Lazard Ltd Reports Third-Quarter and Nine-Month 2018 Results
Record nine-month operating revenue for Financial Advisory and Asset Management
Average assets under management of
Strong operating cash flow resulted in record return of capital year to date
For the first nine months of 2018, net income, as adjusted1 and excluding a pre-tax charge 2, was
“Record operating revenue for the first nine months of 2018 was tempered by a relatively flat third quarter, but we are well positioned to achieve strong results for the full year,” said
($ in millions, except per share data and AUM) |
Quarter Ended Sept. 30, |
Nine Months Ended Sept. 30, |
|||||||||||||||
2018 | 2017 | %’18-’17 | 2018 | 2017 | %’18-’17 | ||||||||||||
Net Income | |||||||||||||||||
US GAAP | $107 | $109 | (2)% | $414 | $337 | 23% | |||||||||||
Per share, diluted | $0.82 | $0.82 | 0% | $3.16 | $2.55 | 24% | |||||||||||
Adjusted1,2 | $111 | $112 | (1)% | $420 | $352 | 19% | |||||||||||
Per share, diluted | $0.86 | $0.85 | 1% | $3.21 | $2.66 | 21% | |||||||||||
Operating Revenue1 | |||||||||||||||||
Total operating revenue | $606 | $627 | (3)% | $2,070 | $1,972 | 5% | |||||||||||
Financial Advisory | $304 | $306 | (1)% | $1,108 | $1,053 | 5% | |||||||||||
Asset Management | $302 | $315 | (4)% | $961 | $901 | 7% | |||||||||||
AUM ($ in billions) | |||||||||||||||||
Period End | $240 | $238 | 1% | ||||||||||||||
Average | $240 | $234 | 3% | $247 | $221 | 12% |
Note: Endnotes are on page 7 of this release. A reconciliation of adjusted GAAP to U.S. GAAP is on page 18.
OPERATING REVENUE
Operating revenue1 was
Financial Advisory
Our Financial Advisory results include M&A Advisory, Capital Advisory, Capital Raising, Restructuring, Shareholder Advisory, Sovereign Advisory, and other strategic advisory work for clients.
Third Quarter
Financial Advisory operating revenue was
During the third quarter of 2018,
Among the major M&A transactions that were completed during the third quarter of 2018 were the following (clients are in italics): WGL Holdings’
During or since the third quarter of 2018 we have been engaged in a broad range of highly visible and complex restructuring and debt advisory assignments for debtors and creditors. Publicly announced assignments completed during the third quarter of 2018 on which
Our Sovereign and Capital Advisory services remained active globally, advising governments and corporations on balance sheet matters, financing strategy and capital raising.
Please see M&A transactions on which
First Nine Months
Financial Advisory operating revenue was a record
Asset Management
In the text portion of this press release, we present our Asset Management results as 1) Management fees and other revenue, and 2) Incentive fees.
Third Quarter
Asset Management operating revenue was
Management fees and other revenue was
Average AUM for the third quarter of 2018 was
AUM as of
Incentive fees were
First Nine Months
Asset Management operating revenue was a record
Management fees and other revenue was a record
Average AUM for the first nine months of 2018 was
Incentive fees were
OPERATING EXPENSES
Compensation and Benefits
In managing compensation and benefits expense, we focus on annual awarded compensation (cash compensation and benefits plus deferred incentive compensation with respect to the applicable year, net of estimated future forfeitures and excluding charges). We believe annual awarded compensation reflects the actual annual compensation cost more accurately than the GAAP measure of compensation cost, which includes applicable-year cash compensation and the amortization of deferred incentive compensation principally attributable to previous years’ deferred compensation. We believe that by managing our business using awarded compensation with a consistent deferral policy, we can better manage our compensation costs, increase our flexibility in the future and build shareholder value over time.
For the third quarter of 2018, we accrued adjusted compensation and benefits expense1 at an adjusted compensation1 ratio of 55.8%. This resulted in
For the first nine months of 2018, adjusted compensation and benefits expensewas
We manage our compensation and benefits expense based on awarded compensation with a consistent deferral policy. Assuming that the performance of both of our businesses, our hiring levels, and the compensation environment are similar to 2017, we expect our 2018 awarded compensation ratio1 to be in line with the 2017 awarded compensation ratio.
We take a disciplined approach to compensation, and our goal is to maintain a compensation-to-operating revenue ratio over the cycle in the mid- to high-50s percentage range on both an awarded and adjusted basis, with consistent deferral policies.
Non-Compensation Expense
For the third quarter of 2018, adjusted non-compensation expense1 was
For the first nine months of 2018, adjusted non-compensation expense was
Our goal remains to achieve an adjusted non-compensation expense-to-operating revenue ratio over the cycle of 16% to 20%.
TAXES
The provision for taxes, on an adjusted basis1,2, was
CAPITAL MANAGEMENT AND BALANCE SHEET
Our primary capital management goals include managing debt and returning capital to shareholders through dividends and share repurchases.
For the third quarter of 2018,
For the first nine months of 2018,
In the third quarter of 2018, we issued
Year to date, we have repurchased 6.2 million shares at an average price of
On
On
Lazard’s financial position remains strong. As of
***
CONFERENCE CALL
A replay of the conference call will be available by
ABOUT
***
Cautionary Note Regarding Forward-Looking Statements:
This press release contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “could”, “would”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “target,” “goal”, or “continue”, and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies, business plans and initiatives and anticipated trends in our business.These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements.
These factors include, but are not limited to, those discussed in our Annual Report on Form 10-K under Item 1A “Risk Factors,” and also discussed from time to time in our reports on Forms 10-Q and 8-K, including the following:
- A decline in general economic conditions or the global or regional financial markets;
- A decline in our revenues, for example due to a decline in overall mergers and acquisitions (M&A) activity, our share of the M&A market or our assets under management (AUM);
- Losses caused by financial or other problems experienced by third parties;
- Losses due to unidentified or unanticipated risks;
- A lack of liquidity, i.e., ready access to funds, for use in our businesses; and
- Competitive pressure on our businesses and on our ability to retain and attract employees at current compensation levels.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this release to conform our prior statements to actual results or revised expectations and we do not intend to do so.
***
ENDNOTES
1 A non-U.S. GAAP measure. See attached financial schedules and related notes for a detailed explanation of adjustments to corresponding U.S. GAAP results. We believe that presenting our results on an adjusted basis, in addition to U.S. GAAP results, is the most meaningful and useful way to compare our operating results across periods.
2 Third-quarter and first nine-month 2018 adjusted results exclude pre-tax charges of (i)
LAZ-EPE
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FINANCIAL ADVISORY ASSIGNMENTS*
*Note: the timing of completions may not match the timing of fee recognition under U.S. GAAP
Mergers and Acquisitions (Completed in the third quarter of 2018)
Among the large, publicly announced M&A Advisory transactions or assignments completed during the third quarter of 2018 on which
- WGL Holdings’
$6.4 billion sale toAltaGas - Sky on the sale of its stake in Sky Betting & Gaming (“SBG”) as part of SBG’s
$4.7 billion sale to TheStars Group Quality Care Properties on its$3.9 billion sale toWelltower in conjunction with the sale of HCR ManorCare to ProMedicaDaily Mail & General Trust in the £2.5 billion sale of ZPG toSilver Lake - Total’s €2.5 billion acquisition of Direct Energie
- Servier’s
$2.4 billion acquisition of Shire’s Oncology business - Scotiabank’s
$2.2 billion acquisition of BBVA’s 68% interest in BBVA Chile - Accruent’s
$2.0 billion sale toFortive Dalmore Capital and Equitix in the £1.4 billion recommended consortium acquisition ofJohn Laing Infrastructure Fund - CDH Investments in the AUD 1.9 billion consortium acquisition of Sirtex
- Space4 in its combination with
Guala Closures , valuing Guala at €1.1 billion - Special Committee of the
Board of Representatives of Deep Gulf Energy on the company’s$1.2 billion sale toKosmos Energy - Altice on the sale of a 75% stake in Towers of
Portugal to a consortium, valuing the company at €660 million Chequers Capital , IGI Private Equity and Rollon management in the €470 million sale of Rollon to Timken- Cirsa’s sale to Blackstone
- Beeline’s partnership with
New Mountain Capital - Selmet’s sale to Consolidated Precision Products
- Investindustrial’s acquisition of HTL Strefa
Mergers and Acquisitions (Announced)
Among the ongoing, large, publicly announced M&A transactions and assignments on which
- Aetna’s
$77 billion sale toCVS Health - Express Scripts’
$67 billion sale toCigna - The Supervisory Board ofinnogy in the company’s €37.9 billion takeover by E.ON
The Woodbridge Company in Thomson Reuters’ sale of a 55% stake in its Financial & Risk business to Blackstone, valuing the business at$20 billion *- AkzoNobel’s €10.1 billion sale of its Specialty Chemicals business to Carlyle and GIC*
- Forest City’s
$11.4 billion sale toBrookfield - Beni Stabili’s merger with
Covivio , creating a combined entity with a market capitalization of over €7 billion - Caisse des Dépôts et Consignations in the
$6.6 billion contribution of its 41% stake inCNP Assurances toLa Poste , with Caisse des Dépôts et Consignations subsequently becoming the majority shareholder of Groupe La Poste - Thales’ €5.6 billion acquisition of
Gemalto through a recommended all-cash offer - MassMutual in the
$5.8 billion strategic combination ofInvesco and OppenheimerFunds - Showa Shell Sekiyu’s
$5.5 billion share exchange agreement withIdemitsu Kosan - WestRock’s
$4.9 billion acquisition of KapStone - Altice on the sale of a 49.99% stake in Starlight France to KKR, valuing the company at €3.6 billion
Independent Committee of Vedanta Resources in the recommended cash offer for Vedanta made by Volcan Investments, valuing Vedanta at$3.1 billion *- SUPERVALU’s
$2.9 billion sale toUnited Natural Foods * - Genworth Financial’s
$2.7 billion sale toChina Oceanwide Sempra Energy , on the$2.2 billion acquisition ofInfraREIT by its majority-owned affiliate, Oncor, and Sempra’s concurrent acquisition of a 50% limited partnership interest inSharyland Utilities for$98 million - BASF’s €1.6 billion acquisition of Solvay’s global polyamide business
- Archer Daniels Midland’s €1.5 billion acquisition of
Neovia - Sempra Energy’s
$1.54 billion sale of its U.S. non-utility solar platform and certain other renewable energy assets toConsolidated Edison - Episerver’s
$1.16 billion sale toInsight Venture Partners * - Telia Company’s
SEK 9.2 billion acquisition ofBonnier Broadcasting - Rolls-Royce’s £500 million sale of its Commercial Marine business to KONGSBERG
- Asco Industries’
$650 million sale toSpirit AeroSystems - Allstate’s
$525 million acquisition of InfoArmor* Alpha Bank , Eurobank,National Bank of Greece andPiraeus Bank in the sale of majority stakes inNireus and Selonda toAndromeda Group , AMERRA and Mubadala, valuing the combined business at approximately$500 million Carrefour on the potential investment byTencent and Yonghui in Carrefour China and a strategic cooperation agreement withTencent inChina - Rhône Capital’s acquisition of a 45% stake in MAXAM from Advent
- AviAlliance in the 20-year extension of the
Athens International Airport Concession Agreement - Ardian in the sale of its stake in Siaci Saint Honore
- EnerMech’s sale to Carlyle
*Transaction completed since
Capital Advisory
Among the publicly announced Capital Advisory transactions or assignments on which
Special Committee of Independent Directors of VMware in VMware’s declaration of an$11 billion cash dividend in connection with Dell’s Class V tracking stock exchange transaction- Aston Martin Lagonda’s £1.1 billion initial public offering
- EF Solare Italia, an equal JV between
Enel and F2i, on its €1.0 billion refinancing - Neoen’s €628 million initial public offering
Risanamento on its €542 million debt refinancing in connection with the Milano Santa Giulia development projectLGT Group Foundation inChina Renaissance’s$345 million initial public offering- KAEFER Isoliertechnik on its €250 million senior secured notes offering
- Piovan’s €179 million initial public offering
- Verastem’s
$150 million registered direct offering of convertible notes Legacy Reserves in its$130 million exchange of senior notes for new convertible senior notesDHT Holdings in its$125 million privately negotiated exchanges of existing convertible notes and concurrent private placement of new convertible notes
Sovereign Advisory
Among the publicly announced Sovereign Advisory assignments on which
- Southern Gas Corridor CJSC of
Azerbaijan Ministry of Finance (The Kingdom ofBahrain )National Bank of Bahrain - Mumtalakat Bahrain
- The
Democratic Republic of the Congo - The
Republic of the Congo - The
Republic of Croatia The Federal Democratic Republic ofEthiopia The Gabonese Republic - The Hashemite Kingdom of
Jordan - SNIM (
The Islamic Republic ofMauritania ) - The
Republic ofMozambique Nama Holding (Oman )Oman Oil Company Belgrade Nikola Tesla Airport (TheRepublic ofSerbia )Eskom Holdings (Republic ofSouth Africa )- Banque Ouest Africaine de Développement (
Togo ) - The
Republic ofTogo Ukraine - NJSC Naftogaz of
Ukraine - The
Republic ofZimbabwe
Restructuring and Debt Advisory Assignments
Restructuring and debtor or creditor advisory assignments completed during the third quarter of 2018 on which
Notable ongoing restructuring and debtor or creditor advisory assignments on which
*Assignment completed since
LAZARD LTDUNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS(U.S. GAAP) | ||||||||||||
Three Months Ended | % Change From | |||||||||||
September 30, | June 30, | September 30, | June 30, | September 30, | ||||||||
($ in thousands, except per share data) | 2018 | 2018 | 2017 | 2018 | 2017 | |||||||
Total revenue | $640,800 | $771,528 | $638,131 | (17%) | 0% | |||||||
Interest expense | (14,319) | (13,590) | (13,272) | |||||||||
Net revenue | 626,481 | 757,938 | 624,859 | (17%) | 0% | |||||||
Operating expenses: | ||||||||||||
Compensation and benefits | 343,987 | 416,159 | 361,787 | (17%) | (5%) | |||||||
Occupancy and equipment | 28,848 | 29,240 | 29,156 | |||||||||
Marketing and business development | 21,868 | 28,228 | 19,798 | |||||||||
Technology and information services | 36,394 | 32,527 | 31,373 | |||||||||
Professional services | 13,353 | 16,714 | 11,005 | |||||||||
Fund administration and outsourced services | 34,748 | 33,227 | 18,325 | |||||||||
Amortization and other acquisition-related (benefits) costs | (5,851) | (8,483) | 172 | |||||||||
Other | 14,453 | 10,386 | 9,031 | |||||||||
Subtotal | 143,813 | 141,839 | 118,860 | 1% | 21% | |||||||
Operating expenses | 487,800 | 557,998 | 480,647 | (13%) | 1% | |||||||
Operating income | 138,681 | 199,940 | 144,212 | (31%) | (4%) | |||||||
Provision for income taxes | 29,956 | 51,561 | 32,742 | (42%) | (9%) | |||||||
Net income | 108,725 | 148,379 | 111,470 | (27%) | (2%) | |||||||
Net income attributable to noncontrolling interests | 1,651 | 1,416 | 2,260 | |||||||||
Net income attributable to Lazard Ltd | $107,074 | $146,963 | $109,210 | (27%) | (2%) | |||||||
Attributable to Lazard Ltd Common Stockholders: | ||||||||||||
Weighted average shares outstanding: | ||||||||||||
Basic | 119,456,516 | 120,306,257 | 121,243,598 | (1%) | (1%) | |||||||
Diluted | 129,859,728 | 130,249,054 | 132,393,664 | (0%) | (2%) | |||||||
Net income (loss) per share: | ||||||||||||
Basic | $0.90 | $1.22 | $0.90 | (26%) | 0% | |||||||
Diluted | $0.82 | $1.13 | $0.82 | (27%) | 0% |
LAZARD LTD | ||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | ||||||
(U.S. GAAP) | ||||||
Nine Months Ended | ||||||
September 30, 2018 | September 30, 2017 | % Change | ||||
($ in thousands, except per share data) | ||||||
Total revenue | $2,180,533 | $2,005,497 | 9% | |||
Interest expense | (41,416) | (39,994) | ||||
Net revenue | 2,139,117 | 1,965,503 | 9% | |||
Operating expenses: | ||||||
Compensation and benefits | 1,165,193 | 1,138,200 | 2% | |||
Occupancy and equipment | 88,326 | 87,468 | ||||
Marketing and business development | 75,755 | 63,577 | ||||
Technology and information services | 102,173 | 87,429 | ||||
Professional services | 42,498 | 33,701 | ||||
Fund administration and outsourced services | 103,159 | 52,576 | ||||
Amortization and other acquisition-related (benefits) costs | (13,468) | 5,003 | ||||
Other | 51,032 | 30,639 | ||||
Subtotal | 449,475 | 360,393 | 25% | |||
Operating expenses | 1,614,668 | 1,498,593 | 8% | |||
Operating income | 524,449 | 466,910 | 12% | |||
Provision for income taxes | 105,684 | 124,109 | (15%) | |||
Net income | 418,765 | 342,801 | 22% | |||
Net income attributable to noncontrolling interests | 5,036 | 5,660 | ||||
Net income attributable to Lazard Ltd | $413,729 | $337,141 | 23% | |||
Attributable to Lazard Ltd Common Stockholders: | ||||||
Weighted average shares outstanding: | ||||||
Basic | 119,897,626 | 122,142,303 | (2%) | |||
Diluted | 130,750,392 | 132,407,551 | (1%) | |||
Net income per share: | ||||||
Basic | $3.45 | $2.76 | 25% | |||
Diluted | $3.16 | $2.55 | 24% |
LAZARD LTDUNAUDITED CONDENSED CONSOLIDATEDSTATEMENT OF FINANCIAL CONDITION\ (U.S. GAAP) |
|||||
|
|||||
September 30, |
December 31, 2017 | ||||
($ in thousands) | |||||
ASSETS | |||||
Cash and cash equivalents | $1,132,395 | $1,483,836 | |||
Deposits with banks and short-term investments | 1,015,872 | 935,431 | |||
Cash deposited with clearing organizations and other segregated cash | 37,985 | 35,539 | |||
Receivables | 640,787 | 571,616 | |||
Investments | 609,595 | 427,186 | |||
Goodwill and other intangible assets | 379,241 | 391,364 | |||
Deferred tax assets | 610,389 | 650,260 | |||
Other assets | 518,514 | 433,445 | |||
Total Assets | $4,944,778 | $4,928,677 | |||
LIABILITIES & STOCKHOLDERS' EQUITY | |||||
Liabilities | |||||
Deposits and other customer payables | $1,056,342 | $992,338 | |||
Accrued compensation and benefits | 489,090 | 593,781 | |||
Senior debt | 1,433,702 | 1,190,383 | |||
Tax receivable agreement obligation | 277,163 | 310,275 | |||
Other liabilities | 566,896 | 582,995 | |||
Total liabilities | 3,823,193 | 3,669,772 | |||
Commitments and contingencies | |||||
Stockholders' equity | |||||
Preferred stock, par value $.01 per share | - | - | |||
Common stock, par value $.01 per share | 1,298 | 1,298 | |||
Additional paid-in capital | 701,849 | 788,140 | |||
Retained earnings | 1,140,610 | 1,080,413 | |||
Accumulated other comprehensive loss, net of tax | (260,365) | (232,518) | |||
Subtotal | 1,583,392 | 1,637,333 | |||
Class A common stock held by subsidiaries, at cost | (516,267) | (437,530) | |||
Total Lazard Ltd stockholders' equity | 1,067,125 | 1,199,803 | |||
Noncontrolling interests | 54,460 | 59,102 | |||
Total stockholders' equity | 1,121,585 | 1,258,905 | |||
Total liabilities and stockholders' equity | $4,944,778 | $4,928,677 |
LAZARD LTDSELECTED SUMMARY FINANCIAL INFORMATION (a)(Non-GAAP - unaudited) | ||||||||||||
Three Months Ended | % Change From | |||||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | June 30, 2018 | September 30, 2017 | ||||||||
($ in thousands, except per share data) | ||||||||||||
Revenues: | ||||||||||||
Financial Advisory | $303,769 | $415,006 | $305,890 | (27%) | (1%) | |||||||
Asset Management | 301,527 | 329,409 | 315,470 | (8%) | (4%) | |||||||
Corporate | 314 | (3,713) | 5,965 | NM | (95%) | |||||||
Operating revenue (b) | $605,610 | $740,702 | $627,325 | (18%) | (3%) | |||||||
Expenses: | ||||||||||||
Adjusted compensation and benefits expense (c) | $337,930 | $413,312 | $354,439 | (18%) | (5%) | |||||||
Ratio of adjusted compensation to operating revenue | 55.8% | 55.8% | 56.5% | |||||||||
Non-compensation expense (d) | $109,330 | $118,481 | $110,507 | (8%) | (1%) | |||||||
Ratio of non-compensation to operating revenue | 18.1% | 16.0% | 17.6% | |||||||||
Earnings: | ||||||||||||
Earnings from operations (e) | $158,350 | $208,909 | $162,379 | (24%) | (2%) | |||||||
Operating margin (f) | 26.1% | 28.2% | 25.9% | |||||||||
Adjusted net income (g) | $111,424 | $143,020 | $112,433 | (22%) | (1%) | |||||||
Diluted adjusted net income per share | $0.86 | $1.10 | $0.85 | (22%) | 1% | |||||||
Diluted weighted average shares | 129,859,728 | 130,249,054 | 132,393,664 | (0%) | (2%) | |||||||
Effective tax rate (h) | 23.0% | 26.9% | 24.6% | |||||||||
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Reconciliation of U.S. GAAP to Selected Summary Financial Information and Notes to Financial Schedules. |
LAZARD LTDSELECTED SUMMARY FINANCIAL INFORMATION (a)(Non-GAAP - unaudited) | ||||||||
Nine Months Ended | ||||||||
September 30, 2018 | September 30, 2017 | % Change | ||||||
($ in thousands, except per share data) | ||||||||
Revenues: | ||||||||
Financial Advisory | $1,107,631 | $1,052,584 | 5% | |||||
Asset Management | 960,791 | 900,694 | 7% | |||||
Corporate | 1,825 | 18,642 | (90%) | |||||
Operating revenue (b) | $2,070,247 | $1,971,920 | 5% | |||||
Expenses: | ||||||||
Adjusted compensation and benefits expense (c) | $1,155,198 | $1,114,135 | 4% | |||||
Ratio of adjusted compensation to operating revenue | 55.8% | 56.5% | ||||||
Non-compensation expense (d) | $341,892 | $334,088 | 2% | |||||
Ratio of non-compensation to operating revenue | 16.5% | 16.9% | ||||||
Earnings: | ||||||||
Earnings from operations (e) | $573,157 | $523,697 | 9% | |||||
Operating margin (f) | 27.7% | 26.6% | ||||||
Adjusted net income (g) | $420,359 | $352,414 | 19% | |||||
Diluted adjusted net income per share | $3.21 | $2.66 | 21% | |||||
Diluted weighted average shares | 130,750,392 | 132,407,551 | (1%) | |||||
Effective tax rate (h) | 21.2% | 27.2% | ||||||
This presentation includes non-U.S. GAAP ("non-GAAP") measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Reconciliation of U.S. GAAP to Selected Summary Financial Information and Notes to Financial Schedules. |
LAZARD LTDASSETS UNDER MANAGEMENT ("AUM") | |||||||||||||
(unaudited) | |||||||||||||
($ in millions) | |||||||||||||
As of | Variance | ||||||||||||
September 30, 2018 | June 30, 2018 | December 31, 2017 | Qtr to Qtr | YTD | |||||||||
Equity: | |||||||||||||
Emerging Markets | $45,449 | $47,207 | $52,349 | (3.7%) | (13.2%) | ||||||||
Global | 46,088 | 43,932 | 43,663 | 4.9% | 5.6% | ||||||||
Local | 42,524 | 40,688 | 42,650 | 4.5% | (0.3%) | ||||||||
Multi-Regional | 66,945 | 67,014 | 70,696 | (0.1%) | (5.3%) | ||||||||
Total Equity | 201,006 | 198,841 | 209,358 | 1.1% | (4.0%) | ||||||||
Fixed Income: | |||||||||||||
Emerging Markets | 15,964 | 16,453 | 17,320 | (3.0%) | (7.8%) | ||||||||
Global | 4,745 | 4,155 | 4,109 | 14.2% | 15.5% | ||||||||
Local | 6,226 | 5,306 | 4,497 | 17.3% | 38.4% | ||||||||
Multi-Regional | 7,455 | 8,151 | 9,154 | (8.5%) | (18.6%) | ||||||||
Total Fixed Income | 34,390 | 34,065 | 35,080 | 1.0% | (2.0%) | ||||||||
Alternative Investments | 2,650 | 2,764 | 2,846 | (4.1%) | (6.9%) | ||||||||
Private Equity | 1,453 | 1,458 | 1,478 | (0.3%) | (1.7%) | ||||||||
Cash Management | 588 | 748 | 697 | (21.4%) | (15.6%) | ||||||||
Total AUM | $240,087 | $237,876 | $249,459 | 0.9% | (3.8%) | ||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||
AUM - Beginning of Period | $237,876 | $225,761 | $249,459 | $197,910 | |||||||||
Net Flows | (288) | 15 | (1,727) | 2,953 | |||||||||
Market and foreign exchange appreciation (depreciation) | 2,499 | 12,349 | (7,645) | 37,262 | |||||||||
AUM - End of Period | $240,087 | $238,125 | $240,087 | $238,125 | |||||||||
Average AUM | $239,897 | $233,808 | $246,920 | $220,840 | |||||||||
% Change in average AUM | 2.6% | 11.8% | |||||||||||
Note: Average AUM generally represents the average of the monthly ending AUM balances for the period. |
LAZARD LTDRECONCILIATION OF U.S. GAAP TO SELECTED SUMMARY FINANCIAL INFORMATION (a)(unaudited) | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||
($ in thousands, except per share data) | ||||||||||||||
Operating Revenue | ||||||||||||||
Net revenue - U.S. GAAP Basis | $626,481 | $757,938 | $624,859 | $2,139,117 | $1,965,503 | |||||||||
Adjustments: | ||||||||||||||
Revenue related to noncontrolling interests (i) | (4,512) | (5,622) | (5,039) | (15,351) | (13,079) | |||||||||
(Gains) losses related to Lazard Fund Interests ("LFI") and other similar arrangements | (3,647) | 499 | (4,875) | (1,712) | (17,981) | |||||||||
Distribution fees, reimbursable deal costs and bad debt expense (j) | (25,880) | (24,718) | - | (90,112) | - | |||||||||
Interest expense | 13,168 | 12,605 | 12,380 | 38,305 | 37,477 | |||||||||
Operating revenue, as adjusted (b) | $605,610 | $740,702 | $627,325 | $2,070,247 | $1,971,920 | |||||||||
Compensation and Benefits Expense | ||||||||||||||
Compensation and benefits expense - U.S. GAAP Basis | $343,987 | $416,159 | $361,787 | $1,165,193 | $1,138,200 | |||||||||
Adjustments: | ||||||||||||||
(Charges) credits pertaining to LFI and other similar arrangements | (3,647) | 499 | (4,875) | (1,712) | (17,981) | |||||||||
Compensation related to noncontrolling interests (i) | (2,410) | (3,346) | (2,473) | (8,283) | (6,084) | |||||||||
Compensation and benefits expense, as adjusted (c) | $337,930 | $413,312 | $354,439 | $1,155,198 | $1,114,135 | |||||||||
Non-Compensation Expense | ||||||||||||||
Non-compensation expense - Subtotal - U.S. GAAP Basis | $143,813 | $141,839 | $118,860 | $449,475 | $360,393 | |||||||||
Adjustments: | ||||||||||||||
Expenses associated with ERP system implementation (k) | (7,659) | (5,404) | (6,530) | (20,489) | (15,391) | |||||||||
Expenses related to office space reorganization (l) | - | (1,036) | (1,412) | (2,425) | (4,573) | |||||||||
Distribution fees, reimbursable deal costs and bad debt expense (j) | (25,880) | (24,718) | - | (90,112) | - | |||||||||
Amortization and other acquisition-related benefits (costs) (m) | 5,851 | 8,483 | (172) | 13,468 | (5,003) | |||||||||
Charges pertaining to Senior Debt refinancing (n) | (6,523) | - | - | (6,523) | - | |||||||||
Non-compensation expense related to noncontrolling interests (i) | (272) | (683) | (239) | (1,502) | (1,338) | |||||||||
Non-compensation expense, as adjusted (d) | $109,330 | $118,481 | $110,507 | $341,892 | $334,088 | |||||||||
Pre-Tax Income and Earnings From Operations | ||||||||||||||
Operating Income - U.S. GAAP Basis | $138,681 | $199,940 | $144,212 | $524,449 | $466,910 | |||||||||
Expenses associated with ERP system implementation (k) | 7,659 | 5,404 | 6,530 | 20,489 | 15,391 | |||||||||
Expenses related to office space reorganization (l) | - | 1,036 | 1,412 | 2,425 | 4,573 | |||||||||
Acquisition-related (benefits) costs (m) | (6,707) | (9,346) | (612) | (16,020) | 2,568 | |||||||||
Charges pertaining to Senior Debt refinancing (n) | 6,818 | - | - | 6,818 | - | |||||||||
Net income related to noncontrolling interests (i) | (1,651) | (1,416) | (2,330) | (5,036) | (5,661) | |||||||||
Pre-tax income, as adjusted | 144,800 | 195,618 | 149,212 | 533,125 | 483,781 | |||||||||
Interest expense | 12,873 | 12,605 | 12,380 | 38,010 | 37,477 | |||||||||
Amortization (LAZ only) | 677 | 686 | 787 | 2,022 | 2,439 | |||||||||
Earnings from operations, as adjusted (e) | $158,350 | $208,909 | $162,379 | $573,157 | $523,697 | |||||||||
Net Income (loss) attributable to Lazard Ltd | ||||||||||||||
Net income attributable to Lazard Ltd - U.S. GAAP Basis | $107,074 | $146,963 | $109,210 | $413,729 | $337,141 | |||||||||
Adjustments: | ||||||||||||||
Expenses associated with ERP system implementation (k) | 7,659 | 5,404 | 6,530 | 20,489 | 15,391 | |||||||||
Expenses related to office space reorganization (l) | - | 1,036 | 1,412 | 2,425 | 4,573 | |||||||||
Acquisition-related (benefits) costs (m) | (6,707) | (9,346) | (612) | (16,020) | 2,568 | |||||||||
Charges pertaining to Senior Debt refinancing (n) | 6,818 | - | - | 6,818 | - | |||||||||
Tax benefit allocated to adjustments | (3,420) | (1,037) | (4,107) | (7,082) | (7,259) | |||||||||
Net income, as adjusted (g) | $111,424 | $143,020 | $112,433 | $420,359 | $352,414 | |||||||||
Diluted net income per share: | ||||||||||||||
U.S. GAAP Basis | $0.82 | $1.13 | $0.82 | $3.16 | $2.55 | |||||||||
Non-GAAP Basis, as adjusted | $0.86 | $1.10 | $0.85 | $3.21 | $2.66 | |||||||||
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to comparable U.S. GAAP measures, see Notes to Financial Schedules. |
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See Notes to Financial Schedules |
LAZARD LTD | ||||
Notes to Financial Schedules | ||||
(a) | Selected Summary Financial Information are non-GAAP measures. Lazard believes that presenting results and measures on an adjusted basis in conjunction with U.S. GAAP measures provides the most meaningful basis for comparison of its operating results across periods. | |||
(b) | A non-GAAP measure which excludes (i) revenue related to non-controlling interests (see (i) below), (ii) (gains)/losses related to the changes in the fair value of investments held in connection with Lazard Fund Interests and other similar deferred compensation arrangements for which a corresponding equal amount is excluded from compensation & benefits expense, (iii) for the three and nine month periods ended September 30, 2018 and for the three month period ended June 30, 2018, revenue related to distribution fees and reimbursable deal costs in accordance with the newly adopted revenue recognition guidance and bad debt expense (see (j) below), (iv) interest expense primarily related to corporate financing activities, and (v) for the three and nine month periods ended September 30, 2018, excess interest expense pertaining to Senior Debt refinancing (see (n) below). | |||
(c) | A non-GAAP measure which excludes (i) (charges) credits related to the changes in the fair value of the compensation liability recorded in connection with Lazard Fund Interests and other similar deferred compensation arrangements, and (ii) compensation and benefits related to noncontrolling interests (see (i) below). | |||
(d) | A non-GAAP measure which excludes (i) expenses associated with ERP system implementation (see (k) below), (ii) for the three month periods ended June 30, 2018 and September 30, 2017 and nine month periods ended September 30, 2018 and September 30, 2017, expenses related to office space reorganization (see (l) below), (iii) for the three and nine month periods ended September 30, 2018 and for the three month period ended June 30, 2018, expenses related to distribution fees and reimbursable deal costs in accordance with the newly adopted revenue recognition guidance and bad debt expense (see (j) below), (iv) amortization and other acquisition-related benefits (costs) (see (m) below), (v) expenses related to noncontrolling interests (see (i) below), and (vi) for the three and nine month periods ended September 30, 2018, charges pertaining to Senior Debt refinancing (see (n) below). | |||
(e) | A non-GAAP measure which excludes (i) expenses associated with ERP system implementation (see (k) below), (ii) for the three month periods ended June 30, 2018 and September 30, 2017 and nine month periods ended September 30, 2018 and September 30, 2017, expenses related to office space reorganization (see (l) below), (iii) acquisition-related (benefits) costs (see (m) below), (iv) net revenue and expenses related to noncontrolling interests (see (i) below), (v) interest expense primarily related to corporate financing activities, and (vi) for the three and nine month periods ended September 30, 2018, charges pertaining to Senior Debt refinancing (see (n) below). | |||
(f) | Represents earnings from operations as a percentage of operating revenue, and is a non-GAAP measure. | |||
(g) |
A non-GAAP measure which excludes (i) expenses associated with ERP system implementation (see (k) below), (ii) for the three month periods ended June 30, 2018 and September 30, 2017 and nine month periods ended September 30, 2018 and September 30, 2017, expenses related to office space reorganization (see (l) below), (iii) acquisition-related (benefits) costs, (see (m) below), and (iv) for the three and nine month periods ended September 30, 2018, charges pertaining to Senior Debt refinancing, net of tax benefits (see (n) below). |
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(h) | Effective tax rate is a non-GAAP measure based upon the U.S. GAAP rate with adjustments for the tax applicable to the non-GAAP adjustments to operating income, generally based upon the effective marginal tax rate in the applicable jurisdiction of the adjustments. The computation is based on a quotient, the numerator of which is the provision for income taxes of $33,376, $52,599, and $36,779 for the three month periods ended September 30, 2018, June 30, 2018, and September 30, 2017, respectively, $112,767 and $131,367 for the nine month periods ended September 30, 2018 and 2017, respectively, and the denominator of which is pre-tax income of $144,800, $195,618, and $149,212 for the three month periods ended September 30, 2018, June 30, 2018, and September 30, 2017, respectively, $533,125 and $483,781 for the nine month periods ended September 30, 2018 and 2017, respectively. | |||
(i) | Noncontrolling interests include revenue and expenses principally related to Edgewater, and is a non-GAAP measure. | |||
(j) | Represents certain distribution fees and reimbursable deal costs paid to third parties for which an equal amount is excluded from both non-GAAP operating revenue and non-compensation expense, respectively, and excludes bad debt expense, which represents fees that are deemed uncollectible. | |||
(k) | Represents expenses associated with Enterprise Resource Planning (ERP) system implementation. | |||
(l) | Represents incremental rent expense and lease abandonment costs related to office space reorganization and an onerous lease provision. | |||
(m) | Primarily represents the change in fair value of the contingent consideration associated with certain business acquisitions. | |||
(n) | The company incurred charges related to the extinguishment of $250 million of the $500 million 4.25% Senior Notes maturing in November 2020 and the issuance of $500 million of 4.50% notes maturing in September 2028. The charges include a pre-tax loss on the extinguishment of $6.5 million and excess interest expense of $0.3 million (due to the period of time between the issuance of the 2028 notes and the settlement of the 2020 notes). | |||
NM | Not meaningful |
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