Lazard Ltd Reports Fourth-Quarter and Full-Year 2009 Results

Highlights

  • Operating revenue was $514.4 million for the fourth quarter of 2009, the third best quarter in our history, compared to $402.5 million for the fourth quarter of 2008 and $431.5 million for the third quarter of 2009, and was $1,617.6 million for the full year of 2009
  • Both Financial Advisory and Asset Management contributed to the 28% increase in operating revenue over fourth-quarter 2008 and the 19% sequential improvement from the 2009 third quarter
  • Compensation and benefits expense for the fourth quarter and full year of 2009 was impacted negatively by significant special charges(a) and changes in compensation policies to enhance our competitiveness and drive shareholder value
  • Net loss per share(b) of $1.64 and $1.68 for the fourth quarter and full year of 2009, respectively; net loss per share(b) of $0.46 for the fourth quarter and net income per share (diluted) of $0.09 for the full year of 2009, on a fully exchanged basis(c) and before special charges(a)
  • M&A and Strategic Advisory operating revenue of $170.2 million for the fourth quarter of 2009, was an increase of 37% over the 2009 third quarter; Restructuring operating revenue was $103.4 million for the fourth quarter and a record year of $376.7 million
  • Asset Management operating revenue of $204.1 million, an increase of 63% over the fourth quarter of 2008; Assets Under Management increased 42% to $129.5 billion at December 31, 2009, from $91.1 billion at the end of 2008; net inflows were $4.6 billion and $10.3 billion for the 2009 fourth quarter and full year, respectively

NEW YORK--()--Lazard Ltd (NYSE: LAZ) today announced financial results for the fourth quarter and full year ended December 31, 2009. On a U.S. GAAP basis, which is before exchange of exchangeable interests, the net loss was $142.4 million, or $1.64 per share, for the fourth quarter of 2009, compared to net income of $38.0 million, or $0.50 per share (diluted), for the fourth quarter of 2008. The net loss was $130.2 million, or $1.68 per share, for the full year of 2009, compared to net income of $3.1 million or $0.06 per share (diluted) for the full year of 2008.

Net loss on a fully exchanged basis was $54.9 million, or $0.46 per share, for the fourth quarter of 2009, excluding pre-tax 2009 special charges of $147.0 million, compared to net income of $61.2 million, or $0.50 per share (diluted), for the fourth quarter of 2008. Net income on a fully exchanged basis was $11.1 million, or $0.09 per share (diluted), for the full year of 2009, excluding the 2009 special charges, compared to $196.4 million, or $1.65 per share (diluted) for the full year of 2008, excluding the 2008 special charge(d).

Lazard’s operating revenues in both its Financial Advisory and Asset Management businesses exhibit the continued improvement of those businesses, which began in the second quarter of 2009. Lazard’s results were impacted negatively by significant special charges related to compensation and changes in its compensation policies, which are described in detail later in this release.

A reconciliation of the U.S. GAAP results to the adjusted results is presented on page 15 of this release.

Lazard believes that results assuming full exchange of outstanding exchangeable interests and excluding special charges provide the most meaningful basis for comparison among present, historical and future periods.

Operating Revenue and Operating Income

Operating revenue was $514.4 million for the fourth quarter of 2009, the third highest quarter in Lazard’s history, a 28% increase over $402.5 million for the fourth quarter of 2008 and a 19% increase over $431.5 million for the third quarter of 2009. Operating loss was $74.6 million for the 2009 fourth quarter, excluding 2009 special charges of $147.0 million, compared to operating income of $54.1 million for the fourth quarter of 2008.

Operating revenue was $1,617.6 million for the 2009 full year, compared to $1,675.1 million for the full year of 2008. Operating income was $27.3 million for the 2009 full year, excluding 2009 special charges of $209.6 million, compared to operating income of $224.7 million for the full year of 2008, excluding the 2008 special charge of $199.6 million.

The Company’s quarterly revenue and profits can fluctuate materially depending on the number, size and timing of completed transactions on which it advised, as well as seasonality and other factors. Accordingly, the revenue and profits in any particular quarter may not be indicative of future results. As such, Lazard management believes that annual results are the most meaningful.

Comments

“We achieved the third highest quarter of operating revenue in our history, with the second half of the year improving in excess of 40% over the first half,” said Kenneth M. Jacobs, Chairman and Chief Executive Officer of Lazard. “This is a testament to the success of our strategy and the strength of our model. During the second half of 2009, Financial Advisory revenue increased 38% and Asset Management revenue increased 54% over the first half of the year. M&A fourth-quarter revenue increased 37% over the third quarter of 2009. Assets Under Management increased 42% during the year to $130 billion, including net inflows of $10 billion for the year.”

"Our performance in the second half of 2009 demonstrates the substantial opportunities for growth inherent in our two businesses of Financial Advisory and Asset Management," said Mr. Jacobs. "We enter 2010 with strong trends in our Asset Management business, continued strength in Restructuring and gathering momentum in M&A and Capital Structure Advisory. The breadth and depth of our franchise position us well to benefit from a turn of the cycle and to capitalize on our ongoing investments in our business."

“At the same time, as part of the 2009 compensation cycle, we took special charges during the fourth quarter relating to compensation, and have made changes to our compensation policies, which result in our substantially exceeding the previous year’s ratio of compensation to revenues. These special charges and changes to our compensation policies should enhance our competitiveness and drive shareholder value," said Mr. Jacobs. "Our goal is to grow annual compensation expense at a slower rate than revenues and to achieve over the cycle compensation levels on average consistent with the targets we established when we went public in 2005.”

Revenue

Financial Advisory

Financial Advisory operating revenue increased 24% to $313.6 million for the 2009 fourth quarter, compared to $252.4 million for the fourth quarter of 2008 and increased 21% compared to $260.2 million for the third quarter of 2009. Financial Advisory operating revenue was $990.4 million for the full year of 2009, compared to $1,024.0 million for the full year of 2008.

Lazard’s Financial Advisory business of M&A and Strategic Advisory, Restructuring, and Capital Markets and Other Advisory encompasses general strategic and transaction-specific advice to public and private companies, governments and other parties, and includes various corporate finance advisory services. Some of our assignments and, therefore, related revenue, are not reflected in publicly available statistical information. Restructuring assignments normally are executed over a six- to eighteen-month period, which has an impact on the timing of the recognition of Restructuring revenue.

M&A and Strategic Advisory

M&A and Strategic Advisory operating revenue was $170.2 million for the fourth quarter of 2009, compared to $192.7 million for the fourth quarter of 2008 and compared to $124.7 million for the 2009 third quarter. M&A and Strategic Advisory operating revenue generally does not include M&A fees for the sale of distressed assets, which are recognized in Restructuring operating revenue. For the full year of 2009, M&A and Strategic Advisory operating revenue was $526.2 million, compared to $814.7 million for the full year of 2008.

Among the transactions completed during the fourth quarter of 2009 on which Lazard advised were the following:

  • Barclays’ $13.5 billion sale of the Barclays Global Investors business to BlackRock
  • Transaction Committee of the Board of IMS Health on the company’s $5.2 billion sale to TPG and CPP Investment Board
  • Resolution’s £1.9 billion acquisition of Friends Provident
  • Anheuser-Busch InBev’s up to $3.0 billion sale of its Central European operations to CVC
  • Anheuser-Busch InBev’s up to $2.7 billion sale of Busch Entertainment to Blackstone
  • Special Committee of the Board of Clear Channel Outdoor on its $2.5 billion refinancing
  • Nortel’s $1.13 billion sale of its CDMA Business and LTE Access assets to Ericsson
  • Nortel’s $915 million sale of its Enterprise Solutions Business to Avaya
  • Onyx Pharmaceuticals’ up to $851 million acquisition of Proteolix
  • Amazon.com’s $807 million acquisition of Zappos.com
  • Capmark Financial Group’s $515 million sale of its North American servicing and mortgage banking businesses to Berkadia
  • Anheuser-Busch InBev’s $577 million sale of four metal beverage container manufacturing plants to Ball
  • Mid Europa Partners’ acquisition of a majority stake in Invitel
  • Pfizer’s agreement with GlaxoSmithKline to create a specialist HIV company

Among the pending, publicly announced M&A transactions on which Lazard advised in the fourth quarter, continued to advise, or completed since December 31, 2009, are the following:

  • BHP Billiton’s $58.0 billion Western Australian iron ore production joint venture with Rio Tinto
  • Kraft Foods’ $21.6 billion recommended final offer for Cadbury
  • AREVA’s €4.1 billion sale of its transmission and distribution business
  • Cisco’s NOK 19.0 billion acquisition of Tandberg
  • Kraft Foods’ $3.7 billion sale of its North American pizza business to Nestle
  • Océ’s €1.5 billion pending sale to Canon
  • Cazenove Group’s £1.0 billion sale to J.P. Morgan
  • Nortel’s $769 million sale of its Optical Networking and Carrier Ethernet businesses to Ciena
  • Chinatrust Financial’s $660 million acquisition of a 30% stake in AIG’s Nan Shan Life from China Strategic Holdings
  • Telefónica’s €400 million sale of its 32% stake in Medi Telecom (Méditel)
  • FGX International’s $565 million sale to Essilor International
  • Nortel’s $282 million sale of Carrier VoIP and Application Solutions business
  • Sensor Technologies’ $242 million sale to ManTech
  • SIX Group’s €235 million joint acquisition with Deutsche Börse of STOXX
  • France Telecom in the merger of Orange Switzerland and Sunrise
  • Veolia Environnement in the merger of its Veolia Transport division with Transdev

Restructuring

Restructuring operating revenue was a fourth-quarter record of $103.4 million, compared to $47.1 million for the fourth quarter of 2008 and to $119.1 million for the third quarter of 2009. Restructuring operating revenue was a full-year record of $376.7 million, compared to $119.3 million for the full year of 2008. Restructuring operating revenue reflects an increased level of restructuring advisory activity in the U.S. and Europe as well as fees for advising on distressed asset sales.

Over the past decade, Lazard’s global restructuring team, paired with its M&A industry specialist bankers, has advised on more than 450 restructurings worldwide, with an aggregate value over $1 trillion. The firm has been recognized as having the world’s leading restructuring group, including receiving numerous awards since 2003, such as Euromoney’s “Best Global Corporate Restructuring House” and IFR’s “Americas Restructuring House” for 2009.

During the full year of 2009, Lazard advised on over 140 restructuring assignments worldwide, of which over 70 are currently active. The majority of assignments during 2009 were non-bankruptcy related. Lazard has advised debtors or creditors on 22 of the top 30 Chapter 11 bankruptcies since 2008, and on all of the top 10 filed in 2009.

Completed fourth-quarter 2009 Restructuring assignments include advising Charter Communications, Hayes-Lemmerz, Hawaiian Telcom, Metaldyne Corporation, Pilgrim’s Pride and True Temper in connection with their Chapter 11 filings.

Notable Chapter 11 bankruptcies, on which Lazard advised debtors or creditors during or since the fourth quarter of 2009, are:

  • Automotive: Cooper-Standard
  • Chemicals: Chemtura, Lyondell
  • Consumer Goods: Eddie Bauer
  • Gaming, Entertainment and Hospitality: Station Casinos, Tropicana Entertainment, Trump Entertainment Resorts, Twin River Casino
  • Professional/Financial Services: Lehman Brothers
  • Real Estate/Property Development: Capmark Financial, Crescent Resources, Extended Stay Hotels, Tarragon, TOUSA
  • Technology/Media/Telecom: Citadel Broadcasting Group, MIG Inc., Nortel, Tribune Co., R.H. Donnelley
  • Other industries: AbitibiBowater, Smurfit-Stone Container

Among other publicly announced restructuring and debt advisory assignments on which Lazard has advised during or since the fourth quarter of 2009, are:

  • Alliance Bank (Kazakhstan) on its debt restructuring
  • Bavaria Yachtbau on its debt restructuring
  • Belvédère – advising the FRN noteholder committee
  • BTA Bank (Kazakhstan) on its debt restructuring
  • CPI – advised senior lenders in the company’s restructuring
  • Eurotunnel on its offer for early redemption of its convertible bonds
  • Gala Coral on its debt restructuring
  • German Federal Ministry of Economics and Technology on the restructuring of Adam Opel GmbH/General Motors Europe
  • Global Garden Products – advising the steering committee of senior lenders in the company's restructuring
  • Grupo Alfonso Gallardo on the extension of certain debt facilities and new financing
  • Italtel on its debt restructuring
  • La Rinascente and UPIM on their debt restructuring
  • Monier – advised the consortium of Apollo, TowerBrook and York Capital on the company's creditor-led restructuring
  • Morris Publishing in evaluating its strategic options regarding the company’s existing capital structure
  • Paroc on its debt restructuring
  • Polynt on its debt restructuring
  • Republic of Côte d’Ivoire – advised the Ministry of Finance on the restructuring of the Republic's Brady bonds
  • Republic of Senegal on its inaugural international bond issue
  • Schuler on its syndicated loan extension
  • SGD on its debt restructuring
  • Stroili Oro on its covenant reset
  • Terreal on its debt restructuring
  • Thomson – advising US private placement noteholders in the company's restructuring
  • TI Automotive on its restructuring through a UK scheme of arrangement

Capital Markets and Other Advisory

Capital Markets and Other Advisory operating revenue was $39.9 million for the fourth quarter of 2009, compared to $12.5 million for the fourth quarter of 2008 and compared to $16.4 million for the third quarter of 2009. Capital Markets and Other Advisory operating revenue was $87.4 million for the full year of 2009, compared to $90.0 million for the full year of 2008. This decrease in annual revenues was primarily due to a decline in Equity Capital Markets transactions and private placements during the first nine months of 2009.

Assignments in the fourth quarter of 2009 included advising on:

  • IPOs: RailAmerica and STR Holdings, CFAO
  • Follow-on offerings: Boise, Dendreon, Savient Pharmaceuticals, SuccessFactors and Transcend Services, JJB Sports plc and Quintain Estates & Development
  • Convertible and convertible exchange transactions: DST Systems, Forest City Enterprises, GenCorp and Genesco, Neopost and Artémis-Vinci
  • PIPEs, Registered Direct Offerings, Underwritten Registered Direct Offerings, and Private Placements as well as other convertible and capital markets transactions: Verenium, NicOx, Affymax, Comverge, Novavax, Beacon Power, Westport Innovations, G-III Apparel Group, Ballard Power, Amonix, and Circulite.

Asset Management

Asset Management operating revenue was $204.1 million for the fourth quarter of 2009, compared to $125.4 million for the 2008 fourth quarter, an increase of 63%, and compared to $157.3 million for the third quarter of 2009, an increase of 30%. Asset Management operating revenue was $596.0 million for the full year of 2009, compared to $628.7 million for the full year of 2008.

Assets Under Management at December 31, 2009 were $129.5 billion, representing a 42% increase over assets under management of $91.1 billion at December 31, 2008, and representing an 8% increase over assets under management of $120.2 billion at September 30, 2009. The increase for the 2009 fourth quarter and full year includes net inflows of $4.6 billion and $10.3 billion for the respective periods. At December 31, 2009, approximately 82% of Lazard’s AUM was invested in equities and 14% in fixed income.

Average assets under management were $124.9 billion for the fourth quarter of 2009, representing a 22% increase over average assets under management of $102.2 billion for the fourth quarter of 2008, and a 14% increase compared to $109.1 billion for the third quarter of 2009. Average assets under management were $104.0 billion for the full year of 2009, compared to $122.8 billion for the full year of 2008.

Management fees increased 42% to $152.8 million for the fourth quarter of 2009, compared to $108.0 million for the 2008 fourth quarter and increased 15% compared to $133.4 million for the third quarter of 2009. Management fees were $486.8 million for the full year of 2009, compared to $568.4 million for the 2008 full year.

Incentive fees were $41.0 million and $74.8 million for the fourth quarter and full year of 2009, respectively, compared to $16.4 million and $35.0 million for the comparable periods in 2008. Incentive fees are recorded on the measurement date, which for most of our alternative strategies that are subject to incentive fees occurs in the fourth quarter.

Other Asset Management revenue was $10.3 million for the fourth quarter of 2009, compared to $1.0 million for the fourth quarter of 2008. Other Asset Management revenue was $34.4 million for the full year of 2009, compared to $25.3 million for the full year of 2008. The increases in the 2009 periods were due to investment losses in the 2008 respective periods, which did not occur in 2009.

Our Asset Management business provides investment management and advisory services to governments, institutions, financial intermediaries, private clients and investment vehicles around the world. Our goal in our Asset Management business is to produce superior risk-adjusted investment returns and provide investment solutions customized for our clients. Asset Management includes the management of equity and fixed income securities as well as alternative investment and private equity funds.

Corporate

Corporate operating revenue was a negative $3.3 million for the fourth quarter of 2009, compared to positive operating revenue of $24.8 million for the fourth quarter of 2008. The negative operating revenue in the fourth quarter of 2009 was due primarily to a $13 million charge relating to our investment in warrants of Sapphire Industrials Corp., which was a special purpose acquisition corporation. Fourth quarter 2008 revenue included gains of $20.3 million on the repurchase of a portion of the Company’s senior notes.

Corporate operating revenue was $31.3 million for the full year of 2009, compared to $22.5 million for the full year of 2008. Revenue for the 2009 full year primarily represents net investment gains and returns on average cash balances.

Expenses

Compensation and Benefits

Compensation and benefits expense was $615.5 million and $1,309.2 million for the fourth quarter and full year of 2009, respectively, compared to $221.9 million and $1,128.3 million for the fourth quarter and full year of 2008, respectively.

Compensation and benefits expense, excluding special charges, was $468.5 million and $1,162.2 million for the fourth quarter and full year of 2009, respectively, compared to $221.9 million and $930.7 million for the fourth quarter and the full year of 2008, respectively.

During the fourth quarter of 2009, we have taken special charges and as part of the 2009 compensation cycle we have changed our compensation policies, while still maintaining significant retention mechanisms. As a result, we:

  • as previously announced and pursuant to the terms of the awards, accelerated the amortization of restricted stock units previously granted to our former Chairman and Chief Executive Officer who passed away in October 2009, resulting in a non-cash special charge of $86.5 million in the fourth quarter of 2009
  • accelerated the vesting of the deferred cash incentive compensation that was awarded as part of the 2008 compensation cycle, and which would have been expensed in future periods, resulting in a non-cash special charge of $60.5 million in the fourth quarter
  • changed the mix from 2008 of our incentive compensation awards by increasing the current cash and deferred equity based components and eliminating deferred cash awards. These changes were made with the intention to:
    • be in line with the practices followed in the 2006 and 2007 compensation cycles
    • reduce future amortization charges and to allow greater flexibility in the future to address competitive conditions
    • more closely align current pay cycle with reported compensation and revenues
    • maintain significant retention mechanisms by focusing stock grant awards at the more senior levels, where they are more highly effective and valued

      While the economic cost is the same, regardless of mix, this year’s change in mix increased our compensation ratio for the year by approximately 900 basis points and increased our fourth quarter compensation and benefits expense.
  • held the aggregate 2009 current cash compensation plus deferrals awarded during the 2009 compensation cycle, in line with 2008 and 2006 levels
  • implemented and amended a previously approved retirement policy in the first quarter of 2010, which accelerates the accounting for certain deferred stock awards and will result in a non-cash pre-tax special charge of approximately $24.8 million in the first quarter of 2010
  • are implementing selective staff reductions, while simultaneously maintaining a program to hire senior bankers and Asset Management professionals. We expect to record a pre-tax charge of approximately $90 million in the first quarter of 2010, including a non-cash charge of $41 million relating to restricted stock units previously granted to individuals who are being terminated.

The ratio of compensation and benefits expense, excluding special charges, to operating revenue was 71.8% for the full year of 2009, compared to 55.6% for the full year of 2008. Adjusted for employees who will be leaving as part of staff reductions after year-end or have already left and assuming no impact on revenues from departures, the compensation ratio for the full year of 2009 would be 65.9%.

Base U.S. GAAP compensation expense going into 2010, for illustrative purposes only, assuming current levels of pay for continuing employees, no increases in staffing, and no change in mix between current and deferred compensation, is estimated to be approximately $1,060 million. Actual compensation for 2010 will depend on competitive pay conditions, our operating performance, and staffing levels, as well as the mix between deferred and current compensation. It is our goal to grow annual compensation expense at a slower rate than revenues, and to achieve over the cycle compensation levels on average consistent with the targets established at the time we went public in 2005.

Please see additional information relating to the trend of Lazard’s compensation and benefits is presented in the tables on pages 17 and 18 of this release.

Non-Compensation

The ratio of non-compensation expense to operating revenue was lower in both the fourth quarter and full year of 2009, compared to the corresponding 2008 periods. The ratio of non-compensation expenses to operating revenue, excluding amortization of intangibles and the effects of our Tax Receivable Agreement, was 19.4% and 20.8% in the fourth quarter and full year of 2009, respectively, compared to 20.5% and 22.0% in the respective 2008 periods, excluding a special provision for counterparty defaults and the LAM Equity charge-related transaction costs.

Non-compensation expense increased 23% to $102.1 million for the fourth quarter of 2009, compared to $82.8 million for the fourth quarter of 2008, and decreased 11% to $342.2 million for the full year of 2009, compared to $384.7 million for the full year of 2008, excluding in each year the effects of our Tax Receivable Agreement and in the full year 2008 excludes transaction costs related to the LAM Equity charge.

Non-compensation expense includes amortization of intangibles related to acquisitions of $2.3 million and $5.0 million in the fourth quarter and full year of 2009, respectively, compared to $0.3 million and $4.6 million in the fourth quarter and full year of 2008, respectively. Other factors contributing to the quarter-over-quarter increase include higher business development expenses for travel and market related data and fund administration expenses related to the increased level of business activity and assets under management, as well as higher legal and consulting fees.

Non-compensation expense in the full year of 2008 includes a special provision for counterparty defaults of $12.4 million relating primarily to the bankruptcy filing of one of our prime brokers. Other factors contributing to the 2009 full-year decrease, include lower spending for travel and other business development expenses, consulting and recruiting fees as well as the strengthening of the U. S. dollar versus foreign currencies, partially offset by higher fees related to Asset Management outsourced services.

The percentage of non-compensation expenses to operating revenue can vary from quarter to quarter due to quarterly fluctuation in revenues, among other things. Accordingly, the results in a particular quarter may not be indicative of future results. Lazard management believes that annual results are the most meaningful basis for comparison.

Provision for Income Taxes

The provision for income taxes, on a fully exchanged basis, was $13.4 million for the full year of 2009, compared to $41.6 million for the full year of 2008, (when excluding the effects of the 2009 and 2008 special charges). The effective tax rate on the same basis for the full year of 2009 was 52.4% and was 23% for the 2008 full year, exclusive of noncontrolling interests and including the effects of our Tax Receivable Agreement.

Noncontrolling interests

Net income (loss) attributable to noncontrolling interests, on a fully exchanged basis, amounted to $1.6 million and $(3.6) million for the fourth quarters of 2009 and 2008, respectively, and was $2.8 million and $(13.3) million for the full year of 2009 and 2008, respectively. Noncontrolling interests, on a fully exchanged basis, represents interests that the Company is deemed to control but not own in (i) various LAM-related general partnerships and (ii) in Edgewater management vehicles acquired during the third quarter of 2009.

Liquidity, Capital Resources and Other Items

Lazard continues to maintain a strong liquidity position with over $1.1 billion at December 31, 2009, in cash, US Government and agency securities, and marketable equity securities.

At December 31, 2009, total stockholders’ equity related to Lazard’s interests was $355.4 million, which includes positive adjustments to total Accumulated Other Comprehensive Loss during the full year of 2009, due primarily to (i) net foreign currency translation adjustments of $37.4 million, and (ii) net unrealized gains of $20.6 million related to securities designated as available for sale. During the fourth quarter of 2009, Lazard did not repurchase any shares of its Class A common stock or exchangeable interests and at December 31, 2009, the remaining share repurchase authorization expired.

Due to the net loss for the quarter, there was no dilution with respect to approximately 18 million incremental issueable shares for restricted stock units, convertible notes and convertible preferred stock.

On January 27, 2010, the Board of Directors of Lazard Ltd approved a new share repurchase authorization of up to $200 million in Class A common stock and exchangeable interests, for purchases through December 31, 2011.

Non-GAAP Information

Lazard discloses certain non-GAAP financial information, which management believes provides the most meaningful basis for comparison among present, historical and future periods. The following are non-GAAP measures used in the accompanying financial information:

  • Net income (loss) attributable to Lazard Ltd, assuming full exchange of exchangeable interests (or fully exchanged basis) and excluding special items
  • Net income (loss) assuming full exchange of exchangeable interests (or fully exchanged basis) and excluding special items
  • Operating revenue
  • Operating income, excluding special items
  • Noncontrolling interests assuming full exchange of exchangeable interests
  • Weighted average shares outstanding, assuming full exchange of exchangeable interests and excluding special items
  • Net income per share, assuming full exchange of exchangeable interests and excluding special items
  • Provisions for income taxes on a fully exchanged basis
  • Net income (loss) attributable to LAZ-MD
  • Net income (loss) attributable to other noncontrolling interests

Additional financial, statistical and business-related information is included in a financial supplement. This earnings release, the financial supplement and selected transaction information will be available today on our website at www.lazard.com.

Lazard, one of the world's preeminent financial advisory and asset management firms, operates from 39 cities across 24 countries in North America, Europe, Asia, Australia, Central and South America. With origins dating back 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.

Conference Call

Kenneth M. Jacobs, Chairman and Chief Executive Officer, and Michael J. Castellano, Chief Financial Officer, will host a conference call today at 10 am EST to discuss the company’s financial results for the fourth quarter and full year of 2009. The conference call can be accessed via a live audio web cast available through Lazard’s Investor Relations website at www.lazard.com, or by dialing 1 (800) 533-7954 (U.S. and Canada) or +1 (785) 830-1924 (outside of the U.S. and Canada), 15 minutes prior to the start of the conference call.

A replay of the conference call will be available beginning today at 1:00 p.m. EST, through February 17, 2010, via the Lazard Investor Relations website, or by dialing 1 (888) 203-1112 (for the U.S. and Canada) or +1 (719) 457-0820 (outside of the U.S. and Canada). The replay access code is 5041041.

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements.” In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, and the negative of these terms and other comparable terminology. These forward-looking statements are not historical facts but instead represent only our belief regarding future results, many of which, by their nature, are inherently uncertain and outside of our control. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements.

These factors include, but are not limited to, those discussed in our Annual Report on Form 10-K under Item 1A “Risk Factors,” and also disclosed from time to time in reports on Forms 10-Q and 8-K including the following:

  • A decline in general economic conditions or the global financial markets;
  • 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.

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 hedge funds and mutual funds and other investment products managed by Lazard Asset Management LLC and its subsidiaries. Monthly updates of these funds will be posted to the Lazard Asset Management website (www.lazardnet.com) on the third business day following the end of each month. Investors can link to Lazard and its operating company websites through www.lazard.com.

LAZ-G

(a) Refers to pre-tax charges (i) in the fourth quarter 2009 to compensation and benefits expense of $147.0 million, including $60.5 million due to the accelerated vesting of previously awarded deferred cash incentive awards and $86.5 million due to the previously announced accelerated amortization of restricted stock units previously granted to our former Chairman and Chief Executive Officer who passed away in October 2009, and (ii) in the first quarter of 2009 to restructuring expenses of $62.6 million due to staff reductions and realignments.

(b) Refers to net income or loss attributable to Lazard Ltd.

(c) Refers to the full conversion of all outstanding exchangeable interests held by the members of LAZ-MD Holdings and is a non-GAAP measure.

(d) Refers to a pre-tax charge in the third quarter 2008 of $199.6 million to compensation expense and transaction costs in connection with the firm’s purchase of all outstanding Lazard Asset Management (LAM) equity units (the LAM Equity charge).

 
LAZARD LTD
OPERATING REVENUE
(unaudited)
 
  Three Months Ended December 31,   Year Ended December 31,
       
  2009     2008   % Change     2009     2008   % Change  
($ in thousands)
Financial Advisory
M&A and Strategic Advisory $ 170,206 $ 192,678 (12 %) $ 526,226 $ 814,660 (35 %)
Restructuring 103,449 47,135 119 % 376,710 119,283 216 %
Capital Markets & Other Advisory   39,943     12,542   218 %   87,431     90,017   (3 %)
Total 313,598 252,355 24 % 990,367 1,023,960 (3 %)
 
Asset Management
Management Fees 152,810 107,987 42 % 486,810 568,436 (14 %)
Incentive Fees 40,988 16,353 151 % 74,795 34,961 114 %
Other Revenue   10,324     1,018   NM   34,366     25,267   36 %
Total   204,122     125,358   63 %   595,971     628,664   (5 %)
 
Core Operating Business Revenue (a) 517,720 377,713 37 % 1,586,338 1,652,624 (4 %)
 
Corporate   (3,327 )   24,835   NM   31,290     22,472   39 %
 
Operating Revenue (b) 514,393 402,548 28 % 1,617,628 1,675,096 (3 %)
 
Revenue (loss) related to noncontrolling interests (c) 4,062 (3,577 ) 6,965 (13,348 )
Other Interest Expense   (23,672 )   (23,051 )   (94,075 )   (104,541 )
 
Net Revenue $ 494,783   $ 375,920   32 % $ 1,530,518   $ 1,557,207   (2 %)
 
 
 
(a) Core operating business revenue includes the results of Financial Advisory and Asset Management businesses and excludes the results of Corporate.
 
(b) Operating revenue excludes interest expense relating to financing activities and revenue (loss) relating to noncontrolling interests, each of which are included in net revenue.
 
(c) Represents the revenues related to noncontrolling interests other than LAZ-MD in which the company has no economic interest.
 
NM - Not meaningful
 
 
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
         
Three Months Ended Year Ended
Ended December 31, Ended December 31,
 
  2009     2008   % Change     2009     2008   % Change  
($ in thousands, except per share data)
 
Total revenue (a) $ 517,487 $ 408,723 27 % $ 1,631,443 $ 1,710,454 (5 %)
LFB interest expense   (3,094 )   (6,175 )   (13,815 )   (35,358 )
Operating revenue 514,393 402,548 28 % 1,617,628 1,675,096 (3 %)
Revenue (loss) related to noncontrolling interests 4,062 (3,577 ) 6,965 (13,348 )
Other interest expense   (23,672 )   (23,051 )   (94,075 )   (104,541 )
Net revenue 494,783 375,920 32 % 1,530,518 1,557,207 (2 %)
Operating expenses:
Compensation and benefits 615,515 221,894 177 % 1,309,240 1,128,253 16 %
 
Occupancy and equipment 24,679 22,543 88,453 97,186
Marketing and business development 20,736 17,230 64,047 81,282
Technology and information services 19,950 16,879 69,620 67,892
Professional services 12,686 7,686 44,569 53,207
Fund administration and outsourced services 11,852 9,118 37,927 30,830
Amortization of intangible assets related to acquisitions 2,270 344 4,990 4,596
Other   9,929     9,049     32,614     51,737  
Subtotal 102,102 82,849 23 % 342,220 386,730 (12 %)
Provision (benefit) pursuant to tax receivable agreement   (1,258 )   17,084     (1,258 )   17,084  
Total non-compensation expense 100,844 99,933 1 % 340,962 403,814 (16 %)
 
Restructuring expense (b)   -     -     62,550     -  
Operating expenses   716,359     321,827   123 %   1,712,752     1,532,067   12 %
 
Operating income (loss) (221,576 ) 54,093 NM (182,234 ) 25,140 NM
 
Provision (benefit) for income taxes   (23,301 )   (5,875 ) NM   6,011     25,379   (76 %)
Net income (loss) (198,275 ) 59,968 NM (188,245 ) (239 ) NM
Net income (loss) attributable to LAZ-MD (57,539 ) 25,552 (60,836 ) 9,956
Net income (loss) attributable to other noncontrolling interests   1,615     (3,563 )   2,833     (13,333 )
Net income (loss) attributable to Lazard Ltd   ($142,351 ) $ 37,979   NM   ($130,242 ) $ 3,138   NM
 
Attributable to Lazard Ltd Common Stockholders:
Weighted average shares outstanding (c):
Basic 87,411,073 71,099,843 23 % 78,311,947 60,874,734 29 %
Diluted 87,411,073 125,270,558 (30 %) 78,311,947 60,874,734 29 %
Net income (loss) per share:
Basic ($1.64 ) $ 0.54 ($1.68 ) $ 0.06
Diluted ($1.64 ) $ 0.50 ($1.68 ) $ 0.06
                         
Supplemental Information Assuming Full Exchange of Exchangeable Interests and excluding Special Charges (d):
 
Compensation and benefits excluding special charges $ 468,489   $ 221,894   111 % $ 1,162,214   $ 930,703   25 %
 
Non-compensation expense excluding special charges $ 100,844   $ 99,933   1 % $ 340,962   $ 401,814   (15 %)
 
Operating income (loss) excluding special charges   ($74,550 ) $ 54,093   NM $ 27,342   $ 224,690   (88 %)
 
Net income (loss) attributable to Lazard Ltd assuming full exchange
of exchangeable interests and excluding special charges   ($54,870 ) $ 61,154   NM $ 11,071   $ 196,429   (94 %)
 
Attributable to Lazard Ltd Common Stockholders:
Weighted average shares outstanding, assuming full
exchange of exchangeable interests and excluding
special charges (e):
Basic 118,935,403 117,145,417 2 % 116,342,862 112,460,633 3 %
Diluted 118,935,403 125,270,558 (5 %) 122,284,372 122,523,533 (0 %)
Net income (loss) per share - assuming full exchange
of exchangeable interests and excluding
special charges:
Basic ($0.46 ) $ 0.52 $ 0.10 $ 1.75
Diluted ($0.46 ) $ 0.50 $ 0.09 $ 1.65
 
Ratio of compensation to operating revenue (f) 91.1 % 55.1 % 71.8 % 55.6 %
Ratio of non-compensation to operating revenue (g) 19.4 % 20.5 % 20.8 % 22.0 %
                         
 
See Notes to Unaudited Condensed Consolidated Statements of Operations
and Reconciliation of US GAAP Results to Full Exchange Excluding Special Charges
 
 
LAZARD LTD
RECONCILIATION OF U.S. GAAP RESULTS TO FULL EXCHANGE EXCLUDING SPECIAL CHARGES (d)
(unaudited)
 
  Three Months Ended     Year Ended
Ended December 31, Ended December 31,
   
  2009     2008     2009     2008  
($ in thousands, except per share data)
 
Compensation & Benefits
Compensation & Benefits - U.S. GAAP Basis $ 615,515 $ 221,894 $ 1,309,240 $ 1,128,253
 
Adjustments to exclude special charges (d):
Acceleration of unamortized restricted stock units (86,514 ) - (86,514 ) -
Acceleration of unamortized deferred cash awards (60,512 ) - (60,512 ) -
LAM equity charge   -     -     -     (197,550 )
 
Compensation & benefits excluding special charges $ 468,489   $ 221,894   $ 1,162,214   $ 930,703  
                   
 
Non-Compensation & Other Expenses
Non-Compensation & Other Expenses - U.S. GAAP Basis $ 100,844 $ 99,933 $ 403,512 $ 403,814
 
Adjustments to exclude special charges (d):
Restructuring expense - - (62,550 ) -
LAM equity charge   -     -     -     (2,000 )
 
Non-compensation & other expenses excluding special charges $ 100,844   $ 99,933   $ 340,962   $ 401,814  
                   
 
Operating Income (Loss)
Operating Income (Loss) - U.S. GAAP Basis ($221,576 ) $ 54,093 ($182,234 ) $ 25,140
 
Adjustments to exclude special charges (d):
Acceleration of unamortized restricted stock units 86,514 - 86,514 -
Acceleration of unamortized deferred cash awards 60,512 - 60,512 -
LAM equity charge - - - 199,550
Restructuring expense   -     -     62,550     -  
 
Operating income (loss) excluding special charges   ($74,550 ) $ 54,093   $ 27,342   $ 224,690  
                   
 
Net Income (Loss) attributable to Lazard Ltd
Net income (loss) attributable to Lazard Ltd - U.S. GAAP Basis ($142,351 ) $ 37,979 ($130,242 ) $ 3,138
 
Adjustments to exclude special charges (d):
Acceleration of unamortized restricted stock units 86,514 - 86,514 -
Acceleration of unamortized deferred cash awards (net of tax benefit of $2,566) 57,946 - 57,946 -
LAM equity charge (net of tax benefit of $7,427) - - - 192,123
Restructuring expense (net of tax benefit of $6,401) - - 56,149 -
Net loss attributable to LAZ-MD (36,815 ) - (57,890 ) (83,495 )
 
Adjustment for full exchange of exchangeable interests (e):
Tax adjustment for full exchange 560 (2,377 ) 1,540 (8,788 )
Amount attributable to LAZ-MD   (20,724 )   25,552     (2,946 )   93,451  
 
Net income (loss) attributable to Lazard Ltd excluding
special charges and assuming full exchange
of exchangeable interests   ($54,870 ) $ 61,154   $ 11,071   $ 196,429  
                   
 
Diluted net income (loss) per share (c):
U.S. GAAP Basis - Net income (loss) attributable to Lazard Ltd ($1.64 ) $ 0.50 ($1.68 ) $ 0.06
 
Net income (loss) assuming full exchange of exchangeable interests
and excluding special charges ($0.46 ) $ 0.50 $ 0.09 $ 1.65
 
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, see item (d) in notes to unaudited condensed consolidated statements of operations and reconciliation of US GAAP results to full exchange excluding special charges. Lazard believes that results assuming full exchange of outstanding exchangeable interests and excluding special charges provides the most meaningful basis for comparison among present, historical and future periods.
                   
See Notes to Unaudited Condensed Consolidated Statements of Operations
and Reconciliation of US GAAP Results to Full Exchange Excluding Special Charges
 
 
LAZARD LTD
 
Notes to Unaudited Condensed Consolidated Statements of Operations
and Reconciliation of US GAAP Results to Full Exchange Excluding Special Charges
 
 
 
(a) Excludes revenue/(loss) related to noncontrolling interests.
 
(b) Expenses related to severance, benefits and other charges in the three month period ended March 31, 2009 in connection with the reduction and realignment of staff.
 
(c) See "Reconciliation of Shares Outstanding and Basic & Diluted Net Income (Loss) Per Share".
 
(d) For the year ended December 31, 2009, special charges consist of (i) the expenses related to the reduction and realignment of staff noted in (b) above and (ii) the charges recorded to compensation and benefits expense in the three month period ended December 31, 2009 in connection with the acceleration of unamortized restricted stock units previously granted to our former Chairman and Chief Executive Officer and the accelerated vesting of deferred cash awards previously granted of $86,514 and $60,512, respectively. For the year ended December 31, 2008 special charges consist of $197,550 and $2,000 recorded to compensation and benefits expense and to non-compensation expense, respectively, in connection with the company's purchase of all outstanding LAM Equity units held by certain current and former MDs and employees of LAM ("LAM Equity Charge").
 
(e) Represents a reversal of noncontrolling interests related to LAZ-MD Holdings’ ownership of Lazard Group common membership interests net of an adjustment for Lazard Ltd entity-level taxes to effect a full exchange of interests and excluding the items noted in (d) above (see "Reconciliation of US GAAP to Full Exchange Excluding Special Charges").
 
(f) For the three month period and the year ended December 31, 2009, excludes the charges aggregating $147,026 noted in (d) (ii) above and for the year ended December 31, 2008, excludes the $197,550 charge noted in (d) above. Also excludes charges related to severance and benefits noted in (b) above.
 
(g) Excludes the amortization of intangible assets related to acquisitions and the provision pursuant to tax receivable agreement and for the year ended December 31, 2008 excludes the $2,000 charge noted in (d) above and $12,368 provisions for losses from counterparty defaults related to the bankruptcy filing of one of our prime brokers.
 
NM Not meaningful
 
 
LAZARD LTD
COMPENSATION AND BENEFITS - ANALYSIS
(unaudited)
($ in millions except share price)
           
2009  
  2005 ((a))   2006     2007     2008   Amount

Pro Forma (c)

                             
ADJUSTED US GAAP BASIS (EXCLUDING SPECIAL CHARGES)
 
Base salary and benefits $ 380.1 $ 397.8 $ 456.2 $ 467.7 $ 424.3 $ 398.1
Cash incentive compensation   393.1     470.6     562.1     224.7     404.5     392.4  
Total cash compensation and benefits 773.2 868.4 1,018.3 692.4 828.8 790.5
Amortization of deferred incentive awards   1.0     23.0     104.8     238.3     333.4     275.7  
Compensation and benefits - US GAAP basis
excluding special charges $ 774.2   $ 891.4   $ 1,123.1   $ 930.7   (b) $ 1,162.2   (b) $ 1,066.2  
                               
                               
ON A COMPENSATION PLAN YEAR BASIS - NOTIONAL
 
Total cash compensation and benefits (per above) $ 773.2 $ 868.4 $ 1,018.3 $ 692.4 $ 828.8 $ 790.5
Plus: Deferred cash-based year end incentive awards - - - 147.7 1.8 1.8
Deferred equity-based year end incentive awards   94.2     198.9     332.2     202.3     238.1     232.2  
Compensation and benefits - Plan year basis before
special deferred incentive awards 867.4 1,067.3 1,350.5 1,042.4 1,068.7 1,024.5
Sign-on and other special deferred incentive awards (d)   26.6     12.8     87.9     179.6     39.2     36.1  
Total Compensation and benefits - Plan year basis $ 894.0   $ 1,080.1   $ 1,438.4   $ 1,222.0   $ 1,107.9   $ 1,060.6  
                               
 
Memo:
Equity-based year end awards - share equivalents ('000) 2,711 3,971 8,787 6,489 TBD n/a
Average price at issuance $ 34.75 $ 50.08 $ 37.81 $ 31.17 TBD n/a
 
Ratio of deferred component of year end incentive
awards to total incentive awards   19.3 %   29.7 %   37.1 %   60.9 %   37.2 %   37.4 %
 
Operating revenue $ 1,357.6   $ 1,571.1   $ 2,014.8   $ 1,675.1   $ 1,617.6   $ 1,617.6  
 
 
(a) Reflects payments for services rendered by our employee members of LAM and managing directors, which prior to the IPO in May 2005 were accounted for as either distributions from members’ capital or as minority interest expense.
 
(b) See "Reconciliation of U.S. GAAP to Full Exchange excluding Special Charges"
 
(c) Pro forma reflects reduction for compensation and benefits related to employees departing in connection with staff reductions and realignments and certain other former employees.
 
(d) Special deferred incentive awards are granted outside the year end compensation process and include grants to new hires.
 
TBD - To be determined
 
n/a - Not applicable
 
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
 
 
LAZARD LTD
COMPENSATION AND BENEFITS - ANALYSIS (CONTINUED)
(unaudited)
($ in millions)
   
2009  
% of
Operating
$ Revenue
Operating revenue $ 1,617.6   -
 
Compensation and benefits - US GAAP basis $ 1,309.2 80.9 %
Less: Acceleration of unamortized restricted stock units (a) (86.5 )
Accelerated deferred cash amortization (a)   (60.5 )
Compensation and benefits - US GAAP basis excluding special charges 1,162.2 71.8 %
Less: Adjustment for headcount reductions (b)   (96.0 )
Pro forma compensation and benefits - excluding special charges
and headcount reductions 1,066.2 65.9 %

*

Less: 2009 amortization of deferred incentive awards (275.7 )
Plus: Estimated 2010 amortization of deferred incentive awards (c)   269.5  
Pro forma compensation and benefits - going into 2010 (d) $ 1,060.0  
 
* Assuming no impact on revenues from headcount reductions and assuming no change in the mix of current and deferred incentive compensation compared to 2008, the pro forma ratio would have been approximately 900 basis points lower.
 
(a) The charges recorded to compensation and benefits expense in the three month period ended December 31, 2009 in connection with the acceleration of unamortized restricted stock units previously granted to our former Chairman and Chief Executive Officer and the accelerated vesting of deferred cash awards previously granted.
 
(b) Reflects reduction for compensation and benefits related to employees departing in connection with staff reductions and realignments and certain other former employees.
 
(c) Includes the effect of deferred incentive awards for the 2009 compensation year and excludes the special charge of $24.8m relating to the amendment to the retirement policy.
 
(d) Assumes current levels of pay for continuing employees, no increases in staffing, and no change in mix between current and deferred compensation. It is our goal to grow annual compensation expense at a slower rate than revenues and to achieve over the cycle compensation levels on average consistent with the targets established at the time we went public in 2005.
 
This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
 
 
LAZARD LTD
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
( $ in thousands)
  December 31,   December 31,
  2009     2008  

ASSETS

Cash and cash equivalents $ 917,329 $ 909,707
Cash deposited with clearing organizations and other segregated cash 20,217 14,583
Receivables 669,475 712,526
Investments (a)
Debt:
U.S. Government and agencies 147,507 -
Other   313,342     333,070  
460,849 333,070
Equities 82,442 71,105
Other   264,402     215,792  
807,693 619,967
Goodwill and other intangible assets 317,780 175,144
Other assets   411,397     431,004  
 
Total Assets $ 3,143,891   $ 2,862,931  
 

LIABILITIES & STOCKHOLDERS' EQUITY

Liabilities
Deposits and other customer payables $ 322,101 $ 541,784
Accrued compensation and benefits 515,033 203,750
Senior debt 1,086,850 1,087,750
Other liabilities 546,810 567,895
Subordinated debt   150,000     150,000  
Total liabilities 2,620,794 2,551,179
 
Commitments and contingencies
 
Stockholders' equity
Preferred stock, par value $.01 per share:
Series A - -
Series B - -
Common stock, par value $.01 per share:
Class A 922 763
Class B - -
Additional paid-in capital 549,022 429,694
Accumulated other comprehensive loss, net of tax (57,048 ) (79,435 )
Retained earnings   53,635     221,410  
546,531 572,432
Less: Class A common stock held by a subsidiary, at cost   (191,140 )   (321,852 )

Total Lazard Ltd stockholders' equity

355,391 250,580
Noncontrolling interests   167,706     61,172  
Total stockholders' equity   523,097     311,752  
 
Total liabilities and stockholders' equity $ 3,143,891   $ 2,862,931  
 
 
(a) At fair value, except for investments aggregating $199,188 and $75,695 at December 31, 2009 and 2008, respectively, at amortized cost or equity method.
 
 
LAZARD LTD
SELECTED QUARTERLY OPERATING RESULTS
(unaudited)
  Three Months Ended
               
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
  2009 (a)   2009   2009   2009 (b)   2008   2008 (c)   2008   2008     2007  
($ in thousands, except per share data)
Financial Advisory
M&A and Strategic Advisory $ 170,206 $ 124,691 $ 134,855 $ 96,474 $ 192,678 $ 230,890 $ 225,108 $ 165,984 $ 313,622
Restructuring 103,449 119,101 93,231 60,929 47,135 23,944 32,666 15,538 32,321
Capital Markets & Other Advisory   39,943     16,390   25,005   6,094     12,542   15,349     31,220   30,906     47,190  
Total 313,598 260,182 253,091 163,497 252,355 270,183 288,994 212,428 393,133
 
Asset Management
Management Fees 152,810 133,377 107,123 93,500 107,987 145,332 157,108 158,009 165,432
Incentive Fees 40,988 15,202 13,170 5,435 16,353 10,179 8,429 - 48,959
Other Revenue   10,324     8,769   11,273   4,000     1,018   536     13,289   10,424     16,782  
Total   204,122     157,348   131,566   102,935     125,358   156,047     178,826   168,433     231,173  
 
Core operating business revenue (d) 517,720 417,530 384,657 266,432 377,713 426,230 467,820 380,861 624,306
 
Corporate   (3,327 )   13,953   14,190   6,473     24,835   11,076     26,219   (39,658 )   (6,710 )
 
Operating revenue (e) $ 514,393   $ 431,483 $ 398,847 $ 272,905   $ 402,548 $ 437,306   $ 494,039 $ 341,203   $ 617,596  
 
Operating income (loss) (f) $ (74,550 ) $ 73,165 $ 56,946 $ (28,219 ) $ 54,093 $ 64,837   $ 87,738 $ 18,022   $ 132,278  
 
Net income (loss) attributable to
Lazard Ltd $ (34,705 ) $ 37,418 $ 28,187 $ (18,422 ) $ 37,979 $ 31,671   $ 34,317 $ 7,799   $ 59,125  
 
Net income (loss) per share
attributable to Lazard Ltd
Basic ($0.40 ) $ 0.47 $ 0.38 ($0.27 ) $ 0.54 $ 0.48 $ 0.61 $ 0.16 $ 1.17
Diluted ($0.40 ) $ 0.41 $ 0.34 ($0.27 ) $ 0.50 $ 0.44 $ 0.54 $ 0.14 $ 1.04
                                   
Supplemental Information:
 
Net income (loss) attributable to
Lazard Ltd assuming full exchange
of exchangeable interests $ (54,870 ) $ 52,487 $ 43,145 $ (29,691 ) $ 61,154 $ 54,750   $ 64,570 $ 15,956   $ 122,577  
 
Net income (loss) attributable to
Lazard Ltd per share assuming full
exchange of exchangeable interests
Basic ($0.46 ) $ 0.46 $ 0.37 ($0.26 ) $ 0.52 $ 0.47 $ 0.58 $ 0.15 $ 1.16
Diluted ($0.46 ) $ 0.41 $ 0.34 ($0.26 ) $ 0.50 $ 0.44 $ 0.54 $ 0.14 $ 1.04
Assets Under Management ($ millions) $ 129,543 $ 120,185 $ 98,020 $ 81,084 $ 91,109 $ 113,287 $ 134,139 $ 134,193 $ 141,413
 
(a) The three month period ended December 31, 2009 represents U.S. GAAP results less operating expenses related to the acceleration of unamortized restricted stock units previously granted to our former Chairman and Chief Executive Officer and the accelerated vesting of deferred cash awards previously granted of $86,514 and $60,512, respectively and related tax effect.
 
(b) The three month period ended March 31, 2009 represents U.S. GAAP results less restructuring expense of $62,550 and related tax effect.
 
(c) The three month period ended September 30, 2008 represents U.S. GAAP results less an operating expense charge of $199,550 and related tax effect in connection with the company's purchase of all outstanding LAM Equity units held by certain current and former MDs and employees of LAM.
 
(d) Core operating business revenue includes the results of Financial Advisory and Asset Management businesses and excludes the results of Corporate.
 
(e) Operating revenue excludes interest expense relating to financing activities and revenue/(loss) related to the consolidation of noncontrolling interests, each of which are included in net revenue.
 
(f) Operating income is after interest expense and before income taxes and noncontrolling interests.
 
LAZARD LTD
RECONCILIATION OF SHARES OUTSTANDING AND BASIC & DILUTED NET INCOME (LOSS) PER SHARE
(unaudited)
 

BEFORE FULL EXCHANGE

         
Three Months Ended December 31, Year Ended December 31,
2009     2008 2009     2008
($ in thousands, except per share data)
Basic
Numerator:
Net income (loss) attributable to Lazard Ltd ($142,351 ) $ 37,979 ($130,242 ) $ 3,138
Add - net income (loss) associated with Class A
common shares issuable on a non-contingent basis (a) (1,167 )   577 (1,292 )   484
Basic net income (loss) attributable to Lazard Ltd ($143,518 ) $ 38,556 ($131,534 ) $ 3,622
Denominator:
Weighted average shares outstanding (a) 87,411,073     71,099,843 78,311,947     60,874,734
 
Basic net income (loss) per share attributable to Lazard Ltd ($1.64 ) $ 0.54 ($1.68 ) $ 0.06
 
 
Diluted
Numerator:
Basic net income (loss) attributable to Lazard Ltd ($143,518 ) $ 38,556 ($131,534 ) $ 3,622
Add - dilutive effect of adjustments to income for:
Interest expense on convertible debt, net of tax (b) - 647 - -
Noncontrolling interest in net income resulting from
assumed share issuances (see incremental issuable
shares in the denominator calculation below) and
Ltd level income tax effect -     22,963 -     -
Diluted net income (loss) attributable to Lazard Ltd ($143,518 ) $ 62,166 ($131,534 ) $ 3,622
 
Denominator:
Weighted average shares outstanding 87,411,073 71,099,843 78,311,947 60,874,734
Add - dilutive effect of incremental issuable shares (c):
Restricted stock units - 4,707,459 - -
Equity security units - - - -
Convertible notes - 2,631,570 - -
Series A and Series B convertible preferred stock (d) - 786,112 - -
Exchangeable interests -     46,045,574 -     -
Diluted weighted average shares outstanding 87,411,073     125,270,558 78,311,947     60,874,734
 
Diluted net income (loss) per share attributable to Lazard Ltd. ($1.64 ) $ 0.50 ($1.68 ) $ 0.06
 
(a) For the three month period and full year ended December 31, 2009, includes 662,015 and 866,197 weighted average shares and for the three month period and year ended December 31, 2008, includes 993,024 and 1,110,070 weighted average shares, respectively, related to the Class A common stock that are issuable on a non-contingent basis with respect to acquisitions. For the three month period and year ended December 31, 2009, includes 2,239,918 and 2,224,853 weighted average shares, respectively related to the Class A common stock that are issuable on a non-contingent basis with respect to the purchase of all outstanding LAM Equity units. For the three month period and year ended December 31, 2008, includes 2,201,457 and 586,258 weighted average shares, respectively related to the Class A common stock that are issuable on a non-contingent basis with respect to the purchase of all outstanding LAM Equity units.
 
(b) For the three month period ended December 31, 2008, includes interest expense, net of tax related to the convertible notes.
 
(c) Incremental issuable shares included if dilutive.
 
(d) For the three month period ended December 31, 2008 includes 7,293 shares of Series A convertible preferred stock plus the impact of 230 shares that were converted into Class A common stock during the period. The rate of conversion into Class A common stock is dependent, in part, on the future value of the Class A common stock and currency exchange rates, therefore, the shares are excluded from the basic net income per share calculation but included in the diluted net income per share calculation.
 
LAZARD LTD
RECONCILIATION OF SHARES OUTSTANDING AND BASIC & DILUTED NET INCOME (LOSS) PER SHARE
         

ASSUMING FULL EXCHANGE OF EXCHANGEABLE INTERESTS

& EXCLUDING SPECIAL CHARGES (a)

 
Three Months Ended December 31, Year Ended December 31,
2009     2008   2009   2008
Basic ($ in thousands, except per share data)
Numerator:
Net income (loss) attributable to Lazard Ltd ($54,870 ) $ 61,154 $ 11,071 $ 196,429
Denominator:
Weighted average shares outstanding (b) 118,935,403     117,145,417   116,342,862   112,460,633
 
Basic net income (loss) per share attributable to Lazard Ltd ($0.46 ) $ 0.52 $ 0.10 $ 1.75
 
Diluted
Numerator:
Net income (loss) attributable to Lazard Ltd ($54,870 ) $ 61,154 $ 11,071 $ 196,429
Add dilutive effect of adjustments to income for:
Interest expense on convertible debt, net of tax (c) -     1,012   -   5,318
Diluted net income (loss) attributable to Lazard Ltd ($54,870 ) $ 62,166 $ 11,071 $ 201,747
 
Denominator:
Weighted average shares outstanding 118,935,403 117,145,417 116,342,862 112,460,633
Add - dilutive effect of incremental issuable shares (d):
Restricted stock units - 4,707,459 5,385,775 5,068,804
Equity security units - - - 1,762,749
Convertible notes - 2,631,570 - 1,973,678
Series A and Series B convertible preferred stock (e) -     786,112   555,735   1,257,669
Diluted weighted average shares outstanding 118,935,403     125,270,558   122,284,372   122,523,533
 
Diluted net income (loss) per share attributable to Lazard Ltd. ($0.46 ) $ 0.50 $ 0.09 $ 1.65
 
(a) For the year ended December 31, 2009, special charges consist of (i) the expenses in the three month period ended March 31st related to the reduction and realignment of staff and (ii) the charges recorded to compensation and benefits expense in the three month period ended December 31st in connection with the acceleration of unamortized restricted stock units previously granted to our former Chairman and Chief Executive Officer and the accelerated vesting of deferred cash awards previously granted. For the year ended December 31, 2008 special charges consist of expenses in connection with the company's purchase of all outstanding LAM Equity units held by certain current and former MDs and employees of LAM ("LAM Equity Charge").
 
(b) For the three month period and full year ended December 31, 2009, includes 662,015 and 866,197 weighted average shares and for the three month period and year ended December 31, 2008, includes 993,024 and 1,110,070 weighted average shares, respectively, related to the Class A common stock that are issuable on a non-contingent basis with respect to acquisitions. For the three month period and year ended December 31, 2009, includes 2,239,918 and 2,224,853 weighted average shares, respectively related to the Class A common stock that are issuable on a non-contingent basis with respect to the purchase of all outstanding LAM Equity units. For the three month period and year ended December 31, 2008, includes 2,201,457 and 586,258 weighted average shares, respectively related to the Class A common stock that are issuable on a non-contingent basis with respect to the purchase of all outstanding LAM Equity units.
 
(c) For the three month period ended December 31, 2008 includes interest expense, net of tax, related to the convertible notes. For the full year ended December 31, 2008 includes interest expense, net of tax, related to the convertible notes and the equity security units.
 
(d) Incremental issuable shares included if dilutive.
 
(e) For the full year period ended December 31, 2009 includes 7,293 shares of Series A convertible preferred stock plus the impact of 4,862 shares that were converted into Class A common stock during the period. For the three month period ended December 31, 2008, includes 7,293 shares of Series A convertible preferred stock plus the impact of 230 shares of Series A convertible preferred stock that was converted during the period. For the year ended December 31, 2008, includes 7,293 shares of Series A convertible preferred stock plus the impact of 4,862 shares of Series A and 277 shares of Series B that were converted during the period. The rate of conversion into Class A common stock is dependent, in part, on the future value of the Class A common stock and currency exchange rates, therefore, the shares are excluded from the basic net income per share calculation but included in the diluted net income per share calculation.
 
 
LAZARD LTD
ASSETS UNDER MANAGEMENT ("AUM")
         
As of Variance
December 31, September 30, December 31,
  2009     2009     2008 Q4 vs Q3 YTD
($ in millions)
Equities $ 106,603 $ 97,129 $ 69,730 9.8 % 52.9 %
Fixed Income 18,056 18,570 15,824 (2.8 %) 14.1 %
Alternative Investments 3,936 3,582 3,196 9.9 % 23.2 %
Private Equity (a) 839 783 1,579 7.2 % (46.9 %)
Cash   109     121     780   (9.9 %)   (86.0 %)
Total AUM $ 129,543   $ 120,185   $ 91,109   7.8 %   42.2 %
 
 
 
Three Months Ended December 31, Year Ended December 31,
  2009     2008     2009     2008  
($ in millions) ($ in millions)
AUM - Beginning of Period $ 120,185 $ 113,287 $ 91,109 $ 141,413
 
Net Flows 4,603 (2,232 ) 10,253 1,371
Acquisitions/Dispositions - - (831 ) -
Market and foreign exchange
appreciation (depreciation)   4,755     (19,946 )   29,012     (51,675 )
 
AUM - End of Period $ 129,543   $ 91,109   $ 129,543   $ 91,109  
 
Average AUM (b) $ 124,863   $ 102,198   $ 103,988   $ 122,828  
 
% Change in average AUM   22.2 %   (15.3 %)
 
 
(a) 2009 AUM reflects $0.6 billion related to the third quarter 2009 acquisition of Edgewater management vehicles. Period ended December 31, 2008 includes $1.2 billion held by an investment company for which Lazard may earn carried interests. Lazard terminated this relationship in the quarter ended September 30, 2009.
 
(b) Average AUM is based on an average of quarterly ending balances for the respective periods.

Contacts

Lazard Ltd
Media:
Judi Frost Mackey, +1 212-632-1428
judi.mackey@lazard.com
or
Richard Creswell, +44 207 187 2305
richard.creswell@lazard.com
or
Investor:
Michael J. Castellano, +1 212-632-8262
Chief Financial Officer
or
Investor Relations, +1 212-632-2685
or 1 877-266-8601 (US only)
investorrelations@lazard.com

Sharing

Contacts

Lazard Ltd
Media:
Judi Frost Mackey, +1 212-632-1428
judi.mackey@lazard.com
or
Richard Creswell, +44 207 187 2305
richard.creswell@lazard.com
or
Investor:
Michael J. Castellano, +1 212-632-8262
Chief Financial Officer
or
Investor Relations, +1 212-632-2685
or 1 877-266-8601 (US only)
investorrelations@lazard.com