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, 2018
Lazard Ltd
(Exact name of registrant as specified in its charter)
Bermuda
(State or other jurisdiction of incorporation)
| 001-32492 | 98-0437848 | |
| (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 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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 26, 2018, Lazard Ltd (the “Company”) issued a press release announcing financial results for its second quarter ended June 30, 2018. 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 9.01 | Financial Statements and Exhibits |
(d) Exhibits.
| Exhibit Number |
Description of Exhibit | |
| 99.1 | Press Release issued on July 26, 2018. | |
EXHIBIT INDEX
| Exhibit Number |
Description of Exhibit | |
| 99.1 |
Press Release issued on July 26, 2018. | |
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 26, 2018
Exhibit 99.1
LAZARD LTD REPORTS
SECOND-QUARTER AND FIRST-HALF 2018 RESULTS
| Record quarterly and first-half operating |
Record quarterly and first-half operating revenue for Financial Advisory |
Returned $588 million of capital to shareholders in first half of year |
NEW YORK, July 26, 2018 – Lazard Ltd (NYSE: LAZ) today reported record quarterly operating revenue1 of $741 million for the quarter ended June 30, 2018. Net income, as adjusted1 and excluding a pre-tax benefit2, was $143 million, or $1.10 (diluted) per share for the quarter. Second-quarter 2018 net income on a U.S. GAAP basis was $147 million, or $1.13 per share (diluted).
First-half net income as adjusted1 and excluding a pre-tax charge2, was $309 million, or $2.35 per share (diluted). On a U.S. GAAP basis, first-half net income was $307 million, or $2.34 per share (diluted).
“Record operating revenue for the second quarter and first half underscores the differentiated strength of Lazard’s franchise,” said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. “Our global platform incorporates diverse revenue streams of significant scale, innovative client solutions that drive performance, and growth opportunities in which we continue to invest.”
| ($ in millions, except per share data and AUM) |
Quarter Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||||||
| 2018 | 2017 | %’18-’17 | 2018 | 2017 | %’18-’17 | |||||||||||||||||||
| Net Income |
||||||||||||||||||||||||
| U.S. GAAP |
$ | 147 | $ | 120 | 22 | % | $ | 307 | $ | 228 | 35 | % | ||||||||||||
| Per share, diluted |
$ | 1.13 | $ | 0.91 | 24 | % | $ | 2.34 | $ | 1.72 | 36 | % | ||||||||||||
| Adjusted1,2 |
$ | 143 | $ | 130 | 10 | % | $ | 309 | $ | 240 | 29 | % | ||||||||||||
| Per share, diluted |
$ | 1.10 | $ | 0.98 | 12 | % | $ | 2.35 | $ | 1.81 | 30 | % | ||||||||||||
| Operating Revenue1 |
||||||||||||||||||||||||
| Total operating revenue |
$ | 741 | $ | 720 | 3 | % | $ | 1,465 | $ | 1,345 | 9 | % | ||||||||||||
| Financial Advisory |
$ | 415 | $ | 411 | 1 | % | $ | 804 | $ | 747 | 8 | % | ||||||||||||
| Asset Management |
$ | 329 | $ | 307 | 7 | % | $ | 659 | $ | 585 | 13 | % | ||||||||||||
| AUM ($ in billions) |
||||||||||||||||||||||||
| Period End |
$ | 238 | $ | 226 | 5 | % | ||||||||||||||||||
| Average |
$ | 245 | $ | 222 | 10 | % | $ | 251 | $ | 214 | 17 | % | ||||||||||||
| Media Contact: Judi Frost Mackey | +1 212 632 1428 | judi.mackey@lazard.com | ||
| Investor Contact: Alexandra Deignan | +1 212 632 6886 | alexandra.deignan@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 $741 million for the second quarter of 2018, and a record $1,465 million for the first half of 2018, up 3% and 9%, respectively, from the 2017 periods.
Financial Advisory
Our Financial Advisory results include M&A Advisory, Capital Advisory, Capital Raising, Restructuring, Shareholder Advisory, Sovereign Advisory, and other strategic advisory work for clients.
Second Quarter
Financial Advisory operating revenue was a quarterly record of $415 million for 2018, 1% higher than the record second quarter of 2017. Operating revenue included strong performance in M&A Advisory and Restructuring.
During the second quarter of 2018, 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 2018 were the following (clients are in italics): Altice on its $40 billion group reorganization; Unibail-Rodamco’s $24.7 billion acquisition of Westfield; Great Plains Energy’s $14 billion merger of equals with Westar Energy; AccorHotels’ sale of a 57.8% stake in AccorInvest; Bacardi’s $5.1 billion acquisition of Patrón Tequila; and Dover on the spin-off of Apergy.
During or since the second quarter of 2018 we have been engaged in a broad range of highly visible and complex restructuring and debt advisory assignments for debtors and creditors. Assignments completed during the second quarter of 2018 on which Lazard advised included: Takata; Community Health Systems; and Breitburn Energy Partners.
Our Sovereign and Capital Advisory services remained active globally, advising governments and corporations on balance sheet matters, financing strategy and capital raising.
Please see M&A transactions on which Lazard advised in the second quarter, or continued to advise or completed since June 30, 2018, as well as Capital Advisory, Sovereign Advisory and Restructuring assignments, on pages 8 - 11 of this release.
2
First Half
Financial Advisory operating revenue was a record $804 million for the first half of 2018, 8% higher than the record first half of 2017.
Lazard advised or continues to advise on a number of significant and complex M&A transactions announced year to date, including: Express Scripts’ $67 billion sale to Cigna; The Woodbridge Company in Thomson Reuters’ sale of a 55% stake in its Financial & Risk business to Blackstone; and AkzoNobel’s €10.1 billion sale of its Specialty Chemicals business to Carlyle and GIC.
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 second-quarter record of $329 million for the second quarter of 2018, 7% higher than the record second quarter of 2017.
Management fees and other revenue was $317 million for the second quarter of 2018, 9% higher than the second quarter of 2017, and 2% lower than the first quarter of 2018.
Average assets under management (AUM) for the second quarter of 2018 was $245 billion, 10% higher than the second quarter of 2017, and 4% lower than the first quarter of 2018.
AUM as of June 30, 2018, was $238 billion, up 5% from June 30, 2017, and down 6% from March 31, 2018. The sequential decrease was primarily driven by foreign exchange movement, market depreciation, and net outflows of $3.8 billion.
Incentive fees during the period were $12 million, compared to $17 million for the second quarter of 2017.
First Half
Asset Management operating revenue was a record $659 million for the first half of 2018, 13% higher than the first half of 2017.
Management fees and other revenue was $641 million for the first half of 2018, 14% higher than the first half of 2017.
Average AUM for the first half of 2018 was $251 billion, 17% higher than the first half of 2017. Net outflows were $1.4 billion for the first half of 2018.
Incentive fees were $18 million for the first half of 2018, compared to $24 million for the first half of 2017.
3
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 2018, we accrued compensation and benefits expense1 at an adjusted compensation1 ratio of 55.8%. This resulted in $413 million of adjusted compensation and benefits expense, compared to $407 million for the second quarter of 2017. The increase reflected higher operating revenue.
For the first half of 2018, adjusted compensation and benefits expense1 was $817 million, compared to $760 million for the first half of 2017, also reflecting higher operating revenue.
We manage our compensation and benefits expense based on awarded compensation with a consistent deferral policy. 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
Adjusted non-compensation expense1 for the second quarter of 2018 was $118 million, 2% higher than the second quarter of 2017. The ratio of adjusted non-compensation expense to operating revenue for the second quarter of 2018 was 16.0%, compared to 16.1% for the second quarter of 2017.
Adjusted non-compensation expense1 for the first half of 2018 was $233 million, 4% higher than the first half of 2017. The ratio of adjusted non-compensation expense to operating revenue for the first half of 2018 was 15.9%, compared to 16.6% for the first half of 2017.
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 $53 million for the second quarter of 2018 and $79 million for the first half of 2018. The effective tax rate on the same basis was 26.9% for the second quarter and 20.4% for the first half of 2018, compared to 29.6% and 28.3% for the respective 2017 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 2018, Lazard returned $139 million to shareholders, which included: $53 million in dividends; $78 million in share repurchases of our Class A common stock; and $8 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.
For the first half of 2018, Lazard returned $588 million to shareholders, which included: $255 million in dividends; $224 million in share repurchases of our Class A common stock; and $109 million in satisfaction of employee tax obligations in lieu of share issuances upon vesting of equity grants.
Year to date, we have repurchased 4.5 million shares at an average price of $53.69 per share. In line with our objectives, these repurchases have more than offset the potential dilution from our 2017 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 $56.22 per share. As of today, our remaining share repurchase authorization is $308 million.
On July 25, 2018, Lazard declared a quarterly dividend of $0.44 per share on its outstanding common stock. The dividend is payable on August 17, 2018, to stockholders of record on August 6, 2018.
Lazard’s financial position remains strong. As of June 30, 2018, our cash and cash equivalents were $845 million, and stockholders’ equity related to Lazard’s interests was $1,055 million.
***
5
CONFERENCE CALL
Lazard will host a conference call at 8:00 a.m. EDT on July 26, 2018, to discuss the company’s financial results for the second quarter and first half of 2018. 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 (800) 239-9838 (U.S. and Canada) or +1 (323) 794-2551 (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 26, 2018, 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 2872646.
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 2018 results were affected primarily by the following benefits and charges:
| • | Second-quarter and first-half 2018 adjusted results exclude pre-tax charges of (i) $5.4 million and $12.8 million, respectively, of costs associated with the implementation of a new Enterprise Resource Planning (ERP) system, and (ii) $1.0 million and $2.4 million, respectively, of office space reorganization costs primarily relating to incremental rent expense and lease abandonment costs. In addition, second-quarter and first-half 2018 adjusted results exclude a benefit of $9.3 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, these items resulted in a net benefit of $3.9 million, or $0.03 (diluted) per share, in the second quarter, and a net charge of $2.3 million, or $0.02 (diluted) per share, for the first half of 2018. |
LAZ-EPE
###
7
FINANCIAL ADVISORY ASSIGNMENTS
Mergers and Acquisitions (Completed in the second quarter of 2018)
Among the large, publicly announced M&A Advisory transactions or assignments completed during the second quarter of 2018 on which Lazard advised were the following:
| • | Altice on its $40 billion group reorganization, including the spin-off of Altice USA and new Altice Europe structure |
| • | Unibail-Rodamco’s $24.7 billion acquisition of Westfield |
| • | Great Plains Energy’s $14 billion merger of equals with Westar Energy |
| • | AccorHotels’ sale of a 57.8% stake in AccorInvest to a consortium of investors, valuing AccorInvest at €6.3 billion |
| • | Bacardi’s $5.1 billion acquisition of Patrón Tequila |
| • | Sanofi’s €3.9 billion acquisition of Ablynx |
| • | NJJ Capital in the €3.5 billion consortium acquisition of eir |
| • | Saint-Gobain on its agreement with Sika and the Burkard family, including the CHF 3.2 billion acquisition of Schenker-Winkler Holding and associated transactions |
| • | Imagina Media Audiovisual in Orient Hontai Capital’s acquisition of a majority stake from existing shareholders, valuing the company at €1.9 billion |
| • | MRH’s £1.2 billion combination with MFG |
| • | Reliance Worldwide’s £688 million acquisition of John Guest |
| • | Wilson Therapeutics on its SEK 7.1 billion sale to Alexion |
| • | Patricia Industries’ SEK 7.0 billion acquisition of Piab Group |
| • | Owens & Minor’s $710 million acquisition of Halyard Health’s S&IP business |
| • | Total on the $545 million acquisition of several Gulf of Mexico assets from Cobalt International Energy, including a partnership with Statoil for the North Platte assets |
| • | Extant’s $525 million sale to TransDigm |
| • | Dover on the spin-off of Apergy |
| • | Rhône’s strategic partnership with, and sale of a 30% interest to, Eurazeo |
| • | Nippon Steel & Sumitomo Metal’s acquisition of Ovako Group |
| • | H.C. Starck’s sale of its Tantalum and Niobium division to JX Nippon Mining & Metals |
| • | RugsUSA in Comvest Partners’ investment in the company |
8
Mergers and Acquisitions (Announced)
Among the ongoing, large, publicly announced M&A transactions or assignments on which Lazard advised during or since the 2018 second quarter, or completed since June 30, 2018, are the following:
| • | Aetna’s $77 billion sale to CVS Health |
| • | Express Scripts’ $67 billion sale to Cigna |
| • | The Supervisory Board of innogy in the company’s €37.9 billion takeover by E.ON |
| • | The Woodbridge Company in Thomson Reuters’ sale of a 55% stake in its Financial & Risk business to Blackstone, valuing the business at $20 billion |
| • | AkzoNobel’s €10.1 billion sale of its Specialty Chemicals business to Carlyle and GIC |
| • | Beni Stabili’s merger with Covivio, creating a combined entity with a market capitalization of over €7 billion |
| • | Thales’ €5.6 billion acquisition of Gemalto through a recommended all-cash offer |
| • | WGL Holdings’ $6.4 billion sale to AltaGas* |
| • | WestRock’s $4.9 billion acquisition of KapStone |
| • | Sky on the sale of its stake in Sky Betting & Gaming (“SBG”) as part of SBG’s $4.7 billion sale to The Stars Group* |
| • | Altice on the sale of a 49.99% stake in Starlight France to KKR, valuing the company at €3.6 billion |
| • | Quality Care Properties on its $3.9 billion sale to Welltower in conjunction with the sale of HCR ManorCare to ProMedica |
| • | Daily Mail & General Trust in the £2.5 billion sale of ZPG to Silver Lake* |
| • | Total’s €2.5 billion acquisition of Direct Energie |
| • | Genworth Financial’s $2.7 billion sale to China Oceanwide |
| • | Servier’s $2.4 billion acquisition of Shire’s Oncology business |
| • | Scotiabank’s $2.2 billion acquisition of BBVA’s 68% interest in BBVA Chile* |
| • | BASF’s €1.6 billion acquisition of Solvay’s global polyamide business |
| • | Archer Daniels Midland’s €1.5 billion acquisition of Neovia |
| • | CDH Investments in the AUD 1.9 billion consortium acquisition of Sirtex |
| • | Space4 in its combination with Guala Closures, valuing Guala at €1.1 billion |
| • | Telia Company’s SEK 9.2 billion acquisition of Bonnier Broadcasting |
| • | VEON on the $940 million sale of its tower business in Pakistan |
| • | Altice on the sale of a 75% stake in Towers of Portugal to a consortium, valuing the company at €660 million |
| • | Rolls-Royce’s £500 million sale of its Commercial Marine business to KONGSBERG |
| • | Asco Industries’ $650 million sale to Spirit AeroSystems |
| • | Liberty House Group’s $500 million binding conditional offer to acquire Aluminium Dunkerque from Rio Tinto |
| • | Alpha Bank, Eurobank, National Bank of Greece and Piraeus Bank in the sale of majority stakes in Nireus and Selonda to Andromeda Group, AMERRA and Mubadala, valuing the combined business at approximately $500 million |
| • | Cirsa’s sale to Blackstone* |
| • | Carrefour on the potential investment by Tencent and Yonghui in Carrefour China and a strategic cooperation agreement with Tencent in China |
| • | AviAlliance in the 20-year extension of the Athens International Airport Concession Agreement |
| • | Ardian in the sale of its stake in Siaci Saint Honore |
9
| • | Selmet’s sale to Consolidated Precision Products |
| • | Investindustrial’s acquisition of HTL Strefa |
| * | Transaction completed since June 30, 2018 |
Capital Advisory
Among the publicly announced Capital Advisory transactions or assignments on which Lazard advised during or since the second quarter of 2018 were the following:
| • | Special Committee of Independent Directors of VMware in VMware’s declaration of an $11 billion cash dividend in connection with Dell’s Class V tracking stock exchange transaction |
| • | AXA in the $3.2 billion initial public offering of AXA Equitable Holdings and concurrent $863 million offering of mandatory exchangeable bonds |
| • | Merlin Entertainments in relation to its £600 million revolving credit facility and $400 million senior notes issuance |
| • | EF Solare Italia, an equal JV between Enel and F2i, on its €1.0 billion refinancing |
| • | Infigen Energy on its AUD 605 million corporate loan |
| • | Carel Industries on its €290 million initial public offering |
| • | KAEFER Isoliertechnik on its €250 million senior secured notes offering |
| • | Rise Broadband on its $205 million refinancing |
| • | Scorpio Tankers on its $189 million exchange of convertible notes |
| • | AKASOL’s €118 million initial public offering |
Sovereign Advisory
Among the publicly announced Sovereign Advisory assignments on which Lazard advised during or since the second quarter of 2018 were the following:
| • | The Commonwealth of Australia |
| • | Southern Gas Corridor CJSC of Azerbaijan |
| • | Economic Development Board (The Kingdom of Bahrain) |
| • | Ministry of Finance (The Kingdom of Bahrain) |
| • | The Democratic Republic of the Congo |
| • | The Republic of the Congo |
| • | The Republic of Croatia |
| • | The Federal Democratic Republic of Ethiopia |
| • | The Gabonese Republic |
| • | The Hellenic Republic |
| • | The Hashemite Kingdom of Jordan |
| • | SNIM (The Islamic Republic of Mauritania) |
| • | The Republic of Mozambique |
| • | Nama Holding (Oman) |
| • | Oman Oil Company |
| • | Belgrade Nikola Tesla Airport (The Republic of Serbia) |
| • | Eskom Holdings (Republic of South Africa) |
| • | Banque Ouest Africaine de Développement (Togo) |
| • | Ukraine and certain sub-sovereign entities |
| • | NJSC Naftogaz of Ukraine |
| • | The Republic of Zimbabwe |
10
Restructuring and Debt Advisory Assignments
Restructuring and debtor or creditor advisory assignments completed during the second quarter of 2018 on which Lazard advised include: Breitburn Energy Partners, GST AutoLeather, Remington Outdoor, and Takata in connection with their Chapter 11 bankruptcy restructurings; Community Health Systems in connection with its liability management and refinancing transactions; and CGG’s refinancing of its first lien indebtedness.
Notable ongoing restructuring and debtor or creditor advisory assignments on which Lazard advised during or since the second quarter of 2018 include: Assured Guaranty in connection with Puerto Rico’s restructuring; Claire’s Stores, FirstEnergy Solutions, Nine West, Seadrill*, and Toys “R” Us in connection with their Chapter 11 or similar bankruptcy restructurings; lenders to Danaos on the company’s restructuring; Quality Care Properties on strategic options in relation to HCR ManorCare; and an ad hoc group of secured noteholders to Tops Markets with regard to the company’s restructuring.
| * | Assignment completed since June 30, 2018 |
***
11
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(U.S. GAAP)
| Three Months Ended | % Change From | |||||||||||||||||||
| ($ in thousands, except per share data) | June 30, 2018 |
March 31, 2018 |
June 30, 2017 |
March 31, 2018 |
June 30, 2017 |
|||||||||||||||
| Total revenue |
$ | 771,528 | $ | 768,205 | $ | 729,946 | 0% | 6% | ||||||||||||
| Interest expense |
(13,590 | ) | (13,507 | ) | (12,766 | ) | ||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Net revenue |
757,938 | 754,698 | 717,180 | 0% | 6% | |||||||||||||||
| Operating expenses: |
||||||||||||||||||||
| Compensation and benefits |
416,159 | 405,047 | 414,612 | 3% | 0% | |||||||||||||||
| Occupancy and equipment |
29,240 | 30,238 | 30,828 | |||||||||||||||||
| Marketing and business development |
28,228 | 25,659 | 24,027 | |||||||||||||||||
| Technology and information services |
32,527 | 33,252 | 32,032 | |||||||||||||||||
| Professional services |
16,714 | 12,431 | 11,234 | |||||||||||||||||
| Fund administration and outsourced services |
33,227 | 35,184 | 18,338 | |||||||||||||||||
| Amortization and other acquisition-related (benefits) costs |
(8,483 | ) | 866 | 1,257 | ||||||||||||||||
| Other |
10,386 | 26,193 | 12,351 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Subtotal |
141,839 | 163,823 | 130,067 | (13%) | 9% | |||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Operating expenses |
557,998 | 568,870 | 544,679 | (2%) | 2% | |||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Operating income |
199,940 | 185,828 | 172,501 | 8% | 16% | |||||||||||||||
| Provision for income taxes |
51,561 | 24,167 | 51,600 | NM | (0%) | |||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Net income |
148,379 | 161,661 | 120,901 | (8%) | 23% | |||||||||||||||
| Net income attributable to noncontrolling interests |
1,416 | 1,969 | 523 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Net income attributable to Lazard Ltd |
$ | 146,963 | $ | 159,692 | $ | 120,378 | (8%) | 22% | ||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Attributable to Lazard Ltd Common Stockholders: |
||||||||||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||||||
| Basic |
120,306,257 | 119,930,106 | 122,368,150 | 0% | (2%) | |||||||||||||||
| Diluted |
130,249,054 | 132,142,394 | 132,139,616 | (1%) | (1%) | |||||||||||||||
| Net income (loss) per share: |
||||||||||||||||||||
| Basic |
$ | 1.22 | $ | 1.33 | $ | 0.98 | (8%) | 24% | ||||||||||||
| Diluted |
$ | 1.13 | $ | 1.21 | $ | 0.91 | (7%) | 24% | ||||||||||||
12
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(U.S. GAAP)
| Six Months Ended | ||||||||||||
| ($ in thousands, except per share data) | June 30, 2018 |
June 30, 2017 |
% Change | |||||||||
| Total revenue |
$ | 1,539,733 | $ | 1,367,366 | 13 | % | ||||||
| Interest expense |
(27,097 | ) | (26,722 | ) | ||||||||
|
|
|
|
|
|||||||||
| Net revenue |
1,512,636 | 1,340,644 | 13 | % | ||||||||
| Operating expenses: |
||||||||||||
| Compensation and benefits |
821,206 | 776,413 | 6 | % | ||||||||
| Occupancy and equipment |
59,478 | 58,312 | ||||||||||
| Marketing and business development |
53,887 | 43,779 | ||||||||||
| Technology and information services |
65,779 | 56,056 | ||||||||||
| Professional services |
29,145 | 22,696 | ||||||||||
| Fund administration and outsourced services |
68,411 | 34,251 | ||||||||||
| Amortization and other acquisition-related (benefits) costs |
(7,617 | ) | 4,831 | |||||||||
| Other |
36,579 | 21,608 | ||||||||||
|
|
|
|
|
|||||||||
| Subtotal |
305,662 | 241,533 | 27 | % | ||||||||
|
|
|
|
|
|||||||||
| Operating expenses |
1,126,868 | 1,017,946 | 11 | % | ||||||||
|
|
|
|
|
|||||||||
| Operating income |
385,768 | 322,698 | 20 | % | ||||||||
| Provision for income taxes |
75,728 | 91,367 | (17 | %) | ||||||||
|
|
|
|
|
|||||||||
| Net income |
310,040 | 231,331 | 34 | % | ||||||||
| Net income attributable to noncontrolling interests |
3,385 | 3,400 | ||||||||||
|
|
|
|
|
|||||||||
| Net income attributable to Lazard Ltd |
$ | 306,655 | $ | 227,931 | 35 | % | ||||||
|
|
|
|
|
|||||||||
| Attributable to Lazard Ltd Common Stockholders: |
||||||||||||
| Weighted average shares outstanding: |
||||||||||||
| Basic |
120,118,182 | 122,591,656 | (2 | %) | ||||||||
| Diluted |
131,195,725 | 132,414,496 | (1 | %) | ||||||||
| Net income per share: |
||||||||||||
| Basic |
$ | 2.55 | $ | 1.86 | 37 | % | ||||||
| Diluted |
$ | 2.34 | $ | 1.72 | 36 | % | ||||||
13
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
(U.S. GAAP)
| ($ in thousands) | June 30, 2018 |
December 31, 2017 |
||||||
| ASSETS | ||||||||
| Cash and cash equivalents |
$ | 845,167 | $ | 1,483,836 | ||||
| Deposits with banks and short-term investments |
1,000,662 | 935,431 | ||||||
| Cash deposited with clearing organizations and other segregated cash |
37,089 | 35,539 | ||||||
| Receivables |
714,397 | 571,616 | ||||||
| Investments |
505,194 | 427,186 | ||||||
| Goodwill and other intangible assets |
382,360 | 391,364 | ||||||
| Deferred tax assets |
618,455 | 650,260 | ||||||
| Other assets |
524,668 | 433,445 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 4,627,992 | $ | 4,928,677 | ||||
|
|
|
|
|
|||||
| LIABILITIES & STOCKHOLDERS’ EQUITY |
| |||||||
| Liabilities |
||||||||
| Deposits and other customer payables |
$ | 1,055,244 | $ | 992,338 | ||||
| Accrued compensation and benefits |
403,495 | 593,781 | ||||||
| Senior debt |
1,191,277 | 1,190,383 | ||||||
| Tax receivable agreement obligation |
277,163 | 310,275 | ||||||
| Other liabilities |
587,709 | 582,995 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
3,514,888 | 3,669,772 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity |
||||||||
| Preferred stock, par value $.01 per share |
— | — | ||||||
| Common stock, par value $.01 per share |
1,298 | 1,298 | ||||||
| Additional paid-in capital |
652,013 | 788,140 | ||||||
| Retained earnings |
1,092,381 | 1,080,413 | ||||||
| Accumulated other comprehensive loss, net of tax |
(253,499 | ) | (232,518 | ) | ||||
|
|
|
|
|
|||||
| Subtotal |
1,492,193 | 1,637,333 | ||||||
| Class A common stock held by subsidiaries, at cost |
(437,031 | ) | (437,530 | ) | ||||
|
|
|
|
|
|||||
| Total Lazard Ltd stockholders’ equity |
1,055,162 | 1,199,803 | ||||||
| Noncontrolling interests |
57,942 | 59,102 | ||||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
1,113,104 | 1,258,905 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 4,627,992 | $ | 4,928,677 | ||||
|
|
|
|
|
|||||
14
LAZARD LTD
SELECTED SUMMARY FINANCIAL INFORMATION (a)
(Non-GAAP - unaudited)
| Three Months Ended | % Change From | |||||||||||||||||||
| ($ in thousands, except per share data) | June 30, 2018 |
March 31, 2018 |
June 30, 2017 |
March 31, 2018 |
June 30, 2017 |
|||||||||||||||
| Revenues: |
||||||||||||||||||||
| Financial Advisory |
$ | 415,006 | $ | 388,856 | $ | 410,882 | 7% | 1% | ||||||||||||
| Asset Management |
329,409 | 329,855 | 306,796 | (0%) | 7% | |||||||||||||||
| Corporate |
(3,713 | ) | 5,224 | 2,483 | NM | NM | ||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Operating revenue (b) |
$ | 740,702 | $ | 723,935 | $ | 720,161 | 2% | 3% | ||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Expenses: |
||||||||||||||||||||
| Adjusted compensation and benefits expense (c) |
$ | 413,312 | $ | 403,956 | $ | 406,891 | 2% | 2% | ||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Ratio of adjusted compensation to operating revenue |
55.8 | % | 55.8 | % | 56.5 | % | ||||||||||||||
| Non-compensation expense (d) |
$ | 118,481 | $ | 114,081 | $ | 116,111 | 4% | 2% | ||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Ratio of non-compensation to operating revenue |
16.0 | % | 15.8 | % | 16.1 | % | ||||||||||||||
| Earnings: |
||||||||||||||||||||
| Earnings from operations (e) |
$ | 208,909 | $ | 205,898 | $ | 197,159 | 1% | 6% | ||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Operating margin (f) |
28.2 | % | 28.4 | % | 27.4 | % | ||||||||||||||
| Adjusted net income (g) |
$ | 143,020 | $ | 165,915 | $ | 129,840 | (14%) | 10% | ||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Diluted adjusted net income per share |
$ | 1.10 | $ | 1.26 | $ | 0.98 | (13%) | 12% | ||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Diluted weighted average shares |
130,249,054 | 132,142,394 | 132,139,616 | (1%) | (1%) | |||||||||||||||
| Effective tax rate (h) |
26.9 | % | 13.9 | % | 29.6 | % | ||||||||||||||
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see Reconciliation of U.S. GAAP to Selected Summary Financial Information and Notes to Financial Schedules.
15
LAZARD LTD
SELECTED SUMMARY FINANCIAL INFORMATION (a)
(Non-GAAP – unaudited)
| Six Months Ended | ||||||||||||
| ($ in thousands, except per share data) | June 30, 2018 |
June 30, 2017 |
% Change | |||||||||
| Revenues: |
||||||||||||
| Financial Advisory |
$ | 803,862 | $ | 746,694 | 8 | % | ||||||
| Asset Management |
659,264 | 585,224 | 13 | % | ||||||||
| Corporate |
1,511 | 12,677 | (88 | %) | ||||||||
|
|
|
|
|
|||||||||
| Operating revenue (b) |
$ | 1,464,637 | $ | 1,344,595 | 9 | % | ||||||
|
|
|
|
|
|||||||||
| Expenses: |
||||||||||||
| Adjusted compensation and benefits expense (c) |
$ | 817,268 | $ | 759,696 | 8 | % | ||||||
|
|
|
|
|
|||||||||
| Ratio of adjusted compensation to operating revenue |
55.8 | % | 56.5 | % | ||||||||
| Non-compensation expense (d) |
$ | 232,562 | $ | 223,581 | 4 | % | ||||||
|
|
|
|
|
|||||||||
| Ratio of non-compensation to operating revenue |
15.9 | % | 16.6 | % | ||||||||
| Earnings: |
||||||||||||
| Earnings from operations (e) |
$ | 414,807 | $ | 361,318 | 15 | % | ||||||
|
|
|
|
|
|||||||||
| Operating margin (f) |
28.3 | % | 26.9 | % | ||||||||
| Adjusted net income (g) |
$ | 308,935 | $ | 239,981 | 29 | % | ||||||
|
|
|
|
|
|||||||||
| Diluted adjusted net income per share |
$ | 2.35 | $ | 1.81 | 30 | % | ||||||
|
|
|
|
|
|||||||||
| Diluted weighted average shares |
131,195,725 | 132,414,496 | (1 | %) | ||||||||
| Effective tax rate (h) |
20.4 | % | 28.3 | % | ||||||||
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, 2018 |
March 31, 2018 |
December 31, 2017 |
Qtr to Qtr | YTD | ||||||||||||||||
| Equity: |
||||||||||||||||||||
| Emerging Markets |
$ | 47,207 | $ | 53,862 | $ | 52,349 | (12.4 | %) | (9.8 | %) | ||||||||||
| Global |
43,932 | 44,403 | 43,663 | (1.1 | %) | 0.6 | % | |||||||||||||
| Local |
40,688 | 41,407 | 42,650 | (1.7 | %) | (4.6 | %) | |||||||||||||
| Multi-Regional |
67,014 | 70,405 | 70,696 | (4.8 | %) | (5.2 | %) | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Total Equity |
198,841 | 210,077 | 209,358 | (5.3 | %) | (5.0 | %) | |||||||||||||
| Fixed Income: |
||||||||||||||||||||
| Emerging Markets |
16,453 | 18,191 | 17,320 | (9.6 | %) | (5.0 | %) | |||||||||||||
| Global |
4,155 | 4,418 | 4,109 | (6.0 | %) | 1.1 | % | |||||||||||||
| Local |
5,306 | 5,176 | 4,497 | 2.5 | % | 18.0 | % | |||||||||||||
| Multi-Regional |
8,151 | 8,871 | 9,154 | (8.1 | %) | (11.0 | %) | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Total Fixed Income |
34,065 | 36,656 | 35,080 | (7.1 | %) | (2.9 | %) | |||||||||||||
| Alternative Investments |
2,764 | 2,884 | 2,846 | (4.2 | %) | (2.9 | %) | |||||||||||||
| Private Equity |
1,458 | 1,455 | 1,478 | 0.2 | % | (1.4 | %) | |||||||||||||
| Cash Management |
748 | 608 | 697 | 23.0 | % | 7.3 | % | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Total AUM |
$ | 237,876 | $ | 251,680 | $ | 249,459 | (5.5 | %) | (4.6 | %) | ||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| AUM – Beginning of Period |
$ | 251,680 | $ | 215,178 | $ | 249,459 | $ | 197,910 | ||||||||||||
| Net Flows |
(3,846 | ) | (365 | ) | (1,439 | ) | 2,938 | |||||||||||||
| Market and foreign exchange appreciation (depreciation) |
(9,958 | ) | 10,948 | (10,144 | ) | 24,913 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| AUM – End of Period |
$ | 237,876 | $ | 225,761 | $ | 237,876 | $ | 225,761 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Average AUM |
$ | 245,127 | $ | 222,208 | $ | 250,614 | $ | 214,495 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| % Change in average AUM |
10.3 | % | 16.8 | % | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||
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, 2018 |
March 31, 2018 |
June 30, 2017 |
June 30, 2018 | June 30, 2017 | |||||||||||||||
| Operating Revenue | ||||||||||||||||||||
| Net revenue–U.S. GAAP Basis |
$ | 757,938 | $ | 754,698 | $ | 717,180 | $ | 1,512,636 | $ | 1,340,644 | ||||||||||
| Adjustments: |
||||||||||||||||||||
| Revenue related to noncontrolling interests (i) |
(5,622 | ) | (5,217 | ) | (3,098 | ) | (10,839 | ) | (8,040 | ) | ||||||||||
| (Gains) losses related to Lazard Fund Interests (“LFI”) and other similar arrangements |
499 | 1,436 | (5,753 | ) | 1,935 | (13,106 | ) | |||||||||||||
| Distribution fees, reimbursable deal costs and bad debt expense (j) |
(24,718 | ) | (39,514 | ) | — | (64,232 | ) | — | ||||||||||||
| Interest expense |
12,605 | 12,532 | 11,832 | 25,137 | 25,097 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating revenue, as adjusted (b) |
$ | 740,702 | $ | 723,935 | $ | 720,161 | $ | 1,464,637 | $ | 1,344,595 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Compensation and Benefits Expense | ||||||||||||||||||||
| Compensation and benefits expense–U.S. GAAP Basis |
$ | 416,159 | $ | 405,047 | $ | 414,612 | $ | 821,206 | $ | 776,413 | ||||||||||
| Adjustments: |
||||||||||||||||||||
| (Charges) credits pertaining to LFI and other similar arrangements |
499 | 1,436 | (5,753 | ) | 1,935 | (13,106 | ) | |||||||||||||
| Compensation related to noncontrolling interests (i) |
(3,346 | ) | (2,527 | ) | (1,968 | ) | (5,873 | ) | (3,611 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Compensation and benefits expense, as adjusted (c) |
$ | 413,312 | $ | 403,956 | $ | 406,891 | $ | 817,268 | $ | 759,696 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Non-Compensation Expense | ||||||||||||||||||||
| Non-compensation expense–Subtotal–U.S. GAAP Basis |
$ | 141,839 | $ | 163,823 | $ | 130,067 | $ | 305,662 | $ | 241,533 | ||||||||||
| Adjustments: |
||||||||||||||||||||
| Expenses associated with ERP system implementation (k) |
(5,404 | ) | (7,426 | ) | (8,861 | ) | (12,830 | ) | (8,861 | ) | ||||||||||
| Expenses related to office space reorganization (l) |
(1,036 | ) | (1,389 | ) | (3,161 | ) | (2,425 | ) | (3,161 | ) | ||||||||||
| Distribution fees, reimbursable deal costs and bad debt expense (j) |
(24,718 | ) | (39,514 | ) | — | (64,232 | ) | — | ||||||||||||
| Amortization and other acquisition-related benefits (costs) (m) |
8,483 | (866 | ) | (1,257 | ) | 7,617 | (4,831 | ) | ||||||||||||
| Non-compensation expense related to noncontrolling interests (i) |
(683 | ) | (547 | ) | (677 | ) | (1,230 | ) | (1,099 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Non-compensation expense, as adjusted (d) |
$ | 118,481 | $ | 114,081 | $ | 116,111 | $ | 232,562 | $ | 223,581 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Pre-Tax Income and Earnings From Operations | ||||||||||||||||||||
| Operating Income–U.S. GAAP Basis |
$ | 199,940 | $ | 185,828 | $ | 172,501 | $ | 385,768 | $ | 322,698 | ||||||||||
| Adjustments: |
||||||||||||||||||||
| Expenses associated with ERP system implementation (k) |
5,404 | 7,426 | 8,861 | 12,830 | 8,861 | |||||||||||||||
| Expenses related to office space reorganization (l) |
1,036 | 1,389 | 3,161 | 2,425 | 3,161 | |||||||||||||||
| Acquisition-related (benefits) costs (m) |
(9,346 | ) | 33 | 435 | (9,313 | ) | 3,180 | |||||||||||||
| Net income related to noncontrolling interests (i) |
(1,416 | ) | (1,969 | ) | (454 | ) | (3,385 | ) | (3,331 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Pre-tax income, as adjusted |
195,618 | 192,707 | 184,504 | 388,325 | 334,569 | |||||||||||||||
| Interest expense |
12,605 | 12,532 | 11,832 | 25,137 | 25,097 | |||||||||||||||
| Amortization (LAZ only) |
686 | 659 | 823 | 1,345 | 1,652 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Earnings from operations, as adjusted (e) |
$ | 208,909 | $ | 205,898 | $ | 197,159 | $ | 414,807 | $ | 361,318 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Income (loss) attributable to Lazard Ltd | ||||||||||||||||||||
| Net income attributable to Lazard Ltd–U.S. GAAP Basis |
$ | 146,963 | $ | 159,692 | $ | 120,378 | $ | 306,655 | $ | 227,931 | ||||||||||
| Adjustments: |
||||||||||||||||||||
| Expenses associated with ERP system implementation (k) |
5,404 | 7,426 | 8,861 | 12,830 | 8,861 | |||||||||||||||
| Expenses related to office space reorganization (l) |
1,036 | 1,389 | 3,161 | 2,425 | 3,161 | |||||||||||||||
| Acquisition-related (benefits) costs (m) |
(9,346 | ) | 33 | 435 | (9,313 | ) | 3,180 | |||||||||||||
| Tax benefit allocated to adjustments |
(1,037 | ) | (2,625 | ) | (2,995 | ) | (3,662 | ) | (3,152 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net income, as adjusted (g) |
$ | 143,020 | $ | 165,915 | $ | 129,840 | $ | 308,935 | $ | 239,981 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Diluted net income per share: |
||||||||||||||||||||
| U.S. GAAP Basis |
$ | 1.13 | $ | 1.21 | $ | 0.91 | $ | 2.34 | $ | 1.72 | ||||||||||
| Non-GAAP Basis, as adjusted |
$ | 1.10 | $ | 1.26 | $ | 0.98 | $ | 2.35 | $ | 1.81 | ||||||||||
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to comparable U.S. GAAP measures, see Notes to Financial Schedules.
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LAZARD LTD
Notes to Financial Schedules
| (a) | Selected Summary Financial Information are non-GAAP measures. Lazard believes that presenting results and measures on an adjusted basis in conjunction with U.S. GAAP measures provides the most meaningful basis for comparison of its operating results across periods. |
| (b) | A non-GAAP measure which excludes (i) revenue related to non-controlling interests (see (i) below), (ii) (gains)/losses related to the changes in the fair value of investments held in connection with Lazard Fund Interests and other similar deferred compensation arrangements for which a corresponding equal amount is excluded from compensation & benefits expense, (iii) for the three and six month periods ended June 30, 2018 and for the three month period ended March 31, 2018, revenue related to distribution fees and reimbursable deal costs in accordance with the newly adopted revenue recognition guidance and bad debt expense (see (j) below), and (iv) 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) expenses associated with ERP system implementation (see (k) below), (ii) expenses related to office space reorganization (see (l) below), (iii) for the three and six month periods ended June 30, 2018 and for the three month period ended March 31, 2018, expenses related to distribution fees and reimbursable deal costs in accordance with the newly adopted revenue recognition guidance and bad debt expense (see (j) below), (iv) amortization and other acquisition-related benefits (costs) (see (m) below), and (v) expenses related to noncontrolling interests (see (i) below). |
| (e) | A non-GAAP measure which excludes (i) expenses associated with ERP system implementation (see (k) below), (ii) expenses related to office space reorganization (see (l) below), (iii) acquisition-related (benefits) costs (see (m) below), (iv) net revenue and expenses related to noncontrolling interests (see (i) below), 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) expenses associated with ERP system implementation (see (k) below), (ii) expenses related to office space reorganization (see (l) below), and (iii) amortization and other acquisition-related (benefits) costs, net of tax benefits (see (m) 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 $52,599, $26,792, and $54,664 for the three month periods ended June 30, 2018, March 31, 2018, and June 30, 2017, respectively, $79,391 and $94,588 for the six month periods ended June 30, 2018 and 2017 and the denominator of which is pre-tax income of $195,618, $192,707, and $184,504 for the three month periods ended June 30, 2018, March 31, 2018, and June 30, 2017, respectively, $388,325 and $334,569 for the six month periods ended June 30, 2018 and 2017. |
| (i) | Noncontrolling interests include revenue and expenses principally related to Edgewater, and is a non-GAAP measure. |
| (j) | Represents certain distribution fees and reimbursable deal costs paid to third parties for which an equal amount is excluded from both non-GAAP operating revenue and non-compensation expense, respectively, and excludes bad debt expense, which represents fees that are deemed uncollectible. |
| (k) | Represents expenses associated with Enterprise Resource Planning (ERP) system implementation. |
| (l) | Represents incremental rent expense and lease abandonment costs related to office space reorganization and an onerous lease provision. |
| (m) | Primarily represents the change in fair value of the contingent consideration associated with certain business acquisitions. |
| NM | Not meaningful |
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