UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) JUNE 14, 2005
LAZARD LTD
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(Exact Name of Registrant as Specified in Its Charter)
BERMUDA
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(State or Other Jurisdiction of Incorporation)
001-32492 98-0437848
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(Commission File Number) (IRS Employer Identification No.)
CLARENDON HOUSE, 2 CHURCH STREET, HAMILTON, BERMUDA HM 11
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(Address of Principal Executive Offices) (Zip Code)
441-295-1422
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(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On June 15, 2005, Lazard Ltd issued a press release announcing financial
results for its fiscal first quarter ended March 31, 2005. A copy of Lazard
Ltd's press release containing this information is being furnished as Exhibit
99.1 to this Report on Form 8-K and is incorporated herein by reference.
The information furnished pursuant to this Item 2.02, including Exhibit
99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the
liabilities under that Section and shall not be deemed to be incorporated by
reference into any filing of Lazard Ltd under the Securities Act of 1933 or the
Exchange Act.
ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF
DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS
On June 14, 2005, the Board of Directors of Lazard Ltd (the "Board")
elected Steven J. Heyer to the Board. Mr. Heyer has been appointed as
Chairman of the Compensation Committee of the Board. A copy of Lazard Ltd's
press release announcing this information is being furnished as Exhibit 99.2 to
this Report on Form 8-K and is incorporated herein by reference.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS.
The following exhibits are filed as part of this Report on Form 8-K:
99.1 Press Release issued on June 15, 2005.
99.2 Press Release issued on June 15, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report on Form 8-K to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: June 15, 2005
LAZARD LTD
By:/s/ Scott D. Hoffman
--------------------------
Name: Scott D. Hoffman
Title: Managing Director and General
Counsel
EXHIBIT INDEX
99.1 Press Release issued on June 15, 2005.
99.2 Press Release issued on June 15, 2005.
EXHIBIT 99.1
[LAZARD LOGO]
Media Contact: Investor Contact:
Richard Silverman, +1 212 632 6285 Michael J. Castellano, +1 212 632 8262
richard.silverman@lazard.com investorrelations@lazard.com
LAZARD LTD REPORTS
FIRST QUARTER FINANCIAL RESULTS
PRO FORMA NET OPERATING REVENUES(1) INCREASED 27%
TO $265.5 MILLION; M&A REVENUE UP 66% TO $122.3 MILLION
PRO FORMA NET INCOME ON A FULLY EXCHANGED BASIS
INCREASED 281% TO $31.3 MILLION OR 31 CENTS PER DILUTED SHARE;
HISTORICAL NET INCOME ROSE 387% TO $73.4 MILLION
NEW YORK, June 15, 2005 - Lazard Ltd (NYSE:LAZ), which completed its
initial public offering (IPO) on May 10, 2005, today announced financial results
for its first quarter ended March 31, 2005:
o Pro forma net operating revenues(1) rose by 27% to $265.5 million in
the first quarter of 2005, from $209.0 million in the first quarter of
2004;
o M&A net revenues increased by 66% to $122.3 million in the first
quarter of 2005, from $73.8 million in the first quarter of 2004;
o Pro forma net income assuming full exchange of outstanding
exchangeable interests increased by 281% to $31.3 million, or 31 cents
per diluted share, in the first quarter of 2005, from $8.2 million, or
8 cents per diluted share, in the first quarter of 2004;
o Pro forma net income before exchange of outstanding exchangeable
interests increased by 281% to $11.7 million, or 31 cents per diluted
share, in the first quarter of 2005, from $3.1 million, or 8 cents per
diluted share, in the first quarter of 2004;
o Historical net operating revenues, including our separated businesses,
increased 22% to $309.7 million in the first quarter of 2005, from
$253.8 million in the first quarter of 2004;
-MORE-
(1) Net operating revenues exclude interest expense relating to financing
activities which are included in net revenues.
2
o Historical net income, including our separated businesses, reported as
a historical partnership, increased by 387% to $73.4 million in the
first quarter of 2005, from $15.1 million in the first quarter of
2004.
THE COMPANY'S QUARTERLY REVENUES AND PROFITS CAN FLUCTUATE MATERIALLY
DEPENDING ON THE NUMBER AND SIZE OF COMPLETED TRANSACTIONS ON WHICH IT ADVISED,
AS WELL AS SEASONALITY AND OTHER FACTORS. ACCORDINGLY, THE REVENUES AND PROFITS
IN ANY PARTICULAR QUARTER MAY NOT BE INDICATIVE OF FUTURE RESULTS.
The basis of presentation for Lazard Ltd's historical and pro forma
financial information is discussed later in this release (see section entitled
"Basis of Historical and Pro Forma Information"). Lazard believes that pro forma
results assuming full exchange of outstanding exchangeable interests provide the
most meaningful basis for comparison among present, historical and future
periods.
"These results underscore the strength of Lazard's franchise," said Bruce
Wasserstein, Chairman and Chief Executive Officer of Lazard Ltd. "Our business
model is simple. We generate revenues through our focus on M&A, financial
restructuring and asset management. Our strategy is to target no more than 57.5%
of operating revenues as cost for people, and to hold relatively constant dollar
levels of expenses for facilities and technology. The intended result is a
company with a high degree of operating leverage. Unlike many of our
competitors, Lazard does not use its own financial capital to take trading
risks. We are a company that focuses on its intellectual capital."
Steve Golub, Lazard's Vice Chairman, noted: "We are very pleased with our
revenue results. Equally significant in this quarter was our ability to contain
costs."
NET REVENUES
FINANCIAL ADVISORY
Financial Advisory (which includes primarily M&A and Financial
Restructuring) net revenues rose by 49% to $157.3 million in the first quarter
of 2005, from $105.5 million in the first quarter of 2004.
-MORE-
3
M&A
M&A net revenues increased by 66% to $122.3 million in the first quarter
of 2005, from $73.8 million in the first quarter of 2004.
Announced first-quarter 2005 M&A transactions included the following
transactions on which Lazard advised:
o Mitsubishi Tokyo Financial in its $41 billion acquisition of UFJ
Holdings
o SunGard Data Systems in its $11.3 billion sale to a private equity
consortium
o MCI in its $10.3 billion merger with Verizon Communications
o Air France-KLM in its $6.3 billion acquisition of Amadeus Global
Travel Distribution
o ClearWave NV in its $4.5 billion sale to Vodafone
o RAC plc in its (pound)1.2 billion sale to Aviva plc
o Siemens in its (euro)1.2 billion acquisition of Flender Holding GmbH
o National Australian Bank in its A$2.5 billion sale of its Irish banks
to Danske Group
o Transurban in its A$1.8 billion acquisition of Hills Motorway Group
o Charterhouse Capital Partners in its (pound)820 million sale of the
Tussauds Group.
Completed first-quarter 2005 M&A transactions included the following
transactions on which Lazard advised:
o Sagem SA in its (euro)5.7 billion merger with SNECMA
o Clayton Dubilier in its (euro)3.7 billion acquisition of Rexel SA
o Interbrew SA in its $2.1 billion acquisition of Ambev
o Premiere AG in its (euro)1.2 billion IPO
o Entel SA in its sale of a $1.6 billion stake to Almendral SA
o Alcan in its $1.6 billion spin-off of Novelis
o Alcoa in its $870 million sale of Elkem ASA to Orkla ASA
o Debenhams in its (pound)495 million investment by British Land.
FINANCIAL RESTRUCTURING
Financial Restructuring net revenues increased by 33% to $24.1 million in
the first quarter of 2005, from $18.2 million in the first quarter of 2004.
Notable announced first quarter 2005 assignments included: Trump Hotels
and Casino Resorts, and Tower Automotive. In addition, we continued to work on
assignments involving Parmalat, Eurotunnel, and Olympic Airlines and Airways
Services, in the first quarter of 2005.
-MORE-
4
ASSET MANAGEMENT
Asset management net revenues increased by 10% to $106.9 million in the
first quarter of 2005, from $96.8 million in the first quarter of 2004.
This increase was due to higher management fees, driven by growth in
average assets under management, and higher incentive fees. Average assets under
management rose 9% to $86.3 billion in the first quarter of 2005, from $79.2
billion in the first quarter of 2004. During the first quarter of 2005, assets
under management decreased $178 million from the end of 2004 to $86.3 billion at
the end of the first quarter of 2005, as net asset inflows of $346 million were
offset by decreases due to market depreciation and unfavorable foreign exchange
movements as a result of the strengthening of the U.S. dollar.
OPERATING EXPENSES FROM CONTINUING OPERATIONS
COMPENSATION AND BENEFITS
Prior to the IPO, Lazard operated as a limited liability company.
Accordingly, historical compensation and benefits expenses do not include
payments for services rendered by managing directors and other key employees of
Lazard Asset Management (LAM), which were accounted for as minority interest, or
for services by our other managing directors which were accounted for as
distributions of members' capital. Subsequent to the IPO, all such payments are
included in compensation and benefits expenses.
On a pro forma basis, compensation and benefits expenses, including the
aforementioned payments, resulted in a compensation expense to operating revenue
ratio of 57.5% in the first quarter of 2005. In the first quarter of 2004 only,
pro forma compensation and benefits expenses also included a reduction of $84.2
million to reflect new compensation arrangements with managing directors to
achieve a target compensation expense to operating revenue ratio of 57.5%.
Without this adjustment the 2004 ratio would have been 98%. In 2005, the new
compensation arrangements were in affect and no similar reduction was necessary.
On a pro forma basis, after the aforementioned reduction in 2004,
compensation and benefits expenses increased by 27% to $152.7 million in the
first quarter of 2005, from $120.2 million in the first quarter of 2004,
consistent with the increase in net revenues.
-MORE-
5
On an historical basis, and after giving effect to the separation,
compensation and benefits expenses fell by 6% to $105.9 million in the first
quarter of 2005, from $112.0 million in the first quarter of 2004. The decrease
was due to a 5% reduction in employee headcount (to 2,035 employees, excluding
managing directors) as well as decreases in pension expense and post-retirement
health benefits.
Non-compensation
On a pro forma basis and on an historical basis, and after giving effect
to the separation, non-compensation and benefits expenses were down 11% to $55.9
million in the first quarter of 2005, compared with $63.1 million in the first
quarter of 2004. The reduction is related principally to decreases in travel and
entertainment expenses of $3.2 million and lower premises and occupancy expenses
of $1.9 million. The ratio of non-compensation and benefits expenses to
operating revenues was 21.1% in the first quarter of 2005, compared with 30.2%
in the first quarter of 2004, reflecting the lower expense level and the
operating leverage from higher operating revenues.
PROVISION FOR INCOME TAXES
Prior to our IPO, Lazard and its subsidiaries generally were not subject
to U.S. federal income tax. As a result of completing the IPO, Lazard has a new
structure and a portion of its income is subject to U.S. federal income tax,
which is reflected in the Company's pro forma financial statements. For the
first quarter of 2005, on a pro forma basis assuming an effective tax rate of
28%, Lazard Ltd's provision for taxes was $7.5 million, compared with pro forma
provision for taxes of $1.2 million in the first quarter of 2004.
On an historical basis, and after giving effect to the separation, the
provision for income taxes was $7.8 million for the first quarter of 2005, an
increase of $10.4 million, compared with a tax benefit of $2.6 million for the
corresponding period in 2004, due to increased profitability in locations that
are subject to corporate income taxes.
-MORE-
6
MINORITY INTEREST
On a pro forma basis, minority interest was $18.3 million in the first
quarter of 2005, compared with $1.9 million in the first quarter of 2004. The
increase was due principally to the higher profits in the 2005 period and the
related allocation to the LAZ-MD Holdings ownership of 62.5% of Lazard Group
($22.6 million in 2005, up from $5.6 million in 2004). LAZ-MD Holdings is a
holding company owned by current and former managing directors of Lazard Group,
whose ownership interests will be effectively exchangeable over time, on a
one-for-one basis, for shares of Lazard Ltd common stock.
On a historical basis, and after giving effect to the separation, minority
interest was $10.3 million for the first quarter of 2005, a decrease of $4.7
million versus $15.0 million for the corresponding period in 2004, due
principally to a decrease in performance-based compensation for LAM members.
BASIS OF HISTORICAL AND PRO FORMA INFORMATION
In connection with the IPO, Lazard Ltd and its subsidiaries entered into a
series of separation and recapitalization transactions, including the separation
of its Capital Markets and Other activities from Lazard Group, a Delaware
limited liability company that holds Lazard Ltd's businesses. As a result of
completing the IPO, Lazard Ltd has no material assets other than indirect
ownership of 37.5% of the common membership interests of Lazard Group and its
managing member interest in Lazard Group. The remaining 62.5% of Lazard Group's
membership interests is held by LAZ-MD Holdings.
Under generally accepted accounting principles in the United States (U.S.
GAAP), Lazard's historical consolidated financial statements reflect the
historical results of operations and financial position of Lazard Group,
including the separated businesses until May 10, 2005, which was the effective
date of the separation. On May 10, 2005, Lazard began treating the separated
businesses as discontinued operations as required under U.S. GAAP. Although the
effective date of separation was May 10, 2005, the historical financial
information described herein is presented as if the separation occurred prior to
the date of the historical financial statements covered in this release because
of management's belief that such presentation enhances the understanding of the
financial results of Lazard Ltd's continuing businesses.
-MORE-
7
The historical financial statements do not reflect what the results of
operations and financial position of Lazard Ltd or Lazard Group would have
been had these companies operated as separate, independent public entities
for the periods presented. Specifically, the historical results of
operations do not give effect to the following matters:
o The separation of Lazard's Capital Markets and Other activities, which
consists of equity, fixed income and convertibles sales and trading;
broking, research and underwriting services; merchant banking
fund-management activities outside of France; and specified
non-operating assets and liabilities,
o Payment for services rendered by Lazard's managing directors, which,
as a result of Lazard operating as a limited liability company,
historically has been accounted for as distributions from members'
capital, or, in some cases, as minority interest, rather than as
compensation and benefits expenses, and
o U.S. corporate federal income taxes, since Lazard has operated in the
U.S. as a limited liability company that was treated as a partnership
for U.S. federal income tax purposes. As a result, Lazard's income has
not been subject to U.S. federal income taxes. Income taxes shown on
the historical financial statements are attributable to taxes incurred
in non-U.S. entities and to unincorporated business taxes attributable
to Lazard's operations apportioned to New York.
The unaudited pro forma financial data contained in this press release
present Lazard's historical financial information adjusted to reflect the
separation and recapitalization transactions, including the IPO and the
additional financing transactions, assuming they had been completed as of
January 1, 2004, with respect to the unaudited pro forma condensed
consolidated statements of income information, and at March 31, 2005, with
respect to the unaudited pro forma condensed consolidated statement of
financial condition information. The adjustments include:
o The separation of Lazard Group's Capital Markets and Other Activities,
o Payment for services rendered by managing directors,
o Income taxes Lazard expects to pay as a corporation assuming an annual
effective tax rate of 28%,
-MORE-
8
o Minority interest expense reflecting LAZ-MD Holdings' ownership of
62.5% of the Lazard Group common membership interests outstanding
immediately after the IPO and the separation and recapitalization
transactions,
o The use of proceeds from the IPO and the additional financing
transactions, and
o The net incremental interest expense related to the additional
financing transactions.
The unaudited pro forma financial information are included for
informational purposes only and do not purport to reflect the results of
operations or financial position of Lazard LLC or Lazard Group that would have
occurred had they operated as separate, independent companies during the periods
presented.
Actual results might have differed from pro forma results if Lazard LLC,
Lazard Group or Lazard Ltd had operated independently.
The pro forma consolidated financial information should not be relied upon
as being indicative of Lazard Group or Lazard Ltd's results of operations or
financial condition had the transactions contemplated in connection with the
separation and recapitalization transactions, including the IPO and the
additional financing transactions, been completed on the dates assumed. The pro
forma financial information also does not project the results of operations or
financial position for any future period or date.
* * *
FUTURE CONFERENCE CALLS
Lazard intends to hold two conference calls each year to discuss its
financial results. Lazard expects such calls will be held in connection with the
release of its second quarter results and its fourth quarter and year-end
financial results. Lazard anticipates that its second quarter results for 2005
will be released on or about August 10, 2005. Following such release, Lazard
plans to hold a conference call to discuss the results and related matters.
Specific information regarding the conference call will be announced
approximately 10 days prior to the date of the call.
* * *
9
On May 5, 2005, Class A common stock of Lazard Ltd began trading on the
New York Stock Exchange under the trading symbol "LAZ." In addition, Lazard Ltd
equity security units also began trading on the NYSE under the trading symbol
"LDZ."
Lazard, one of the world's preeminent financial advisory and asset
management firms, operates from 27 cities across 15 countries in North America,
Europe, Asia and Australia. With origins dating back to 1848, the firm provides
services including mergers and acquisitions advice, asset management, and
restructuring advice 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 REGISTRATION STATEMENT ON FORM S-1 (COMMISSION FILE NUMBER
333-121407) UNDER THE CAPTION "RISK FACTORS," INCLUDING THE FOLLOWING:
o A DECLINE IN GENERAL ECONOMIC CONDITIONS OR THE GLOBAL FINANCIAL
MARKETS;
o LOSSES CAUSED BY FINANCIAL OR OTHER PROBLEMS EXPERIENCED BY THIRD
PARTIES;
o LOSSES DUE TO UNIDENTIFIED OR UNANTICIPATED RISKS;
o A LACK OF LIQUIDITY, I.E., READY ACCESS TO FUNDS, FOR USE IN OUR
BUSINESSES;
o COMPETITIVE PRESSURE.
# # #
10
LAZARD GROUP AND LAZARD LTD
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31,
---------------------------------------------
LAZARD GROUP LAZARD LTD
PRO FORMA* PRO FORMA
------------------- ---------------------
2004 2005 2004 2005
-------- -------- -------- --------
($ in thousands, except per share data)
Total revenues $213,679 $270,007 $213,679 $270,007
LFB interest expense (4,703) (4,478) (4,703) (4,478)
-------- -------- -------- --------
Operating revenues 208,976 265,529 208,976 265,529
Other interest expense (5,521) (5,430) (19,464) (19,373)
-------- -------- -------- --------
Net revenues 203,455 260,099 189,512 246,156
Operating Expenses:
Compensation and benefits 112,048 105,881 120,161 152,679
Premises and occupancy costs 18,273 16,383 18,273 16,383
Professional fees 10,554 8,858 10,554 8,858
Travel and entertainment 12,184 8,975 12,184 8,975
Other 22,118 21,733 22,118 21,733
-------- -------- -------- --------
Operating expenses 175,177 161,830 183,290 208,628
-------- -------- -------- --------
Operating income 28,278 98,269 6,222 37,528
Provision (benefit)
for income taxes (2,610) 7,803 1,236 7,458
-------- -------- -------- --------
Income before minority
interests 30,888 90,466 4,986 30,070
Minority interests excluding
LAZ-MD 14,964 10,259 (3,724) (4,275)
Minority interests relating
to LAZ-MD - - 5,634 22,609
-------- -------- -------- --------
Income from continuing
operations 15,924 80,207 3,076 11,736
Loss from discontinued
operations (871) (6,851) - -
-------- -------- -------- --------
Net income $15,053 $73,356 $3,076 $11,736
-------- -------- -------- --------
-------- -------- -------- --------
Net income assuming full exchange of
exchangeable interests $8,204 $31,295
-------- --------
-------- --------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 37,500,000 37,500,000
Diluted 100,000,000 100,000,000
Net income PER SHARE:
Basic $0.08 $0.31
Diluted $0.08 $0.31
* Pro forma to reflect separated businesses as discontinued operations
SEE NOTES TO UNAUDITED PRO FORM A CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
11
LAZARD GROUP AND LAZARD LTD
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Three Month Period Ended March 31, 2005
----------------------------------------------------------
Pro Forma Adjustments Lazard Ltd
Lazard --------------------------------- Pro Forma,
Group Separation(a) Continuing as
Historical (Disc. Ops) Operations Other Adjusted(i)
---------- ------------- ---------- -------- -----------
($ in thousands, except per share data)
Total revenues $314,128 $44,121 $270,007 $ - $270,007
LFB interest expense (4,478) - (4,478) (4,478)
-------- ------- -------- -------- --------
Operating revenues 309,650 44,121 265,529 - 265,529
Other interest expense (11,672)(b) (6,242) (5,430) (13,943)(c) (19,373)
-------- ------- -------- -------- --------
Net revenues 297,978 37,879 260,099 (13,943) 246,156
Operating Expenses:
Compensation and
benefits 127,487 21,606 105,881 46,798 (d) 152,679
Premises and
occupancy costs 27,531 11,148 16,383 - 16,383
Professional fees 13,332 4,474 8,858 - 8,858
Travel and
entertainment 10,501 1,526 8,975 - 8,975
Other 27,455 5,722 21,733 - 21,733
-------- ------- -------- -------- --------
Operating expenses 206,306 44,476 161,830 46,798 208,628
-------- ------- -------- -------- --------
Operating income
(loss) 91,672 (6,597) 98,269 (60,741) 37,528
Provision for income
taxes 8,056 253 7,803 (345)(e) 7,458
-------- ------- -------- -------- --------
Income (loss) before
minority interests 83,616 (6,850) 90,466 (60,396) 30,070
Minority interests
excluding LAZ-MD 10,260 1 10,259 (14,534)(d) (4,275)
Minority interests
relating to LAZ-MD - - - 22,609 (f) 22,609
-------- ------- -------- -------- --------
Net income (loss) $ 73,356 ($6,851) $ 80,207 ($68,471) $ 11,736
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Net income assuming full exchange of exchangeable interests $31,295
--------
--------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 37,500,000(g)
Diluted 100,000,000(g)
NET INCOME PER SHARE:
Basic $0.31(h)
Diluted $0.31(h)
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
12
LAZARD GROUP AND LAZARD LTD
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Three Month Period Ended March 31, 2004
----------------------------------------------------------
Pro Forma Adjustments Lazard Ltd
Lazard --------------------------------- Pro Forma,
Group Separation(a) Continuing as
Historical (Disc. Ops) Operations Other Adjusted(i)
---------- ------------- ---------- -------- -----------
($ in thousands, except per share data)
Total revenues $258,459 $44,780 $213,679 $ - $213,679
LFB interest expense (4,703) - (4,703) (4,703)
-------- ------- -------- -------- --------
Operating revenues 253,756 44,780 208,976 - 208,976
Other interest expense (8,167)(b) (2,646) (5,521) (13,943)(c) (19,464)
-------- ------- -------- -------- --------
Net revenues 245,589 42,134 203,455 (13,943) 189,512
Operating Expenses:
Compensation and
benefits 140,860 28,812 112,048 8,113 (d) 120,161
Premises and
occupancy costs 22,227 3,954 18,273 - 18,273
Professional fees 13,656 3,102 10,554 - 10,554
Travel and
entertainment 13,839 1,655 12,184 - 12,184
Other 27,110 4,992 22,118 - 22,118
-------- ------- -------- -------- --------
Operating expenses 217,692 42,515 175,177 8,113 183,290
-------- ------- -------- -------- --------
Operating income
(loss) 27,897 (381) 28,278 (22,056) 6,222
Provision for income
taxes (2,121) 489 (2,610) 3,846 (e) 1,236
-------- ------- -------- -------- --------
Income (loss) before
minority interests 30,018 (870) 30,888 (25,902) 4,986
Minority interests
excluding LAZ-MD 14,965 1 14,964 (18,688)(d) (3,724)
Minority interests
relating to LAZ-MD - - - 5,634 (f) 5,634
-------- ------- -------- -------- --------
Net income (loss) $ 15,053 ($871) $ 15,924 ($12,848) $ 3,076
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Net income assuming full exchange of exchangeable interests $8,204
--------
--------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 37,500,000(g)
Diluted 100,000,000(g)
NET INCOME PER SHARE:
Basic $0.08(h)
Diluted $0.08(h)
SEE NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF INCOME
13
LAZARD GROUP LLC
UNAUDITED HISTORICAL
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
---------------------
2004 2005
-------- ---------
($ in thousands)
REVENUE
Investment banking and other advisory fees $110,221 $ 158,135
Money management fees 95,455 106,059
Commissions 18,366 16,396
Trading gains and losses - net 7,248 8,915
Underwriting 8,316 4,840
Investment gains and losses, non-trading - net 2,554 2,413
Interest income 11,112 14,066
Other 5,187 3,304
-------- ---------
Total Revenue 258,459 314,128
Interest expense 12,870 16,150
-------- ---------
Net revenue 245,589 297,978
-------- ---------
OPERATING EXPENSES
Employee compensation and benefits 140,860 127,487
Premises and occupancy costs 22,227 27,531
Professional fees 13,656 13,332
Travel and entertainment 13,839 10,501
Communications and information services 9,941 10,989
Equipment costs 5,101 5,450
Other 12,068 11,016
-------- ---------
Total operating expenses 217,692 206,306
-------- ---------
OPERATING INCOME 27,897 91,672
Provision (benefit) for income taxes (2,121) 8,056
-------- ---------
INCOME ALLOCABLE TO MEMBERS BEFORE
MINORITY INTEREST 30,018 83,616
Minority interest 14,965 10,260
-------- ---------
NET INCOME ALLOCABLE TO MEMBERS $ 15,053 $ 73,356
-------- ---------
-------- ---------
14
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(a) Reflects adjustments necessary to remove the historical results of
operations of Lazard Group's separated businesses.
(b) Interest expense includes accrued dividends relating to Lazard Group's
mandatorily redeemable preferred stock issued in March 2001.
(c) Reflects net incremental interest expense related to the separation and
recapitalization transactions, including the additional financing
transactions and the amortization of capitalized costs associated with the
additional financing transactions.
(d) The adjustment reflects payments for services rendered by our managing
directors and employee members of LAM, which prior to the initial public
offering were disclosed as either a reduction of capital or as minority
interest expense. Following the completion of the initial public offering,
our policy is that our employee compensation and benefits expense,
including that payable to our managing directors, will not exceed 57.5% of
operating revenue each year (although we retain the ability to change this
policy in the future). The adjustment has been determined as if the new
compensation policy had been in place during 2004 and 2005. Accordingly,
the pro forma condensed consolidated statements of income data reflect
compensation and benefits expense based on new retention agreements that
are in effect.
(e) Reflects adjustments for the following: (i) a tax benefit related to the
reclassification of LAM minority interest, (ii) the net income tax impact
associated with the separation and recapitalization transactions and (iii)
an adjustment for Lazard Ltd entity-level taxes.
(f) Minority interest expense includes an adjustment for LAZ-MD Holdings'
ownership of 62.5% of the Lazard Group common membership interests
outstanding immediately after the initial public offering.
(g) For purposes of presentation of basic net income per share, the weighted
average shares outstanding reflects the 37,500,000 shares of Class A common
stock outstanding immediately following the initial public offering. For
purposes of presentation of diluted net income per share, LAZ-MD Holdings
exchangeable interests are included on an as-if-exchanged basis. Shares
issuable with respect to the exercise of the purchase contracts associated
with the equity security units offered in the ESU offering and the IXIS ESU
placement are not included because, under the treasury stock method of
accounting, such securities currently are not dilutive.
(h) Calculated after considering the impact of all the pro forma adjustments
described above and based on the weighted average basic and diluted shares
outstanding, as applicable, as described in note (g) above.
(i) Captions relating to "income allocable to members" means "income" with
respect to the Lazard Ltd amounts.
15
LAZARD GROUP AND LAZARD LTD
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
As of March 31, 2005
----------------------------------------------------------
Lazard Ltd
Lazard Pro Forma Adjustments Consolidated
Group --------------------------------- Pro Forma,
Historical Separation(a) Subtotal Other as Adjusted
---------- ------------- ---------- -------- ------------
($ in thousands)
ASSETS
Cash & cash
equivalents $234,227 ($43,960) $190,267 (30,722)(b), $159,545(h)
(e)
Cash & securities
segregated for
regulatory
purposes 39,650 (23,500) 16,150 - 16,150
Marketable
investments 95,281 - 95,281 - 95,281(h)
Securities owned 635,692 (275,559) 360,133 - 360,133
Securities
borrowed 1,194,668 (1,194,668) - - -
Receivables 996,079 (301,784) 694,295 - 694,295
Other assets 654,744 (197,847) 456,897 (30,269)(e) 426,628
---------- ----------- ---------- -------- ----------
Total assets $3,850,341 ($2,037,318) $1,813,023 ($60,991) $1,752,032
---------- ----------- ---------- -------- ----------
---------- ----------- ---------- -------- ----------
LIABILITIES & MEMBERS' EQUITY
Notes payable $55,496 ($1,382) $54,114 (50,000)(e) $4,114
Securities
loaned 1,123,507 (1,123,507) - - -
Payables 818,099 (197,415) 620,684 - 620,684
Accrued employee
compensation 67,721 (20,878) 46,843 97,123 (c), 143,966
(d)
Miscellaneous
other lia-
bilities 1,056,942 (439,522) 617,420 6,013 (f) 623,433
Lazard Group
senior notes - - - 550,000 (e) 550,000
Lazard Group
Finance senior
notes under-
lying equity
security units - - - 437,500 (e) 437,500
Subordinated
loans 200,000 - 200,000 - 200,000
Mandatorily
redeemable pre-
ferred stock 100,000 - 100,000 (100,000)(e) -
Minority interest 141,308 (18,748) 122,560 (20,493)(c) 102,067
Members' equity 287,268 (235,866) 51,402 (51,402)(b),(d), -
(e),(f)
Stockholders'
equity (deficiency):
Common stock,
par value
$.01 per share - - - 375 (g) 375
Additional
paid-in capital - - - (930,107) (g) (930,107)
---------- ----------- ---------- -------- ----------
Total members'
equity and
stockholders'
equity
(deficiency) 287,268 (235,866) 51,402 (981,134) (929,732)
---------- ----------- ---------- -------- ----------
Total liabilities,
members' equity
and stockholders'
equity
(deficiency) $3,850,341 ($2,037,318) $1,813,023 ($60,991) $1,752,032
---------- ----------- ---------- -------- ----------
---------- ----------- ---------- -------- ----------
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
16
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
CONDITION
(a) Reflects adjustments necessary to remove the historical balances relating
to Lazard Group's separated businesses.
(b) Reflects cash contribution in recognition of indemnities made by the
separated businesses in favor of Lazard Group.
(c) Reclassifies minority interest relating to services rendered by managing
directors and employee members associated with Lazard Group's controlled
affiliate, LAM, to accrued compensation.
(d) As a result of the consummation of the initial public offering, we now
include all payments for services rendered by our managing directors in
compensation and benefits expense. The pro forma adjustment reflects the
compensation payable to managing directors (excluding LAM and the separated
businesses).
(e) Reflects the net impact of the initial public offering, the additional
financing transactions and the recapitalization.
(f) Reflects an adjustment to record a liability for the present value of the
quarterly contract adjustment payments related to the purchase contracts
associated with the equity security units, including those issued pursuant
to the IXIS investment agreement, with a corresponding charge to additional
paid-in-capital.
(g) Reflects the issuance of shares of Class A common stock pursuant to the
initial public offering, net of applicable costs with respect thereto, and
the net effect of the consolidation by Lazard Ltd of Lazard Group,
including the classification of LAZ-MD Holdings' approximate 62.5%
ownership of Lazard Group's common membership interests as of March 31,
2005 as a reduction of Lazard Ltd's additional paid-in capital rather than
minority interest, since such minority interest would be negative.
(h) Historically, employee bonuses have generally been paid in January
following the end of each fiscal year. Payments to managing directors for
services rendered have generally been made in three monthly installments,
as soon as practicable, after the end of each fiscal year. Such payments
usually begin in February and end in April. Accordingly, the cash and
marketable investments balances shown do not reflect the final payment made
in April, to our managing directors for services rendered.
17
LAZARD GROUP AND LAZARD LTD
PRO FORMA OPERATING REVENUES
Three Months Ended March 31,
---------------------------------------
Increase /
2004 2005 (Decrease)
-------- -------- ---------------
($ in thousands)
FINANCIAL ADVISORY
M&A $ 73,835 $122,311 $48,476 66%
Financial Restructuring 18,200 24,148 5,948 33%
Corporate Finance and Other 13,459 10,800 (2,659) (20%)
-------- -------- -------
Total 105,494 157,259 51,765 49%
ASSET MANAGEMENT
Management and Other Fees 96,796 102,043 5,247 5%
Incentive Fees 30 4,820 4,790 -
-------- -------- -------
Total 96,826 106,863 10,037 10%
CORPORATE 1,135 (4,023) (5,158) -
NET REVENUES 203,455 260,099 56,644 28%
Add Back Non-LFB Interest Expense 5,521 5,430 (91) -
-------- -------- -------
OPERATING REVENUES $208,976 $265,529 $56,553 27%
-------- -------- -------
-------- -------- -------
18
LAZARD LTD
RECONCILIATION OF PRO FORMA SHARES OUTSTANDING AND
NET INCOME FOR BASIC AND DILUTED EPS
Three Months Ended Three Months Ended
March 31, 2004 March 31, 2005
------------------------------ ------------------------------
Weighted Net Weighted Net
Average Income Average Income
Shares Net Per Shares Net Per
Outstanding Income Share Outstanding Income Share
----------- ------ ----- ----------- ------- ------
($ in thousands, except per share data)
Amounts as
reported for
basic net
income per
share 37,500,000 $3,076 $0.08 37,500,000 $11,736 $0.31
----- -----
----- -----
Amounts
applicable
to LAZ-MD
exchangeable
interests:
Share of
Lazard
Group
income 5,634 (a) 22,609 (a)
Additional
Corporate
tax (506)(b) (3,050)(b)
Shares
issuable 62,500,000 62,500,000
----------- ------ ----------- ------- -----
Amounts as
reported for
diluted net
income per
share 100,000,000 $8,204 $0.08 100,000,000 $31,295 $0.31
----------- ------ ----- ----------- ------- -----
----------- ------ ----- ----------- ------- -----
(a) 62.5% of pro forma Lazard Group net income of $9,013 and $36,174 in the 2004
and 2005 period, respectively
(b) Based on pro forma Lazard Group operating income of $6,222 and $37,528 in
the 2004 and 2005 period, respectively.
19
ASSETS UNDER MANAGEMENT (AUM)
As of
---------------------
December 31, March 31, March 31,
2004 2004 2005
------------ --------- ---------
($ in millions)
Total Equities $69,745 $64,565 $69,724
Total Fixed Income 11,204 11,401 11,314
Alternative Investments 2,800 1,697 2,921
Merchant Banking 551 423 523
Cash 2,135 1,914 1,775
------- ------- -------
Total AUM $86,435 $80,000 $86,257
------- ------- -------
Three Months Ended
Year Ended March 31,
December 31, ---------------------
2004 2004 2005
------------ --------- ---------
($ in millions)
AUM-Beginning of Period $78,371 $78,371 $86,435
Net Flows (3,489) (42) 346
Market Appreciation
(Depreciation) 10,793 1,872 (43)
Foreign Currency Adjustments 760 (201) (481)
------- ------- -------
AUM-End of Period $86,435 $80,000 $86,257
------- ------- -------
------- ------- -------
Average AUM (note) $80,261 $79,185 $86,346
------- ------- -------
------- ------- -------
Note: Average AUM is based on an average of quarterly ending balances for the
respective periods (five point average for the full year and two point
average for the quarters).
EXHIBIT 99.2
[LAZARD LOGO]
Media Contact: Investor Contact:
- ------------- ----------------
Richard Silverman, +1 212 632 6285 Michael J. Castellano, +1 212 632 8262
richard.silverman@lazard.com investorrelations@lazard.com
LAZARD REORGANIZES
EUROPEAN INVESTMENT BANKING GROUP;
FIRM ELECTS STEVEN J. HEYER TO BOARD
NEW YORK, June 15, 2005 - Lazard Ltd (NYSE: LAZ) today announced it has
reorganized its European investment banking group, which will be run as one
business.
The new European organization will continue to be based on the priority of
client relationships, balancing the contributions of local expertise with
Lazard's global industry groups.
Separately, Lazard also announced it that has elected Steven J. Heyer,
Chief Executive Officer of Starwood Hotels & Resorts Worldwide Inc., to its
Board of Directors, effective immediately.
As part of the new European structure, Georges Ralli, Jeffrey Rosen and
William Rucker will serve as Co-Chairmen of Lazard's European Investment Banking
Committee, and will make recommendations on key matters to the firm's Chief
Executive Officer. Lazard also said that, in addition to his current
responsibilities, Bruno Roger has been named Chairman of Global Investment
Banking, coordinating cross-border business; he will also attend Committee
meetings. Matthieu Pigasse will serve as Chief Marketing Officer of the
Committee, and Antonio Weiss will serve as Chief Operating Officer of the
Committee.
The Committee will work in conjunction with a European Advisory
Board, co-chaired by Marcus Agius and Bruno Roger. The other members
of the European Advisory Board are: Arnaldo Borghesi, Matthieu
Bucaille, Ernst Fassbender, Erik Maris, Pedro Pasquin, Mr. Pigasse, Mr.
Ralli, Mr. Rosen, Mr. Rucker, Nicholas Shott, and Mr. Weiss.
"Our European reorganization is the culmination of a process to enhance
our ability to serve our clients," said Bruce Wasserstein, Chairman and Chief
Executive Officer of Lazard Ltd. "It confirms the emergence of a new generation
of talented leaders, who, along with their U.S. counterparts, are the future of
Lazard. We are committed to our vision for Lazard as a unified business, with a
clear mission and effective coordination and leadership."
-MORE-
2
Lazard also announced that Gerardo Braggiotti has delivered to Lazard
notice stating that he will resign effective July 15, 2005. Lazard has
reiterated to Mr. Braggiotti that it has complied with, and will continue to
comply with, the agreement that Lazard and Mr. Braggiotti had signed, and Lazard
and Mr. Braggiotti are in discussions concerning their relationship. In the
event that Mr. Braggiotti resigns, Lazard does not expect any material adverse
effect on its overall 2005 financial results from his resignation.
The addition of Mr. Heyer to the Board increases the number of Lazard Ltd
directors to six.
Mr. Heyer, 53, has served as CEO of Starwood Hotels & Resorts Worldwide
since October 2004. Prior to joining Starwood, he was President and Chief
Operating Officer of The Coca-Cola Company from 2001 to 2004; was President and
Chief Operating Officer of Turner Broadcasting System, Inc., and a member of AOL
Time Warner's Operating Committee from 1994 to 2001. Previously, Mr. Heyer was
President and Chief Operating Officer of Young & Rubicam Advertising Worldwide,
and before that spent 15 years at Booz Allen & Hamilton, ultimately becoming
Senior Vice President and Managing Partner. He currently serves on the Board of
Directors of the National Collegiate Athletic Association and the Special
Olympics.
The other members of Lazard's Board are: Mr. Wasserstein;
Robert Charles Clark, who serves as the Harvard University
Distinguished Service Professor at Harvard Law School; Ellis
Jones, CEO of Wasserstein & Co. LP; Vernon E. Jordan, Jr., a
Senior Managing Director of Lazard Ltd; and Anthony Orsatelli,
CEO of IXIS Corporate and Investment Bank.
On May 5, 2005, Class A common stock of Lazard Ltd began trading on the
New York Stock Exchange under the trading symbol "LAZ." In addition, Lazard Ltd
equity security units also began trading on the NYSE under the trading symbol
"LDZ."
Lazard, one of the world's preeminent financial advisory and asset
management firms, operates from 27 cities across 15 countries in North America,
Europe, Asia and Australia. With origins dating back to 1848, the firm provides
services including mergers and acquisitions advice, asset management, and
restructuring advice to corporations, partnerships, institutions, governments,
and individuals. For more information on Lazard, please visit www.lazard.com.
# # #