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) August 9, 2005
--------------------------
LAZARD LTD
(Exact Name of Registrant as Specified in Its Charter)
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BERMUDA
(State or Other Jurisdiction of Incorporation)
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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 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On August 9, 2005, the Board of Directors of Lazard Ltd (the "Board")
approved an arrangement for the compensation of Non-Executive Directors that
will provide them with an annual cash retainer of US $50,000 and an annual award
of deferred stock units ("DSUs") with a grant value of US $50,000. The Chair of
the Audit Committee shall be paid an additional annual retainer of US $30,000
and the Chairs of each of the Nominating & Governance Committee and the
Compensation Committee shall be paid an additional annual retainer US $20,000,
in each case to be paid 50% in cash and 50% in DSUs. Each of the other members
of the Audit Committee shall be paid an additional annual retainer of US $20,000
and each of the other members of the Nominating & Governance Committee and the
Compensation Committee shall be paid an additional annual retainer of US
$15,000, in each case to be paid 50% in cash and 50% in DSUs. All DSUs awarded
under this arrangement will be (i) issued under the Lazard Ltd 2005 Equity
Incentive Plan or any successor plan thereto, and (ii) converted to Lazard Class
A common stock, par value $0.01 per share, and distributed to the Director in
accordance with the vesting schedule determined by the Nominating & Governance
Committee.
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 10, 2005, Lazard Ltd issued a press release announcing
financial results for its fiscal second quarter ended June 30, 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 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 August 10, 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: August 10, 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 August 10, 2005.
Exhibit 99.1
LAZARD
MEDIA CONTACT: INVESTOR CONTACT:
Richard Silverman, +1 212 632 6285 Michael J. Castellano
RICHARD.SILVERMAN@LAZARD.COM Chief Financial Officer,
+1 212 632 8262
Alexander F. Stern
Head of Corporate Strategy,
+ 1 212 632 8231
INVESTORRELATIONS@LAZARD.COM
LAZARD LTD REPORTS IMPROVED FINANCIAL RESULTS IN THE
SECOND QUARTER AND FIRST HALF OF 2005
M&A REVENUE INCREASED 35% TO $182.0 MILLION IN 2Q05
AND 46% TO $304.3 MILLION IN THE FIRST HALF OF 2005
OPERATING REVENUES(1) INCREASED 17% TO $330.1 MILLION IN 2Q05 AND
21% TO $595.7 MILLION IN THE FIRST HALF OF 2005
PRO FORMA OPERATING INCOME(2) INCREASED 45% TO $57.0 MILLION IN 2Q05 AND
107% TO $94.5 MILLION IN THE FIRST HALF OF 2005
PRO FORMA NET INCOME ON A FULLY EXCHANGED BASIS
INCREASED 29% TO $32.0 MILLION OR 32 CENTS PER DILUTED SHARE IN 2Q05 AND
92% TO $63.3 MILLION OR 63 CENTS PER DILUTED SHARE IN THE FIRST HALF OF 2005
NEW YORK, August 10, 2005 - Lazard Ltd (NYSE:LAZ) today announced
financial results for its second quarter and first half ended June 30, 2005:
o M&A net revenues increased 35% to $182.0 million in the second quarter of
2005 from $135.1 million in the second quarter of 2004 and increased 46%
to $304.3 million in the first half of 2005 from $208.9 million in the
first half of 2004;
o Operating revenues(1) increased 17% to $330.1 million in the second
quarter of 2005 from $282.1 million in the second quarter of 2004 and
increased 21% to $595.7 million in the first half of 2005 from $491.0
million in the first half of 2004;
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(1) Operating revenues exclude interest expense relating to financing activities
which are included in net revenues.
(2) Operating income is before income taxes and minority interest.
Lazard-2
o Pro forma operating income(2) increased 45% to $57.0 million in the second
quarter of 2005 from $39.4 million in the second quarter of 2004 and
increased 107% to $94.5 million in the first half of 2005 from $45.6
million in the first half of 2004;
o Pro forma net income assuming full exchange of outstanding exchangeable
interests increased 29% to $32.0 million in the second quarter of 2005
from $24.7 million in the second quarter of 2004 and increased 92% to
$63.3 million in the first half of 2005 from $32.9 million in the first
half of 2004;
o Pro forma net income before exchange of outstanding exchangeable interests
increased 29% to $12.0 million in the second quarter of 2005 from $9.3
million in the second quarter of 2004 and increased 92% to $23.7 million
in the first half of 2005 from $12.4 million in the first half of 2004
which include the additional minority interest related to the exchangeable
interests;
o Pro forma net income per fully diluted share increased 29% to 32 cents for
the second quarter of 2005 from 25 cents in the second quarter of 2004 and
increased 92% to 63 cents for the first half of 2005 from 33 cents for the
first half of 2004;
o The 2005 pro forma operating income, net income and net income per share
amounts exclude one-time IPO-related professional fees and other costs of
$4.6 million or 3 cents per fully diluted share.
"We are very pleased with our strong performance" said Bruce Wasserstein,
Chairman and Chief Executive Officer of Lazard Ltd. "Our results for the quarter
and for the first six months of this year underscore the strength of Lazard's
franchise and the effectiveness of our business model, which is to generate
revenues through our focus on M&A, financial restructuring and asset management.
The investments we have made in the past to broaden our global advisory
capabilities have positioned the firm for long-term growth."
Steven J. Golub, Lazard's Vice Chairman, noted: "We are pleased that our
strong results demonstrate the benefits of our simple business model which
should now be readily understood. By aligning our compensation costs at no more
than 57.5% of our operating revenues and containing our non-compensation costs,
we are achieving the benefits of our operating leverage."
-MORE-
(2) Operating income is before income taxes and minority interest.
Lazard-3
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.
Historical net income is reported as a historical partnership until the
IPO on May 10, 2005 and does not include payments for services rendered by
managing directors as compensation expense and a provision for U.S. federal
income taxes. In addition, historical net income for periods prior to the IPO do
not include a charge for the minority interest relating to the outstanding
exchangeable interests. Such payments, tax provisions and minority interest
expense are included in subsequent periods. Therefore, historical results for
periods prior to the IPO on May 10, 2005 and subsequent to the IPO are not
comparable. Notwithstanding such lack of comparability, historical net income
from continuing operations decreased by 43% to $37.9 million in the second
quarter of 2005 from $66.9 million in the second quarter of 2004, and increased
43% to $118.1 million in the first half of 2005 from $82.8 million in the first
half of 2004, reflecting these differences in reporting payments for services
rendered by managing directors and in tax provisions and minority interest
expense.
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").
NET REVENUES
FINANCIAL ADVISORY
Financial Advisory (which includes primarily M&A and Financial
Restructuring) net revenues increased 24% to $211.6 million in the second
quarter of 2005, from $170.1 million in the second quarter of 2004 and increased
34% to $368.8 million in the first half of 2005 from $275.6 million in the first
half of 2004.
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Lazard-4
M&A
M&A net revenues increased 35% to $182.0 million in the second quarter of
2005 from $135.1 million in the second quarter of 2004 and increased 46% to
$304.3 million in the first half of 2005 from $208.9 million in the first half
of 2004.
Announced second-quarter 2005 M&A pending transactions included the
following transactions on which Lazard is advising:
o Duke Energy in its $14.3 billion merger with Cinergy
o Royal Dutch Shell in its (euro)4.4 billion sale of Basell
o Resolution Life Group in its (pound)1.8 billion merger with Britannic
Group
o Yellow Brick Road Management in its (euro)1.8 billion sale to a group of
private investors
o Pfizer in its $1.8 billion acquisition of Vicuron Pharmaceuticals
o Pirelli S.p.A. in the (euro)1.3 billion sale of its energy and telecom
cables and systems businesses
o IIR Holdings in its (pound)768 million sale to T&F Informa
o Groupe Danone in the (pound)470 million sale of its sauce business to H.J.
Heinz Company
o Viacom in the announced segmentation of its businesses
o Maytag in its current sale process
o Neuf Telecom in its merger with Cegetel
Completed second-quarter 2005 M&A transactions included the following
transactions on which Lazard advised:
o Telecom Italia Mobile in its (euro)21 billion sale to Telecom Italia
o Telesystems International Wireless in its $4.4 billion sale of ClearWave
NV to Vodafone
o Unsecured Creditors Committee of NextWave Telecom in its $3.0 billion sale
to Verizon Wireless
o RAC plc in its (pound)1.0 billion sale to Aviva plc
o Siemens in its (euro)1.2 billion acquisition of Flender Holding GmbH
o Lee Enterprises in its $1.5 billion acquisition of Pulitzer
o Eurofind SA in the (euro)1.1 billion sale of Rinascente Upin to a group of
private investors
o Charterhouse Capital Partners in its (pound)800 million sale of the
Tussauds Group
o Hollywood Entertainment in its $1.2 billion sale to Movies Gallery
o Transurban in its A$2.2 billion acquisition of Hills Motorway Group
o Texas Pacific Group in its investment in Lenovo Group
-MORE-
Lazard-5
FINANCIAL RESTRUCTURING
Financial Restructuring net revenues were $16.3 million in the second
quarter of 2005 compared to $13.5 million in the second quarter of 2004 and were
$40.4 million in the first half of 2005 compared to $31.7 million in the first
half of 2004.
Notable announced assignments since the first quarter of 2005 included:
Collins & Aikman, Meridian Automotive and United Auto Workers. In addition, we
continued to work on assignments involving Parmalat, Eurotunnel, Tower
Automotive, and Olympic Airlines and Airways Services, among others, in the
second quarter of 2005.
ASSET MANAGEMENT
Management and other fees, which excludes incentive fees, increased 12% to
$105.7 million in the second quarter of 2005 from $94.7 million in the second
quarter of 2004 and 8% to $207.8 million in the first half of 2005 from $191.5
million in the first half of 2004.
The increases in each of the 2005 periods compared to the corresponding
2004 periods were driven by growth in average assets under management, which
rose 8% to $85.2 billion in the first half of 2005 from $78.8 billion in the
first half of 2004. Partially offsetting this increase were lower incentive fees
in the 2005 periods compared to the corresponding 2004 periods. As a result,
asset management net revenues increased 5% to $108.8 million in the second
quarter of 2005 from $103.9 million in the second quarter of 2004 and increased
7% to $215.7 million in the first half of 2005 from $200.7 million in the first
half of 2004.
Assets under management totaled $83.0 billion at the end of the quarter,
down 4% from the end of the first quarter of 2005 due primarily to net asset
outflows of $2.9 billion and negative currency translation adjustments of $0.7
billion.
OPERATING EXPENSES
COMPENSATION AND BENEFITS
On a pro forma basis, compensation and benefits expenses include the
payments for services rendered by employee members of Lazard Asset Management
(LAM) and by managing directors for all periods presented. The compensation
expense to operating revenue ratio was 57.5% in the
-MORE-
Lazard-6
second quarter and the first half of 2005. In the second quarter and the first
half of 2004 only, pro forma compensation and benefits expenses also included a
reduction of $24.5 million and $108.7 million, respectively, 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 ratios would have been 66.2% and 79.6% in the respective
periods. In 2005, the new compensation arrangements were in effect and no
similar reduction was necessary.
On a pro forma basis, compensation and benefits expenses increased 17% to
$189.8 million in the second quarter of 2005 from $162.2 million in the second
quarter of 2004 and increased 21% to $342.5 million in the first half of 2005
from $282.3 million in the first half of 2004. The increases in each period are
consistent with the increase in operating revenues.
On an historical basis, compensation and benefits increased 49% to $161.1
million in the second quarter of 2005 from $107.9 million in the second quarter
of 2004 and 21% to $267.0 million in the first half of 2005 from $220.0 million
in the first half of 2004. Historical compensation and benefits are not on a
comparable basis between periods prior to the IPO and subsequent to the IPO.
Prior to the IPO, payments for services rendered by employee members of LAM and
by managing directors were not included in compensation and benefits expense
whereas for periods subsequent to the IPO they are included.
NON-COMPENSATION
On a pro forma basis, which in 2005 excludes one-time IPO-related costs,
non-compensation and benefits expenses were $63.6 million or 19.3% of operating
revenues in the second quarter of 2005, compared with $61.0 million or 21.6% of
operating revenues in the second quarter of 2004 and were $119.5 million or
20.1% of operating revenues in the first half of 2005 compared with $124.2
million or 25.3% of operating revenues in the first half of 2004. The decrease
in the year-to-date ratio of non-compensation and benefits expenses to operating
revenues is due to a decrease of 4% in non-compensation and benefits expenses
and the operating leverage from higher operating revenues. The 4% decrease in
non-compensation expenses in the first half of 2005 compared with the comparable
period in 2004 reflects lower travel and entertainment expenses of $4.4 million
and lower premises and occupancy expenses of $2.7 million, partially offset by
the costs of being a public company.
-MORE-
Lazard-7
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 operating results. For the second
quarter and the first half of 2005, on a pro forma basis assuming an effective
tax rate of 28% on Lazard Ltd's allocable share of Lazard Group's income, the
provision for taxes was $16.8 million and $24.3 million, respectively, compared
with a pro forma provision for taxes of $7.8 million and $9.1 million in the
corresponding 2004 periods. The pro forma effective tax rate for the first half
of 2005 and 2004 was 25.7% and 19.9%, respectively. The increases were due to an
increase in non-U.S. income taxes allocable to the minority interest's share of
Lazard Group's income.
On an historical basis, the provision for income taxes for the second
quarter and the first half of 2005 was $25.5 million and $33.3 million,
respectively, compared with a tax provision of $15.0 million and $12.3 million
for the corresponding periods in 2004. The increases in the provisions in 2005
were due to increased profitability in locations that are subject to corporate
income taxes, including a provision for U.S. federal income taxes for the period
commencing May 10, 2005.
MINORITY INTEREST
On a pro forma basis, minority interest assuming full exchange of the
outstanding exchangeable interests was $9.0 million in the second quarter of
2005 and $4.7 million in the first half of 2005, compared with $3.6 million and
benefit of $0.1 million in the corresponding 2004 periods. The increase in 2005
was due primarily due to the higher financial advisory revenue and profits from
our strategic alliance in Italy.
Before exchange of the exchangeable interests, minority interest also
includes a provision for the 62.5% interest in the after tax results of Lazard
Group allocable to the exchangeable interests. In the second quarter and first
half of 2005 this amounted to $19.2 million and $41.8 million, respectively, up
from $18.7 million and $24.3 million, respectively, in the comparable periods of
2004 due to higher profits of Lazard Group in each of the 2005 periods compared
to 2004.
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Lazard-8
On an historical basis, minority interest was $26.3 million and $36.6
million for the second quarter and first half of 2005, respectively, versus
$25.7 million and $40.7 million for the corresponding periods in 2004. As
mentioned previously, historical results are not on a comparable basis between
periods. The changes in historical minority interest relate primarily to (i) the
increased profits from our strategic alliance in Italy mentioned above, (ii)
LAZ-MD Holdings' interest in the results of Lazard Group for the period
beginning with the IPO on May 10, 2005, and (iii) including payments for
services rendered by managing directors of LAM and employee members of LAM as
minority interest for periods prior to the IPO and as compensation and benefits
expense for subsequent periods.
BASIS OF HISTORICAL AND PRO FORMA INFORMATION
In connection with the IPO on May 10, 2005, 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 LLC, a Delaware limited liability company that
holds Lazard Ltd's businesses. As a result of completing the IPO, Lazard Ltd has
no material operating 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 which are effectively exchangeable over time, on a
one-for-one basis, for shares of Lazard Ltd common stock. LAZ-MD Holdings is a
holding company owned by current and former managing directors of Lazard Group.
Under generally accepted accounting principles in the United States (U.S.
GAAP), Lazard's historical consolidated financial statements reflect the
historical results of operations of Lazard Group, including the separated
businesses, until May 10, 2005, which was the effective date of the separation.
The separated businesses are presented as discontinued operations as required
under U.S. GAAP.
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Lazard-9
The historical financial statements do not reflect what the results of
operations of Lazard Ltd or Lazard Group would have been had these companies
operated as separate, independent public entities for the periods presented. In
addition, the historical results of operations for periods prior to and
subsequent to the IPO are not on a comparable basis. Specifically, for periods
prior to the IPO the historical results of operations under U.S. GAAP 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
outside of France; broking, research and underwriting services; merchant
banking fund-management activities outside of France; and specified
non-operating assets and liabilities (which are reported as discontinued
operations),
o Payment for services rendered by Lazard's managing directors, which, as a
result of Lazard operating as a limited liability company, had been
accounted for prior to the IPO as distributions from members' capital, or,
in some cases, as minority interest, rather than as compensation and
benefits expense, and
o U.S. corporate federal income taxes prior to the IPO, 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. Income taxes shown on
the historical financial statements include taxes incurred in non-U.S.
entities and to unincorporated business taxes attributable to Lazard's
operations apportioned to New York City.
For periods subsequent to the IPO, the historical results of operations
under U.S. GAAP include:
o Payments to managing directors within compensation and benefits expense,
o Provision for U.S. federal income taxes, and
o Allocation of profits to LAZ-MD Holdings' 62.5% membership interest in
Lazard Group as minority interest.
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Lazard-10
The unaudited pro forma condensed consolidated statements of income
information 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 the beginning of each period presented.
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%,
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,
o The net incremental interest expense related to the additional financing
transactions, and
o Exclusion of one-time IPO-related costs.
The unaudited pro forma financial information are included for
informational purposes only and do not purport to reflect the results of
operations of Lazard Ltd 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 Ltd or Lazard Group
had operated independently.
The pro forma consolidated financial information should not be relied upon
as being indicative of Lazard Ltd or Lazard Group's results of operations 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 for any future
period.
* * *
Lazard-11
CONFERENCE CALL AND ADDITIONAL FINANCIAL INFORMATION
Bruce Wasserstein, Chairman, Steven J. Golub, Vice Chairman, and Michael
J. Castellano, Chief Financial Officer, will host a conference call today at
10:00 a.m. EDT to discuss the company's 2005 second quarter and first half
results. The conference call can be accessed via a live audio webcast available
through the Investor Relations website at WWW.LAZARD.COM or by dialing
1-800-818-5264(within the U.S.) and 1-913-981-4910 (outside the U.S.) 15 minutes
prior to the start of the call. On-demand replay of the webcast will be
available beginning at 1:00 p.m. EDT today through August 16, 2005 at the same
website or by phone by dialing 1-888-203-1112 (within the U.S.) and
1-719-457-0820 (outside the U.S.); access code 9347223.
Additional financial, statistical and business-related information is
included in a financial supplement. The earnings release is, and the financial
supplement will be, available today through the Investor Relations website at
WWW.LAZARD.COM.
* * *
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 29 cities across 16 countries in North America,
Europe, Asia, Australia and South America. 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.
* * *
Lazard-12
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.
# # #
Lazard-13
LAZARD LTD
PRO FORMA OPERATING REVENUES
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------------------- ------------------------------------------
INCREASE / INCREASE/
2004 2005 (DECREASE) 2004 2005 (DECREASE)
----- ----- ----------- ----- ----- ----------
($ in thousands)
FINANCIAL ADVISORY
M&A $135,108 $182,007 $46,899 35% $208,942 $304,318 $95,376 46%
Financial Restructuring 13,500 16,263 2,763 20% 31,700 40,411 8,711 27%
Corporate Finance and Other 21,468 13,296 (8,172) (38%) 34,929 24,096 (10,833) (31%)
------- ------- ------- ------- ------- -------
Total 170,076 211,566 41,490 24% 275,571 368,825 93,254 34%
ASSET MANAGEMENT
Management and Other Fees 94,743 105,725 10,982 12% 191,539 207,768 16,229 8%
Incentive Fees 9,118 3,112 (6,006) - 9,148 7,933 (1,215) -
------- ------- ------- ------- ------- -------
Total 103,861 108,837 4,976 5% 200,687 215,701 15,014 7%
CORPORATE (11,366) (10,062) 1,304 - (24,175) (28,029) (3,854) -
------- ------- ------- ------- ------- -------
NET REVENUES 262,571 310,341 47,770 18% 452,083 556,497 104,414 23%
Add Back Non-LFB Interest Expense 19,489 19,790 301 - 38,954 39,163 209 -
------- ------- ------- ------- ------- -------
OPERATING REVENUES $282,060 $330,131 $48,071 17% $491,037 $595,660 $104,623 21%
========= ========= ======== ========= ========= =========
Lazard-14
LAZARD LTD
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
<
PRO FORMA
----------------------------------------------------
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------- --------------
2004 2005 2004 2005
----- ----- ----- ----
($ in thousands, except per share data)
Total revenues $286,431 $336,398 $500,111 $606,405
LFB interest expense (4,371) (6,267) (9,074) (10,745)
------- ------- ------- -------
Operating revenues 282,060 330,131 491,037 595,660
Other interest expense (19,489) (19,790) (38,954) (39,163)
------- ------- ------- -------
Net revenues 262,571 310,341 452,083 556,497
Operating expenses:
Compensation and benefits 162,186 189,826 282,346 342,505
Premises and occupancy costs 18,332 17,477 36,605 33,860
Professional fees 10,121 11,802 20,675 20,660
Travel and entertainment 12,353 11,130 24,537 20,105
Other 20,219 23,151 42,337 44,884
------- ------- ------- -------
Operating expenses 223,211 253,386 406,500 462,014
------- ------- ------- -------
Operating income 39,360 56,955 45,583 94,483
Provision for income taxes 7,822 16,810 9,059 24,268
------ ------- ------ -------
Income before minority interests 31,538 40,145 36,524 70,215
Minority interests (excluding LAZ-MD)* 3,596 8,986 (128) 4,712
Minority interests (LAZ-MD only) 18,662 19,192 24,296 41,800
------- ------- ------- -------
Net income from continuing operations 9,280 11,967 12,356 23,703
Net income (loss) from discontinued operations - - - -
------- ------- ------- -------
Net income $9,280 $11,967 $12,356 $23,703
======= ======= ======= =======
Net income assuming full exchange of exchangeable interests $24,743 $32,023 $32,948 $63,317
======== ======== ======== =======
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 37,500,000 37,500,000 37,500,000 37,500,000
Diluted 100,000,000 100,000,000 100,000,000 100,000,000
NET INCOME PER SHARE:
Basic $0.25 $0.32 $0.33 $0.63
Diluted $0.25 $0.32 $0.33 $0.63
* Includes charges relating to our strategic alliances in Italy of $4,345 and
$8,709 in the three months ended June 30, 2004 and 2005, respectively and $843
and $4,352 in the six months ended June 30, 2004 and 2005, respectively.
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Lazard-15
LAZARD LTD
UNAUDITED HISTORICAL CONSOLIDATED STATEMENTS OF INCOME
Historical net income is reported as a historical partnership until the IPO on
May 10, 2005 and does not include payments for services rendered by managing
directors as compensation expense and a provision for U.S. federal income taxes.
In addition, historical net income for periods prior to the IPO do not include a
charge for the minority interest relating to the outstanding exchangeable
interests. Such payments, tax provisions and minority interest expense are
included in subsequent periods. Therefore, historical results for periods prior
to the IPO on May 10, 2005 and subsequent to the IPO are not comparable.
HISTORICAL
----------------------------------------------
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------- --------------
2004 2005 2004 2005
----- ----- ----- ----
($ in thousands, except per share data)
Total revenues $286,431 $336,398 $500,111 $606,405
LFB interest expense (4,371) (6,267) (9,074) (10,745)
------- ------- ------- -------
Operating revenues 282,060 330,131 491,037 595,660
Other interest expense (5,545) (12,768) (11,067) (18,198)
------- ------- ------- -------
Net revenues 276,515 317,363 479,970 577,462
Operating expenses:
Compensation and benefits 107,916 161,148 219,963 267,029
Premises and occupancy costs 18,332 17,477 36,605 33,860
Professional fees 10,121 14,737 20,675 23,595
Travel and entertainment 12,353 11,130 24,537 20,105
Other 20,219 23,151 42,337 44,884
------- ------- ------- -------
Operating expenses 168,941 227,643 344,117 389,473
------- -------- -------- -------
Operating income 107,574 89,720 135,853 187,989
Provision for income taxes 14,951 25,463 12,342 33,266
------- ------- ------- -------
Income before minority interests 92,623 64,257 123,511 154,723
Minority interests (excluding LAZ-MD)* 25,746 3,533 40,710 13,793
Minority interests (LAZ-MD only) - 22,813 - 22,813
------- ------- ------- -------
Net income from continuing operations 66,877 37,911 82,801 118,117
Net income (loss) from discontinued operations and
extraordinary gain 12,486 (10,318) 11,615 (17,168)
------- -------- ------- -------
Net income $79,363 $27,593 $94,416 $100,949
======== ======== ======== ========
Net income assuming full exchange of exchangeable interests
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic - 37,500 - 37,500
Diluted - 100,000 - 100,000
NET INCOME PER SHARE FROM CONTINUING OPERATIONS:
Basic - $0.30 - $0.30
====== ======= ======= =======
Diluted - $0.30 - $0.30
====== ======= ======= =======
* Includes charges relating to our strategic alliances in Italy of $4,345 and
$8,709 in the three months ended June 30, 2004 and 2005, respectively and $843
and $4,352 in the six months ended June 30, 2004 and 2005, respectively.
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Lazard-16
LAZARD LTD
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
THREE MONTH PERIOD ENDED JUNE 30, 2005
------------------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
-----------------------------------------
SEPARATION (a) CONTINUING PRO FORMA,
HISTORICAL (DISC. OPS) OPERATIONS OTHER AS ADJUSTED
------------ ------------- ----------- ------ -----------
($ in thousands, except per share data)
Total revenues $336,398 $- $336,398 $- $336,398
LFB interest expense (6,267) - (6,267) - (6,267)
------- ------- ------- ------- -------
Operating revenues 330,131 - 330,131 - 330,131
Other interest expense (12,768)(b) - (12,768) (7,022)(c) (19,790)
-------- ------- -------- ------- -------
Net revenues 317,363 - 317,363 (7,022) 310,341
Operating expenses:
Compensation and benefits 161,148 - 161,148 28,678 (d) 189,826
Premises and occupancy costs 17,477 - 17,477 - 17,477
Professional fees 14,737 - 14,737 (2,935)(i) 11,802
Travel and entertainment 11,130 - 11,130 - 11,130
Other 23,151 - 23,151 - 23,151
------- - ------- ------- -------
Operating expenses 227,643 - 227,643 25,743 253,386
------- ------- ------- ------- -------
Operating income (loss) 89,720 - 89,720 (32,765) 56,955
Provision for income taxes 25,463 - 25,463 (8,653)(e) 16,810
------- ------- ------- ------- -------
Income (loss) before minority interests 64,257 - 64,257 (24,112) 40,145
Minority interests (excluding LAZ-MD) 3,533 - 3,533 5,453 (d) 8,986
Minority interests (LAZ-MD only) 22,813 - 22,813 (3,621)(f) 19,192
------- ------- ------- ------- -------
Net income (loss) from continuing operations 37,911 - 37,911 (25,944) 11,967
Net income (loss) from discontinued operations (10,318) 10,318 - - -
-------- ------- ------- ------- -------
Net income (loss) $27,593 $10,318 $37,911 ($25,944) $11,967
======== ======== ======== ========= =======
Net income assuming full exchange of exchangeable interests $32,023
=======
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 37,500,000 (g)
Diluted 100,000,000 (g)
NET INCOME PER SHARE:
Basic $0.32 (h)
Diluted $0.32 (h)
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Lazard-17
LAZARD LTD
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
THREE MONTH PERIOD ENDED JUNE 30, 2004
--------------------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
----------------------------------------------
SEPARATION (a) CONTINUING PRO FORMA,
HISTORICAL (DISC. OPS) OPERATIONS OTHER AS ADJUSTED
------------ ------------- ----------- ------ -----------
($ in thousands, except per share data)
Total revenues $286,431 $- $286,431 $- $286,431
LFB interest expense (4,371) - (4,371) - (4,371)
------- ------- ------- ------- -------
Operating revenues 282,060 - 282,060 - 282,060
Other interest expense (5,545)(b) - (5,545) (13,944)(c) (19,489)
------- ------- ------- -------- --------
Net revenues 276,515 - 276,515 (13,944) 262,571
Operating expenses:
Compensation and benefits 107,916 - 107,916 54,270 (d) 162,186
Premises and occupancy costs 18,332 - 18,332 - 18,332
Professional fees 10,121 - 10,121 - 10,121
Travel and entertainment 12,353 - 12,353 - 12,353
Other 20,219 - 20,219 - 20,219
------- ------- ------- ------- -------
Operating expenses 168,941 - 168,941 54,270 223,211
------- ------- ------- ------- -------
Operating income (loss) 107,574 - 107,574 (68,214) 39,360
Provision for income taxes 14,951 - 14,951 (7,129)(e) 7,822
------- ------- ------- ------- -------
Income (loss) before minority interests 92,623 - 92,623 (61,085) 31,538
Minority interests (excluding LAZ-MD) 25,746 - 25,746 (22,150)(d) 3,596
Minority interests (LAZ-MD only) - - - 18,662 (f) 18,662
------- ------- ------- ------- -------
Net income (loss) from continuing operations 66,877 - 66,877 (57,597) 9,280
Net income (loss) from discontinued operations
and extraordinary gain 12,486 (12,486) - - -
------- ------- ------- ------- -------
Net income (loss) $79,363 ($12,486) $66,877 ($57,597) $9,280
======== ========= ======== ========= ======
Net income assuming full exchange of exchangeable interests $24,743
=======
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 37,500,000 (g)
Diluted 100,000,000 (g)
NET INCOME PER SHARE:
Basic $0.25 (h)
Diluted $0.25 (h)
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Lazard-18
LAZARD LTD
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
SIX MONTH PERIOD ENDED JUNE 30, 2005
-----------------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
------------------------------------------
SEPARATION (a) CONTINUING PRO FORMA,
HISTORICAL (DISC. OPS) OPERATIONS OTHER AS ADJUSTED
------------ ------------- ----------- ------ -----------
($ in thousands, except per share data)
Total revenues $606,405 $- $606,405 $- $606,405
LFB interest expense (10,745) - (10,745) - (10,745)
-------- -------- -------- -------- --------
Operating revenues 595,660 - 595,660 - 595,660
Other interest expense (18,198)(b) - (18,198) (20,965)(c) (39,163)
-------- -------- -------- -------- --------
Net revenues 577,462 - 577,462 (20,965) 556,497
Operating expenses:
Compensation and benefits 267,029 - 267,029 75,476 (d) 342,505
Premises and occupancy costs 33,860 - 33,860 - 33,860
Professional fees 23,595 - 23,595 (2,935)(i) 20,660
Travel and entertainment 20,105 - 20,105 - 20,105
Other 44,884 - 44,884 - 44,884
-------- -------- -------- -------- --------
Operating expenses 389,473 - 389,473 72,541 462,014
-------- -------- -------- -------- --------
Operating income (loss) 187,989 - 187,989 (93,506) 94,483
Provision for income taxes 33,266 - 33,266 (8,998)(e) 24,268
-------- -------- -------- -------- --------
Income (loss) before minority interests 154,723 - 154,723 (84,508) 70,215
Minority interests (excluding LAZ-MD) 13,793 - 13,793 (9,081)(d) 4,712
Minority interests (LAZ-MD only) 22,813 - 22,813 18,987 (f) 41,800
-------- -------- -------- -------- --------
Net income (loss) from continuing operations 118,117 - 118,117 (94,414) 23,703
Net income (loss) from discontinued operations (17,168) 17,168 - - -
-------- -------- - - -
Net income (loss) $100,949 $17,168 $118,117 ($94,414) $23,703
========= ========= ========= ========= =======
Net income assuming full exchange of exchangeable interests $63,317
=======
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 37,500,000 (g)
Diluted 100,000,000 (g)
NET INCOME PER SHARE:
Basic $0.63 (h)
Diluted $0.63 (h)
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Lazard-19
LAZARD LTD
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
SIX MONTH PERIOD ENDED JUNE 30, 2004
-------------------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
-------------------------------------------
SEPARATION (a) CONTINUING PRO FORMA,
HISTORICAL (DISC. OPS) OPERATIONS OTHER AS ADJUSTED
------------ ------------- ----------- ------ -----------
($ in thousands, except per share data)
Total revenues $500,111 $- $500,111 $- $500,111
LFB interest expense (9,074) - (9,074) - (9,074)
-------- -------- -------- -------- --------
Operating revenues 491,037 - 491,037 - 491,037
Other interest expense (11,067)(b) - (11,067) (27,887)(c) (38,954)
-------- -------- -------- -------- --------
Net revenues 479,970 - 479,970 (27,887) 452,083
Operating expenses:
Compensation and benefits 219,963 - 219,963 62,383 (d) 282,346
Premises and occupancy costs 36,605 - 36,605 - 36,605
Professional fees 20,675 - 20,675 - 20,675
Travel and entertainment 24,537 - 24,537 - 24,537
Other 42,337 - 42,337 - 42,337
-------- -------- -------- -------- --------
Operating expenses 344,117 - 344,117 62,383 406,500
-------- -------- -------- -------- --------
Operating income (loss) 135,853 - 135,853 (90,270) 45,583
Provision for income taxes 12,342 - 12,342 (3,283)(e) 9,059
-------- -------- -------- -------- -------
Income (loss) before minority interests 123,511 - 123,511 (86,987) 36,524
Minority interests (excluding LAZ-MD) 40,710 - 40,710 (40,838)(d) (128)
Minority interests (LAZ-MD only) - - - 24,296 (f) 24,296
-------- -------- -------- -------- --------
Net income (loss) from continuing operations 82,801 - 82,801 (70,445) 12,356
Net income (loss) from discontinued operations
and extraordinary gain 11,615 (11,615) - - -
-------- --------- -------- -------- -------
Net income (loss) $94,416 ($11,615) $82,801 ($70,445) $12,356
======== ========== ======== ========= =======
Net income assuming full exchange of exchangeable interests $32,948
=======
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 37,500,000 (g)
Diluted 100,000,000 (g)
NET INCOME PER SHARE:
Basic $0.33 (h)
Diluted $0.33 (h)
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Lazard-20
LAZARD LTD
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(a) Represents adjustments necessary to remove Lazard Group's discontinued
operations, and when applicable extraordinary items, related to the
separated businesses.
(b) For the three and six month periods ended June 30, 2004, interest expense
includes $2,000 and $4,000 in accrued dividends relating to Lazard Group's
mandatorily redeemable preferred stock issued in March 2001. The three
month and six month periods ended June 30, 2005 include a credit of $10,000
and $8,000, respectively, which represents accrued dividends on Lazard
Group's mandatorily redeemable preferred stock which were cancelled in
connection with the redemption of membership interests of historical
partners.
(c) Represents (i) net incremental interest expense related to the separation
and recapitalization transactions, including the financing transactions and
the amortization of capitalized costs associated with the financing
transactions and (ii) for the three month and six month periods ended June
30, 2005 only, exclusion of one-time IPO-related costs of $1,661.
(d) The adjustment reflects payments for services rendered by employee members
of LAM and managing directors, which prior to the IPO were accounted for as
either distributions from members' capital or as minority interest expense.
Following the completion of the IPO, 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) Represents (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) Represents the adjustment for LAZ-MD Holdings' ownership of 62.5% of the
Lazard Group common membership interests outstanding immediately after the
IPO.
(g) For 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 IPO. For diluted net income per share, LAZ-MD
Holdings exchangeable interests also 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 are not dilutive
currently.
(h) Calculated after considering the impact of all the pro forma adjustments
and based on the weighted average basic and diluted shares outstanding, as
described in note (g) above.
(i) Represents exclusion of one-time IPO-related costs of $2,935 for the three
and six month periods ended June 30, 2005.
Lazard-21
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
AS OF JUNE 30, 2005
ASSETS
Cash and cash equivalents $320,784
Cash and securities segregated for regulatory purposes 23,328
Marketable investments 11,146
Securities owned - at fair value 327,246
Receivables 1,022,905
Other assets 393,381
-------
Total assets $2,098,790
==========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY)
Payables $949,558
Accrued compensation and benefits 176,972
Other liabilities 613,400
Senior notes:
Underlying equity security units 437,500
Others 580,199
Subordinated loans 200,000
---------
Total liabilities 2,957,659
Commitments and contingencies
Minority interest 99,874
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock:
Class A, par value $ .01 per share 375
Class B, par value $ .01 per share -
Additional paid-in capital (950,276)
Accumulated other comprehensive income (loss), net of tax (20,208)
Retained earnings 11,366
--------
Total stockholders' equity (deficiency) (958,743)
---------
Total liabilities and stockholders' equity (deficiency) $2,098,790
==========
Lazard-22
LAZARD LTD
RECONCILIATION OF PRO FORMA SHARES OUTSTANDING AND
NET INCOME FOR BASIC AND DILUTED E.P.S
THREE MONTHS ENDED JUNE 30, 2004 THREE MONTHS ENDED JUNE 30, 2005
-------------------------------- --------------------------------
WEIGHTED NET WEIGHTED NET
AVERAGE SHARES NET INCOME AVERAGE SHARES NET INCOME
OUTSTANDING INCOME PER SHARE OUTSTANDING INCOME PER SHARE
----------- ------ --------- ----------- ------ ---------
($ in thousands, except per share data)
Amounts as reported for basic
net income per share 37,500,000 $9,280 $0.25 37,500,000 $11,967 $0.32
===== =====
Amounts applicable to LAZ-MD
exchangeable interests:
Share of Lazard Group income 18,662 (a) 19,193 (a)
Additional Corporate tax (3,199)(b) 863 (b)
Shares issuable 62,500,000 62,500,000
---------- ------- ---------- -------
Amounts as reported
for diluted net income per share 100,000,000 $24,743 $0.25 100,000,000 $32,023 $0.32
=========== ======= ===== =========== ======= =====
SIX MONTHS ENDED JUNE 30, 2004 SIX MONTHS ENDED JUNE 30, 2005
------------------------------ ------------------------------
WEIGHTED NET WEIGHTED NET
AVERAGE SHARES NET INCOME AVERAGE SHARES NET INCOME
OUTSTANDING INCOME PER SHARE OUTSTANDING INCOME PER SHARE
----------- ------ --------- ----------- ------ ---------
($ in thousands, except per share data)
Amounts as reported for basic
net income per share 37,500,000 $12,356 $0.33 37,500,000 $23,703 $0.63
===== =====
Amounts applicable to LAZ-MD
exchangeable interests:
Share of Lazard Group income 24,296 (a) 41,801 (a)
Additional Corporate tax (3,704)(b) (2,187)(b)
Shares issuable 62,500,000 62,500,000
---------- ------- ---------- -------
Amounts as reported
for diluted net income per share 100,000,000 $32,948 $0.33 100,000,000 $63,317 $0.63
=========== ======= ===== =========== ======= =====
(a) 62.5% of pro forma Lazard Group net income of $29,860 and $30,708 for the
three months ended June 30, 2004 and 2005, respectively, and $38,874 and
$66,881 for the six months ended June 30, 2004 and 2005.
(b) Based on pro forma Lazard Group operating income of $39,360 and $57,045 for
the three months ended June 30, 2004 and 2005, respectively, and $45,583
and $94,573 for the six months ended June 30, 2004 and 2005.
Lazard-23
ASSETS UNDER MANAGEMENT (AUM)
AS OF
--------------------------------------------------------------
JUNE 30, DECEMBER 31, MARCH 31, JUNE 30,
2004 2004 2005 2005
----- ----- ----- ----
($ in millions)
Total Equities $62,490 $69,745 $69,724 $66,077
Total Fixed Income 11,134 11,204 11,314 11,210
Alternative Investments 2,069 2,800 2,921 3,054
Merchant Banking 451 551 523 801
Cash 1,838 2,135 1,775 1,870
------- ------- ------- ------
Total AUM $77,982 $86,435 $86,257 $83,012
======== ======== ======== =======
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- -------------------------
2004 2005 2004 2005
----- ----- ----- ----
AUM - Beginning of Period $80,000 $86,257 $78,371 $86,435
Net Flows (1,636) (2,943) (1,654) (2,577)
Market Appreciation (Depreciation) (280) 357 1,589 290
Foreign Currency Adjustments (102) (659) (324) (1,136)
----- ----- ----- -------
AUM - End of Period $77,982 $83,012 $77,982 $83,012
======== ======== ======== =======
Average AUM (note) $78,991 $84,634 $78,784 $85,235
======== ======== ======== =======
Note: Average AUM is based on an average of quarterly ending balances for the
respective periods
Lazard-24
LAZARD LTD
SCHEDULE OF PRO FORMA INCOME TAX PROVISION
ALLOCATION OF OPERATING INCOME
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
2004 2005 2004 2005
---- ---- ---- ----
($ in thousands)
Operating income:
Lazard Group ........................................................ $39,360 $57,045 $45,583 $94,573
Lazard Ltd .......................................................... - (90) - (90)
------- ------- ------- -------
Total ............................................................ $39,360 $56,955 $45,583 $94,483
======= ======= ======= =======
Operating income allocable to Lazard Ltd:
Lazard Group (37.5%) ................................................ $14,760 $21,392 $17,094 $35,465
Lazard Ltd (100%) ................................................... - (90) - (90)
------- ------- ------- -------
Total ............................................................ $14,760 $21,302 $17,094 $35,375
======= ======= ======= =======
Operating income allocable to LAZ-MD Holdings:
Lazard Group (62.5%) ................................................ $24,600 $35,653 $28,489 $59,108
======= ======= ======= =======
PRO FORMA INCOME TAX PROVISION
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
2004 2005 2004 2005
---- ---- ---- ----
($ in thousands)
Lazard Ltd's entity level taxes (28%) .................................. $4,133 $5,965 $4,786 $9,905
Flow through provision for Lazard Group income taxes applicable to LAZ-MD
Holdings' 62.5% ownership - effective tax rates of 15%* and 30.4%* for the
three month periods ended June 30, 2004 and 2005 and 15% and 24.3%
for the six month periods ended June 30, 2004 and 2005, respectively 3,689 10,845 4,273 14,363
------ ------ ------ ------
Total pro forma provision for income taxes ............................. 7,822 16,810 9,059 24,268
Pro forma provision for income taxes before final
adjustment for the equity public offering ........................... 5,904 19,585 6,837 25,214
------ ------ ------ ------
Pro forma adjustment ................................................... $1,918 (2,775) $2,222 (946)
====== ======= ====== ======
Lazard Ltd consolidated effective tax rate ............................. 19.9% 29.5% 19.9% 25.7%
===== ===== ===== =====
* Effective tax rate of 30.4% for the three months ended June 30, 2005 is due
to increasing the estimated pro forma Lazard Group effective tax rate for
2005 from 15% estimated at the end of March 2005 to 24.3% estimated at the
end of June 2005.
