SEC Filing | Lazard Ltd

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laz-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

001-32492

(Commission File Number)

LAZARD LTD

(Exact name of registrant as specified in its charter)

Bermuda	98-0437848
(State or Other Jurisdiction of Incorporation	(I.R.S. Employer Identification No.)
or Organization)

Clarendon House

2 Church Street

Hamilton HM11, Bermuda

(Address of principal executive offices)

Registrant’s telephone number: (441) 295-1422

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	LAZ	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If the Registrant is 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. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 22, 2021, there were 112,766,091 shares of the Registrant’s common stock outstanding (including 9,892,150 shares held by subsidiaries).

TABLE OF CONTENTS

When we use the terms “Lazard”, “we”, “us”, “our” and “the Company”, we mean Lazard Ltd, a company incorporated under the laws of Bermuda, and its subsidiaries, including Lazard Group LLC, a Delaware limited liability company (“Lazard Group”), that is the current holding company for our businesses. Lazard Ltd’s primary operating asset is its indirect ownership as of September 30, 2021 of all of the common membership interests in Lazard Group and its controlling interest in Lazard Group. When we use the term “common stock”, we mean Class A common stock of Lazard Ltd, the only class of common stock of Lazard outstanding.

		Page
Part I. Financial Information

Item 1. Financial Statements (Unaudited)		1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		38

Item 3. Quantitative and Qualitative Disclosures About Market Risk		65

Item 4. Controls and Procedures		66

Part II. Other Information

Item 1. Legal Proceedings		67

Item 1A. Risk Factors		67

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		67

Item 3. Defaults Upon Senior Securities		68

Item 4. Mine Safety Disclosures		68

Item 5. Other Information		68

Item 6. Exhibits		69

Signatures		72

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

		Page

Condensed Consolidated Statements of Financial Condition as of September 30, 2021 and December 31, 2020		2

Condensed Consolidated Statements of Operations for the three month and nine month periods ended September 30, 2021 and 2020		4

Condensed Consolidated Statements of Comprehensive Income for the three month and nine month periods ended September 30, 2021 and 2020		5

Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2021 and 2020		6

Condensed Consolidated Statements of Changes in Stockholders’ Equity and Redeemable Noncontrolling Interests for the three month and nine month periods ended September 30, 2021 and 2020		7

Notes to Condensed Consolidated Financial Statements		11

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

SEPTEMBER 30, 2021 AND DECEMBER 31, 2020

(UNAUDITED)

(dollars in thousands, except for per share data)

	September 30,		December 31,
	2021		2020
ASSETS
Cash and cash equivalents	$	1,184,772	$	1,389,876
Deposits with banks and short-term investments		1,360,957		1,134,463
Restricted cash		615,297		44,488
Receivables (net of allowance for doubtful accounts of $37,292 and $36,649 at September 30, 2021 and December 31, 2020, respectively):
Fees		547,087		621,880
Customers and other		153,049		121,261
		700,136		743,141
Investments		914,975		658,532
Property (net of accumulated amortization and depreciation of $363,299 and $402,471 at September 30, 2021 and December 31, 2020, respectively)		247,595		257,587
Operating lease right-of-use assets		468,524		513,923
Goodwill and other intangible assets (net of accumulated amortization of $70,200 and $70,155 at September 30, 2021 and December 31, 2020, respectively)		379,847		384,071
Deferred tax assets		480,533		538,448
Other assets		373,944		307,332
Total Assets	$	6,726,580	$	5,971,861

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

SEPTEMBER 30, 2021 AND DECEMBER 31, 2020

(UNAUDITED)

(dollars in thousands, except for per share data)

	September 30,			December 31,
	2021			2020
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits and other customer payables	$	1,450,764		$	1,201,150
Accrued compensation and benefits		711,779			734,544
Operating lease liabilities		554,900			606,963
Tax receivable agreement obligation		211,236			221,451
Senior debt		1,684,606			1,682,741
Deferred tax liabilities		1,323			1,041
Other liabilities		559,258			524,538
Total Liabilities		5,173,866			4,972,428
Commitments and contingencies
Redeemable noncontrolling interests		575,000			-
STOCKHOLDERS’ EQUITY
Preferred stock, par value $.01 per share; 15,000,000 shares authorized:
Series A - no shares issued and outstanding		-			-
Series B - no shares issued and outstanding		-			-
Common stock:
Class A, par value $.01 per share (500,000,000 shares authorized; 112,766,091 shares issued at September 30, 2021 and December 31, 2020, including shares held by subsidiaries as indicated below)		1,128			1,128
Additional paid-in-capital		110,470			135,439
Retained earnings		1,402,191			1,295,386
Accumulated other comprehensive loss, net of tax		(246,534	)		(238,368	)
		1,267,255			1,193,585
Class A common stock held by subsidiaries, at cost (9,438,417 and 7,728,387 shares at September 30, 2021 and December 31, 2020, respectively)		(389,448	)		(281,813	)
Total Lazard Ltd Stockholders’ Equity		877,807			911,772
Noncontrolling interests		99,907			87,661
Total Stockholders’ Equity		977,714			999,433
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity	$	6,726,580		$	5,971,861

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

(dollars in thousands, except for per share data)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
REVENUE
Investment banking and other advisory fees	$	384,821	$	304,999	$	1,177,813	$	906,927
Asset management fees		323,747		265,562		997,162		780,071
Interest income		1,276		1,059		3,910		4,811
Other		27,963		26,402		82,090		56,634
Total revenue		737,807		598,022		2,260,975		1,748,443
Interest expense		20,378		20,344		60,302		60,459
Net revenue		717,429		577,678		2,200,673		1,687,984
OPERATING EXPENSES
Compensation and benefits		419,627		354,625		1,336,091		1,025,948
Occupancy and equipment		31,015		31,318		95,638		94,090
Marketing and business development		9,922		7,562		25,905		34,265
Technology and information services		37,559		33,457		107,003		97,444
Professional services		16,698		14,701		51,642		45,974
Fund administration and outsourced services		34,137		26,196		94,718		76,639
Amortization of intangible assets related to acquisitions		15		458		45		1,359
Other		13,497		4,681		34,121		27,623
Total operating expenses		562,470		472,998		1,745,163		1,403,342
OPERATING INCOME		154,959		104,680		455,510		284,642
Provision for income taxes		39,446		28,165		124,255		76,720
NET INCOME		115,513		76,515		331,255		207,922
LESS - NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS		8,304		1,423		13,568		(4,650	)
NET INCOME ATTRIBUTABLE TO LAZARD LTD	$	107,209	$	75,092	$	317,687	$	212,572
ATTRIBUTABLE TO LAZARD LTD CLASS A COMMON STOCKHOLDERS:
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
Basic		105,415,743		107,168,615		106,484,652		106,711,547
Diluted		112,994,037		113,181,564		114,139,936		112,929,830
NET INCOME PER SHARE OF COMMON STOCK:
Basic	$	1.00	$	0.69	$	2.94	$	1.96
Diluted	$	0.94	$	0.66	$	2.78	$	1.88

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

(dollars in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
NET INCOME	$	115,513		$	76,515		$	331,255		$	207,922
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Currency translation adjustments:
Currency translation adjustments before reclassification		(25,861	)		34,326			(40,102	)		5,964
Adjustment for items reclassified to earnings		51			-			23,630			-
Employee benefit plans:
Actuarial gain (loss) (net of tax (benefit) expense of $1,107 and $(1,666) for the three months ended September 30, 2021 and 2020, respectively, and $1,496 and $(9) for the nine months ended September 30, 2021 and 2020, respectively)		4,442			(6,534	)		4,030			3,045
Adjustment for items reclassified to earnings (net of tax expense of $422 and $412 for the three months ended September 30, 2021 and 2020, respectively, and $1,286 and $1,088 for the nine months ended September 30, 2021 and 2020, respectively)		1,481			1,345			4,275			4,855
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX		(19,887	)		29,137			(8,167	)		13,864
COMPREHENSIVE INCOME		95,626			105,652			323,088			221,786
LESS - COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS		8,303			1,424			13,567			(4,649	)
COMPREHENSIVE INCOME ATTRIBUTABLE TO LAZARD LTD	$	87,323		$	104,228		$	309,521		$	226,435

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

(dollars in thousands)

	Nine Months Ended
	September 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	331,255		$	207,922
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of property		28,315			25,716
Noncash lease expense		52,509			46,965
Currency translation adjustment reclassification		23,630			-
Amortization of deferred expenses and share-based incentive compensation		325,645			282,955
Amortization of intangible assets related to acquisitions		45			1,359
Deferred tax provision		53,766			30,680
(Increase) decrease in operating assets and increase (decrease) in operating liabilities:
Receivables-net		26,453			86,038
Investments		(360,959	)		(1,035	)
Other assets		(33,946	)		(160,066	)
Accrued compensation and benefits and other liabilities		(33,489	)		(265,128	)
Net cash provided by operating activities		413,224			255,406
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property		(25,290	)		(34,210	)
Disposals of property		699			151
Net cash used in investing activities		(24,591	)		(34,059	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Contributions from noncontrolling interests		413			91
LGAC IPO		575,000			-
Customer deposits		295,837			-
Payments for:
Customer deposits		-			(37,850