10-Q 1 laz-10q_20170331.htm 10-Q laz-10q_20170331.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 March 31, 2017

OR

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

 

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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post 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. (Check one):

 

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 April 21, 2017, there were 129,766,091 shares of the Registrant’s Class A common stock outstanding (including 7,157,305 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 March 31, 2017 of all of the common membership interests in Lazard Group and its controlling interest in Lazard Group.

 

 

 

 

i


 

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

 

 

 

 

1


 

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

MARCH 31, 2017 AND DECEMBER 31, 2016

(UNAUDITED)

(dollars in thousands, except for per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

891,455

 

 

$

1,158,785

 

Deposits with banks and short-term investments

 

 

572,496

 

 

 

419,668

 

Cash deposited with clearing organizations and other segregated cash

 

 

33,687

 

 

 

29,030

 

Receivables (net of allowance for doubtful accounts of $29,662 and $16,386 at March 31,

   2017 and December 31, 2016, respectively):

 

 

 

 

 

 

 

 

Fees

 

 

439,836

 

 

 

564,291

 

Customers and other

 

 

87,778

 

 

 

73,991

 

 

 

 

527,614

 

 

 

638,282

 

Investments

 

 

382,074

 

 

 

459,422

 

Property (net of accumulated amortization and depreciation of $296,280 and $286,001

   at March 31, 2017 and December 31, 2016, respectively)

 

 

206,143

 

 

 

209,021

 

Goodwill and other intangible assets (net of accumulated amortization of $60,909 and

   $60,080 at March 31, 2017 and December 31, 2016, respectively)

 

 

387,908

 

 

 

382,024

 

Deferred tax assets

 

 

1,135,107

 

 

 

1,075,777

 

Other assets

 

 

248,774

 

 

 

184,499

 

Total Assets

 

$

4,385,258

 

 

$

4,556,508

 

 

 

See notes to condensed consolidated financial statements.

 

2


 

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

MARCH 31, 2017 AND DECEMBER 31, 2016

(UNAUDITED)

(dollars in thousands, except for per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Deposits and other customer payables

 

$

625,797

 

 

$

472,283

 

Accrued compensation and benefits

 

 

288,987

 

 

 

541,588

 

Senior debt

 

 

1,189,043

 

 

 

1,188,600

 

Tax receivable agreement obligation

 

 

512,874

 

 

 

513,610

 

Deferred tax liabilities

 

 

8,801

 

 

 

9,168

 

Capital lease obligations

 

 

6,913

 

 

 

7,205

 

Other liabilities

 

 

539,656

 

 

 

530,241

 

Total Liabilities

 

 

3,172,071

 

 

 

3,262,695

 

Commitments and contingencies

 

 

 

 

 

 

 

 

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;

   129,766,091 shares issued at March 31, 2017 and December 31, 2016,

   including shares held by subsidiaries as indicated below)

 

 

1,298

 

 

 

1,298

 

Additional paid-in-capital

 

 

608,073

 

 

 

688,231

 

Retained earnings

 

 

1,101,988

 

 

 

1,134,186

 

Accumulated other comprehensive loss, net of tax

 

 

(296,699

)

 

 

(314,222

)

 

 

 

1,414,660

 

 

 

1,509,493

 

Class A common stock held by subsidiaries, at cost (6,879,471 and 7,628,786

   shares at March 31, 2017 and December 31, 2016, respectively)

 

 

(261,583

)

 

 

(273,506

)

Total Lazard Ltd Stockholders’ Equity

 

 

1,153,077

 

 

 

1,235,987

 

Noncontrolling interests

 

 

60,110

 

 

 

57,826

 

Total Stockholders’ Equity

 

 

1,213,187

 

 

 

1,293,813

 

Total Liabilities and Stockholders’ Equity

 

$

4,385,258

 

 

$

4,556,508

 

 

 

 

See notes to condensed consolidated financial statements.

 

3


 

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

(UNAUDITED)

(dollars in thousands, except for per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

 

2016

 

REVENUE

 

 

 

 

 

 

 

 

Investment banking and other advisory fees

 

$

334,916

 

 

$

265,143

 

Asset management fees

 

 

272,924

 

 

 

233,731

 

Interest income

 

 

1,654

 

 

 

1,372

 

Other

 

 

27,926

 

 

 

9,870

 

Total revenue

 

 

637,420

 

 

 

510,116

 

Interest expense

 

 

13,956

 

 

 

11,898

 

Net revenue

 

 

623,464

 

 

 

498,218

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

361,801

 

 

 

297,210

 

Occupancy and equipment

 

 

27,484

 

 

 

27,007

 

Marketing and business development

 

 

19,752

 

 

 

19,688

 

Technology and information services

 

 

24,024

 

 

 

22,931

 

Professional services

 

 

11,462

 

 

 

9,762

 

Fund administration and outsourced services

 

 

15,913

 

 

 

13,435

 

Amortization and other acquisition-related costs

 

 

3,574

 

 

 

644

 

Other

 

 

9,257

 

 

 

9,164

 

Total operating expenses

 

 

473,267

 

 

 

399,841

 

OPERATING INCOME

 

 

150,197

 

 

 

98,377

 

Provision for income taxes

 

 

39,767

 

 

 

27,654

 

NET INCOME

 

 

110,430

 

 

 

70,723

 

LESS - NET INCOME ATTRIBUTABLE TO

   NONCONTROLLING INTERESTS

 

 

2,877

 

 

 

3,900

 

NET INCOME ATTRIBUTABLE TO LAZARD LTD

 

$

107,553

 

 

$

66,823

 

ATTRIBUTABLE TO LAZARD LTD CLASS A

      COMMON STOCKHOLDERS:

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OF COMMON STOCK

     OUTSTANDING:

 

 

 

 

 

 

 

 

Basic

 

 

122,815,163

 

 

 

126,040,441

 

Diluted

 

 

132,689,375

 

 

 

132,891,284

 

NET INCOME PER SHARE OF COMMON STOCK:

 

 

 

 

 

 

 

 

Basic

 

$

0.88

 

 

$

0.53

 

Diluted

 

$

0.81

 

 

$

0.50

 

DIVIDENDS DECLARED PER SHARE OF

     COMMON STOCK

 

$

1.58

 

 

$

1.55

 

 

 

See notes to condensed consolidated financial statements.

 

4


 

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

(UNAUDITED)

(dollars in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

 

2016

 

NET INCOME

 

$

110,430

 

 

$

70,723

 

OTHER COMPREHENSIVE INCOME (LOSS), NET OF

   TAX:

 

 

 

 

 

 

 

 

Currency translation adjustments (including a tax benefit of $1,146 for

   the three months ended March 31, 2016)

 

 

16,932

 

 

 

11,739

 

Employee benefit plans:

 

 

 

 

 

 

 

 

Actuarial loss (net of tax benefit of $261 and $70 for the

   three months ended March 31, 2017 and  2016, respectively)

 

 

(495

)

 

 

(141

)

Adjustment for items reclassified to earnings (net of tax

   expense of $276 and $393 for the three months ended

   March 31, 2017 and 2016, respectively)

 

 

1,086

 

 

 

1,186

 

OTHER COMPREHENSIVE INCOME, NET OF TAX

 

 

17,523

 

 

 

12,784

 

COMPREHENSIVE INCOME

 

 

127,953

 

 

 

83,507

 

LESS - COMPREHENSIVE INCOME ATTRIBUTABLE TO

   NONCONTROLLING INTERESTS

 

 

2,877

 

 

 

3,900

 

COMPREHENSIVE INCOME ATTRIBUTABLE TO

   LAZARD LTD

 

$

125,076

 

 

$

79,607

 

 

 

 

See notes to condensed consolidated financial statements.

 

5


 

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

(UNAUDITED)

(dollars in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

 

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

110,430

 

 

$

70,723

 

Adjustments to reconcile net income to net cash provided by (used in)

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization of property

 

 

7,662

 

 

 

8,389

 

Amortization of deferred expenses and share-based incentive compensation

 

 

92,766

 

 

 

117,140

 

Amortization and other acquisition-related costs

 

 

3,574

 

 

 

644

 

Deferred tax provision

 

 

17,520

 

 

 

11,586

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

Deposits with banks and short-term investments

 

 

(146,251

)

 

 

19,498

 

Cash deposited with clearing organizations and other segregated cash

 

 

(4,533

)

 

 

1,474

 

Receivables-net

 

 

115,043

 

 

 

(11,757

)

Investments

 

 

66,979

 

 

 

86,169

 

Other assets

 

 

(73,026

)

 

 

(46,592

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

Deposits and other payables

 

 

146,271

 

 

 

(2,729

)

Accrued compensation and benefits and other liabilities

 

 

(242,052

)

 

 

(354,436

)

Net cash (used in) provided by operating activities

 

 

94,383

 

 

 

(99,891

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Additions to property

 

 

(3,847

)

 

 

(5,454

)

Disposals of property

 

 

135

 

 

 

104

 

Net cash used in investing activities

 

 

(3,712

)

 

 

(5,350

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from:

 

 

 

 

 

 

 

 

Contributions from noncontrolling interests

 

 

-

 

 

 

93

 

Excess tax benefits from share-based incentive compensation

 

 

-

 

 

 

2,720

 

Payments for:

 

 

 

 

 

 

 

 

Capital lease obligations

 

 

(396

)

 

 

(417

)

Distributions to noncontrolling interests

 

 

(1,001

)

 

 

(424

)

Payments under tax receivable agreement

 

 

(736

)

 

 

(10,086

)

Purchase of Class A common stock

 

 

(106,048

)

 

 

(83,140

)

Class A common stock dividends

 

 

(192,264

)

 

 

(194,382

)

Settlement of vested share-based incentive compensation

 

 

(61,478

)

 

 

(50,455

)

Other financing activities

 

 

(7,947

)

 

 

(1,614

)

Net cash used in financing activities

 

 

(369,870

)

 

 

(337,705

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

 

11,869

 

 

 

12,187

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(267,330

)

 

 

(430,759

)

CASH AND CASH EQUIVALENTS—January 1

 

 

1,158,785

 

 

 

1,132,083

 

CASH AND CASH EQUIVALENTS—March 31

 

$

891,455

 

 

$

701,324

 

 

 

 

See notes to condensed consolidated financial statements.

 

6


 

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2016

(UNAUDITED)

(dollars in thousands)

 

 

 

Series A

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated

Other

Comprehensive

 

 

Class A

Common Stock

 

 

Total

Lazard Ltd

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In-

 

 

Retained

 

 

Income (Loss),

 

 

Held By Subsidiaries

 

 

Stockholders’

 

 

Noncontrolling

 

 

Stockholders’

 

 

 

Shares

 

 

$

 

 

Shares

 

 

$

 

 

Capital

 

 

Earnings

 

 

Net of Tax

 

 

Shares

 

 

$

 

 

Equity

 

 

Interests

 

 

Equity

 

Balance - January 1, 2016

 

 

7,921

 

 

$

-

 

 

 

129,766,091

 

 

$

1,298

 

 

$

600,034

 

 

$

1,123,728

 

 

$

(234,356

)

 

 

4,253,381

 

 

$

(177,249

)

 

$

1,313,455

 

 

$

53,851

 

 

$

1,367,306

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

66,823

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

66,823

 

 

 

3,900

 

 

 

70,723

 

Other comprehensive income - net

   of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,784

 

 

 

 

 

 

 

 

 

 

 

12,784

 

 

 

 

 

 

 

12,784

 

Amortization of share-based incentive

   compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

94,638

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

94,638

 

 

 

 

 

 

 

94,638

 

Dividend-equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,793

 

 

 

(25,361

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,568

)

 

 

 

 

 

 

(1,568

)

Class A common stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(194,382

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(194,382

)

 

 

 

 

 

 

(194,382

)

Purchase of Class A common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,424,571

 

 

 

(83,140

)

 

 

(83,140

)

 

 

 

 

 

 

(83,140

)

Delivery of Class A common stock in

   connection with share-based incentive

   compensation and related tax benefit

   of $7,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(192,121

)

 

 

 

 

 

 

 

 

 

 

(3,674,957

)

 

 

148,885

 

 

 

(43,236

)

 

 

 

 

 

 

(43,236

)

Distributions to noncontrolling interests,

   net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

(331

)

 

 

(331

)

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(46

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(46

)

 

 

 

 

 

 

(46

)

Balance - March 31, 2016

 

 

7,921

 

 

$

-

 

 

 

129,766,091

 

 

$

1,298

 

 

$

526,298

 

 

$

970,808

 

 

$

(221,572

)

 

 

3,002,995

 

 

$

(111,504

)

 

$

1,165,328

 

 

$

57,420

 

 

$

1,222,748

 

 

 

See notes to condensed consolidated financial statements.

 

7


 

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2017

(UNAUDITED)

(dollars in thousands)

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Accumulated

Other

Comprehensive

 

 

Class A

Common Stock

 

 

Total

Lazard Ltd

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In-

 

 

Retained

 

 

Income (Loss),

 

 

Held By Subsidiaries

 

 

Stockholders’

 

 

Noncontrolling

 

 

Stockholders’

 

 

 

Shares

 

 

$

 

 

Capital

 

 

Earnings

 

 

Net of Tax

 

 

Shares

 

 

$

 

 

Equity

 

 

Interests

 

 

Equity

 

Balance - January 1, 2017

 

 

129,766,091

 

 

$

1,298

 

 

$

688,231

 

 

$

1,134,186

 

 

$

(314,222

)

 

 

7,628,786

 

 

$

(273,506

)

 

$

1,235,987

 

 

$

57,826

 

 

$

1,293,813

 

Adjustment for the cumulative effect on prior

   years from the adoption of new accounting

   guidance related to share-based incentive

   compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

81,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

81,544

 

 

 

 

 

 

 

81,544

 

Balance, as adjusted - January 1, 2017

 

 

129,766,091

 

 

 

1,298

 

 

 

688,231

 

 

 

1,215,730

 

 

 

(314,222

)

 

 

7,628,786

 

 

 

(273,506

)

 

 

1,317,531

 

 

 

57,826

 

 

 

1,375,357

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107,553

 

 

 

2,877

 

 

 

110,430

 

Other comprehensive income - net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,523

 

 

 

 

 

 

 

 

 

 

 

17,523

 

 

 

 

 

 

 

17,523

 

Amortization of share-based incentive

   compensation

 

 

 

 

 

 

 

 

 

 

77,527

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77,527

 

 

 

 

 

 

 

77,527

 

Dividend-equivalents

 

 

 

 

 

 

 

 

 

 

25,977

 

 

 

(29,031

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,054

)

 

 

 

 

 

 

(3,054

)

Class A common stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(192,264

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(192,264

)

 

 

 

 

 

 

(192,264

)

Purchase of Class A common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,464,967

 

 

 

(106,048

)

 

 

(106,048

)

 

 

 

 

 

 

(106,048

)

Delivery of Class A common stock in

   connection with share-based incentive

   compensation and related tax expense

   of $4,287

 

 

 

 

 

 

 

 

 

 

(183,736

)

 

 

 

 

 

 

 

 

 

 

(3,214,282

)

 

 

117,971

 

 

 

(65,765

)

 

 

 

 

 

 

(65,765

)

Business acquisitions and related equity

   transactions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A common stock issuable

   (including related amortization)

 

 

 

 

 

 

 

 

 

 

74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

74

 

 

 

 

 

 

 

74

 

Distributions to noncontrolling interests, net