laz-10q_20200930.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, 2020


☐	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 23, 2020, there were 112,766,091 shares of the Registrant’s common stock outstanding (including 7,734,128 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, 2020 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		42

Item 3. Quantitative and Qualitative Disclosures About Market Risk		70

Item 4. Controls and Procedures		70

Part II. Other Information

Item 1. Legal Proceedings		71

Item 1A. Risk Factors		71

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		72

Item 3. Defaults Upon Senior Securities		73

Item 4. Mine Safety Disclosures		73

Item 5. Other Information		73

Item 6. Exhibits		74

Signatures		77

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

		Page

Condensed Consolidated Statements of Financial Condition as of September 30, 2020 and December 31, 2019		2

Condensed Consolidated Statements of Operations for the three month and nine month periods ended September 30, 2020 and 2019		4

Condensed Consolidated Statements of Comprehensive Income for the three month and nine month periods ended September 30, 2020 and 2019		5

Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2020 and 2019		6

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three month and nine month periods ended September 30, 2020 and 2019		7

Notes to Condensed Consolidated Financial Statements		11

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

SEPTEMBER 30, 2020 AND DECEMBER 31, 2019

(UNAUDITED)

(dollars in thousands, except for per share data)

	September 30,		December 31,
	2020		2019
ASSETS
Cash and cash equivalents	$	1,109,745	$	1,231,593
Deposits with banks and short-term investments		1,193,717		1,180,686
Cash deposited with clearing organizations and other segregated cash		41,260		43,280
Receivables (net of allowance for doubtful accounts of $38,250 and $27,130 at September 30, 2020 and December 31, 2019, respectively):
Fees		468,352		537,442
Customers and other		106,746		125,696
		575,098		663,138
Investments		535,245		531,995
Property (net of accumulated amortization and depreciation of $398,336 and $367,545 at September 30, 2020 and December 31, 2019, respectively)		233,481		219,842
Operating lease right-of-use assets		517,583		551,504
Goodwill and other intangible assets (net of accumulated amortization of $69,590 and $68,305 at September 30, 2020 and December 31, 2019, respectively)		373,841		373,594
Deferred tax assets		557,120		586,750
Other assets		329,907		257,199
Total Assets	$	5,466,997	$	5,639,581

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

SEPTEMBER 30, 2020 AND DECEMBER 31, 2019

(UNAUDITED)

(dollars in thousands, except for per share data)

	September 30,			December 31,
	2020			2019
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits and other customer payables	$	1,244,562		$	1,246,200
Accrued compensation and benefits		451,180			602,777
Operating lease liabilities		609,850			644,345
Tax receivable agreement obligation		221,890			247,344
Senior debt		1,681,487			1,679,562
Deferred tax liabilities		2,582			3,511
Other liabilities		476,748			534,268
Total Liabilities		4,688,299			4,958,007
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; 112,766,091 shares issued at September 30, 2020 and December 31, 2019, including shares held by subsidiaries as indicated below)		1,128			1,128
Additional paid-in-capital		95,143			41,020
Retained earnings		1,160,310			1,193,570
Accumulated other comprehensive loss, net of tax		(279,785	)		(293,648	)
		976,796			942,070
Class A common stock held by subsidiaries, at cost (7,760,197 and 8,513,493 shares at September 30, 2020 and December 31, 2019, respectively)		(282,983	)		(332,079	)
Total Lazard Ltd Stockholders’ Equity		693,813			609,991
Noncontrolling interests		84,885			71,583
Total Stockholders’ Equity		778,698			681,574
Total Liabilities and Stockholders’ Equity	$	5,466,997		$	5,639,581

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, 2020 AND 2019

(UNAUDITED)

(dollars in thousands, except for per share data)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020			2019
REVENUE
Investment banking and other advisory fees	$	304,999	$	305,303	$	906,927		$	970,081
Asset management fees		265,562		287,140		780,071			876,159
Interest income		1,059		3,962		4,811			11,775
Other		26,402		14,668		56,634			65,537
Total revenue		598,022		611,073		1,748,443			1,923,552
Interest expense		20,344		20,005		60,459			58,120
Net revenue		577,678		591,068		1,687,984			1,865,432
OPERATING EXPENSES
Compensation and benefits		354,625		391,363		1,025,948			1,136,087
Occupancy and equipment		31,318		29,856		94,090			89,104
Marketing and business development		7,562		27,318		34,265			84,086
Technology and information services		33,457		34,076		97,444			104,956
Professional services		14,701		15,105		45,974			48,466
Fund administration and outsourced services		26,196		28,425		76,639			85,848
Amortization and other acquisition-related costs		458		1,022		1,359			9,534
Other		4,681		11,530		27,623			33,630
Total operating expenses		472,998		538,695		1,403,342			1,591,711
OPERATING INCOME		104,680		52,373		284,642			273,721
Provision for income taxes		28,165		4,177		76,720			55,536
NET INCOME		76,515		48,196		207,922			218,185
LESS - NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS		1,423		1,492		(4,650	)		8,662
NET INCOME ATTRIBUTABLE TO LAZARD LTD	$	75,092	$	46,704	$	212,572		$	209,523
ATTRIBUTABLE TO LAZARD LTD CLASS A COMMON STOCKHOLDERS:
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
Basic		107,168,615		109,285,727		106,711,547			111,070,395
Diluted		113,181,564		113,881,690		112,929,830			116,959,041
NET INCOME PER SHARE OF COMMON STOCK:
Basic	$	0.69	$	0.42	$	1.96		$	1.87
Diluted	$	0.66	$	0.40	$	1.88		$	1.77

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, 2020 AND 2019

(UNAUDITED)

(dollars in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
NET INCOME	$	76,515		$	48,196		$	207,922		$	218,185
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Currency translation adjustments		34,326			(26,760	)		5,964			(30,033	)
Employee benefit plans:
Prior service cost (credit) (net of tax (benefit) expense of $(22) for the three months ended September 30, 2020 and $16 for the nine months ended September 30, 2020)		(110	)		-			74			-
Actuarial gain (loss) (net of tax (benefit) expense of $(1,644) and $(1,607) for the three months ended September 30, 2020 and 2019, respectively, and $(25) and $1,113 for the nine months ended September 30, 2020 and 2019, respectively)		(6,424	)		9,050			2,971			11,911
Adjustment for items reclassified to earnings (net of tax expense of $412 and $172 for the three months ended September 30, 2020 and 2019, respectively, and $1,088 and $524 for the nine months ended September 30, 2020 and 2019, respectively)		1,345			1,074			4,855			3,319
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX		29,137			(16,636	)		13,864			(14,803	)
COMPREHENSIVE INCOME		105,652			31,560			221,786			203,382
LESS - COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS		1,424			1,493			(4,649	)		8,662
COMPREHENSIVE INCOME ATTRIBUTABLE TO LAZARD LTD	$	104,228		$	30,067		$	226,435		$	194,720

See notes to condensed consolidated financial statements.

LAZARD LTD

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

(UNAUDITED)

(dollars in thousands)

	Nine Months Ended
	September 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	207,922		$	218,185
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of property		25,716			24,857
Noncash lease expense		46,965			40,268
Amortization of deferred expenses and share-based incentive compensation		282,955			317,111
Amortization and other acquisition-related costs		1,359			9,534
Deferred tax provision (benefit)		30,680			(6,413	)
Loss on extinguishment of debt		-			6,505
(Increase) decrease in operating assets and increase (decrease) in operating liabilities:
Receivables-net		86,038			6,866
Investments		(1,035	)		43,559
Other assets		(160,066	)		(128,562	)
Accrued compensation and benefits and other liabilities		(265,128	)		(213,501	)
Net cash provided by operating activities		255,406			318,409
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property		(34,210	)		(40,669	)
Disposals of property		151			98
Net cash used in investing activities		(34,059	)		(40,571	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Issuance of senior debt, net of expenses		-			492,032
Customer deposits		-			345,394
Contributions from noncontrolling interests		91			1,193
Payments for:
Senior debt		-			(255,746	)
Customer deposits		(37,850	)		-
Distributions to noncontrolling interests		(1,921	)		(8,913	)
Payments under tax receivable agreement		(25,454	)		(23,687	)
Purchase of Class A common stock		(95,227	)		(430,281	)
Class A common stock dividends		(147,233	)		(205,559	)
Settlement of share-based incentive compensation		(71,508	)		(96,956	)
Other financing activities		(5,316	)		(6,144	)
Net cash used in financing activities		(384,418	)		(188,667	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		52,234			(92,487	)
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(110,837	)		(3,316	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH— January 1		2,455,559			2,291,885
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH— September 30	$	2,344,722		$	2,288,569