServiceSource, Ventrus Biosciences
Convertible Transactions: Forest City Enterprises, Micron Technology, Powerwave Technologies, School Specialty
PIPEs, Registered Directs, Underwritten Registered Directs, Bond/Note Offerings and Private Placements as well as other Capital Markets transactions: Broadwind Energy, Exelis (ITT Defense), Gasco Energy, General Dynamics, Neostem, Romark Laboratories, TowerStream, Xylem (ITT Water)

Restructuring

Restructuring revenue was $38.1 million for the third quarter of 2011, representing a 42% decrease compared to $66.0 million for the third quarter of 2010, and was $122.0 million for the first nine months of 2011, representing a 50% decrease compared to $246.1 million for the first nine months of 2010.

Restructuring and debt advisory assignments completed during the third quarter of 2011 include: Capmark Financial in connection with its Chapter 11 bankruptcy; Ciccolella on the negotiation of new financing; and Värde Partners on the restructuring of Crest Nicholson.

Notable Chapter 11 bankruptcies, on which Lazard advised debtors or creditors during or since the third quarter of 2011, are:

Consumer/Food: The Great Atlantic & Pacific Tea Co. (A&P)
Gaming, Entertainment and Hospitality: Indianapolis Downs, Innkeepers USA Trust, MSR Resorts, the Los Angeles Dodgers
Healthcare: Graceway Pharmaceuticals
Industrials/Logistics: Premier Trailer Leasing
Paper and Packaging: New Page Corporation, White Birch Paper Company
Professional/Financial Services: Ambac, Lehman Brothers
Technology/Media/Telecom: Caribe Media, Local Insight Media, Nortel Networks, Tribune Co.

Among other publicly announced restructuring and debt advisory assignments on which Lazard has advised during or since the third quarter of 2011, are:

Alapis on its capital structure
Belvédère — advising the FRN noteholder committee
Centro Properties Group on the restructuring of its Australian assets
Dynegy on its debt restructuring activities
Eircom — advising the majority shareholder on the company's debt restructuring
Empresas La Polar on its debt restructuring activities
OPTI Canada in connection with its CCAA proceedings
Spanish Broadcasting on the refinancing of its debt
Westgate Resorts on its debt restructuring and related transactions

ASSET MANAGEMENT

Asset Management operating revenue increased 4% to $216.7 million, compared to $208.0 million for the 2010 third quarter. Asset Management operating revenue increased 17% to a nine-month record of $678.4 million, compared to $578.9 million for the 2010 third quarter.

Assets Under Management at September 30, 2011, were $135.8 billion, representing a 5% decrease versus Assets Under Management of $143.6 billion at September 30, 2010, and decreased 16% compared to Assets Under Management of $161.6 billion at June 30, 2011. The decrease primarily reflects market and foreign exchange depreciation and includes net outflows of $1.1 billion and $0.8 billion for the third quarter and nine months of 2011, respectively.

Average Assets Under Management were $148.7 billion for the third quarter of 2011, representing an increase of 11% and a decrease of 8%, compared to the quarters ended September 30, 2010, and June 30, 2011, respectively. Average Assets Under Management were $153.3 billion for the first nine months of 2011, representing a 15% increase over Average Assets Under Management of $132.9 billion for the first nine months of 2010.

Management fees increased 9% to $200.0 million for the third quarter of 2011, compared to $184.0 million for the 2010 third quarter, and increased 22% to $628.0 million for the first nine months of 2011, compared to $512.8 million for the 2010 first nine months.

Incentive fees of $9.4 million for the third quarter of 2011, decreased 39% compared to $15.5 million for the third quarter of 2010, and were $20.9 million for the first nine months of 2011, or a 50% decrease, compared to $41.9 million for the first nine months of 2010. 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 investments and private equity funds.

Expenses

Compensation and Benefits

Compensation and benefits expense⁴, including related accruals, was $276.7 million for the third quarter of 2011, compared to $281.7 million for the 2010 third quarter, and was $831.2 million for the first nine months of 2011, compared to $818.5 million for the first nine months of 2010.

The compensation and benefits expense ratio⁴ was 59.3% and 58.7% for the third quarter and first nine months of 2011, respectively, compared to 59.5% and 59.8% for the corresponding periods in 2010.

Our goal remains to grow annual compensation expense at a slower rate than revenue, and to achieve over the cycle compensation levels on average consistent with the targets established at the time we went public in 2005.

We focus on annual notional compensation⁹ in managing our business, as it reflects total compensation allocated with respect to that year.

Non-Compensation

Non-compensation expense¹⁰ was $98.7 million for the third quarter of 2011, compared to $89.2 million for the third quarter of 2010, and was $291.0 million for the first nine months of 2011, compared to $259.5 million for the first nine months of 2010. The $31.5 million increase, year to date, was attributable, in approximately equal amounts, to costs associated with: i) investments in our businesses, such as recruitment, technology and occupancy, ii) higher activity levels in both Asset Management and Financial Advisory, and iii) the weakening of the U.S. dollar versus foreign currencies.

The non-compensation expense ratio¹¹for the third quarter and first nine months of 2011 was 21.1% and 20.6%, respectively, compared to 18.9% and 19.0% for the comparable 2010 periods.

The expense ratios 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 taxes¹² was $16.5 million and $48.0 million for the third quarter and first nine months of 2011, respectively, and was $17.2 million and $44.4 million for the third quarter and first nine months of 2010, respectively. The effective tax rate¹³ for the third quarter of 2011 and 2010 was 23.8% and 21.7%, respectively. The effective tax rate was 21.3% and 20.1%, respectively, for the 2011 and 2010 first nine months.

Liquidity, Capital Resources and Other Items

During the 2011 third quarter, Lazard repurchased approximately 1.2 million shares of its Class A common stock and exchangeable interests, for approximately $32 million, consistent with our goal to return cash to shareholders. These repurchases, as well as those in the first half of the year, served to offset the current-year equity awards, which were granted at a weighted average price of $43.91 per share.

Lazard's remaining share repurchase authorization was $133 million at September 30, 2011, which expires December 31, 2012. On October 26, 2011, Lazard's Board of Directors authorized an additional share repurchase of up to $125 million, which expires December 31, 2013, and brings the current share repurchase authorization to $258 million.

On July 22, 2011, Lazard entered into an agreement with Intesa Sanpaolo S.p.A., pursuant to which Lazard repurchased its $150 million subordinated convertible promissory note due 2016, guaranteed by Lazard Group and held by Intesa, for a purchase price of approximately $131.8 million plus accrued interest of approximately $1.6 million, resulting in a pre-tax gain of $18.2 million. The repurchase was funded from available cash on hand.

On October 26, 2011, Lazard declared a quarterly dividend of $0.16 per share on its outstanding Class A common stock. On April 26, 2011, Lazard had increased the quarterly dividend on its outstanding Class A common stock by 28% to $0.16 per share.

Lazard's financial position remains strong with $1 billion in cash at September 30, 2011. Total stockholders' equity related to Lazard's interests was $773.3 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-U.S. GAAP measures used in the accompanying financial information:

Fully exchanged and adjusted basis
Operating revenue
Compensation and benefit expense
Non-compensation expense
Earnings from operations
Earnings attributable to noncontrolling interests
Pre-tax income
Net income
Diluted net income per share
Diluted weighted average shares
Provision for income taxes

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.

***

About Lazard

Lazard, one of the world's preeminent financial advisory and asset management firms, operates from 42 cities across 27 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.

LAZ-G

***

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.

Endnotes:

¹	Represents diluted net income per share on both a fully exchanged and adjusted and U.S. GAAP basis, throughout the release. (See Endnotes (2) and (14).)

²	Fully exchanged and adjusted basis includes full conversion of all outstanding exchangeable interests held by the members of LAZ-MD Holdings and excludes for the 2011 third quarter and nine-month periods the gain on the repurchase of the subordinated convertible promissory note. The 2010 nine-month period excludes pre-tax special charges, and is a non-GAAP measure. (See Endnote (14).)

³	Core operating business revenue includes the Financial Advisory and Asset Management businesses, and excludes revenues from Corporate.

⁴	Refers to the percentage of compensation and benefits expense to operating revenue, on a fully exchanged and adjusted basis. Compensation and benefits expense excludes expenses related to noncontrolling interests, gains/losses related to the changes in the fair value of investments held in connection with Lazard Fund Interests, and, for the 2010 nine-month period, excludes a special item related to the amendment of our retirement policy in the 2010 first quarter, and is a non-GAAP measure. (See Endnotes (2) and (14).)

⁵	Excludes gains and losses related to the changes in fair value of the investments held in connection with Lazard Fund Interest Awards, for which a corresponding equal amount is excluded from compensation and benefits. Three- and nine-month periods for 2011 exclude the gain on the repurchase of the subordinated convertible promissory note. (See Endnote (14).)

⁶	Excludes revenues and expenses attributable to noncontrolling interests, amortization of intangible assets related to acquisitions and interest expense primarily related to corporate financing activities and, for the 2011 third quarter and nine-month periods, the gain on the repurchase of the subordinated convertible promissory note, and, for the 2010 nine-month period, excludes pre-tax special charges, and is a non-GAAP measure . (See Endnote (14).)

⁷	Represents earnings from operations as a percentage of operating revenue and is a non-GAAP measure.

⁸	Excludes pre-tax special charges for the 2010 nine-month period, and is a non-GAAP measure. (See Endnote (14).)

⁹	Refers to cash compensation plus deferred incentive compensation applicable to a given year, as illustrated in the compensation history on page 16 of Lazard's fourth-quarter 2010 earnings release.

¹⁰	Non-compensation expense excludes intangible assets related to acquisitions, expenses related to noncontrolling interests and, for the 2010 nine-month period, restructuring charges recorded in the 2010 first quarter, and is a non-GAAP measure. (See Endnote (14).)

¹¹	Refers to the ratio of non-compensation expense to operating revenue, and is a non-GAAP measure. (See Endnotes (10) and (14).)

¹²	Net of the provision pursuant to the tax receivable agreement, when applicable, and is a non-GAAP measure.

¹³	Refers to the provision for income taxes as a percentage of pre-tax earnings, excluding net income attributable to noncontrolling interests, and is a non-GAAP measure. (See Endnotes (12) and (14).)

¹⁴	See Fully Exchanged and Adjusted Statement of Operations, Reconciliation of U.S. GAAP to Fully Exchanged and Adjusted Statement of Operations and Notes to Financial Schedules on pages 11, 13, and 18, respectively.


LAZARD LTD FULLY EXCHANGED AND ADJUSTED STATEMENT OF OPERATIONS (a) (Non-GAAP - unaudited)

	Three Months Ended September 30,								Nine Months Ended September 30,

	2011			2010			% Change		2011			2010 (i)			% Change
	($ in thousands)

Financial Advisory
M&A and strategic advisory	$	199,120		$	160,662		24	%	$	533,440		$	454,073		17	%
Capital markets & other advisory		16,350			27,750		(41	%)		76,197			69,000		10	%
Subtotal		215,470			188,412		14	%		609,637			523,073		17	%
Restructuring		38,149			66,000		(42	%)		122,039			246,066		(50	%)
Total		253,619			254,412		(0	%)		731,676			769,139		(5	%)

Asset Management
Management fees		199,980			183,975		9	%		627,965			512,758		22	%
Incentive fees		9,395			15,469		(39	%)		20,872			41,891		(50	%)
Other revenue		7,321			8,523		(14	%)		29,534			24,266		22	%
Total		216,696			207,967		4	%		678,371			578,915		17	%

Core operating business revenue (b)		470,315			462,379		2	%		1,410,047			1,348,054		5	%

Corporate		(3,777	)		10,786		(135	%)		5,115			20,389		(75	%)

Operating revenue (c)		466,538			473,165		(1	%)		1,415,162			1,368,443		3	%

Less:
Compensation & benefits expense (d)		276,656			281,697		(2	%)		831,223			818,535		2	%
Non-compensation expense (e)		98,653			89,249		11	%		291,003			259,483		12	%

Earnings from operations (f)		91,229			102,219		(11	%)		292,936			290,425		1	%

Earnings attributable to noncontrolling interests (g)		1,440			895					10,158			5,935
Amortization of intangibles		(1,716	)		(1,719	)				(4,896	)		(5,258	)
Interest expense		(21,386	)		(21,928	)				(65,983	)		(67,097	)

Pre-tax income		69,567			79,467		(12	%)		232,215			224,005		4	%

Less:
Provision for income taxes (h)		16,477			17,200					48,015			44,432
Net income attributable to noncontrolling interests		225			111					7,017			2,950
Net income	$	52,865		$	62,156		(15	%)	$	177,183		$	176,623		0	%

Diluted weighted average shares		136,857,956			138,094,101		(1	%)		138,265,494			138,185,702		0	%

Diluted net income per share	$	0.39		$	0.46		(16	%)	$	1.30		$	1.30		(0	%)

Ratio of compensation to operating revenue		59.3	%		59.5	%				58.7	%		59.8	%
Ratio of non-compensation to operating revenue		21.1	%		18.9	%				20.6	%		19.0	%
Margin from operations (i)		19.6	%		21.6	%				20.7	%		21.2	%
Effective tax rate		23.8	%		21.7	%				21.3	%		20.1	%

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 U.S. GAAP Reconciliation to Fully Exchanged and Adjusted Statement of Operations.

See Notes to Financial Schedules


LAZARD LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (U.S. GAAP)

	Three Months Ended September 30,								Nine Months Ended September 30,

	2011			2010			% Change		2011			2010			% Change
	($ in thousands, except per share data)

Total revenue	$	484,583		$	477,310		2	%	$	1,446,529		$	1,384,271		4	%
Interest expense		(22,164	)		(24,073	)				(68,795	)		(73,788	)
Net revenue		462,419			453,237		2	%		1,377,734			1,310,483		5	%
Operating expenses:
Compensation and benefits		273,532			282,528		(3	%)		830,011			845,926		(2	%)

Occupancy and equipment		24,345			22,414					70,030			65,004
Marketing and business development		19,844			17,503					58,834			51,358
Technology and information services		20,417			18,904					60,566			53,552
Professional services		11,434			10,731					34,395			29,716
Fund administration and outsourced services		14,019			12,037					40,777			34,407
Amortization of intangible assets related to acquisitions		1,716			1,719					4,896			5,258
Other		9,374			7,934					27,839			26,117
Subtotal		101,149			91,242		11	%		297,337			265,412		12	%

Restructuring expense		-			-					-			87,108
Operating expenses		374,681			373,770		0	%		1,127,348			1,198,446		(6	%)

Operating income		87,738			79,467		10	%		250,386			112,037		NM

Provision for income taxes		20,605			9,113		126	%		51,704			29,049		NM
Net income		67,133			70,354		(5	%)		198,682			82,988		NM
Net income attributable to noncontrolling interests		4,434			6,263					18,972			7,859
Net income attributable to Lazard Ltd	$	62,699		$	64,091		(2	%)	$	179,710		$	75,129		NM

Attributable to Lazard Ltd Common Stockholders:
Weighted average shares outstanding:
Basic		118,315,944			111,059,071		7	%		117,586,028			101,440,741		16	%
Diluted		136,857,956			138,094,101		(1	%)		138,265,494			135,554,131		2	%
Net income per share:
Basic	$	0.53		$	0.58		(9	%)	$	1.53		$	0.74		NM
Diluted	$	0.49		$	0.51		(4	%)	$	1.39		$	0.58		NM


LAZARD LTD RECONCILIATION OF U.S. GAAP TO FULLY EXCHANGED AND ADJUSTED STATEMENT OF OPERATIONS (a) (unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,

	2011			2010			2011			2010

Operating Revenue
Net revenue - U.S. GAAP Basis	$	462,419		$	453,237		$	1,377,734		$	1,310,483

Adjustments for special items (j):
Gain on repurchase of subordinated debt		(18,171	)		-			(18,171	)		-
Other Adjustments:
Revenue related to noncontrolling interests		(3,057	)		(2,000	)		(14,345	)		(9,137	)
(Gain)/loss related to Lazard Fund Interests		3,961			-			3,961			-
Other interest expense		21,386			21,928			65,983			67,097

Operating revenue	$	466,538		$	473,165		$	1,415,162		$	1,368,443



Compensation & Benefits Expense
Compensation & benefits expense - U.S. GAAP Basis	$	273,532		$	282,528		$	830,011		$	845,926

Adjustments for special items (j):
Acceleration of restricted stock unit vesting related to retirement policy change		-			-			-			(24,860	)
Other Adjustments:
(Charges)/credits pertaining to Lazard Fund Interests derivative liability		3,961			-			3,961			-
Compensation related to noncontrolling interests		(837	)		(831	)		(2,749	)		(2,531	)

Compensation & benefits expense	$	276,656		$	281,697		$	831,223		$	818,535



Non-Compensation Expense
Operating expenses - subtotal - U.S. GAAP Basis	$	101,149		$	91,242		$	297,337		$	265,412

Adjustments:
Amortization of intangible assets related to acquisitions		(1,716	)		(1,719	)		(4,896	)		(5,258	)
Non-comp related to noncontrolling interests		(780	)		(274	)		(1,438	)		(671	)

Non-compensation expense	$	98,653		$	89,249		$	291,003		$	259,483



Pre-Tax Income
Operating income - U.S. GAAP Basis	$	87,738		$	79,467		$	250,386		$	112,037

Adjustments for special items (j):
Gain on repurchase of subordinated debt		(18,171	)		-			(18,171	)		-
Acceleration of restricted stock unit vesting related to retirement policy change		-			-			-			24,860
Restructuring expense		-			-			-			87,108

Pre-tax income	$	69,567		$	79,467		$	232,215		$	224,005



Net Income attributable to Lazard Ltd
Net income attributable to Lazard Ltd - U.S. GAAP Basis	$	62,699		$	64,091		$	179,710		$	75,129
Adjustments for special items (j):
Gain on repurchase of subordinated debt		(18,171	)		-			(18,171	)		-
Acceleration of restricted stock unit vesting related to retirement policy change		-			-			-			24,860
Restructuring expense		-			-			-			87,108
Tax provision/(benefits) allocated to special items		4,634			(7,068	)		4,634			(14,111	)
Net gain/(loss) attributable to LAZ-MD Holdings		801			-			801			(24,388	)

Adjustment for full exchange of exchangeable interests (k):
Tax adjustment for full exchange		(506	)		(1,019	)		(945	)		(1,272	)
Amount attributable to LAZ-MD		3,408			6,152			11,154			29,297

Net income	$	52,865		$	62,156		$	177,183		$	176,623



Diluted net income per share:
U.S. GAAP Basis - Net income attributable to Lazard Ltd	$	0.49		$	0.51		$	1.39		$	0.58

Net income (fully exchanged and adjusted)	$	0.39		$	0.46		$	1.30		$	1.30

See Notes to Financial Schedules


LAZARD LTD UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION ( $ in thousands)

	September 30, 2011			December 31, 2010
ASSETS
Cash and cash equivalents	$	989,894		$	1,209,695
Deposits with banks		267,906			356,539
Cash deposited with clearing organizations and other segregated cash		66,219			92,911
Receivables		595,351			568,704
Investments		346,912			417,410
Goodwill and other intangible assets		394,382			361,439
Other assets		475,805			415,834

Total Assets	$	3,136,469		$	3,422,532


LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities
Deposits and other customer payables	$	342,704		$	361,553
Accrued compensation and benefits		250,252			498,880
Senior debt		1,076,850			1,076,850
Other liabilities		548,681			539,132
Subordinated debt		-			150,000
Total liabilities		2,218,487			2,626,415

Commitments and contingencies

Stockholders' equity
Preferred stock, par value $.01 per share:
Series A		-			-
Series B		-			-
Common stock, par value $.01 per share:
Class A		1,229			1,197
Class B		-			-
Additional paid-in capital		685,800			758,841
Retained earnings		285,575			166,468
Accumulated other comprehensive loss, net of tax		(57,712	)		(46,158	)
		914,892			880,348
Class A common stock held by a subsidiary, at cost		(141,593	)		(227,950	)
Total Lazard Ltd stockholders' equity		773,299			652,398
Noncontrolling interests		144,683			143,719
Total stockholders' equity		917,982			796,117

Total liabilities and stockholders' equity	$	3,136,469		$	3,422,532


LAZARD LTD SELECTED QUARTERLY OPERATING RESULTS ON A FULLY EXCHANGED AND ADJUSTED BASIS (a) (unaudited)

	Three Months Ended

	Sept. 30, 2011			June 30, 2011			Mar. 31, 2011			Dec. 31, 2010			Sept. 30, 2010			June 30, 2010			Mar. 31, 2010 (j)			Dec. 31, 2009 (j)			Sept. 30, 2009
	($ in thousands, except per share and AUM data)
Financial Advisory
M&A and Strategic Advisory	$	199,120		$	170,568		$	163,752		$	259,986		$	160,662		$	145,854		$	147,557		$	170,206		$	124,691
Capital Markets & Other Advisory		16,350			30,298			29,549			43,616			27,750			19,918			21,331			39,943			16,390
Subtotal		215,470			200,866			193,301			303,602			188,412			165,772			168,888			210,149			141,081
Restructuring		38,149			48,333			35,557			47,809			66,000			79,879			100,188			103,449			119,101
Total		253,619			249,199			228,858			351,411			254,412			245,651			269,076			313,598			260,182

Asset Management
Management Fees		199,980			221,217			206,768			203,127			183,975			166,987			161,796			152,810			133,377
Incentive Fees		9,395			6,331			5,146			44,407			15,469			12,635			13,787			40,988			15,202
Other Revenue		7,321			10,115			12,098			8,203			8,523			7,597			8,147			10,324			8,769
Total		216,696			237,663			224,012			255,737			207,967			187,219			183,730			204,122			157,348

Core operating business revenue		470,315			486,862			452,870			607,148			462,379			432,870			452,806			517,720			417,530

Corporate		(3,777	)		4,911			3,981			2,932			10,786			5,498			4,104			(3,327	)		13,953

Operating revenue	$	466,538		$	491,773		$	456,851		$	610,080		$	473,165		$	438,368		$	456,910		$	514,393		$	431,483

Earnings from operations	$	91,229		$	106,548		$	95,160		$	153,679		$	102,219		$	89,180		$	99,026		$	(52,563	)	$	95,816

Pre-tax income (loss) (l)	$	69,567		$	89,202		$	73,446		$	133,974		$	79,467		$	67,051		$	77,487		$	(75,808	)	$	73,165

Net income (loss) attributable to Lazard Ltd	$	52,865		$	65,779		$	58,539		$	104,451		$	62,156		$	53,036		$	61,431		$	(54,870	)	$	52,487

Diluted net income (loss) per share	$	0.39		$	0.48		$	0.43		$	0.76		$	0.46		$	0.39		$	0.46			($0.46	)	$	0.41

Margin from operations (i)		19.6	%		21.7	%		20.8	%		25.2	%		21.6	%		20.3	%		21.7	%		-10.2	%		22.2	%

Supplemental Information:
Ending Assets Under Management ($ millions)	$	135,812		$	161,597		$	160,451		$	155,337		$	143,573		$	123,483		$	134,972		$	129,543		$	120,185

See Notes to Financial Schedules


LAZARD LTD RECONCILIATION OF SHARES OUTSTANDING AND BASIC & DILUTED NET INCOME (LOSS) PER SHARE (unaudited)

U.S. GAAP BASIS

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	($ in thousands, except per share data)
Net income attributable to Lazard Ltd	$	62,699	$	64,091	$	179,710	$	75,129
Add - net income associated with Class A common shares issuable on a non-contingent basis		86		116		285		95
Basic net income attributable to Lazard Ltd		62,785		64,207		179,995		75,224
Add - dilutive effect, as applicable, of:
Adjustments to income relating to interest expense and changes in net income attributable to noncontrolling interests resulting from assumed incremental Class A common share issuances, net of tax		3,618		5,992		12,692		3,988
Diluted net income attributable to Lazard Ltd	$	66,403	$	70,199	$	192,687	$	79,212

Weighted average shares outstanding		115,071,470		108,302,438		114,026,323		98,579,076
Add - adjustment for shares of Class A common issuable on a non-contingent basis		3,244,474		2,756,633		3,559,705		2,861,665
Basic weighted average shares outstanding		118,315,944		111,059,071		117,586,028		101,440,741
Add - dilutive effect, as applicable, of:
Weighted average number of incremental Class A common shares issuable from equity-based compensation awards, convertible note, convertible preferred stock and exchangeable interests		18,542,012		27,035,030		20,679,466		34,113,390
Diluted weighted average shares outstanding		136,857,956		138,094,101		138,265,494		135,554,131

Basic net income per share attributable to Lazard Ltd	$	0.53	$	0.58	$	1.53	$	0.74

Diluted net income per share attributable to Lazard Ltd	$	0.49	$	0.51	$	1.39	$	0.58


FULLY EXCHANGED AND ADJUSTED BASIS (a)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Net income	$	52,865	$	62,156	$	177,183	$	176,623
Add - dilutive effect of adjustments to income for interest expense on convertible note, net of tax		-		975		1,966		2,958
Diluted net income	$	52,865	$	63,131	$	179,149	$	179,581

Basic weighted average shares outstanding		118,315,944		111,059,071		117,586,028		101,440,741

Add - adjustment for shares of Class A common issuable relating to exchangable interests		6,899,292		12,002,898		7,251,355		21,155,267
- dilutive effect, as applicable, of weighted average number of incremental Class A common shares issuable from equity-based compensation awards, convertible note and convertible preferred stock		11,642,720		15,032,132		13,428,111		15,589,694
Diluted weighted average shares outstanding		136,857,956		138,094,101		138,265,494		138,185,702

Diluted net income per share	$	0.39	$	0.46	$	1.30	$	1.30

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 U.S. GAAP Reconciliation to Fully Exchanged and Adjusted Statement of Operations.
See Notes to Financial Schedules


LAZARD LTD
ASSETS UNDER MANAGEMENT ("AUM")

	As of							Variance
	September 30, 2011			June 30, 2011		December 31, 2010		Qtr to Qtr			YTD
				($ in millions)
Equities	$	111,035		$	136,178	$	131,300		(18.5	%)		(15.4	%)
Fixed Income		17,564			17,939		17,144		(2.1	%)		2.4	%
Alternative Investments		5,555			5,877		5,524		(5.5	%)		0.6	%
Private Equity		1,493			1,440		1,294		3.7	%		15.4	%
Cash		165			163		75		1.2	%		120.0	%
Total AUM	$	135,812		$	161,597	$	155,337		(16.0	%)		(12.6	%)



	Three Months Ended September 30,							Nine Months Ended September 30,
	2011			2010				2011			2010
	($ in millions)							($ in millions)
AUM - Beginning of Period	$	161,597		$	123,483			$	155,337		$	129,543

Net Flows		(1,122	)		1,142				(754	)		6,173
Market and foreign exchange appreciation (depreciation)		(24,663	)		18,948				(18,771	)		7,857

AUM - End of Period	$	135,812		$	143,573			$	135,812		$	143,573

Average AUM	$	148,705		$	133,528			$	153,299		$	132,893

% Change in average AUM		11.4	%						15.4	%

Note: Average AUM is based on an average of quarterly ending balances for the respective periods.


LAZARD LTD

Notes to Financial Schedules


(a)	Fully Exchanged and Adjusted Statement of Operations begins with information that is prepared in accordance with U.S. GAAP, (i) adjusted to reflect the full conversion of outstanding exchangeable interests held by members of LAZ-MD Holdings; (ii) excluding special items in certain periods as described more thoroughly in (j) below, and (iii) is presented in a non-U.S. GAAP ("non-GAAP") format including non-GAAP measures. Lazard believes that presenting results and measures on a fully exchanged and adjusted basis in conjunction with U.S. GAAP measures provides the most meaningful basis for comparison of its operating results across periods. (See Reconciliation of U.S. GAAP to Fully Exchanged and Adjusted Statement of Operations.)
(b)	Core operating business revenue includes the results of Financial Advisory and Asset Management businesses and excludes revenues from Corporate.
(c)	Excludes (i) gains/losses related to the changes in the fair value of investments held in connection with Lazard Fund Interests for which a corresponding equal amount is excluded from compensation & benefits, (ii) revenues related to non-controlling interests, and (iii) interest expense related to other financing activities, which is included in "Interest expense," and is a non-GAAP measure. Three and nine-month periods for 2011 exclude a special item related to the gain on repurchase of the Company's subordinated debt. (See Reconciliation of U.S. GAAP to Fully Exchanged and Adjusted Statement of Operations.)
(d)	Excludes (i) charges/credits related to the changes in the fair value of liability in connection with Lazard Fund Interests, (ii) noncontrolling interests, which are included in "Earnings attributable to noncontrolling interests" and, (iii) for the 2010 nine-month period, a special item related to the amendment of our retirement policy, and is a non-GAAP measure. (See note (j) below and adjustments in the Reconciliation of U.S. GAAP to Fully Exchanged and Adjusted Statement of Operations.)
(e)	Excludes amortization of intangible assets related to acquisitions and expenses related to noncontrolling interests, which are included in "Earnings attributable to noncontrolling interests," and is a non-GAAP measure. (See adjustments in the Reconciliation of U.S. GAAP to Fully Exchanged and Adjusted Statement of Operations.)
(f)	Excludes (i) amortization of intangible assets related to acquisitions, (ii) interest expense primarily related to corporate financing activities, which is included in "Interest expense," (iii) revenues and expenses related to noncontrolling interests and (iv) special items noted in (j) below in applicable periods, and is a non-GAAP measure. (See adjustments in the Reconciliation of U.S. GAAP to Fully Exchanged and Adjusted Statement of Operations.)
(g)	Includes noncontrolling interests share of revenue, net of related compensation and benefits and non-compensation expenses, and is a non-GAAP measure.
(h)	Net of the provision pursuant to the tax receivable agreement, when applicable, and is a non-GAAP measure.
(i)	Represents earnings from operations as a percentage of operating revenues, and is a non-GAAP measure.
(j)	For the three and nine-month period ended September 30, 2011, the special item is related to the gain on the repurchase of the Company's subordinated debt and the allocated tax effect. For the three-month and nine-month periods ended March 31, 2010 and September 30, 2010, respectively, special items are comprised of restructuring expense related to severance, benefits and other charges in connection with the reduction and realignment of staff and expenses related to the accelerated vesting of restricted stock units in connection with the Company's change in retirement policy and the allocated tax effect. (See adjustments for special items within the Reconciliation of U.S. GAAP to Fully Exchanged and Adjusted Statement of Operations.) The three-month period ended December 31, 2009 excludes expenses related to the acceleration of unamortized restricted stock units previously granted to our former Chairman and Chief Executive Officer and the accelerated vesting of deferred cash awards previously granted of $86,514 and $60,512, respectively, and the allocated tax effect.
(k)	Represents a reversal of noncontrolling interests related to LAZ-MD Holdings' ownership of Lazard Group common membership interests, net of an adjustment for Lazard Ltd entity-level taxes to affect a full exchange of interests and excluding the items noted in (j) above.
(l)	Pre-tax income (loss) for the three-month periods ended December 31, 2010 and December 31, 2009 is net of the provision (benefit) pursuant to tax receivable agreement of $11,195 and ($1,258), respectively.
NM	Not meaningful

Lazard Ltd
Media contacts:
Judi Frost Mackey, +1 212 632 1428
judi.mackey@lazard.com
Richard Creswell, +44 207 187 2305
richard.creswell@lazard.com
or
Investor contacts:
Matthieu Bucaille, +1 212 632 6259
Chief Financial Officer
Investor Relations, +1 212 632 2685
or 1 877 266 8601 (US only)
investorrelations@lazard.com

Source: Lazard Ltd

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