UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): July 26, 2017
Lazard Ltd
(Exact name of registrant as specified in its charter)
| Bermuda | 001-32492 | 98-0437848 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
| Clarendon House, 2 Church Street, Hamilton, Bermuda |
HM 11 | |||
| (Address of Principal Executive Offices) | (Zip Code) | |||
Registrant’s telephone number, including area code 441-295-1422
Not Applicable
(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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
On July 27, 2017, Lazard Ltd (the “Company”) issued a press release announcing financial results for its second quarter ended June 30, 2017. A copy of the Company’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 the Company under the Securities Act of 1933 or the Exchange Act.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On July 26, 2017, the Company announced that, effective October 1, 2017, Evan Russo, age 42, Managing Director and Co-Head of the Company’s Capital Markets and Capital Structure Advisory practice, will become Chief Financial Officer of the Company and Lazard Group LLC (“Lazard Group”). Effective October 1, 2017, Matthieu Bucaille, who has served as Chief Financial Officer of the Company and Lazard Group since 2011, will become Chief Executive Officer of Lazard International and Chief Executive Officer of Compagnie Financière Lazard Frères and Lazard Frères Banque in Paris.
Scott D. Hoffman, General Counsel of the Company and Lazard Group, has been appointed Chief Administrative Officer of the Company and Lazard Group, effective July 26, 2017. Mr. Hoffman will continue to serve as General Counsel and Secretary of the Company and Lazard Group.
A copy of the Company’s press release announcing this information is attached as Exhibit 99.2 to this Report on Form 8-K and is incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits.
| Exhibit Number |
Description of Exhibit | |
| 99.1 | Press Release issued on July 27, 2017. | |
| 99.2 | Press Release issued on July 26, 2017. | |
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 hereunto duly authorized.
| LAZARD LTD | ||
| (Registrant) | ||
| By: | /s/ Scott D. Hoffman | |
| Name: | Scott D. Hoffman | |
| Title: | Chief Administrative Officer and General Counsel | |
Dated: July 27, 2017
EXHIBIT INDEX
| Exhibit Number |
Description of Exhibit | |
| 99.1 | Press Release issued on July 27, 2017 | |
| 99.2 | Press Release issued on July 26, 2017 | |
Exhibit 99.1
LAZARD LTD REPORTS
SECOND-QUARTER AND FIRST-HALF 2017 RESULTS
| Record quarterly and first-half operating revenue for both businesses |
Record assets under management (AUM) of $226 billion |
Returned $493 million of capital to shareholders in first half of year |
NEW YORK, July 27, 2017 – Lazard Ltd (NYSE: LAZ) today reported record quarterly operating revenue1 of $720 million for the quarter ended June 30, 2017. Net income, as adjusted1 and excluding pre-tax charges2, was $130 million, or $0.98 (diluted) per share for the quarter. Second-quarter 2017 net income on a U.S. GAAP basis was $120 million, or $0.91 per share (diluted).
First-half net income, as adjusted1,2, was $240 million, or $1.81 per share (diluted). On a U.S. GAAP basis, first-half net income was $228 million, or $1.72 per share (diluted).
“Lazard’s record operating revenue underscores the power of our model and the global breadth and depth of our franchise,” said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. “We advised business and government leaders on a wide variety of strategic and financial matters around the world. Asset Management achieved a record level of AUM by providing diverse, sophisticated investment solutions for a global, primarily institutional client base.”
| ($ in millions, except per share data and AUM) |
Quarter Ended June 30, |
Six Months Ended June 30, |
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|||||||||||||||||||||
| 2017 | 2016 | %’17-’16 | 2017 | 2016 | %’17-’16 | |||||||||||||||||||
| Net Income |
||||||||||||||||||||||||
| US GAAP |
$ | 120 | $ | 80 | 50 | % | $ | 228 | $ | 147 | 55 | % | ||||||||||||
| Per share, diluted |
$ | 0.91 | $ | 0.61 | 49 | % | $ | 1.72 | $ | 1.11 | 55 | % | ||||||||||||
| Adjusted1,2 |
$ | 130 | $ | 80 | 62 | % | $ | 240 | $ | 147 | 63 | % | ||||||||||||
| Per share, diluted |
$ | 0.98 | $ | 0.61 | 61 | % | $ | 1.81 | $ | 1.11 | 63 | % | ||||||||||||
| Operating Revenue1 |
||||||||||||||||||||||||
| Total operating revenue |
$ | 720 | $ | 542 | 33 | % | $ | 1,345 | $ | 1,048 | 28 | % | ||||||||||||
| Financial Advisory |
$ | 411 | $ | 287 | 43 | % | $ | 747 | $ | 553 | 35 | % | ||||||||||||
| Asset Management |
$ | 307 | $ | 251 | 22 | % | $ | 585 | $ | 490 | 19 | % | ||||||||||||
| AUM ($ in billions) |
||||||||||||||||||||||||
| Period End |
$ | 226 | $ | 192 | 18 | % | ||||||||||||||||||
| Average |
$ | 222 | $ | 193 | 15 | % | $ | 214 | $ | 189 | 14 | % | ||||||||||||
| Media Contact: | Judi Frost Mackey | +1 212 632 1428 | judi.mackey@lazard.com | |||
| Investor Contact: | Armand Sadoughi | +1 212 632 6358 | armand.sadoughi@lazard.com |
Note: Endnotes are on page 7 of this release. A reconciliation of adjusted GAAP to U.S. GAAP is on page 18.
1
OPERATING REVENUE
Operating revenue1 was a quarterly record of $720 million for the second quarter of 2017, and a first-half record of $1,345 million for the first half of 2017, up 33% and 28%, respectively, from the 2016 periods.
Financial Advisory
In the text portion of this press release, we present our Financial Advisory results as 1) M&A and Strategic Advisory (M&A Advisory, Capital Advisory, Sovereign Advisory, Shareholder Advisory, Capital Raising, and other advisory work for clients), and 2) Restructuring.
Second Quarter
Financial Advisory operating revenue was a quarterly record of $411 million for the second quarter of 2017, 43% higher than the second quarter of 2016.
M&A and Strategic Advisory operating revenue was a second-quarter record of $323 million for the second quarter of 2017, 50% higher than the second quarter of 2016.
During the second quarter of 2017, Lazard was engaged in highly visible, complex M&A transactions and other advisory assignments, including cross-border transactions, spin-offs and distressed asset sales, as well as sovereign, capital and shareholder advisory in the Americas, Europe, Australia, Africa and Asia.
Among the major M&A transactions that were completed during the second quarter of 2017 were the following (clients are in italics): Johnson & Johnson’s $30 billion acquisition of Actelion, with spin-out of Idorsia, a new R&D company; Danone’s $12.5 billion acquisition of WhiteWave; United Arab Shipping Company’s $12.5 billion combination with Hapag-Lloyd; and Alinta Holdings on the sale of Alinta Energy to Chow Tai Fook Enterprises.
Transactions on which we continued to advise during or since the second quarter include: Dow Chemical’s $130 billion merger of equals with DuPont; Reynolds American on the $49 billion recommended offer from BAT for the remaining 57.8% of Reynolds; Great Plains Energy’s $14 billion merger of equals with Westar Energy; Safran’s €8.7 billion acquisition of Zodiac Aerospace; and LVMH Moët Hennessy Louis Vuitton’s € 6.5 billion acquisition of Christian Dior Couture.
Our Sovereign and Capital Advisory services remained active globally, advising governments and corporations on balance sheet matters, financing strategy and capital raising.
Restructuring operating revenue was $88 million for the second quarter of 2017, 22% higher than the second quarter of 2016. The increase primarily reflected the closing of several large assignments. During or since the second quarter of 2017 we have been engaged in a broad range of highly visible and complex restructuring and debt advisory assignments, including publicly announced roles for: CGG, Gymboree, J.Crew, Nine West and Takata.
2
Please see M&A transactions on which Lazard advised in the second quarter, or continued to advise or completed since June 30, 2017, as well as Capital Advisory, Sovereign Advisory and Restructuring assignments, on pages 8 –11 of this release.
First Half
Financial Advisory operating revenue was a record $747 million for the first half of 2017, 35% higher than the first half of 2016.
M&A and Strategic Advisory operating revenue was a record $571 million for the first half of 2017, 30% higher than the first half of 2016.
Restructuring operating revenue was $176 million for the first half of 2017, 53% higher than the first half of 2016.
Asset Management
In the text portion of this press release, we present our Asset Management results as 1) Management fees and other revenue, and 2) Incentive fees.
Second Quarter
Asset Management operating revenue was a quarterly record of $307 million for the second quarter of 2017, 22% higher than the second quarter of 2016.
Management fees and other revenue were a quarterly record of $290 million for the second quarter of 2017, 16% higher than the second quarter of 2016, and 7% higher than the first quarter of 2017. Average assets under management (AUM) for the second quarter of 2017 was a record $222 billion, 15% higher than the second quarter of 2016, and 8% higher than the first quarter of 2017.
AUM as of June 30, 2017, was a record $226 billion, up 18% from June 30, 2016 and up 5% from March 31, 2017. The sequential increase was primarily driven by market appreciation and foreign exchange movement, partially offset by net outflows of $365 million.
Incentive fees were $17 million for the second quarter of 2017, compared to $1 million for the second quarter of 2016.
First Half
Asset Management operating revenue was a record $585 million for the first half of 2017, 19% higher than the first half of 2016.
Management fees and other revenue was a record $561 million for the first half of 2017, 15% higher than the first half of 2016, primarily reflecting changes in average AUM. Average AUM for the first half of 2017 was $214 billion, 14% higher than the first half of 2016. Net inflows were $2.9 billion for the first half of 2017.
3
Incentive fees were $24 million for the first half of 2017, compared to $3 million for the first half of 2016.
OPERATING EXPENSES
Compensation and Benefits
In managing compensation and benefits expense, we focus on annual awarded compensation (cash compensation and benefits plus deferred incentive compensation with respect to the applicable year, net of estimated future forfeitures and excluding charges). We believe annual awarded compensation reflects the actual annual compensation cost more accurately than the GAAP measure of compensation cost, which includes applicable-year cash compensation and the amortization of deferred incentive compensation principally attributable to previous years’ deferred compensation. We believe that by managing our business using awarded compensation with a consistent deferral policy, we can better manage our compensation costs, increase our flexibility in the future and build shareholder value over time.
For the second quarter of 2017, we accrued compensation and benefits expense1 at an adjusted compensation1 ratio of 56.5%. This resulted in $407 million of adjusted compensation and benefits expense, compared to $306 million for the second quarter of 2016. The increase reflected higher operating revenue.
For the first half of 2017, adjusted compensation and benefits expense1 was $760 million, compared to $604 million for the first half of 2016, also reflecting higher operating revenue.
We manage our compensation and benefits expense based on awarded compensation with a consistent deferral policy. Assuming that the performance of both of our businesses, our hiring levels, and the compensation environment are similar to 2016, we expect our 2017 awarded compensation ratio to be in line with the 2016 awarded compensation ratio.
We take a disciplined approach to compensation, and our goal is to maintain a compensation-to-operating revenue ratio over the cycle in the mid- to high-50s percentage range on both an awarded and adjusted basis, with consistent deferral policies.
Non-Compensation Expense
For the second quarter of 2017, adjusted non-compensation expense1 was $116 million, 4% higher than the second quarter of 2016. The ratio of adjusted non-compensation expense to operating revenue for the second quarter of 2017 was 16.1%, compared to 20.7% for the second quarter of 2016.
For the first half of 2017, adjusted non-compensation expense1 was $224 million, 5% higher than the first half of 2016. The ratio of adjusted non-compensation expense to operating revenue for the first half of 2017 was 16.6%, compared to 20.4% for the first half of 2016.
Our goal remains to achieve an adjusted non-compensation expense-to-operating revenue ratio over the cycle of 16% to 20%.
4
TAXES
The provision for taxes, on an adjusted basis1,2, was $55 million for the second quarter of 2017 and $95 million for the first half of 2017. The effective tax rate on the same basis was 29.6% for the second quarter and 28.3% for the first half of 2017, compared to 28.4% and 28.8% for the respective 2016 periods.
CAPITAL MANAGEMENT AND BALANCE SHEET
Our primary capital management goals include managing debt and returning capital to shareholders through dividends and share repurchases.
For the second quarter of 2017, Lazard returned $133 million to shareholders, which included: $50 million in dividends; $79 million in share repurchases of our Class A common stock; and $4 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.
For the first half of 2017, Lazard returned $493 million to shareholders, which included: $242 million in dividends; $185 million in share repurchases of our Class A common stock; and $66 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.
Year to date, we have repurchased 4.3 million shares at an average price of $43.32 per share. In line with our objectives, these repurchases have more than offset the potential dilution from our 2016 year-end equity-based compensation awards (net of estimated forfeitures and tax withholding to be paid in cash in lieu of share issuances), which were granted at an average price of $43.42 per share. As of today, our remaining share repurchase authorization is $170 million.
On July 26, 2017, Lazard declared a quarterly dividend of $0.41 per share on its outstanding common stock. The dividend is payable on August 18, 2017, to stockholders of record on August 7, 2017.
Lazard’s financial position remains strong. As of June 30, 2017, our cash and cash equivalents were $956 million, and stockholders’ equity related to Lazard’s interests was $1,243 million.
***
5
CONFERENCE CALL
Lazard will host a conference call at 8:00 a.m. EDT on July 27, 2017, to discuss the company’s financial results for the second quarter and first half of 2017. The conference call can be accessed via a live audio webcast available through Lazard’s Investor Relations website at www.lazard.com, or by dialing 1 (888) 378-4439 (U.S. and Canada) or +1 (323) 701-0225 (outside of the U.S. and Canada), 15 minutes prior to the start of the call.
A replay of the conference call will be available by 10:00 a.m. EDT on July 27, 2017, via the Lazard Investor Relations website, or by dialing 1 (888) 203-1112 (U.S. and Canada) or +1 (719) 457-0820 (outside of the U.S. and Canada). The replay access code is 1761126.
ABOUT LAZARD
Lazard, one of the world’s preeminent financial advisory and asset management firms, operates from 43 cities across 27 countries in North America, Europe, Asia, Australia, Central and South America. With origins dating to 1848, the firm provides advice on mergers and acquisitions, strategic matters, restructuring and capital structure, capital raising and corporate finance, as well as asset management services to corporations, partnerships, institutions, governments and individuals. For more information on Lazard, please visit www.lazard.com. Follow Lazard at @Lazard.
***
Cautionary Note Regarding Forward-Looking Statements:
This press release contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “could”, “would”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “target,” “goal”, or “continue”, and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies, business plans and initiatives and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements.
These factors include, but are not limited to, those discussed in our Annual Report on Form 10-K under Item 1A “Risk Factors,” and also discussed from time to time in our reports on Forms 10-Q and 8-K, including the following:
| • | A decline in general economic conditions or the global or regional financial markets; |
| • | A decline in our revenues, for example due to a decline in overall mergers and acquisitions (M&A) activity, our share of the M&A market or our assets under management (AUM); |
| • | Losses caused by financial or other problems experienced by third parties; |
| • | Losses due to unidentified or unanticipated risks; |
| • | A lack of liquidity, i.e., ready access to funds, for use in our businesses; and |
| • | Competitive pressure on our businesses and on our ability to retain and attract employees at current compensation levels. |
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this release to conform our prior statements to actual results or revised expectations and we do not intend to do so.
Lazard Ltd is committed to providing timely and accurate information to the investing public, consistent with our legal and regulatory obligations. To that end, Lazard and its operating companies use their websites to convey information about their businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information, and the posting of updates of assets under management in various mutual funds, hedge funds and other investment products managed by Lazard Asset Management LLC and Lazard Frères Gestion SAS. Investors can link to Lazard and its operating company websites through www.lazard.com.
***
6
ENDNOTES
| 1 | A non-U.S. GAAP measure. See attached financial schedules and related notes for a detailed explanation of adjustments to corresponding U.S. GAAP results. We believe that presenting our results on an adjusted basis, in addition to the U.S. GAAP results, is the most meaningful and useful way to compare our operating results across periods. |
| 2 | Second-quarter and first-half 2017 results were affected primarily by the following charges: |
| • | Second-quarter 2017 adjusted results exclude pre-tax charges of (i) $8.9 million of costs associated with the implementation of a new Enterprise Resource Planning (ERP) system, and (ii) $3.2 million of office space reorganization costs primarily relating to incremental rent expense and lease abandonment costs. On a U.S. GAAP basis, these items collectively resulted in a net charge of $9.0 million, or $0.07 (diluted) per share, in the quarter. |
| • | First-half 2017 adjusted results also exclude post-tax charges of $3.1 million of acquisition-related items, primarily reflecting changes in fair value of contingent consideration associated with certain business acquisitions. On a U.S. GAAP basis, this resulted in a charge of $0.02 (diluted) per share in the first half of 2017. |
LAZ-EPE
###
7
FINANCIAL ADVISORY ASSIGNMENTS
Mergers and Acquisitions (Completed in the second quarter of 2017)
Among the large, publicly announced M&A Advisory transactions or assignments completed during the second quarter of 2017 on which Lazard advised were the following:
| • | Johnson & Johnson’s $30 billion acquisition of Actelion, with spin-out of Idorsia, a new R&D company |
| • | Danone’s $12.5 billion acquisition of WhiteWave |
| • | United Arab Shipping Company’s $12.5 billion combination with Hapag-Lloyd |
| • | Stichting Continuiteit Delta Lloyd on NN Group’s € 2.5 billion recommended offer for Delta Lloyd |
| • | Safran’s € 2.4 billion sale of its Identity and Security activities to Advent International |
| • | TIAA’s $2.7 billion acquisition of EverBank |
| • | Vedanta Limited’s $2.3 billion merger with Cairn India |
| • | WestRock’s $2.3 billion acquisition of Multi Packaging Solutions |
| • | Hastings Funds Management and First State Super in the AUD 2.6 billion consortium acquisition of the land titling and registry operations of New South Wales Land and Property Information |
| • | VocaLink on its sale to MasterCard for up to $1.2 billion |
| • | WestRock’s $1.05 billion sale of its Home, Health & Beauty business to Silgan |
| • | Eurazeo in Crédit Agricole’s € 791 million sale of its 15.4% stake in Eurazeo to JCDecaux Holding |
| • | Fininvest’s € 740 million sale of its 99.9% stake in AC Milan to Rossoneri Sport Investment Lux |
| • | Uniwheels Malta, the 61.3% shareholder of Uniwheels AG, in the $715 million sale of Uniwheels AG to Superior Industries |
| • | Harris Corporation’s $690 million sale of its government IT services business to Veritas Capital |
| • | Banca Monte dei Paschi di Siena’s € 536 million sale of its merchant acquiring business to ICBPI |
| • | Owens Corning’s $560 million acquisition of Pittsburgh Corning |
| • | Alinta Holdings on the sale of Alinta Energy to Chow Tai Fook Enterprises |
| • | China Huaxin in the establishment of the Nokia Shanghai Bell joint venture |
| • | Mitratech’s sale of a majority interest to HgCapital |
| • | Eurazeo’s sale of a majority stake in Colisée Groupe to IK Investment Partners |
| • | Cinven’s acquisition of CHRYSO |
| • | OHL Desarrollos’ sale of a majority stake in Mayakoba Hotels to RLH Properties |
8
Mergers and Acquisitions (Announced)
Among the ongoing, large, publicly announced M&A transactions and assignments on which Lazard advised during or since the 2017 second quarter, or completed since June 30, 2017, are the following:
| • | Dow Chemical’s $130 billion merger of equals with DuPont |
| • | Reynolds American on the $49 billion recommended offer from BAT for the remaining 57.8% of Reynolds* |
| • | Level 3 Communications on its $34 billion sale to CenturyLink |
| • | Great Plains Energy’s $14 billion merger of equals with Westar Energy |
| • | Safran’s € 8.7 billion acquisition of Zodiac Aerospace |
| • | LVMH Moët Hennessy Louis Vuitton’s € 6.5 billion acquisition of Christian Dior Couture* |
| • | WGL Holdings’ $6.4 billion sale to AltaGas |
| • | HgCapital, GIC, Montagu and ICG, led by HgCapital, on the buyout of Visma, valuing it at $5.3 billion |
| • | Anheuser-Busch InBev’s $3.2 billion transition of its 54.5% stake in Coca-Cola Beverages Africa to The Coca-Cola Company |
| • | Elis’ € 2.5 billion recommended acquisition of Berendsen |
| • | Genworth Financial’s $2.7 billion sale to China Oceanwide |
| • | Special Committee of the Board of Directors of General Communication, Inc. (“GCI”) in the $2.7 billion sale of GCI to Liberty Interactive |
| • | Blackstone in CF Corporation’s $1.8 billion consortium acquisition of Fidelity & Guaranty Life |
| • | Lexmark’s $1.35 billion sale of its Enterprise Software business to Thoma Bravo* |
| • | Canyon Bridge’s $1.3 billion acquisition of Lattice Semiconductor |
| • | L’Oréal’s proposed € 1.0 billion sale of The Body Shop to Natura Cosméticos |
| • | Astorg’s € 880 million sale of Kerneos to Imerys* |
| • | Special Committee of the Board of Phillips Edison Grocery Center REIT I in the company’s $1.0 billion acquisition of real estate assets and the third party asset management business from Phillips Edison Limited Partnership |
| • | Danone’s $875 million sale of Stonyfield to Lactalis |
| • | Investcorp’s € 605 million sale of Esmalglass to Lone Star Funds |
| • | AviAlliance in the € 600 million 20-year extension of the Athens International Airport Concession Agreement |
| • | Haldex’s SEK 5.5 billion sale to Knorr-Bremse |
| • | Baxter’s $625 million acquisition of Claris Injectables |
| • | SciClone Pharmaceuticals’ $605 million sale to a consortium led by GL Capital |
| • | Melita’s € 506 million merger with Vodafone Malta |
| • | AkzoNobel on strategic advisory related to shareholder engagement and separation of its Specialty Chemicals business |
| • | Areva on its reorganization and recapitalization plan, including the creation of NewCo, the de-listing of Areva SA and certain asset disposals |
| • | Intermediate Capital Group and Sagesse Retraite Santé on the acquisition of DomusVi |
| • | Quala’s sale of its personal care and home care brands to Unilever |
| • | Milestone AV Technologies’ sale to Legrand |
| • | Sparta Systems in Thoma Bravo’s sale of a majority stake in the company to New Mountain Capital |
| • | F2i’s purchase of a wind portfolio from Veronagest |
| • | Liberty Steel Limited on the proposed acquisition of Arrium Australia |
| * | Transaction completed since June 30, 2017 |
9
Capital Advisory
Among the publicly announced Capital Advisory transactions or assignments on which Lazard advised during or since the second quarter of 2017 were the following:
| • | Banca Monte dei Paschi di Siena’s precautionary recapitalization through an € 8.1 billion capital increase and € 5.5 billion disposal of a bad loan portfolio with a total GBV of € 26 billion |
| • | SFPI-FPIM’s € 2.0 billion of forward sale transactions representing a 2.5% stake in BNP Paribas |
| • | Acek Desarollo y Géstion Industrial on the € 877 million IPO of Gestamp Automocion |
| • | McDermott International’s $810 million credit facility |
| • | Hellenic Republic on the € 557 million listing of ADMIE Holding |
| • | Clayton, Dubilier & Rice and SSA Investments on the £454 million secondary disposal of a stake in B&M European Value Retail |
Sovereign Advisory
Among the publicly announced Sovereign Advisory assignments on which Lazard advised during or since the second quarter of 2017 were the following:
| • | The State of Alaska |
| • | The International Bank of Azerbaijan |
| • | Southern Gas Corridor CJSC of Azerbaijan |
| • | Altiplano (Bolivia) |
| • | The Democratic Republic of the Congo |
| • | The Republic of the Congo |
| • | The Republic of Croatia |
| • | Compania Nacional de Telecomunicacion (The Republic of Ecuador) |
| • | Refineria del Pacifico (The Republic of Ecuador) |
| • | The Arab Republic of Egypt |
| • | The Federal Democratic Republic of Ethiopia |
| • | The Gabonese Republic |
| • | Sotrader (joint venture between the government of Gabon and Olam International) |
| • | The Hellenic Republic |
| • | The Hashemite Kingdom of Jordan |
| • | airBaltic (majority owned by the government of Latvia) |
| • | SNIM (The Islamic Republic of Mauritania) |
| • | The Republic of Mozambique |
| • | The Republic of Serbia |
| • | Ukraine and certain sub-sovereign entities |
| • | The Republic of Zimbabwe |
10
Restructuring and Debt Advisory Assignments
Restructuring and debtor or creditor advisory assignments completed during the second quarter of 2017 on which Lazard advised include: AFGlobal, Peabody Energy and Tidewater in connection with their Chapter 11 bankruptcy restructurings; Vivarte’s majority lenders and shareholders on the company’s debt restructuring; and Premuda in connection with its debt restructuring.
Notable ongoing restructuring and debtor or creditor advisory assignments on which Lazard advised during or since the second quarter of 2017 include: Breitburn Energy Partners, CGG, Gymboree, Paragon Offshore*, SunEdison and Takata in connection with their Chapter 11 or similar bankruptcy restructurings; J.Crew*, Nine West, Sorgenia and Toys “R” Us in connection with their debt restructurings; and bondholders of Boart Longyear as well as lenders to Danaos, Jack Wolfskin* and Seadrill on each company’s restructuring.
| * | Assignment completed since June 30, 2017 |
***
11
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(U.S. GAAP)
| Three Months Ended | % Change From | |||||||||||||||||||
| June 30, | March 31, | June 30, | March 31, | June 30, | ||||||||||||||||
| ($ in thousands, except per share data) | 2017 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Total revenue |
$ | 729,946 | $ | 637,420 | $ | 546,642 | 15 | % | 34 | % | ||||||||||
| Interest expense |
($ | 12,766 | ) | (13,956 | ) | (11,962 | ) | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Net revenue |
717,180 | 623,464 | 534,680 | 15 | % | 34 | % | |||||||||||||
| Operating expenses: |
||||||||||||||||||||
| Compensation and benefits |
414,612 | 361,801 | 308,310 | 15 | % | 34 | % | |||||||||||||
| Occupancy and equipment |
30,828 | 27,484 | 27,163 | |||||||||||||||||
| Marketing and business development |
24,027 | 19,752 | 23,877 | |||||||||||||||||
| Technology and information services |
32,032 | 24,024 | 24,296 | |||||||||||||||||
| Professional services |
11,234 | 11,462 | 11,245 | |||||||||||||||||
| Fund administration and outsourced services |
18,338 | 15,913 | 15,895 | |||||||||||||||||
| Amortization and other acquisition-related costs |
1,257 | 3,574 | 330 | |||||||||||||||||
| Other |
12,351 | 9,257 | 10,328 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Subtotal |
130,067 | 111,466 | 113,134 | 17 | % | 15 | % | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Operating expenses |
544,679 | 473,267 | 421,444 | 15 | % | 29 | % | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Operating income |
172,501 | 150,197 | 113,236 | 15 | % | 52 | % | |||||||||||||
| Provision for income taxes |
51,600 | 39,767 | 31,872 | 30 | % | 62 | % | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Net income |
120,901 | 110,430 | 81,364 | 9 | % | 49 | % | |||||||||||||
| Net income attributable to noncontrolling interests |
523 | 2,877 | 1,007 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Net income attributable to Lazard Ltd |
$ | 120,378 | $ | 107,553 | $ | 80,357 | 12 | % | 50 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Attributable to Lazard Ltd Common Stockholders: |
||||||||||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||||||
| Basic |
122,368,150 | 122,815,163 | 125,461,948 | (0 | %) | (2 | %) | |||||||||||||
| Diluted |
132,139,616 | 132,689,375 | 132,341,522 | (0 | %) | (0 | %) | |||||||||||||
| Net income per share: |
||||||||||||||||||||
| Basic |
$ | 0.98 | $ | 0.88 | $ | 0.64 | 11 | % | 53 | % | ||||||||||
| Diluted |
$ | 0.91 | $ | 0.81 | $ | 0.61 | 12 | % | 49 | % | ||||||||||
12
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(U.S. GAAP)
| Six Months Ended | ||||||||||||
| ($ in thousands, except per share data) | June 30, 2017 |
June 30, 2016 |
% Change | |||||||||
| Total revenue |
$ | 1,367,366 | $ | 1,056,758 | 29 | % | ||||||
| Interest expense |
(26,722 | ) | (23,860 | ) | ||||||||
|
|
|
|
|
|||||||||
| Net revenue |
1,340,644 | 1,032,898 | 30 | % | ||||||||
| Operating expenses: |
||||||||||||
| Compensation and benefits |
776,413 | 605,520 | 28 | % | ||||||||
| Occupancy and equipment |
58,312 | 54,170 | ||||||||||
| Marketing and business development |
43,779 | 43,565 | ||||||||||
| Technology and information services |
56,056 | 47,227 | ||||||||||
| Professional services |
22,696 | 21,007 | ||||||||||
| Fund administration and outsourced services |
34,251 | 29,330 | ||||||||||
| Amortization and other acquisition-related costs |
4,831 | 974 | ||||||||||
| Other |
21,608 | 19,492 | ||||||||||
|
|
|
|
|
|||||||||
| Subtotal |
241,533 | 215,765 | 12 | % | ||||||||
|
|
|
|
|
|||||||||
| Operating expenses |
1,017,946 | 821,285 | 24 | % | ||||||||
|
|
|
|
|
|||||||||
| Operating income |
322,698 | 211,613 | 52 | % | ||||||||
| Provision for income taxes |
91,367 | 59,526 | 53 | % | ||||||||
|
|
|
|
|
|||||||||
| Net income |
231,331 | 152,087 | 52 | % | ||||||||
| Net income attributable to noncontrolling interests |
3,400 | 4,907 | ||||||||||
|
|
|
|
|
|||||||||
| Net income attributable to Lazard Ltd |
$ | 227,931 | $ | 147,180 | 55 | % | ||||||
|
|
|
|
|
|||||||||
| Attributable to Lazard Ltd Common Stockholders: |
||||||||||||
| Weighted average shares outstanding: |
||||||||||||
| Basic |
122,591,656 | 125,751,195 | (3 | %) | ||||||||
| Diluted |
132,414,496 | 132,616,403 | (0 | %) | ||||||||
| Net income per share: |
||||||||||||
| Basic |
$ | 1.86 | $ | 1.17 | 59 | % | ||||||
| Diluted |
$ | 1.72 | $ | 1.11 | 55 | % | ||||||
13
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
(U.S. GAAP)
| June 30, | December 31, | |||||||
| ($ in thousands) | 2017 | 2016 | ||||||
| ASSETS | ||||||||
| Cash and cash equivalents |
$ | 955,639 | $ | 1,158,785 | ||||
| Deposits with banks and short-term investments |
756,507 | 419,668 | ||||||
| Cash deposited with clearing organizations and other segregated cash |
34,480 | 29,030 | ||||||
| Receivables |
654,739 | 638,282 | ||||||
| Investments |
421,727 | 459,422 | ||||||
| Goodwill and other intangible assets |
389,216 | 382,024 | ||||||
| Deferred tax assets |
1,113,528 | 1,075,777 | ||||||
| Other assets |
443,926 | 393,520 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 4,769,762 | $ | 4,556,508 | ||||
|
|
|
|
|
|||||
| LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
| Liabilities |
||||||||
| Deposits and other customer payables |
$ | 829,993 | $ | 472,283 | ||||
| Accrued compensation and benefits |
378,279 | 541,588 | ||||||
| Senior debt |
1,189,489 | 1,188,600 | ||||||
| Tax receivable agreement obligation |
512,834 | 513,610 | ||||||
| Other liabilities |
556,454 | 546,614 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
3,467,049 | 3,262,695 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity |
||||||||
| Preferred stock, par value $.01 per share |
— | — | ||||||
| Common stock, par value $.01 per share |
1,298 | 1,298 | ||||||
| Additional paid-in capital |
673,242 | 688,231 | ||||||
| Retained earnings |
1,166,026 | 1,134,186 | ||||||
| Accumulated other comprehensive loss, net of tax |
(277,785 | ) | (314,222 | ) | ||||
|
|
|
|
|
|||||
| Subtotal |
1,562,781 | 1,509,493 | ||||||
| Class A common stock held by subsidiaries, at cost |
(319,755 | ) | (273,506 | ) | ||||
|
|
|
|
|
|||||
| Total Lazard Ltd stockholders’ equity |
1,243,026 | 1,235,987 | ||||||
| Noncontrolling interests |
59,687 | 57,826 | ||||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
1,302,713 | 1,293,813 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 4,769,762 | $ | 4,556,508 | ||||
|
|
|
|
|
|||||
14
LAZARD LTD
SELECTED SUMMARY FINANCIAL INFORMATION (a)
(Non-GAAP - unaudited)
| Three Months Ended | % Change From | |||||||||||||||||||
| ($ in thousands, except per share data) | June 30, 2017 |
March 31, 2017 |
June 30, 2016 |
March 31, 2017 |
June 30, 2016 |
|||||||||||||||
| Revenues: |
||||||||||||||||||||
| Financial Advisory |
$ | 410,882 | $ | 335,812 | $ | 286,967 | 22 | % | 43 | % | ||||||||||
| Asset Management |
306,796 | 278,428 | 250,730 | 10 | % | 22 | % | |||||||||||||
| Corporate |
2,483 | 10,194 | 4,610 | (76 | %) | (46 | %) | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Operating revenue (b) |
$ | 720,161 | $ | 624,434 | $ | 542,307 | 15 | % | 33 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Expenses: |
||||||||||||||||||||
| Compensation and benefits expense (c) |
$ | 406,891 | $ | 352,805 | $ | 306,404 | 15 | % | 33 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Ratio of compensation to operating revenue |
56.5 | % | 56.5 | % | 56.5 | % | ||||||||||||||
| Non-compensation expense (d) |
$ | 116,111 | $ | 107,470 | $ | 112,167 | 8 | % | 4 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Ratio of non-compensation to operating revenue |
16.1 | % | 17.2 | % | 20.7 | % | ||||||||||||||
| Earnings: |
||||||||||||||||||||
| Earnings from operations (e) |
$ | 197,159 | $ | 164,159 | $ | 123,736 | 20 | % | 59 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Operating margin (f) |
27.4 | % | 26.3 | % | 22.8 | % | ||||||||||||||
| Net income (g) |
$ | 129,840 | $ | 110,141 | $ | 80,357 | 18 | % | 62 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Diluted net income per share |
$ | 0.98 | $ | 0.83 | $ | 0.61 | 18 | % | 61 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Diluted weighted average shares |
132,139,616 | 132,689,375 | 132,341,522 | (0 | %) | (0 | %) | |||||||||||||
| Effective tax rate (h) |
29.6 | % | 26.6 | % | 28.4 | % | ||||||||||||||
This presentation includes non-U.S. GAAP (“non-GAAP”) measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Reconciliation of U.S. GAAP to Selected Summary Financial Information and Notes to Financial Schedules.
15
LAZARD LTD
SELECTED SUMMARY FINANCIAL INFORMATION (a)
(Non-GAAP - unaudited)
| Six Months Ended June 30, | ||||||||||||
| ($ in thousands, except per share data) | 2017 | 2016 | % Change | |||||||||
| Revenues: |
||||||||||||
| Financial Advisory |
746,694 | 552,981 | 35% | |||||||||
| Asset Management |
585,224 | 490,280 | 19% | |||||||||
| Corporate |
12,677 | 5,112 | NM | |||||||||
|
|
|
|
|
|||||||||
| Operating revenue (b) |
$ | 1,344,595 | $ | 1,048,373 | 28% | |||||||
|
|
|
|
|
|||||||||
| Expenses: |
||||||||||||
| Compensation and benefits expense (c) |
$ | 759,696 | $ | 604,376 | 26% | |||||||
|
|
|
|
|
|||||||||
| Ratio of compensation to operating revenue |
56.5 | % | 57.6 | % | ||||||||
| Non-compensation expense (d) |
$ | 223,581 | $ | 213,756 | 5% | |||||||
|
|
|
|
|
|||||||||
| Ratio of non-compensation to operating revenue |
16.6 | % | 20.4 | % | ||||||||
| Earnings: |
||||||||||||
| Earnings from operations (e) |
$ | 361,318 | $ | 230,241 | 57% | |||||||
|
|
|
|
|
|||||||||
| Operating margin (f) |
26.9 | % | 22.0 | % | ||||||||
| Net income (g) |
$ | 239,981 | $ | 147,180 | 63% | |||||||
|
|
|
|
|
|||||||||
| Diluted net income per share |
$ | 1.81 | $ | 1.11 | 63% | |||||||
|
|
|
|
|
|||||||||
| Diluted weighted average shares |
132,414,496 | 132,616,403 | (0% | ) | ||||||||
| Effective tax rate (h) |
28.3 | % | 28.8 | % | ||||||||
This presentation includes non-U.S. GAAP (“non-GAAP”) measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Reconciliation of U.S. GAAP to Selected Summary Financial Information and Notes to Financial Schedules.
16
LAZARD LTD
ASSETS UNDER MANAGEMENT (“AUM”)
(unaudited)
($ in millions)
| As of | Variance | |||||||||||||||||||
| June 30, 2017 |
March 31, 2017 |
December 31, 2016 |
Qtr to Qtr | YTD | ||||||||||||||||
| Equity: |
||||||||||||||||||||
| Emerging Markets |
$ | 48,115 | $ | 46,563 | $ | 41,363 | 3.3 | % | 16.3 | % | ||||||||||
| Global |
37,012 | 34,520 | 30,567 | 7.2 | % | 21.1 | % | |||||||||||||
| Local |
39,034 | 38,390 | 36,243 | 1.7 | % | 7.7 | % | |||||||||||||
| Multi-Regional |
63,930 | 59,506 | 54,668 | 7.4 | % | 16.9 | % | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Total Equity |
188,091 | 178,979 | 162,841 | 5.1 | % | 15.5 | % | |||||||||||||
| Fixed Income: |
||||||||||||||||||||
| Emerging Markets |
16,330 | 16,539 | 15,580 | (1.3 | %) | 4.8 | % | |||||||||||||
| Global |
3,860 | 3,646 | 3,483 | 5.9 | % | 10.8 | % | |||||||||||||
| Local |
4,391 | 4,299 | 4,245 | 2.1 | % | 3.4 | % | |||||||||||||
| Multi-Regional |
8,584 | 7,734 | 7,847 | 11.0 | % | 9.4 | % | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Total Fixed Income |
33,165 | 32,218 | 31,155 | 2.9 | % | 6.5 | % | |||||||||||||
| Alternative Investments |
2,621 | 2,420 | 2,422 | 8.3 | % | 8.2 | % | |||||||||||||
| Private Equity |
1,447 | 1,285 | 1,253 | 12.6 | % | 15.5 | % | |||||||||||||
| Cash Management |
437 | 276 | 239 | 58.3 | % | 82.8 | % | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Total AUM |
$ | 225,761 | $ | 215,178 | $ | 197,910 | 4.9 | % | 14.1 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| AUM—Beginning of Period |
$ | 215,178 | $ | 190,554 | $ | 197,910 | $ | 186,380 | ||||||||
| Net Flows |
(365 | ) | 453 | 2,938 | 92 | |||||||||||
| Market and foreign exchange appreciation (depreciation) |
10,948 | 858 | 24,913 | 5,393 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| AUM—End of Period |
$ | 225,761 | $ | 191,865 | $ | 225,761 | $ | 191,865 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Average AUM |
$ | 222,208 | $ | 192,634 | $ | 214,495 | $ | 188,836 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| % Change in average AUM |
15.4 | % | 13.6 | % | ||||||||||||
|
|
|
|
|
|||||||||||||
Note: Average AUM generally represents the average of the monthly ending AUM balances for the period.
17
LAZARD LTD
RECONCILIATION OF U.S. GAAP TO SELECTED SUMMARY FINANCIAL INFORMATION (a)
(unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| ($ in thousands, except per share data) | June 30, 2017 |
March 31, 2017 |
June 30, 2016 |
June 30, 2017 |
June 30, 2016 |
|||||||||||||||
| Operating Revenue | ||||||||||||||||||||
| Net revenue—U.S. GAAP Basis |
$ | 717,180 | $ | 623,464 | $ | 534,680 | $ | 1,340,644 | $ | 1,032,898 | ||||||||||
| Adjustments: |
||||||||||||||||||||
| Revenue related to noncontrolling interests (i) |
(3,098 | ) | (4,942 | ) | (3,398 | ) | (8,040 | ) | (9,610 | ) | ||||||||||
| (Gains) losses related to Lazard Fund Interests (“LFI”) and other similar arrangements |
(5,753 | ) | (7,353 | ) | (312 | ) | (13,106 | ) | 2,202 | |||||||||||
| Interest expense |
11,832 | 13,265 | 11,337 | 25,097 | 22,883 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating revenue, as adjusted (b) |
$ | 720,161 | $ | 624,434 | $ | 542,307 | $ | 1,344,595 | $ | 1,048,373 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Compensation & Benefits Expense | ||||||||||||||||||||
| Compensation & benefits expense—U.S. GAAP Basis |
$ | 414,612 | $ | 361,801 | $ | 308,310 | $ | 776,413 | $ | 605,520 | ||||||||||
| Adjustments: |
||||||||||||||||||||
| (Charges) credits pertaining to LFI and other similar arrangements |
(5,753 | ) | (7,353 | ) | (312 | ) | (13,106 | ) | 2,202 | |||||||||||
| Compensation related to noncontrolling interests (i) |
(1,968 | ) | (1,643 | ) | (1,594 | ) | (3,611 | ) | (3,346 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Compensation & benefits expense, as adjusted (c) |
$ | 406,891 | $ | 352,805 | $ | 306,404 | $ | 759,696 | $ | 604,376 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Non-Compensation Expense | ||||||||||||||||||||
| Non-compensation expense—Subtotal—U.S. GAAP Basis |
$ | 130,067 | $ | 111,466 | $ | 113,134 | $ | 241,533 | $ | 215,765 | ||||||||||
| Adjustments: |
||||||||||||||||||||
| Expenses associated with ERP system implementation (j) |
(8,861 | ) | — | — | (8,861 | ) | — | |||||||||||||
| Expenses related to office space reorganization (k) |
(3,161 | ) | — | — | (3,161 | ) | — | |||||||||||||
| Amortization and other acquisition-related costs (l) |
(1,257 | ) | (3,574 | ) | (330 | ) | (4,831 | ) | (974 | ) | ||||||||||
| Non-compensation expense related to noncontrolling interests (i) |
(677 | ) | (422 | ) | (637 | ) | (1,099 | ) | (1,035 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Non-compensation expense, as adjusted (d) |
$ | 116,111 | $ | 107,470 | $ | 112,167 | $ | 223,581 | $ | 213,756 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Pre-Tax Income and Earnings From Operations | ||||||||||||||||||||
| Operating Income (loss)—U.S. GAAP Basis |
$ | 172,501 | $ | 150,197 | $ | 113,236 | $ | 322,698 | $ | 211,613 | ||||||||||
| Adjustments: |
||||||||||||||||||||
| Expenses associated with ERP system implementation (j) |
8,861 | — | — | 8,861 | — | |||||||||||||||
| Expenses related to office space reorganization (k) |
3,161 | — | — | 3,161 | — | |||||||||||||||
| Acquisition-related costs (l) |
435 | 2,745 | — | 3,180 | — | |||||||||||||||
| Net income related to noncontrolling interests (i) |
(454 | ) | (2,877 | ) | (1,007 | ) | (3,331 | ) | (4,907 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Pre-tax income, as adjusted |
184,504 | 150,065 | 112,229 | 334,569 | 206,706 | |||||||||||||||
| Interest expense |
11,832 | 13,265 | 11,337 | 25,097 | 22,883 | |||||||||||||||
| Amortization (LAZ only) |
823 | 829 | 170 | 1,652 | 652 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Earnings from operations, as adjusted (e) |
$ | 197,159 | $ | 164,159 | $ | 123,736 | $ | 361,318 | $ | 230,241 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Income attributable to Lazard Ltd | ||||||||||||||||||||
| Net income attributable to Lazard Ltd—U.S. GAAP Basis |
$ | 120,378 | $ | 107,553 | $ | 80,357 | $ | 227,931 | $ | 147,180 | ||||||||||
| Adjustments: |
||||||||||||||||||||
| Expenses associated with ERP system implementation (j) |
8,861 | — | — | 8,861 | — | |||||||||||||||
| Expenses related to office space reorganization (k) |
3,161 | — | — | 3,161 | — | |||||||||||||||
| Acquisition-related costs (l) |
435 | 2,745 | — | 3,180 | — | |||||||||||||||
| Tax benefit allocated to adjustments |
(2,995 | ) | (157 | ) | — | (3,152 | ) | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income, as adjusted (g) |
$ | 129,840 | $ | 110,141 | $ | 80,357 | $ | 239,981 | $ | 147,180 | ||||||||||
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| Diluted net income per share: |
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| U.S. GAAP Basis |
$ | 0.91 | $ | 0.81 | $ | 0.61 | $ | 1.72 | $ | 1.11 | ||||||||||
| Non-GAAP Basis, as adjusted |
$ | 0.98 | $ | 0.83 | $ | 0.61 | $ | 1.81 | $ | 1.11 | ||||||||||
This presentation includes non-U.S. GAAP (“non-GAAP”) measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to comparable U.S. GAAP measures, see Notes to Financial Schedules.
18
LAZARD LTD
Notes to Financial Schedules
| (a) | Selected Summary Financial Information are non-U.S. GAAP (“non-GAAP”) measures. Lazard believes that presenting results and measures on an adjusted basis in conjunction with U.S. GAAP measures provides the most meaningful basis for comparison of its operating results across periods. |
| (b) | A non-GAAP measure which excludes (i) revenue related to non-controlling interests (see (i) below), (ii) (gains)/losses related to the changes in the fair value of investments held in connection with Lazard Fund Interests and other similar deferred compensation arrangements for which a corresponding equal amount is excluded from compensation & benefits expense, and (iii) interest expense primarily related to corporate financing activities. |
| (c) | A non-GAAP measure which excludes (i) (charges)/credits related to the changes in the fair value of the compensation liability recorded in connection with Lazard Fund Interests and other similar deferred compensation arrangements, and (ii) compensation and benefits related to noncontrolling interests (see (i) below). |
| (d) | A non-GAAP measure which excludes (i) for the three and six month periods ended June 30, 2017, expenses associated with ERP system implementation (see (j) below), (ii) for the three and six month periods ended June 30, 2017, expenses related to office space reorganization (see (k) below), (iii) amortization and other acquisition-related costs (see (l) below), and (iv) expenses related to noncontrolling interests (see (i) below). |
| (e) | A non-GAAP measure which excludes (i) for the three and six month periods ended June 30, 2017, expenses associated with ERP system implementation (see (j) below), (ii) for the three and six month periods ended June 30, 2017, expenses related to office space reorganization (see (k) below), (iii) amortization and other acquisition-related costs, (iv) revenue and expenses related to noncontrolling interests (see (i) below), and (v) interest expense primarily related to corporate financing activities. |
| (f) | Represents earnings from operations as a percentage of operating revenue, and is a non-GAAP measure. |
| (g) | A non-GAAP measure which excludes (i) for the three and six month periods ended June 30, 2017, expenses associated with ERP system implementation, net of tax benefits (see (j) below), (ii) for the three and six month periods ended June 30, 2017, expenses related to office space reorganization, net of tax benefits (see (k) below), and (iii) for the three and six month periods ended June 30, 2017 and for the three month period ended March 31, 2017, amortization and other acquisition-related costs, net of tax benefits (see (l) below). |
| (h) | Effective tax rate is a non-GAAP measure based upon the U.S. GAAP rate with adjustments for the tax applicable to the non-GAAP adjustments to operating income, generally based upon the effective marginal tax rate in the applicable jurisdiction of the adjustments. The computation is based on a quotient, the numerator of which is the provision for income taxes of $54,664, $39,924, and $31,872 for the three month periods ended June 30, 2017, March 31, 2017, and June 30, 2016, respectively, $94,588 and $59,526 for the six month periods ended June 30, 2017 and 2016, respectively, and the denominator of which is pre-tax income of $184,504, $150,065, and $112,229 for the three month periods ended June 30, 2017, March 31, 2017, and June 30, 2016, respectively, $334,569 and $206,706 for the six month periods ended June 30, 2017 and 2016 respectively. |
| (i) | Noncontrolling interests include revenue and expenses principally related to Edgewater, and is a non-GAAP measure. |
| (j) | Represents expenses associated with Enterprise Resource Planning (ERP) system implementation. |
| (k) | Represents incremental rent expense and lease abandonment costs related to office space reorganization. |
| (l) | Represents the change in fair value of the contingent consideration associated with certain business acquisitions. |
NM Not meaningful
19
Exhibit 99.2
LAZARD ANNOUNCES SENIOR-LEVEL APPOINTMENTS
NEW YORK, July 26, 2017 – Lazard Ltd (NYSE: LAZ) announced today that it has made several new senior-level appointments.
Effective October 1, 2017, Evan Russo, Managing Director and Co-Head of Lazard’s Capital Markets and Capital Structure Advisory practice, will become Chief Financial Officer (CFO) of Lazard. Effective October 1, 2017, Matthieu Bucaille, CFO of Lazard since 2011, will become Chief Executive Officer of Lazard International and Chief Executive Officer of Compagnie Financière Lazard Frères and Lazard Frères Banque in Paris.
“Evan Russo has provided innovative capital structure advice to our clients over the past decade, and I am confident that the firm and its stakeholders will benefit greatly from his experience and expertise,” said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. “Matthieu Bucaille has distinguished himself as our CFO, and the breadth of his experience will benefit the firm and its clients in his new roles.”
As CFO of Lazard, Mr. Russo will be responsible for all finance functions, including financial reporting, treasury, investor relations, capital structure, risk management, portfolio management and capital allocation. He will also work closely with the firm’s leadership team on financial strategy. Mr. Russo will leverage his significant experience over the past 10 years as a Managing Director and Co-Head of Capital Markets and Capital Structure Advisory during which he advised clients on a wide range of transactions including structured equity and minority investments, IPOs, private placements, debt and equity capital markets, debt restructurings and liability management, as well as many of the firm’s most significant M&A assignments. Prior to Lazard, Mr. Russo worked in Investment Banking at Goldman Sachs and at Barclays Capital. Mr. Russo received an M.B.A. from The Wharton School of the University of Pennsylvania, a J.D. from Columbia Law School and a B.A. from Queens College. He joined Lazard in 2007.
In his new roles, Mr. Bucaille will support Alexander F. Stern, CEO of Financial Advisory and Chief Operating Officer of Lazard, and Matthieu Pigasse, Global Head, M&A and Sovereign Advisory and Chief Executive Officer of Lazard Frères S.A.S., Lazard’s financial advisory business in France, as well as Ashish Bhutani, CEO of Lazard Asset Management and Vice Chairman of Lazard, and its senior leadership. Prior to becoming CFO, Mr. Bucaille was based in France. He became a Managing Director in 1998, Vice Chairman Investment Banking Europe in 2008 and Deputy Chief Executive Officer of Lazard Frères Banque S.A. in 2009. He joined Lazard in 1989.
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Separately, Scott D. Hoffman, General Counsel of Lazard, will take on additional responsibilities as Chief Administrative Officer (CAO) of Lazard, a new position, effective immediately. As CAO and General Counsel of Lazard, Mr. Hoffman will drive the execution and coordination of initiatives and internal policies in support of the firm’s overall strategic objectives, provide input to and guidance in business planning, and continue to lead legal and compliance operations. He will maintain his broader responsibilities of providing guidance to Lazard’s CEO and Board of Directors, and overseeing global communications, legislative and regulatory affairs, and internal audit. Mr. Hoffman has served as General Counsel of Lazard Ltd since its formation in 2005, and its predecessor, Lazard Group, since 2001. He has been a Managing Director since January 1999. Mr. Hoffman joined Lazard in 1994.
Effective October 1, 2017, Mr. Bruno Roger, currently Chairman of Lazard in France, will become Vice Chairman of Lazard Group and Honorary Chairman of Lazard in France. As Vice Chairman of Lazard Group, Mr. Bruno Roger will advise Mr. Jacobs and the firm’s senior leadership on strategic and client matters. He will transition his responsibilities regarding Compagnie Financière Lazard Frères and Lazard Frères Banque to Mr. Bucaille and his responsibilities regarding Lazard Frères S.A.S. to Mr. Pigasse. He became a Managing Director of Lazard in 1974, and Chairman of Lazard France in 2002. Mr. Bruno Roger joined Lazard in 1960.
About Lazard
Lazard, one of the world’s preeminent financial advisory and asset management firms, operates from 43 cities across 27 countries in North America, Europe, Asia, Australia, Central and South America. With origins dating to 1848, the firm provides advice on mergers and acquisitions, strategic matters, restructuring and capital structure, capital raising and corporate finance, as well as asset management services to corporations, partnerships, institutions, governments and individuals. For more information on Lazard, please visit www.lazard.com. Follow Lazard at @Lazard.
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Media contacts:
| Judi Frost Mackey, +1 212 632 1428 |
Clare Pickett, +1 212 632 6963 |
| judi.mackey@lazard.com |
clare.pickett@lazard.com |
Investor contact:
Armand Sadoughi + 1 212 632 6358
armand.sadoughi@lazard.com