UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2014
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)
Registrants 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 x 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 x No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x | Accelerated filer ¨ | |
Non-accelerated filer ¨ | Smaller reporting company ¨ |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of October 20, 2014, there were 129,766,091 shares of the Registrants Class A common stock outstanding (including 7,602,792 shares held by subsidiaries).
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 has no material operating assets other than indirect ownership as of September 30, 2014 of all of the common membership interests in Lazard Group and its controlling interest in Lazard Group.
i
Item 1. | Financial Statements (Unaudited) |
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9 |
1
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 2014 AND DECEMBER 31, 2013
(UNAUDITED)
(dollars in thousands, except for per share data)
September 30, 2014 |
December 31, 2013 |
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ASSETS |
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Cash and cash equivalents | $ | 820,584 | $ | 841,482 | ||||
Deposits with banks and short-term investments | 240,728 | 244,879 | ||||||
Cash deposited with clearing organizations and other segregated cash | 44,710 | 62,046 | ||||||
Receivables (net of allowance for doubtful accounts of $29,859 and $28,777 at September 30, 2014 and December 31, 2013, respectively): |
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Fees |
429,477 | 452,535 | ||||||
Customers and other |
77,908 | 52,220 | ||||||
Related parties |
530 | 7,920 | ||||||
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507,915 | 512,675 | |||||||
Investments |
549,922 | 478,105 | ||||||
Property (net of accumulated amortization and depreciation of $257,512 and $253,930 at September 30, 2014 and December 31, 2013, respectively) |
227,359 | 248,796 | ||||||
Goodwill and other intangible assets (net of accumulated amortization of $51,325 and $45,379 at September 30, 2014 and December 31, 2013, respectively) |
356,254 | 363,877 | ||||||
Other assets | 295,418 | 259,277 | ||||||
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Total Assets |
$ | 3,042,890 | $ | 3,011,137 | ||||
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See notes to condensed consolidated financial statements.
2
LAZARD LTD
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 2014 AND DECEMBER 31, 2013
(UNAUDITED)
(dollars in thousands, except for per share data)
September 30, 2014 |
December 31, 2013 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Liabilities: |
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Deposits and other customer payables |
$ | 278,334 | $ | 275,434 | ||||
Accrued compensation and benefits |
517,640 | 523,063 | ||||||
Senior debt |
1,048,350 | 1,048,350 | ||||||
Capital lease obligations |
12,889 | 15,834 | ||||||
Related party payables |
11,952 | 5,031 | ||||||
Other liabilities |
536,065 | 513,427 | ||||||
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Total Liabilities |
2,405,230 | 2,381,139 | ||||||
Commitments and contingencies |
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STOCKHOLDERS EQUITY |
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Preferred stock, par value $.01 per share; 15,000,000 shares authorized: |
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Series A - 7,921 shares issued and outstanding at September 30, 2014 and December 31, 2013 |
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Series B - no shares issued and outstanding |
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Common stock: |
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Class A, par value $.01 per share (500,000,000 shares authorized; |
1,298 | 1,291 | ||||||
Class B, par value $.01 per share (1 share authorized, issued and outstanding at December 31, 2013) |
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Additional paid-in-capital |
657,279 | 737,899 | ||||||
Retained earnings |
333,294 | 203,236 | ||||||
Accumulated other comprehensive loss, net of tax |
(152,184 | ) | (133,004 | ) | ||||
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839,687 | 809,422 | |||||||
Class A common stock held by subsidiaries, at cost (7,602,792 and 8,317,065 shares at September 30, 2014 and December 31, 2013, respectively) |
(267,117 | ) | (249,213 | ) | ||||
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Total Lazard Ltd Stockholders Equity |
572,570 | 560,209 | ||||||
Noncontrolling interests |
65,090 | 69,789 | ||||||
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Total Stockholders Equity |
637,660 | 629,998 | ||||||
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Total Liabilities and Stockholders Equity |
$ | 3,042,890 | $ | 3,011,137 | ||||
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See notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2014 AND 2013
(UNAUDITED)
(dollars in thousands, except for per share data)
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
REVENUE |
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Investment banking and other advisory fees |
$290,604 | $232,006 | $843,186 | $660,351 | ||||||||||||
Asset management fees |
276,940 | 241,478 | 805,848 | 707,536 | ||||||||||||
Interest income |
1,243 | 1,347 | 3,815 | 3,823 | ||||||||||||
Other |
12,936 | 25,692 | 60,832 | 61,587 | ||||||||||||
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Total revenue |
581,723 | 500,523 | 1,713,681 | 1,433,297 | ||||||||||||
Interest expense |
15,512 | 20,169 | 47,174 | 60,635 | ||||||||||||
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Net revenue |
566,211 | 480,354 | 1,666,507 | 1,372,662 | ||||||||||||
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OPERATING EXPENSES |
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Compensation and benefits |
338,612 | 301,809 | 1,006,101 | 910,679 | ||||||||||||
Occupancy and equipment |
29,400 | 27,393 | 86,079 | 96,435 | ||||||||||||
Marketing and business development |
19,127 | 17,077 | 59,254 | 60,646 | ||||||||||||
Technology and information services |
23,025 | 22,217 | 68,466 | 65,331 | ||||||||||||
Professional services |
11,184 | 12,904 | 32,895 | 32,223 | ||||||||||||
Fund administration and outsourced services |
17,034 | 14,475 | 48,490 | 43,328 | ||||||||||||
Amortization of intangible assets related to acquisitions |
4,020 | 877 | 5,946 | 2,758 | ||||||||||||
Provision (benefit) pursuant to tax receivable agreement |
(176 | ) | | 9,064 | | |||||||||||
Other |
10,273 | 2,484 | 30,340 | 17,609 | ||||||||||||
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Total operating expenses |
452,499 | 399,236 | 1,346,635 | 1,229,009 | ||||||||||||
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OPERATING INCOME |
113,712 | 81,118 | 319,872 | 143,653 | ||||||||||||
Provision for income taxes |
23,792 | 18,370 | 58,614 | 31,335 | ||||||||||||
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NET INCOME |
89,920 | 62,748 | 261,258 | 112,318 | ||||||||||||
LESS - NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
1,061 | 2,466 | 6,365 | 5,323 | ||||||||||||
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NET INCOME ATTRIBUTABLE TO LAZARD LTD |
$88,859 | $60,282 | $254,893 | $106,995 | ||||||||||||
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ATTRIBUTABLE TO LAZARD LTD CLASS A COMMON STOCKHOLDERS: |
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WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: |
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Basic |
122,206,914 | 122,199,954 | 122,366,632 | 120,556,047 | ||||||||||||
Diluted |
133,566,684 | 134,242,144 | 133,722,776 | 133,174,000 | ||||||||||||
NET INCOME PER SHARE OF COMMON STOCK: |
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Basic |
$0.73 | $0.49 | $2.08 | $0.89 | ||||||||||||
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Diluted |
$0.67 | $0.45 | $1.91 | $0.81 | ||||||||||||
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DIVIDENDS DECLARED PER SHARE OF COMMON STOCK |
$0.30 | $0.25 |
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$0.90 |
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$0.50 | ||||||||||
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See notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2014 AND 2013
(UNAUDITED)
(dollars in thousands)
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
NET INCOME |
$ | 89,920 | $ | 62,748 | $ | 261,258 | $ | 112,318 | ||||||||
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OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: |
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Currency translation adjustments |
(29,100 | ) | 12,157 | (18,640 | ) | (18,610 | ) | |||||||||
Amortization of interest rate hedge |
| 264 | | 791 | ||||||||||||
Employee benefit plans: |
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Actuarial gain (loss) (net of tax (expense) benefit of $(1,731) and $(25) for the three months ended September 30, 2014 and 2013, respectively, and $1,919 and $1,686 for the nine months ended September 30, 2014 and 2013, respectively) |
3,251 | 50 | (3,695 | ) | (2,669 | ) | ||||||||||
Adjustment for items reclassified to earnings (net of tax expense of $528 and $404 for the three months ended September 30, 2014 and 2013, respectively, and $1,391 and $1,206 for the nine months ended September 30, 2014 and 2013, respectively) |
1,145 | 1,223 | 3,714 | 3,653 | ||||||||||||
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OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX |
(24,704 | ) | 13,694 | (18,621 | ) | (16,835 | ) | |||||||||
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COMPREHENSIVE INCOME |
65,216 | 76,442 | 242,637 | 95,483 | ||||||||||||
LESS - COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
1,061 | 2,523 | 6,365 | 5,201 | ||||||||||||
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COMPREHENSIVE INCOME ATTRIBUTABLE TO LAZARD LTD |
$ | 64,155 | $ | 73,919 | $ | 236,272 | $ | 90,282 | ||||||||
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See notes to condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2014 AND 2013
(UNAUDITED)
(dollars in thousands)
Nine Months Ended September 30, |
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2014 | 2013 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
$ | 261,258 | $ | 112,318 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization of property |
26,332 | 25,465 | ||||||
Amortization of deferred expenses, share-based incentive compensation |
227,896 | 239,357 | ||||||
Amortization of intangible assets related to acquisitions |
5,946 | 2,758 | ||||||
(Increase) decrease in operating assets: |
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Deposits with banks and short-term investments |
(18,626 | ) | 25,558 | |||||
Cash deposited with clearing organizations and other segregated cash |
15,630 | 6,291 | ||||||
Receivables-net |
(12,982 | ) | (55,516 | ) | ||||
Investments |
(78,820 | ) | (54,520 | ) | ||||
Other assets |
(103,778 | ) | (81,898 | ) | ||||
Increase (decrease) in operating liabilities: |
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Deposits and other payables |
34,730 | 14,158 | ||||||
Accrued compensation and benefits and other liabilities |
57,836 | (66,104 | ) | |||||
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Net cash provided by operating activities |
415,422 | 167,867 | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Additions to property |
(14,161 | ) | (54,344 | ) | ||||
Disposals of property |
1,023 | 5,843 | ||||||
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Net cash used in investing activities |
(13,138 | ) | (48,501 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from: |
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Contributions from noncontrolling interests |
1,102 | 805 | ||||||
Excess tax benefits from share-based incentive compensation |
1,508 | 2,211 | ||||||
Payments for: |
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Capital lease obligations |
(1,738 | ) | (2,092 | ) | ||||
Distributions to noncontrolling interests |
(9,182 | ) | (10,228 | ) | ||||
Purchase of Class A common stock |
(192,657 | ) | (77,934 | ) | ||||
Class A common stock dividends |
(109,592 | ) | (60,931 | ) | ||||
Settlement of vested share-based incentive compensation |
(83,783 | ) | (125,546 | ) | ||||
Other financing activities |
(1,754 | ) | (165 | ) | ||||
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Net cash used in financing activities |
(396,096 | ) | (273,880 | ) | ||||
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EFFECT OF EXCHANGE RATE CHANGES ON CASH |
(27,086 | ) | (7,309 | ) | ||||
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NET DECREASE IN CASH AND CASH EQUIVALENTS |
(20,898 | ) | (161,823 | ) | ||||
CASH AND CASH EQUIVALENTSJanuary 1 |
841,482 | 850,190 | ||||||
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CASH AND CASH EQUIVALENTSSeptember 30 |
$ | 820,584 | $ | 688,367 | ||||
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See notes to condensed consolidated financial statements.
6
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2013
(UNAUDITED)
(dollars in thousands)
Series
A Preferred Stock |
Common Stock | Additional Paid-In- Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss), Net of Tax |
Class A Common Stock Held By Subsidiaries |
Total Lazard Ltd Stockholders Equity |
Noncontrolling Interests |
Total Stockholders Equity |
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Shares | $ | Shares(*) | $ | Shares | $ | |||||||||||||||||||||||||||||||||||||||||||
Balance January 1, 2013 |
7,921 | $ | | 128,216,424 | $ | 1,282 | $ | 846,050 | $ | 182,647 | $ | (110,541 | ) | 12,802,938 | $ | (349,782 | ) | $ | 569,656 | $ | 81,884 | $ | 651,540 | |||||||||||||||||||||||||
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Comprehensive income (loss): |
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Net income |
106,995 | 106,995 | 5,323 | 112,318 | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss - net of tax |
(16,713 | ) | (16,713 | ) | (122) | (16,835) | ||||||||||||||||||||||||||||||||||||||||||
Business acquisitions and related equity transactions: |
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Class A common stock issuable (including related amortization) |
829 | 829 | 5 | 834 | ||||||||||||||||||||||||||||||||||||||||||||
Delivery of Class A common stock (including dividend-equivalents) |
(4,994 | ) | (179 | ) | (170,988) | 5,173 | | | ||||||||||||||||||||||||||||||||||||||||
Amortization of share-based incentive compensation |
182,338 | 182,338 | 1,003 | 183,341 | ||||||||||||||||||||||||||||||||||||||||||||
Dividend-equivalents |
8,440 | (8,604 | ) | (164 | ) | (1 | ) | (165 | ) | |||||||||||||||||||||||||||||||||||||||
Class A common stock dividends |
(60,931 | ) | (60,931 | ) | (60,931 | ) | ||||||||||||||||||||||||||||||||||||||||||
Purchase of Class A common stock |
2,201,657 | (77,934) | (77,934 | ) | (77,934 | ) | ||||||||||||||||||||||||||||||||||||||||||
Delivery of Class A common stock in connection with shared-based incentive compensation and related tax benefit of $862 |
(342,898 | ) | (609 | ) | (7,519,848 | ) | 218,819 | (124,688 | ) | 4 | (124,684 | ) | ||||||||||||||||||||||||||||||||||||
Class A common stock issued in exchange for Lazard Group common membership interests |
839,658 | 8 | (8 | ) | | | ||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests, net |
| (9,423 | ) | (9,423 | ) | |||||||||||||||||||||||||||||||||||||||||||
Adjustments related to noncontrolling interests |
3,984 | (598 | ) | 3,386 | (4,386 | ) | (1,000 | ) | ||||||||||||||||||||||||||||||||||||||||
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Balance September 30, 2013 |
7,921 | $ | 129,056,082 | $ | 1,290 | $ | 693,741 | $ | 219,319 | $ | (127,852 | ) | 7,313,759 | $ | (203,724 | ) | $ | 582,774 | $ | 74,287 | $ | 657,061 | ||||||||||||||||||||||||||
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(*) | Includes 128,216,423 and 129,056,081 shares of the Companys Class A common stock issued at January 1, 2013 and September 30, 2013, respectively, and 1 share of the Companys Class B common stock issued at each such date. |
See notes to condensed consolidated financial statements.
7
LAZARD LTD
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2014
(UNAUDITED)
(dollars in thousands)
Series
A Preferred Stock |
Common Stock | Additional Paid-In- Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss), Net of Tax |
Class A Common Stock Held By Subsidiaries |
Total Lazard Ltd Stockholders Equity |
Noncontrolling Interests |
Total Stockholders Equity |
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Shares | $ | Shares(*) | $ | Shares | $ | |||||||||||||||||||||||||||||||||||||||||||
Balance January 1, 2014 |
7,921 | $ | | 129,056,082 | $ | 1,291 | $ | 737,899 | $ | 203,236 | $ | (133,004 | ) | 8,317,065 | $ | (249,213 | ) | $ | 560,209 | $ | 69,789 | $ | 629,998 | |||||||||||||||||||||||||
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Comprehensive income (loss): |
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Net income |
254,893 | 254,893 | 6,365 | 261,258 | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss - net of tax |
(18,621 | ) | (18,621 | ) | (18,621 | ) | ||||||||||||||||||||||||||||||||||||||||||
Business acquisitions and related equity transactions: |
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Class A common stock issuable (including related amortization) |
387 | 387 | 387 | |||||||||||||||||||||||||||||||||||||||||||||
Amortization of share-based incentive compensation |
159,095 | 159,095 | 159,095 | |||||||||||||||||||||||||||||||||||||||||||||
Dividend-equivalents |
13,489 | (15,243 | ) | (1,754 | ) | (1,754 | ) | |||||||||||||||||||||||||||||||||||||||||
Class A common stock dividends |
(109,592 | ) | (109,592 | ) | (109,592 | ) | ||||||||||||||||||||||||||||||||||||||||||
Purchase of Class A common stock |
4,114,206 | (192,657 | ) | (192,657 | ) | (192,657 | ) | |||||||||||||||||||||||||||||||||||||||||
Delivery of Class A common stock in connection with shared-based incentive compensation and related tax benefit of $1,409 |
(257,127 | ) | (4,828,479 | ) | 174,753 | (82,374 | ) | (82,374 | ) | |||||||||||||||||||||||||||||||||||||||
Class A common stock issued in exchange for Lazard Group common membership interests |
710,009 | 7 | (7 | ) | | | ||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests, net |
| (8,080 | ) | (8,080 | ) | |||||||||||||||||||||||||||||||||||||||||||
Adjustments related to noncontrolling interests |
3,543 | (559 | ) | 2,984 | (2,984 | ) | | |||||||||||||||||||||||||||||||||||||||||
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Balance September 30, 2014 |
7,921 | $ | | 129,766,091 | $ | 1,298 | $ | 657,279 | $ | 333,294 | $ | (152,184 | ) | 7,602,792 | $ | (267,117 | ) | $ | 572,570 | $ | 65,090 | $ | 637,660 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) | Includes 129,056,081 and 129,766,091 shares of the Companys Class A common stock issued at January 1, 2014 and September 30, 2014, respectively, and 1 share of the Companys Class B common stock issued at January 1, 2014. |
See notes to condensed consolidated financial statements.
8
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
1. | ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES |
Organization
Lazard Ltd, a Bermuda holding company, and its subsidiaries (collectively referred to as Lazard Ltd, Lazard, we or the Company), including Lazard Ltds indirect investment in Lazard Group LLC, a Delaware limited liability company (collectively referred to, together with its subsidiaries, as Lazard Group), is one of the worlds preeminent financial advisory and asset management firms and has long specialized in crafting solutions to the complex financial and strategic challenges of our clients. We serve a diverse set of clients around the world, including corporations, governments, institutions, partnerships and individuals.
Lazard Ltd indirectly held 100% and approximately 99.5% of all outstanding Lazard Group common membership interests as of September 30, 2014 and December 31, 2013, respectively. Lazard Ltd, through its control of the managing members of Lazard Group, controls Lazard Group, which is governed by an Operating Agreement dated as of May 10, 2005, as amended (the Operating Agreement). LAZ-MD Holdings LLC (LAZ-MD Holdings), an entity formerly owned by Lazard Groups current and former managing directors, held approximately 0.5% of the outstanding Lazard Group common membership interests as of December 31, 2013. Additionally, LAZ-MD Holdings was the sole owner of the one issued and outstanding share of Lazard Ltds Class B common stock (the Class B common stock), which provided LAZ-MD Holdings with approximately 0.6% of the voting power, but no economic rights, in the Company as of December 31, 2013. In May 2014, the remaining outstanding Lazard Group common membership interests held by LAZ-MD Holdings were exchanged for shares of the Companys Class A common stock, par value $0.01 per share (Class A common stock), and the sole issued and outstanding share of the Companys Class B common stock was automatically converted into one share of the Companys Class A common stock pursuant to the provisions of the Companys bye-laws, resulting in only one outstanding class of common stock (the Final Exchange of LAZ-MD Interests). Following the Final Exchange of LAZ-MD Interests, Lazard Group became a wholly-owned indirect subsidiary of Lazard Ltd.
Our sole operating asset is our indirect ownership of the common membership interests of Lazard Group and our managing member interest of Lazard Group, whose principal operating activities are included in two business segments:
| Financial Advisory, which offers corporate, partnership, institutional, government, sovereign and individual clients across the globe a wide array of financial advisory services regarding mergers and acquisitions (M&A) and other strategic matters, restructurings, capital structure, capital raising and various other financial matters, and |
| Asset Management, which offers a broad range of global investment solutions and investment management services in equity and fixed income strategies, alternative investments and private equity funds to corporations, public funds, sovereign entities, endowments and foundations, labor funds, financial intermediaries and private clients. |
In addition, we record selected other activities in our Corporate segment, including management of cash, investments and outstanding indebtedness, as well as certain commercial banking activities of Lazard Groups Paris-based subsidiary Lazard Frères Banque SA (LFB).
LFB is a registered bank regulated by the Autorité de Contrôle Prudentiel et de Résolution (ACPR). It is engaged primarily in commercial and private banking services for clients and funds managed by Lazard Frères Gestion SAS (LFG) and other clients, investment banking activities, including participation in underwritten offerings of securities in France, and asset-liability management.
9
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
Significant Accounting Policies
Basis of PresentationThe accompanying condensed consolidated financial statements of Lazard Ltd have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the SEC) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (U.S. GAAP) for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in Lazard Ltds Annual Report on Form 10-K for the year ended December 31, 2013 (the Form 10-K). The accompanying December 31, 2013 unaudited condensed consolidated statement of financial condition data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP for annual financial statement purposes. The accompanying condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented.
Preparing financial statements requires management to make estimates and assumptions that affect the amounts that are reported in the financial statements and the accompanying disclosures. For example, discretionary compensation and benefits expense for interim periods is accrued based on the year-to-date amount of revenue earned, and an assumed annual ratio of compensation and benefits expense to revenue, with the applicable amounts adjusted for certain items. Although these estimates are based on managements knowledge of current events and actions that Lazard may undertake in the future, actual results may differ materially from the estimates.
The consolidated results of operations for the three month and nine month periods ended September 30, 2014 are not necessarily indicative of the results to be expected for any future interim or annual period.
The condensed consolidated financial statements include Lazard Ltd, Lazard Group and Lazard Groups principal operating subsidiaries: Lazard Frères & Co. LLC (LFNY), a New York limited liability company, along with its subsidiaries, including Lazard Asset Management LLC and its subsidiaries (collectively referred to as LAM); the French limited liability companies Compagnie Financière Lazard Frères SAS (CFLF) along with its subsidiaries, LFB and LFG, and Maison Lazard SAS and its subsidiaries; and Lazard & Co., Limited (LCL), through Lazard & Co., Holdings Limited (LCH), an English private limited company, together with their jointly owned affiliates and subsidiaries.
The Companys policy is to consolidate entities in which it has a controlling financial interest. The Company consolidates (i) a voting interest entity (VOE) where the Company either holds a majority of the voting interest in such entity or is the general partner in such entity and the third-party investors do not have the right to replace the general partner and (ii) a variable interest entity (VIE) where the Company absorbs a majority of the expected losses, expected residual returns, or both, of such entity. When the Company does not have a controlling interest in an entity, but exerts significant influence over such entitys operating and financial decisions, the Company applies the equity method of accounting in which it records in earnings its share of earnings or losses of the entity. Intercompany transactions and balances have been eliminated.
Deposits with Banks and Short-Term InvestmentsRepresents LFBs short-term deposits, including with the Banque de France and amounts placed by LFB in short-term, highly liquid securities, such as French government securities, with original maturities of 90 days or less when purchased. The level of these deposits and investments may be driven by the level of LFB customer and bank-related interest-bearing time and demand deposits (which can fluctuate significantly on a daily basis) and by changes in asset allocation. The carrying value of deposits with banks and short-term investments approximates fair value due to their short-term maturities. Under the fair value hierarchy, such amounts would be categorized within Level 1 if carried at fair value.
10
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
For a detailed discussion about the Companys significant accounting policies, see Note 2 of Notes to Consolidated Financial Statements in our Form 10-K.
2. | RECENT ACCOUNTING DEVELOPMENTS |
Presentation of Unrecognized Tax BenefitsIn July 2013, the Financial Accounting Standards Board (the FASB) issued guidance on the presentation of unrecognized tax benefits when net operating losses or tax credit carryforwards exist. The guidance requires that the unrecognized tax benefit, or a portion of such unrecognized tax benefit, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain situations, as defined in the guidance. The new presentation requirements are effective prospectively for interim and annual reporting periods beginning after December 15, 2013, with early adoption permitted. The Company elected to adopt this guidance in the fourth quarter of 2013, the impact of which did not have a material impact on the Companys consolidated financial statements.
Revenue from Contracts with CustomersIn May 2014, the FASB issued comprehensive new revenue recognition guidance. The guidance requires a company to recognize revenue when it transfers promised services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those services and requires enhanced disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The new guidance is effective for annual and interim periods beginning after December 15, 2016 and early adoption is not permitted. The new guidance can be applied either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the new guidance.
3. | RECEIVABLES |
The Companys receivables represent receivables from fees, customers and other and related parties.
Receivables are stated net of an estimated allowance for doubtful accounts, for past due amounts and for specific accounts deemed uncollectible, which may include situations where a fee is in dispute. Activity in the allowance for doubtful accounts for the three month and nine month periods ended September 30, 2014 and 2013 was as follows:
Three Month Period Ended September 30, |
Nine Month Period Ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Beginning Balance |
$ | 29,943 | $ | 24,593 | $ | 28,777 | $ | 23,017 | ||||||||
Bad debt expense, net of recoveries |
2,064 | (198 | ) | 9,567 | 1,644 | |||||||||||
Charge-offs, foreign currency translation and other adjustments |
(2,148 | ) | 1,765 | (8,485 | ) | 1,499 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Ending Balance |
$ | 29,859 | $ | 26,160 | $ | 29,859 | $ | 26,160 | ||||||||
|
|
|
|
|
|
|
|
At September 30, 2014 and December 31, 2013, the Company had receivables past due or deemed uncollectible of $35,086 and $39,341, respectively.
Of the Companys fee receivables at September 30, 2014 and December 31, 2013, $81,531 and $69,464, respectively, represented interest-bearing financing receivables. Based upon our historical loss experience, the
11
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
credit quality of the counterparties, and the lack of past due or uncollectible amounts, there was no allowance for doubtful accounts required at those dates related to such receivables.
The aggregate carrying amount of our non-interest bearing receivables of $426,384 and $443,211 at September 30, 2014 and December 31, 2013, respectively, approximates fair value.
4. | INVESTMENTS |
The Companys investments and securities sold, not yet purchased, consist of the following at September 30, 2014 and December 31, 2013:
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
Interest-bearing deposits |
$ | 24,785 | $ | 516 | ||||
|
|
|
|
|||||
Debt |
7,185 | 8,013 | ||||||
|
|
|
|
|||||
Equities |
63,275 | 59,394 | ||||||
|
|
|
|
|||||
Funds: |
||||||||
Alternative investments (a) |
36,184 | 37,030 | ||||||
Debt (a) |
81,099 | 58,769 | ||||||
Equity (a) |
211,772 | 190,702 | ||||||
Private equity |
117,104 | 114,193 | ||||||
|
|
|
|
|||||
446,159 | 400,694 | |||||||
|
|
|
|
|||||
Equity method |
8,518 | 9,488 | ||||||
|
|
|
|
|||||
Total investments |
549,922 | 478,105 | ||||||
Less: |
||||||||
Interest-bearing deposits |
24,785 | 516 | ||||||
Equity method |
8,518 | 9,488 | ||||||
|
|
|
|
|||||
Investments, at fair value |
$ | 516,619 | $ | 468,101 | ||||
|
|
|
|
|||||
Securities sold, not yet purchased, at fair value (included in other liabilities) |
$ | 8,630 | $ | 4,045 | ||||
|
|
|
|
(a) | Interests in alternative investment funds, debt funds and equity funds include investments with fair values of $8,566, $43,779 and $166,541, respectively, at September 30, 2014 and $7,099, $31,515 and $130,481, respectively, at December 31, 2013, held in order to satisfy the Companys liability upon vesting of previously granted Lazard Fund Interests (LFI) and other similar deferred compensation arrangements. LFI represent grants by the Company to eligible employees of actual or notional interests in a number of Lazard-managed funds (see Notes 6 and 12 of Notes to Condensed Consolidated Financial Statements). |
Interest-bearing deposits mature within one year and are carried at cost that approximates fair value due to their short-term maturities.
Debt securities primarily consist of seed investments invested in debt securities held within separately managed accounts related to our Asset Management business.
Equities primarily consist of seed investments invested in marketable equity securities of large-, mid- and small-cap domestic, international and global companies held within separately managed accounts related to our Asset Management business.
12
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
Alternative investment funds primarily consist of interests in various Lazard-managed hedge funds and funds of funds.
Debt funds primarily consist of seed investments in funds related to our Asset Management business that invest in debt securities, and amounts related to LFI discussed above.
Equity funds primarily consist of seed investments in funds related to our Asset Management business that invest in equity securities, and amounts related to LFI discussed above.
Private equity investments include those owned by Lazard and those consolidated but not owned by Lazard. Private equity investments owned by Lazard are primarily comprised of investments in private equity funds. Such investments primarily include (i) a mezzanine fund, which invests in mezzanine debt of a diversified selection of small- to mid-cap European companies, (ii) Corporate Partners II Limited (CP II), a fund targeting significant noncontrolling-stake investments in established private companies, (iii) Edgewater Growth Capital Partners III, L.P. (EGCP III), a fund primarily making equity and buyout investments in middle market companies and (iv) Lazard Australia Corporate Opportunities Fund (COF2), a Lazard-managed Australian fund targeting Australian mid-market investments.
Private equity investments consolidated but not owned by Lazard relate to the economic interests that are owned by the management team and other investors in the Edgewater Funds (Edgewater) which totaled $6,732 and $9,787 at September 30, 2014 and December 31, 2013, respectively (see Note 10 of Notes to Condensed Consolidated Financial Statements).
During the three month and nine month periods ended September 30, 2014 and 2013, the Company reported in revenue-other on its condensed consolidated statements of operations gross unrealized investment gains and losses pertaining to trading securities as follows:
Three Month Period Ended September 30, |
Nine Month Period Ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Gross unrealized investment gains |
$ | | $ | 10,925 | $ | 5,526 | $ | 12,044 | ||||||||
Gross unrealized investment losses |
$ | 13,897 | $ | | $ | 5,601 | $ | 3,907 |
5. | FAIR VALUE MEASUREMENTS |
Lazard categorizes its investments and certain other assets and liabilities recorded at fair value into a three-level fair value hierarchy as follows:
Level 1. | Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that Lazard has the ability to access. |
Level 2. | Assets and liabilities whose values are based on (i) quoted prices for similar assets or liabilities in an active market, or quoted prices for identical or similar assets or liabilities in non-active markets, (ii) assets valued based on net asset value (NAV) or its equivalent redeemable at the measurement date or within the near term without redemption restrictions, or (iii) inputs other than quoted prices that are directly observable or derived principally from, or corroborated by, market data. |
13
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
Level 3. | Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect our own assumptions about the assumptions a market participant would use in pricing the asset or liability. Items included in Level 3 include securities or other financial assets whose trading volume and level of activity have significantly decreased when compared with normal market activity and there is no longer sufficient frequency or volume to provide pricing information on an ongoing basis, as well as assets valued based on NAV or its equivalent, but not redeemable within the near term as a result of redemption restrictions. |
The Companys investments in debt securities are classified as Level 1 when their respective fair values are based on unadjusted quoted prices in active markets and are classified as Level 2 when their fair values are primarily based on prices as provided by external pricing services.
The fair value of equities is classified as Level 1 or Level 3 as follows: marketable equity securities are classified as Level 1 and are valued based on the last trade price on the primary exchange for that security as provided by external pricing services; equity securities in private companies are generally classified as Level 3.
The fair value of investments in alternative investment funds is classified as Level 2 and is valued at NAV or its equivalent, which is primarily determined based on information provided by external fund administrators. Such investments are redeemable within the near term.
The fair value of investments in debt funds is classified as Level 1 when the fair values are primarily based on the publicly reported closing price for the fund, and classified as Level 2 when the fair values are primarily based on NAV or its equivalent and are redeemable within the near term.
The fair value of investments in equity funds is classified as Level 1 or 2 as follows: publicly traded asset management funds are classified as Level 1 and are valued based on the reported closing price for the fund; and investments in asset management funds redeemable in the near term are classified as Level 2 and are valued at NAV or its equivalent, which is primarily determined based on information provided by external fund administrators.
The fair value of investments in private equity funds is classified as Level 3, and is primarily based on NAV or its equivalent. Such investments are not redeemable within the near term.
The fair values of derivatives entered into by the Company are classified as Level 2 and are based on the values of the related underlying assets, indices or reference rates as follows - the fair value of forward foreign currency exchange rate contracts is a function of the spot rate and the interest rate differential of the two currencies from the trade date to settlement date; the fair value of total return swaps is based on the change in fair values of the related underlying equity security, financial instrument or index and a specified notional holding; the fair value of interest rate swaps is based on the interest rate yield curve; and the fair value of derivative liabilities related to LFI and other similar deferred compensation arrangements is based on the value of the underlying investments, adjusted for forfeitures. See Note 6 of Notes to Condensed Consolidated Financial Statements.
Where reported information regarding an investment is based on data received from external fund administrators or pricing services, the Company reviews such information and classifies the investment at the relevant level within the fair value hierarchy.
14
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
The following tables present the classification of investments and certain other assets and liabilities measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013 within the fair value hierarchy:
September 30, 2014 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Investments: |
||||||||||||||||
Debt |
$ | 1,141 | $ | 6,044 | $ | | $ | 7,185 | ||||||||
Equities |
61,941 | | 1,334 | 63,275 | ||||||||||||
Funds: |
||||||||||||||||
Alternative investments |
| 36,184 | | 36,184 | ||||||||||||
Debt |
81,095 | 4 | | 81,099 | ||||||||||||
Equity |
211,729 | 43 | | 211,772 | ||||||||||||
Private equity |
| | 117,104 | 117,104 | ||||||||||||
Derivatives |
| 8,625 | | 8,625 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 355,906 | $ | 50,900 | $ | 118,438 | $ | 525,244 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Securities sold, not yet purchased |
$ | 8,630 | $ | | $ | | $ | 8,630 | ||||||||
Derivatives |
| 209,941 | | 209,941 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 8,630 | $ | 209,941 | $ | | $ | 218,571 | ||||||||
|
|
|
|
|
|
|
|
December 31, 2013 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Investments: |
||||||||||||||||
Debt |
$ | 1,681 | $ | 6,332 | $ | | $ | 8,013 | ||||||||
Equities |
58,054 | | 1,340 | 59,394 | ||||||||||||
Funds: |
||||||||||||||||
Alternative investments |
| 37,030 | | 37,030 | ||||||||||||
Debt |
58,765 | 4 | | 58,769 | ||||||||||||
Equity |
190,660 | 42 | | 190,702 | ||||||||||||
Private equity |
| | 114,193 | 114,193 | ||||||||||||
Derivatives |
| 682 | | 682 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 309,160 | $ | 44,090 | $ | 115,533 | $ | 468,783 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Securities sold, not yet purchased |
$ | 4,045 | $ | | $ | | $ | 4,045 | ||||||||
Derivatives |
| 164,001 | | 164,001 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 4,045 | $ | 164,001 | $ | | $ | 168,046 | ||||||||
|
|
|
|
|
|
|
|
15
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
The following tables provide a summary of changes in fair value of the Companys Level 3 assets for the three month and nine month periods ended September 30, 2014 and 2013:
Three Months Ended September 30, 2014 | ||||||||||||||||||||||||
Beginning Balance |
Net
Unrealized/ Realized Gains (Losses) Included In Revenue- Other (a) |
Purchases/ Acquisitions |
Sales/ Dispositions |
Foreign Currency Translation Adjustments |
Ending Balance |
|||||||||||||||||||
Investments: |
||||||||||||||||||||||||
Equities |
$ | 1,370 | $ | | $ | | $ | | $ | (36 | ) | $ | 1,334 | |||||||||||
Private equity funds |
116,895 | 2,500 | 7,498 | (5,769 | ) | (4,020 | ) | 117,104 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Level 3 Assets |
$ | 118,265 | $ | 2,500 | $ | 7,498 | $ | (5,769 | ) | $ | (4,056 | ) | $ | 118,438 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2014 | ||||||||||||||||||||||||
Beginning Balance |
Net
Unrealized/ Realized Gains (Losses) Included In Revenue- Other (a) |
Purchases/ Acquisitions |
Sales/ Dispositions |
Foreign Currency Translation Adjustments |
Ending Balance |
|||||||||||||||||||
Investments: |
||||||||||||||||||||||||
Equities |
$ | 1,340 | $ | 14 | $ | | $ | | $ | (20 | ) | $ | 1,334 | |||||||||||
Private equity funds |
114,193 | 9,336 | 8,709 | (10,854 | ) | (4,280 | ) | 117,104 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Level 3 Assets |
$ | 115,533 | $ | 9,350 | $ | 8,709 | $ | (10,854 | ) | $ | (4,300 | ) | $ | 118,438 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2013 | ||||||||||||||||||||||||
Beginning Balance |
Net
Unrealized/ Realized Gains (Losses) Included In Revenue- Other (a) |
Purchases/ Acquisitions |
Sales/ Dispositions |
Foreign Currency Translation Adjustments |
Ending Balance |
|||||||||||||||||||
Investments: |
||||||||||||||||||||||||
Equities |
$ | 637 | $ | 2 | $ | 650 | $ | | $ | 34 | $ | 1,323 | ||||||||||||
Alternative investment funds |
11 | (11 | ) | | | | | |||||||||||||||||
Private equity funds |
112,833 | 5,174 | 2,907 | (6,848 | ) | 1,502 | 115,568 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Level 3 Assets |
$ | 113,481 | $ | 5,165 | $ | 3,557 | $ | (6,848 | ) | $ | 1,536 | $ | 116,891 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
16
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
Nine Months Ended September 30, 2013 | ||||||||||||||||||||||||
Beginning Balance |
Net
Unrealized/ Realized Gains (Losses) Included In Revenue- Other (a) |
Purchases/ Acquisitions |
Sales/ Dispositions |
Foreign Currency Translation Adjustments |
Ending Balance |
|||||||||||||||||||
Investments: |
||||||||||||||||||||||||
Equities |
$ | 190 | $ | 8 | $ | 1,095 | $ | | $ | 30 | $ | 1,323 | ||||||||||||
Alternative investment funds |
3,457 | 117 | | (3,574 | ) | | | |||||||||||||||||
Equity funds |
10 | | | (10 | ) | | | |||||||||||||||||
Private equity funds |
112,444 | 8,912 | 6,166 | (12,716 | ) | 762 | 115,568 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Level 3 Assets |
$ | 116,101 | $ | 9,037 | $ | 7,261 | $ | (16,300 | ) | $ | 792 | $ | 116,891 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(a) | Earnings for the three month and nine month periods ended September 30, 2014 and the three month and nine month periods ended September 30, 2013 include net unrealized gains of $810, $6,346, $2,680 and $6,007, respectively. |
There were no transfers between any of the Level 1, 2 and 3 categories in the fair value measurement hierarchy during the three month and nine month periods ended September 30, 2014 and 2013.
Fair Value of Certain Investments Based on NAVThe Companys Level 2 and Level 3 investments at September 30, 2014 and December 31, 2013 include certain investments that are valued using NAV or its equivalent as a practical expedient in determining fair value. Information with respect thereto was as follows:
September 30, 2014 | ||||||||||||||||||||||
% of Fair Value Not Redeemable |
Estimated Liquidation Period of Investments Not Redeemable |
Investments Redeemable | ||||||||||||||||||||
Fair value | Unfunded Commitments |
% Next 5 Years |
% 5-10 Years |
% Thereafter |
Redemption Frequency |
Redemption Notice Period | ||||||||||||||||
Alternative investment funds: |
||||||||||||||||||||||
Hedge funds |
$ | 32,344 | $ | | NA | NA | NA | NA | (a) | <30-60 days | ||||||||||||
Funds of funds |
480 | | NA | NA | NA | NA | (b) | <30-90 days | ||||||||||||||
Other |
3,360 | | NA | NA | NA | NA | (c) | <30-60 days | ||||||||||||||
Debt funds |
4 | | NA | NA | NA | NA | (d) | 30 days | ||||||||||||||
Equity funds |
43 | | NA | NA | NA | NA | (e) | 30-90 days | ||||||||||||||
Private equity funds: |
||||||||||||||||||||||
Equity growth |
76,164 | 19,137 | (f) | 100% | 11% | 61% | 28% | NA | NA | |||||||||||||
Mezzanine debt |
40,940 | | 100% | % | % | 100% | NA | NA | ||||||||||||||
|
|
|
|
|||||||||||||||||||
Total |
$ | 153,335 | $ | 19,137 | ||||||||||||||||||
|
|
|
|
(a) | weekly (17%), monthly (64%) and quarterly (19%) |
(b) | monthly (98%) and quarterly (2%) |
(c) | daily (11%), weekly (5%) and monthly (84%) |
(d) | daily (100%) |
(e) | daily (14%), monthly (58%) and quarterly (28%) |
(f) | Unfunded commitments to private equity investments consolidated but not owned by Lazard of $7,518 are excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest holders. |
17
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
December 31, 2013 | ||||||||||||||||||||||
% of Fair Value Not Redeemable |
Estimated Liquidation Period of Investments Not Redeemable |
Investments Redeemable | ||||||||||||||||||||
Fair value | Unfunded Commitments |
% Next 5 Years |
% 5-10 Years |
% Thereafter |
Redemption Frequency |
Redemption Notice Period | ||||||||||||||||
Alternative investment funds: |
||||||||||||||||||||||
Hedge funds |
$ | 31,837 | $ | | NA | NA | NA | NA | (a) | <30-90 days | ||||||||||||
Funds of funds |
475 | | NA | NA | NA | NA | (b) | <30-90 days | ||||||||||||||
Other |
4,718 | | NA | NA | NA | NA | (c) | <30-60 days | ||||||||||||||
Debt funds |
4 | | NA | NA | NA | NA | (d) | 30 days | ||||||||||||||
Equity funds |
42 | | NA | NA | NA | NA | (e) | 30-90 days | ||||||||||||||
Private equity funds: |
||||||||||||||||||||||
Equity growth |
70,054 | 27,135 | (f) | 100% | 17% | 60% | 23% | NA | NA | |||||||||||||
Mezzanine debt |
44,139 | | 100% | % | % | 100% | NA | NA | ||||||||||||||
|
|
|
|
|||||||||||||||||||
Total |
$ | 151,269 | $ | 27,135 | ||||||||||||||||||
|
|
|
|
(a) | weekly (17%), monthly (65%) and quarterly (18%) |
(b) | monthly (95%) and quarterly (5%) |
(c) | daily (7%), weekly (1%) and monthly (92%) |
(d) | daily (100%) |
(e) | daily (13%), monthly (58%) and quarterly (29%) |
(f) | Unfunded commitments to private equity investments consolidated but not owned by Lazard of $10,613 are excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest holders. |
See Note 4 of Notes to Condensed Consolidated Financial Statements for discussion of significant investment strategies for investments with value based on NAV.
Investment Capital Funding CommitmentsAt September 30, 2014, the Companys maximum unfunded commitments for capital contributions to investment funds arose from (i) commitments to CP II, which amounted to $1,644 for potential follow-on investments and/or for fund expenses through the earlier of February 25, 2017 or the liquidation of the fund, (ii) commitments to EGCP III, which amounted to $12,688, through the earlier of October 12, 2016 (i.e., the end of the investment period) for investments and/or expenses (with a portion of the undrawn amount of such commitments as of that date remaining committed until October 12, 2023 in respect of follow-on investments and/or fund expenses) or the liquidation of the fund and (iii) commitments to COF2, which amounted to $4,805, through the earlier of November 11, 2016 (i.e., the end of the investment period) for investments and/or fund expenses (with a portion of the undrawn amount of such commitments as of that date remaining committed until November 11, 2019 in respect of follow-on investments and/or fund expenses) or the liquidation of the fund.
6. | DERIVATIVES |
The Company enters into forward foreign currency exchange rate contracts, interest rate swaps, interest rate futures, total return swap contracts on various equity and debt indices and other derivative contracts to economically hedge exposures to fluctuations in currency exchange rates, interest rates and equity and debt prices. The Company reports its derivative instruments separately as assets and liabilities unless a legal right of
18
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
set-off exists under a master netting agreement enforceable by law. The Companys derivative instruments are recorded at their fair value, and are included in other assets and other liabilities on the consolidated statements of financial condition. Gains and losses on the Companys derivative instruments not designated as hedging instruments are included in interest income and interest expense, respectively, or revenue-other, depending on the nature of the underlying item, on the consolidated statements of operations.
In addition to the derivative instruments described above, the Company records derivative liabilities relating to its obligations pertaining to LFI and other similar deferred compensation arrangements, the fair value of which is based on the value of the underlying investments, adjusted for estimated forfeitures, and is included in accrued compensation and benefits in the consolidated statements of financial condition. Changes in the fair value of the derivative liabilities are included in compensation and benefits in the consolidated statements of operations, the impact of which equally offsets the changes in the fair value of investments which are currently expected to be delivered upon settlement of LFI and other similar deferred compensation arrangements, which are reported in revenue-other in the consolidated statements of operations.
The tables below present the fair values of the Companys derivative instruments reported within other assets and other liabilities and the fair values of the Companys derivative liabilities relating to its obligations pertaining to LFI and other similar deferred compensation arrangements (see Note 12 of Notes to Condensed Consolidated Financial Statements) on the accompanying condensed consolidated statements of financial condition as of September 30, 2014 and December 31, 2013:
September 30, 2014 |
December 31, 2013 |
|||||||
Derivative Assets: |
||||||||
Forward foreign currency exchange rate contracts |
$ | 4,464 | $ | 250 | ||||
Total return swaps and other (a) |
4,161 | 432 | ||||||
|
|
|
|
|||||
$ | 8,625 | $ | 682 | |||||
|
|
|
|
|||||
Derivative Liabilities: |
||||||||
Forward foreign currency exchange rate contracts |
$ | 20 | $ | 1,579 | ||||
LFI and other similar deferred compensation arrangements |
209,921 | 162,422 | ||||||
|
|
|
|
|||||
$ | 209,941 | $ | 164,001 | |||||
|
|
|
|
(a) | For total return swaps, amounts represent the netting of gross derivative assets and liabilities of $4,220 and $59 as of September 30, 2014, respectively, and $2,019 and $1,587 as of December 31, 2013, respectively, for contracts with the same counterparty under legally enforceable master netting agreements. Such amounts are recorded net in other assets, with receivables for net cash collateral under such contracts of $10,434 and $11,384 as of September 30, 2014 and December 31, 2013, respectively. |
19
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
Net gains (losses) with respect to derivative instruments (predominantly reflected in revenue-other) and the Companys derivative liabilities relating to its obligations pertaining to LFI and other similar deferred compensation arrangements (included in compensation and benefits expense) as reflected on the accompanying condensed consolidated statements of operations for the three month and nine month periods ended September 30, 2014 and 2013, were as follows:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Forward foreign currency exchange rate contracts |
$ | 15,355 | $ | (5,310 | ) | $ | 14,380 | $ | (1,705 | ) | ||||||
LFI and other similar deferred compensation arrangements |
5,528 | (7,519 | ) | (6,004 | ) | (7,767 | ) | |||||||||
Total return swaps and other |
2,835 | (6,520 | ) | (5,436 | ) | (6,872 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 23,718 | $ | (19,349 | ) | $ | 2,940 | $ | (16,344 | ) | ||||||
|
|
|
|
|
|
|
|
7. | PROPERTY |
At September 30, 2014 and December 31, 2013, property consists of the following:
Estimated Depreciable Life in Years |
September 30, 2014 |
December 31, 2013 |
||||||||||
Buildings |
33 | $ | 158,551 | $ | 173,772 | |||||||
Leasehold improvements |
3-20 | 169,814 | 175,600 | |||||||||
Furniture and equipment |
3-10 | 151,270 | 149,598 | |||||||||
Construction in progress |
5,236 | 3,756 | ||||||||||
|
|
|
|
|||||||||
Total |
484,871 | 502,726 | ||||||||||
Less - Accumulated depreciation and amortization |
257,512 | 253,930 | ||||||||||
|
|
|
|
|||||||||
Property |
$ | 227,359 | $ | 248,796 | ||||||||
|
|
|
|
8. | GOODWILL AND OTHER INTANGIBLE ASSETS |
The components of goodwill and other intangible assets at September 30, 2014 and December 31, 2013 are presented below:
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
Goodwill |
$ | 343,776 | $ | 345,453 | ||||
Other intangible assets (net of accumulated amortization) |
12,478 | 18,424 | ||||||
|
|
|
|
|||||
$ | 356,254 | $ | 363,877 | |||||
|
|
|
|
At September 30, 2014 and December 31, 2013, goodwill of $279,235 and $280,912, respectively, was attributable to the Companys Financial Advisory segment and, at each such respective date, $64,541 of goodwill was attributable to the Companys Asset Management segment.
20
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
Changes in the carrying amount of goodwill for the nine month periods ended September 30, 2014 and 2013 are as follows:
Nine Months
Ended September 30, |
||||||||
2014 | 2013 | |||||||
Balance, January 1 |
$ | 345,453 | $ | 364,328 | ||||
Business acquisitions |
3,232 | 1,601 | ||||||
Foreign currency translation adjustments |
(4,909 | ) | (15,310 | ) | ||||
|
|
|
|
|||||
Balance, September 30 |
$ | 343,776 | $ | 350,619 | ||||
|
|
|
|
The gross cost and accumulated amortization of other intangible assets as of September 30, 2014 and December 31, 2013, by major intangible asset category, are as follows:
September 30, 2014 | December 31, 2013 | |||||||||||||||||||||||
Gross Cost |
Accumulated Amortization |
Net Carrying Amount |
Gross Cost |
Accumulated Amortization |
Net Carrying Amount |
|||||||||||||||||||
Performance fees |
$ | 30,740 | $ | 21,116 | $ | 9,624 | $ | 30,740 | $ | 17,173 | $ | 13,567 | ||||||||||||
Management fees, customer relationships and non-compete agreements |
33,063 | 30,209 | 2,854 | 33,063 | 28,206 | 4,857 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 63,803 | $ | 51,325 | $ | 12,478 | $ | 63,803 | $ | 45,379 | $ | 18,424 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of intangible assets for the three month and nine month periods ended September 30, 2014 was $4,020 and $5,946, respectively, and for the three month and nine month periods ended September 30, 2013 was $877 and $2,758, respectively. Estimated future amortization expense is as follows:
Year Ending December 31, |
Amortization Expense (a) |
|||
2014 (October 1 through December 31) |
$ | 864 | ||
2015 |
6,433 | |||
2016 |
5,181 | |||
|
|
|||
Total amortization expense |
$ | 12,478 | ||
|
|
(a) | Approximately 46% of intangible asset amortization is attributable to a noncontrolling interest. |
9. | SENIOR DEBT |
Senior debt is comprised of the following as of September 30, 2014 and December 31, 2013:
Initial Principal Amount |
Maturity Date |
Annual Interest Rate |
Outstanding As of | |||||||||||||||||
September
30, 2014 |
December
31, 2013 |
|||||||||||||||||||
Lazard Group 6.85% Senior Notes |
600,000 | 6/15/17 | 6.85 | % | $ | 548,350 | $ | 548,350 | ||||||||||||
Lazard Group 4.25% Senior Notes |
500,000 | 11/14/20 | 4.25 | % | 500,000 | 500,000 | ||||||||||||||
Lazard Group Credit Facility |
150,000 | 9/25/15 | 0.78 | % | | | ||||||||||||||
|
|
|
|
|||||||||||||||||
Total |
$ | 1,048,350 | $ | 1,048,350 | ||||||||||||||||
|
|
|
|
21
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
In November 2013, and in connection with Lazard Groups redemption of $528,500 aggregate principal amount of its then outstanding 7.125% senior notes maturing on May 15, 2015 (the 2015 Notes), Lazard Group issued $500,000 aggregate principal amount of 4.25% senior notes maturing on November 14, 2020 (the 2020 Notes). Interest on the 2020 Notes is payable semi-annually on May 14 and November 14 of each year.
On September 25, 2012, Lazard Group entered into a $150,000, three-year senior revolving credit facility with a group of lenders (the Credit Facility), which expires in September 2015. The Credit Facility replaced a similar revolving credit facility which was terminated as a condition to effectiveness of the Credit Facility. Interest rates under the Credit Facility vary and are based on either a Federal Funds rate or a Eurodollar rate, in each case plus an
applicable margin. As of September 30, 2014, the annual interest rate for a loan accruing interest (based on the Federal Funds overnight rate), including the applicable margin, was 0.78%. At September 30, 2014 and December 31, 2013, no amounts were outstanding under the Credit Facility.
The Credit Facility contains customary terms and conditions, including certain financial covenants. In addition, the Credit Facility, the indenture and the supplemental indentures relating to Lazard Groups senior notes contain certain covenants, events of default and other customary provisions, including a customary make-whole provision in the event of early redemption, where applicable. As of September 30, 2014, the Company was in compliance with such provisions. All of the Companys senior debt obligations are unsecured.
As of September 30, 2014, the Company had approximately $262,000 in unused lines of credit available to it, including the Credit Facility, and unused lines of credit available to LFB of approximately $44,000 (at September 30, 2014 exchange rates) and Edgewater of $64,000. In the second quarter of 2014, $20,000 of Edgewaters available lines of credit was drawn down by the general partner of EGCP III to provide a loan to EGCP III to finance a certain fund investment. The loan to EGCP III was repaid in the third quarter of 2014 from a capital call made by EGCP III to its investors. In addition, LFB has access to the Eurosystem Covered Bond Purchase Program of the Banque de France.
The Companys senior debt at September 30, 2014 and December 31, 2013 is carried at historical amounts. At those dates, the fair value of such senior debt was approximately $1,141,000 and $1,117,000, respectively, and exceeded the aggregate carrying value by approximately $93,000 and $69,000, respectively. The fair value of the Companys senior debt is based on market quotations. The Companys senior debt would be categorized within Level 2 of the hierarchy of fair value measurements if carried at fair value.
22
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
10. | COMMITMENTS AND CONTINGENCIES |
LeasesThe Company has various leases and other contractual commitments arising in the ordinary course of business. At September 30, 2014, minimum rental commitments under non-cancelable operating leases, net of sublease income, are approximately as follows:
Year Ending December 31, |
||||
2014 (October 1 through December 31) |
$ | 21,159 | ||
2015 |
77,287 | |||
2016 |
75,672 | |||
2017 |
70,321 | |||
2018 |
64,894 | |||
Thereafter |
646,775 | |||
|
|
|||
Total minimum lease payments |
956,108 | |||
Sublease proceeds (a) |
82,162 | |||
|
|
|||
Net lease payments |
$ | 873,946 | ||
|
|
(a) | Committed sublease income was reduced by approximately $79,600 in the third quarter of 2014 pursuant to arrangements we entered into with LFCM Holdings LLC (LFCM Holdings). See Note 17 of Notes to Condensed Consolidated Financial Statements. |
GuaranteesIn the normal course of business, LFB provides indemnifications to third parties to protect them in the event of non-performance by its clients. At September 30, 2014, LFB had $4,851 of such indemnifications and held $4,357 of collateral/counter-guarantees to secure these commitments. The Company believes the likelihood of loss with respect to these indemnities is remote. Accordingly, no liability is recorded in the condensed consolidated statement of financial condition.
Certain Business TransactionsOn July 15, 2009, the Company established a private equity business with Edgewater. Edgewater manages funds primarily focused on buy-out and growth equity investments in middle market companies. The acquisition was structured as a purchase by Lazard Group of interests in a holding company that in turn owns interests in the general partner and management company entities of the current Edgewater private equity funds (the Edgewater Acquisition). Following the Edgewater Acquisition, Edgewaters leadership team retained a substantial economic interest in such entities.
The aggregate fair value of the consideration recognized by the Company at the acquisition date was $61,624. Such consideration consisted of (i) a one-time cash payment, (ii) 1,142,857 shares of Class A common stock (the Initial Shares) and (iii) up to 1,142,857 additional shares of Class A common stock (the Earnout Shares) that are subject to earnout criteria and payable over time. The Initial Shares are subject to forfeiture provisions that lapse only upon the achievement of certain performance thresholds and transfer restrictions during the four year period ending December 2014. The Earnout Shares will be issued only if certain performance thresholds are met. As of September 30, 2014 and December 31, 2013, 913,722 shares are issuable on a contingent basis, and 1,371,992 shares have been earned because applicable performance thresholds have been satisfied. As of September 30, 2014 and December 31, 2013, 1,041,436 and 1,029,006, respectively, of the earned shares have been settled.
Contingent Consideration Relating To Other Business AcquisitionsFor a business acquired in 2012, at December 31, 2012, 170,988 shares of Class A common stock (including dividend equivalent shares) were issuable on a
23
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
non-contingent basis. Such shares were delivered in the first quarter of 2013. The Company is obligated to issue a maximum of 202,650 additional shares of Class A common stock if certain performance thresholds are achieved by December 31, 2014.
Other CommitmentsIn the normal course of business, LFB enters into commitments to extend credit, predominately at variable interest rates. These commitments have varying expiration dates, are fully collateralized and generally contain requirements for the counterparty to maintain a minimum collateral level. These commitments may not represent future cash requirements as they may expire without being drawn upon. At September 30, 2014, these commitments were not material.
See Notes 5 and 13 of Notes to Condensed Consolidated Financial Statements for information regarding commitments relating to investment capital funding commitments and obligations to fund our pension plans, respectively.
The Company has various other contractual commitments arising in the ordinary course of business. In addition, from time to time, each of LFB and LFNY (See Note 17 of Notes to Condensed Consolidated Financial Statements) may enter into underwriting commitments in which it will participate as an underwriter. At September 30, 2014, LFB and LFNY had no such underwriting commitments.
In the opinion of management, the fulfillment of the commitments described herein will not have a material adverse effect on the Companys consolidated financial position or results of operations.
LegalThe Company is involved from time to time in judicial, regulatory and arbitration proceedings and inquiries concerning matters arising in connection with the conduct of our businesses, including proceedings initiated by former employees alleging wrongful termination. The Company reviews such matters on a case-by-case basis and establishes any required accrual if a loss is probable and the amount of such loss can be reasonably estimated. The Company experiences significant variation in its revenue and earnings on a quarterly basis. Accordingly, the results of any pending matter or matters could be significant when compared to the Companys earnings in any particular fiscal quarter. The Company believes, however, based on currently available information, that the results of any pending matters, in the aggregate, will not have a material effect on its business or financial condition.
11. | STOCKHOLDERS EQUITY |
Lazard Group DistributionsAs previously described, Lazard Groups common membership interests are held by subsidiaries of Lazard Ltd and, until May 2014, also were held by LAZ-MD Holdings. Pursuant to provisions of the Operating Agreement, Lazard Group distributions in respect of its common membership interests are allocated to the holders of such interests on a pro rata basis. Such distributions represent amounts necessary to fund (i) any dividends Lazard Ltd may declare on its Class A common stock and (ii) tax distributions in respect of income taxes that Lazard Ltds subsidiaries incur and, until May 2014, that the members of LAZ-MD Holdings incurred, as a result of holding Lazard Group common membership interests.
During the nine month periods ended September 30, 2014 and 2013, Lazard Group distributed the following amounts to LAZ-MD Holdings and the subsidiaries of Lazard Ltd (none of which related to tax distributions):
Nine Months Ended September 30, |
||||||||
2014 | 2013 | |||||||
LAZ-MD Holdings |
$ | 213 | $ | 565 | ||||
Subsidiaries of Lazard Ltd |
109,592 | 60,931 | ||||||
|
|
|
|
|||||
$ | 109,805 | $ | 61,496 | |||||
|
|
|
|
24
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
Pursuant to Lazard Groups Operating Agreement, Lazard Group allocates and distributes to its members a substantial portion of its distributable profits in installments, as soon as practicable after the end of each fiscal year. Such installment distributions usually begin in February.
Exchanges of Lazard Group Common Membership InterestsDuring the nine month periods ended September 30, 2014 and 2013, Lazard Ltd issued 710,009 and 839,658 shares of Class A common stock, respectively, in connection with the exchanges of a like number of Lazard Group common membership interests (received from members of LAZ-MD Holdings in exchange for a like number of LAZ-MD Holdings exchangeable interests) (see Note 1 of Notes to Condensed Consolidated Financial Statements for a discussion of the Final Exchange of LAZ-MD Interests).
See Noncontrolling Interests below for additional information regarding Lazard Ltds and LAZ-MD Holdings ownership interests in Lazard Group.
Share Repurchase ProgramDuring the nine month period ended September 30, 2014 and for the years ended December 31, 2013, 2012 and 2011, the Board of Directors of Lazard Ltd authorized the repurchase of Class A common stock and Lazard Group common membership interests as set forth in the table below.
Date |
Share Repurchase Authorization |
Expiration | ||||||
February, 2011 |
$ | 250,000 | December 31, 2012 | |||||
October, 2011 |
$ | 125,000 | December 31, 2013 | |||||
April, 2012 |
$ | 125,000 | December 31, 2013 | |||||
October, 2012 |
$ | 200,000 | December 31, 2014 | |||||
October, 2013 |
$ | 100,000 | December 31, 2015 | |||||
April, 2014 |
$ | 200,000 | December 31, 2015 |
The Company expects that the share repurchase program will primarily be used to offset a portion of the shares that have been or will be issued under the Lazard Ltd 2005 Equity Incentive Plan (the 2005 Plan) and the Lazard Ltd 2008 Incentive Compensation Plan (the 2008 Plan). Pursuant to the share repurchase program, purchases have been made in the open market or through privately negotiated transactions. The rate at which the Company purchases shares in connection with the share repurchase program may vary from quarter to quarter due to a variety of factors. Purchases with respect to such program are set forth in the table below:
Number
of Shares/Common Membership Interests Purchased |
Average Price Per Share/Common Membership Interest |
|||||||
Nine Months Ended September 30: |
||||||||
2013 |
2,201,657 | $ | 35.40 | |||||
2014 |
4,114,206 | $ | 46.83 |
The shares purchased in the nine months ended September 30, 2014 included 1,000,000 shares purchased from Natixis S.A. on June 26, 2014 for $50,340 in connection with the sale by Natixis S.A. of its entire investment in the Companys Class A common stock. The purchase transaction closed on July 1, 2014. As of September 30, 2014, a total of $128,932 of share repurchase authorization remained available under the Companys share repurchase program, which will expire on December 31, 2015.
25
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
During the nine month period ended September 30, 2014, the Company had in place trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934, pursuant to which it effected stock repurchases in the open market.
Preferred StockLazard Ltd has 15,000,000 authorized shares of preferred stock, par value $0.01 per share, inclusive of its Series A and Series B preferred stock. Series A and Series B preferred shares were issued in connection with certain prior year business acquisitions and are each non-participating securities convertible into Class A common stock, and have no voting or dividend rights. As of both September 30, 2014 and December 31, 2013, 7,921 shares of Series A preferred stock were outstanding, and no shares of Series B preferred stock were outstanding. At September 30, 2014 and December 31, 2013, no shares of Series A preferred stock were convertible into shares of Class A common stock on a contingent or a non-contingent basis.
Accumulated Other Comprehensive Income (Loss), Net of Tax (AOCI)The tables below reflect changes in the balances of each component of AOCI during the nine month periods ended September 30, 2014 and 2013:
Currency Translation Adjustments |
Employee Benefit Plans |
Total AOCI |
Amount Attributable to Noncontrolling Interests |
Total Lazard Ltd AOCI |
||||||||||||||||
Balance, January 1, 2014 |
$ | 3,869 | $ | (137,431 | ) | $ | (133,562 | ) | $ | (558 | ) | $ | (133,004 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Activity January 1 to September 30, 2014: |
||||||||||||||||||||
Other comprehensive gain (loss) before reclassifications |
(18,640 | ) | (3,695 | ) | (22,335 | ) | 559 | (22,894 | ) | |||||||||||
Adjustments for items reclassified to earnings, net of tax |
| 3,714 | 3,714 | | 3,714 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net other comprehensive income (loss) |
(18,640 | ) | 19 | (18,621 | ) | 559 | (19,180 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance, September 30, 2014 |
$ | (14,771 | ) | $ | (137,412 | ) | $ | (152,183 | ) | $ | 1 | $ | (152,184 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
Currency Translation Adjustments |
Interest Rate Hedge |
Employee Benefit Plans |
Total AOCI |
Amount Attributable to Noncontrolling Interests |
Total Lazard Ltd AOCI |
|||||||||||||||||||
Balance, January 1, 2013 |
$ | 19,405 | $ | (2,502 | ) | $ | (128,536 | ) | $ | (111,633 | ) | $ | (1,092 | ) | $ | (110,541 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Activity January 1 to September 30, 2013: |
||||||||||||||||||||||||
Other comprehensive gain (loss) before reclassifications |
(18,610 | ) | | (2,669 | ) | (21,279 | ) | 451 | (21,730) | |||||||||||||||
Adjustments for items reclassified to earnings, net of tax |
| 791 | 3,653 | 4,444 | 25 | 4,419 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net other comprehensive income (loss) |
(18,610 | ) | 791 | 984 | (16,835 | ) | 476 | (17,311 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance, September 30, 2013 |
$ | 795 | $ | (1,711 | ) | $ | (127,552 | ) | $ | (128,468 | ) | $ | (616 | ) | $ | (127,852 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
26
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
The table below reflects adjustments for items reclassified out of AOCI, by component, for the three month and nine month periods ended September 30, 2014 and 2013:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Amortization of interest rate hedge (a) |
$ | | $ | 264 | $ | | $ | 791 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Amortization relating to employee benefit plans (b) |
1,673 | 1,627 | 5,105 | 4,859 | ||||||||||||
Less related income taxes |
528 | 404 | 1,391 | 1,206 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net of tax |
1,145 | 1,223 | 3,714 | 3,653 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total reclassifications, net of tax |
$ | 1,145 | $ | 1,487 | $ | 3,714 | $ | 4,444 | ||||||||
|
|
|
|
|
|
|
|
(a) | Included in interest expense on the condensed consolidated statements of operations. |
(b) | Included in the computation of net periodic benefit cost (see Note 13 of Notes to Condensed Consolidated Financial Statements). Such amount is included in compensation and benefits expense on the condensed consolidated statement of operations. |
Noncontrolling InterestsNoncontrolling interests principally represent interests held in (i) Lazard Group by LAZ-MD Holdings until May 2014 and (ii) Edgewaters management vehicles that the Company is deemed to control, but does not own. Following the Final Exchange of LAZ-MD Interests, Lazard Group became a wholly-owned indirect subsidiary of Lazard Ltd.
The following table summarizes the ownership interests in Lazard Group held by Lazard Ltd and LAZ-MD Holdings:
Lazard Ltd | LAZ-MD Holdings | Total Lazard Group Common Membership Interests |
||||||||||||||||||
As of September 30: |
Common Membership Interests |
% Ownership |
Common Membership Interests |
% Ownership |
||||||||||||||||
2013 |
129,056,081 | 99.5 | % | 710,009 | 0.5 | % | 129,766,090 | |||||||||||||
2014 |
129,766,090 | 100 | % | | | 129,766,090 |
The change in Lazard Ltds ownership in Lazard Group in the nine month periods ended September 30, 2014 and 2013 did not materially impact Lazard Ltds stockholders equity.
The tables below summarize net income attributable to noncontrolling interests for the three month and nine month periods ended September 30, 2014 and 2013 and noncontrolling interests as of September 30, 2014 and December 31, 2013 in the Companys condensed consolidated financial statements:
Net Income (Loss) Attributable To Noncontrolling Interests |
||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Edgewater |
$ | 1,060 | $ | 2,018 | $ | 5,732 | $ | 4,671 | ||||||||
LAZ-MD Holdings |
| 365 | 631 | 862 | ||||||||||||
Other |
1 | 83 | 2 | (210 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 1,061 | $ | 2,466 | $ | 6,365 | $ | 5,323 | ||||||||
|
|
|
|
|
|
|
|
27
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
Noncontrolling Interests As Of | ||||||||
September 30, 2014 |
December 31,
2013 |
|||||||
Edgewater |
$ |
64,360 |
|
$ | 66,641 | |||
LAZ-MD Holdings |
| 2,566 | ||||||
Other |
730 | 582 | ||||||
|
|
|
|
|||||
Total |
$ | 65,090 | $ | 69,789 | ||||
|
|
|
|
Dividend Declared, October 2014On October 22, 2014, Lazard Ltd announced a quarterly dividend of $0.30 per share on its Class A common stock, payable on November 14, 2014, to stockholders of record on November 3, 2014.
12. | INCENTIVE PLANS |
Share-Based Incentive Plan Awards
A description of Lazard Ltds 2005 Plan and 2008 Plan and activity with respect thereto during the three month and nine month periods ended September 30, 2014 and 2013, is presented below.
Shares Available Under the 2005 Plan and 2008 Plan
The 2005 Plan authorizes the issuance of up to 25,000,000 shares of Class A common stock pursuant to the grant or exercise of stock options, stock appreciation rights, restricted stock units (RSUs) and other equity-based awards. Each stock unit or similar award granted under the 2005 Plan represents a contingent right to receive one share of Class A common stock, at no cost to the recipient. The fair value of such awards is generally determined based on the closing market price of Class A common stock at the date of grant.
In addition to the shares available under the 2005 Plan, additional shares of Class A common stock are available under the 2008 Plan. The maximum number of shares available under the 2008 Plan is based on a formula that limits the aggregate number of shares that may, at any time, be subject to awards that are considered outstanding under the 2008 Plan to 30% of the then-outstanding shares of Class A common stock (treating, for this purpose, the then-outstanding exchangeable interests of LAZ-MD Holdings on a fully-exchanged basis as described in the 2008 Plan).
The following reflects the amortization expense recorded with respect to share-based incentive plans within compensation and benefits expense (with respect to RSUs, performance-based restricted stock units (PRSUs) and restricted stock awards) and professional services expense (with respect to deferred stock units (DSUs)) within the Companys accompanying condensed consolidated statements of operations for the three month and nine month periods ended September 30, 2014 and 2013:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Share-based incentive awards: |
||||||||||||||||
RSUs (a) |
$ | 39,091 | $ | 46,095 | $ | 132,307 | $ | 163,184 | ||||||||
PRSUs |
4,957 | 6,467 | 11,657 | 8,900 | ||||||||||||
Restricted Stock (b) |
2,637 | 2,627 | 13,493 | 9,712 | ||||||||||||
DSUs |
102 | 71 | 1,638 | 1,545 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 46,787 | $ | 55,260 | $ | 159,095 | $ | 183,341 | ||||||||
|
|
|
|
|
|
|
|
28
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
(a) | Includes charges relating to the cost saving initiatives of $9,099 for the nine month period ended September 30, 2013 (see Note 14 of Notes to Condensed Consolidated Financial Statements). |
(b) | Includes charges relating to the cost saving initiatives of $247 for the nine month period ended September 30, 2013. |
The ultimate amount of compensation and benefits expense relating to share-based awards is dependent upon the actual number of shares of Class A common stock that vest. The Company periodically assesses the forfeiture rates used for such estimates. A change in estimated forfeiture rates results in a cumulative adjustment to previously recorded compensation and benefits expense and also would cause the aggregate amount of compensation expense recognized in future periods to differ from the estimated unrecognized compensation expense described below.
For purposes of calculating diluted net income per share, RSUs and restricted stock awards are included in the diluted weighted average shares of Class A common stock outstanding using the treasury stock method. PRSUs are included in the diluted weighted average shares of Class A common stock outstanding to the extent the performance conditions are met at the end of the reporting period, also using the treasury stock method.
The Companys incentive plans are described below.
RSUs and DSUs
RSUs generally require future service as a condition for the delivery of the underlying shares of Class A common stock (unless the recipient is then eligible for retirement under the Companys retirement policy) and convert into shares of Class A common stock on a one-for-one basis after the stipulated vesting periods. PRSUs, which are RSUs that are also subject to service-based vesting conditions, have additional performance conditions, and are described below. The grant date fair value of the RSUs, net of an estimated forfeiture rate, is amortized over the vesting periods or requisite service periods (generally one-third after two years, and the remaining two-thirds after the third year), and is adjusted for actual forfeitures over such period.
RSUs generally include a dividend participation right that provides that during vesting periods each RSU is attributed additional RSUs (or fractions thereof) equivalent to any dividends paid on Class A common stock during such period. During the nine month periods ended September 30, 2014 and 2013, issuances of RSUs pertaining to such dividend participation rights and respective charges to retained earnings, net of estimated forfeitures (with corresponding credits to additional paid-in-capital), consisted of the following:
Nine Months Ended September 30, |
||||||||
2014 | 2013 | |||||||
Number of RSUs issued |
|
288,272 |
|
257,418 | ||||
Charges to retained earnings, net of estimated forfeitures |
$ |
13,489 |
|
$ | 8,440 |
Non-executive members of the Board of Directors (Non-Executive Directors) receive approximately 55% of their annual compensation for service on the Board of Directors and its committees in the form of DSUs, which resulted in 26,360 and 39,315 DSUs granted during the nine month periods ended September 30, 2014 and 2013, respectively. Their remaining compensation is payable in cash, which they may elect to receive in the form of additional DSUs under the Directors Fee Deferral Unit Plan described below. DSUs are convertible into shares of Class A common stock at the time of cessation of service to the Board of Directors and, for purposes of calculating diluted net income per share, are included in the diluted weighted average shares of Class A common stock
29
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
outstanding using the treasury stock method. DSUs include a cash dividend participation right equivalent to any ordinary quarterly dividends paid on Class A common stock, and resulted in nominal cash payments for the nine month periods ended September 30, 2014 and 2013.
The Companys Directors Fee Deferral Unit Plan permits the Non-Executive Directors to elect to receive additional DSUs pursuant to the 2005 Plan in lieu of some or all of their cash fees. The number of DSUs that shall be granted to a Non-Executive Director pursuant to this election will equal the value of cash fees that the applicable Non-Executive Director has elected to forego pursuant to such election, divided by the market value of a share of Class A common stock on the date immediately preceding the date of the grant. During the nine month periods ended September 30, 2014 and 2013, 6,381 and 5,880 DSUs, respectively, had been granted pursuant to such Plan.
DSU awards are expensed at their fair value on their date of grant, inclusive of amounts related to the Directors Fee Deferral Unit Plan.
The following is a summary of activity relating to RSUs and DSUs during the nine month periods ended September 30, 2014 and 2013:
RSUs | DSUs | |||||||||||||||
Units | Weighted Average Grant Date Fair Value |
Units | Weighted Average Grant Date Fair Value |
|||||||||||||
Balance, January 1, 2014 |
16,630,009 | $ | 34.51 | 251,434 | $ | 32.02 | ||||||||||
Granted (including 288,272 RSUs relating to dividend participation) |
3,733,113 | $ | 42.75 | 32,741 | $ | 50.04 | ||||||||||
Forfeited |
(210,458 | ) | $ | 33.45 | | | ||||||||||
Vested |
(6,529,801 | ) | $ | 37.86 | | | ||||||||||
|
|
|
|
|||||||||||||
Balance, September 30, 2014 |
13,622,863 | $ | 35.18 | 284,175 | $ | 34.10 | ||||||||||
|
|
|
|
|||||||||||||
Balance, January 1, 2013 |
21,481,131 | $ | 33.92 | 204,496 | $ | 31.47 | ||||||||||
Granted (including 257,418 RSUs relating to dividend participation) |
4,868,963 | $ | 36.92 | 45,195 | $ | 34.18 | ||||||||||
Forfeited |
(239,117 | ) | $ | 34.63 | | | ||||||||||
Vested |
(9,363,792 | ) | $ | 34.78 | | | ||||||||||
|
|
|
|
|||||||||||||
Balance, September 30, 2013 |
16,747,185 | $ | 34.30 | 249,691 | $ | 31.96 | ||||||||||
|
|
|
|
In connection with RSUs that vested during the nine month periods ended September 30, 2014 and 2013, the Company satisfied its minimum statutory tax withholding requirements in lieu of issuing 1,876,398 and 3,471,813 shares of Class A common stock in the respective nine month periods. Accordingly, 4,653,403 and 5,891,979 shares of Class A common stock held by the Company were delivered during the nine month periods ended September 30, 2014 and 2013, respectively.
During the fourth quarter of 2012, 958,213 RSUs were modified through forward purchase agreements into liability awards. Such liability awards were settled on March 1, 2013 for $28,612. During the nine month period ended September 30, 2013, compensation expense of $1,690 was recorded for such liability awards.
30
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
As of September 30, 2014, estimated unrecognized RSU compensation expense was approximately $168,382, with such expense expected to be recognized over a weighted average period of approximately 1.1 years subsequent to September 30, 2014.
Restricted Stock
The following is a summary of activity related to shares of restricted Class A common stock associated with compensation arrangements during the nine month periods ended September 30, 2014 and 2013:
Restricted Shares |
Weighted Average Grant Date Fair Value |
|||||||
Balance, January 1, 2014 |
575,054 | $ | 32.72 | |||||
Granted |
449,911 | $ | 45.52 | |||||
Forfeited |
(12,097 | ) | $ | 41.19 | ||||
Vested |
(205,075 | ) | $ | 35.23 | ||||
|
|
|||||||
Balance, September 30, 2014 |
807,793 | $ | 39.08 | |||||
|
|
|||||||
Balance, January 1, 2013 |
1,972,609 | $ | 34.85 | |||||
Granted |
368,736 | $ | 36.74 | |||||
Forfeited |
(35,794 | ) | $ | 33.35 | ||||
Vested |
(1,728,509 | ) | $ | 36.00 | ||||
|
|
|||||||
Balance, September 30, 2013 |
577,042 | $ | 32.72 | |||||
|
|
In connection with shares of restricted Class A common stock that vested during the nine month periods ended September 30, 2014 and 2013, the Company satisfied its minimum statutory tax withholding requirements in lieu of delivering 29,999 and 18,631 shares of Class A common stock during the respective nine month periods. Accordingly, 175,076 and 1,709,878 shares of Class A common stock held by the Company were delivered during the nine month periods ended September 30, 2014 and 2013, respectively.
The restricted stock awards include a cash dividend participation right equivalent to any ordinary quarterly dividends paid on Class A common stock during the period, which will vest concurrently with the underlying restricted stock award. At September 30, 2014, estimated unrecognized restricted stock expense was approximately $13,460, with such expense to be recognized over a weighted average period of approximately 1.4 years subsequent to September 30, 2014.
PRSUs
PRSUs are subject to both performance-based and service-based vesting conditions. The number of shares of Class A common stock that a recipient will receive upon vesting of a PRSU will be calculated by reference to certain performance metrics that relate to the Companys performance over a three-year period. The target number of shares of Class A common stock subject to each PRSU is one; however, based on the achievement of the performance criteria, the number of shares of Class A common stock that may be received in connection with each PRSU can range from zero to two times the target number (or, for PRSUs granted in 2013, three times the target number in the event of a substantial increase in fiscal year 2014 revenue (adjusted for certain items)). The PRSUs granted in 2014 will vest on a single date three years following the date of the grant and the PRSUs
31
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
granted in 2013 will vest 33% in March 2015 and 67% in March 2016, in each case provided the applicable service and performance conditions are satisfied. In addition, the performance metrics applicable to each PRSU will be evaluated on an annual basis at the end of each fiscal year during the performance period and, if the Company has achieved a threshold level of performance with respect to the fiscal year, 25% of the target number of shares of Class A common stock subject to each PRSU will no longer be at risk of forfeiture based on the achievement of performance criteria. PRSUs include dividend participation rights that provide that during vesting periods the target number of PRSUs receive dividend equivalents at the same rate that dividends are paid on Class A common stock during such period. These dividend equivalents are credited as RSUs that are not subject to the performance-based vesting criteria but are otherwise subject to the same restrictions as the underlying PRSUs to which they relate.
The following is a summary of activity relating to PRSUs during the nine month periods ended September 30, 2014 and 2013 at the target level:
PRSUs | Weighted Average Grant Date Fair Value |
|||||||
Balance, January 1, 2014 |
448,128 | $ | 36.11 | |||||
Granted |
360,783 | $ | 44.46 | |||||
|
|
|||||||
Balance, September 30, 2014 |
808,911 | $ | 39.83 | |||||
|
|
|||||||
Balance, January 1, 2013 |
| | ||||||
Granted |
448,128 | $ | 36.11 | |||||
|
|
|||||||
Balance, September 30, 2013 |
448,128 | $ | 36.11 | |||||
|
|
Compensation expense recognized for PRSU awards is determined by multiplying the number of shares of Class A common stock underlying such awards that, based on the Companys estimate, are considered probable of vesting, by the grant date fair value. As of September 30, 2014, the total estimated unrecognized compensation expense was approximately $23,850, and the Company expects to amortize such expense over a weighted-average period of approximately 1.6 years subsequent to September 30, 2014.
LFI and Other Similar Deferred Compensation Arrangements
Commencing in February 2011, the Company granted LFI to eligible employees. In connection with the LFI and other similar deferred compensation arrangements, which generally require future service as a condition for vesting, the Company recorded a prepaid compensation asset and a corresponding compensation liability on the grant date based upon the fair value of the award. The prepaid asset is amortized on a straight-line basis over the applicable vesting periods or requisite service periods (which are generally similar to the comparable periods for RSUs), and is charged to compensation and benefits expense within the Companys consolidated statement of operations. LFI and similar deferred compensation arrangements that do not require future service are expensed immediately. The related compensation liability is accounted for at fair value as a derivative liability, which contemplates the impact of estimated forfeitures, and is adjusted for changes in fair value primarily related to changes in value of the underlying investments.
32
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
The following is a summary of activity relating to LFI and other similar deferred compensation arrangements during the nine month periods ended September 30, 2014 and 2013:
Prepaid Compensation Asset |
Compensation Liability |
|||||||
Balance, January 1, 2014 |
$ | 60,433 | $ | 162,422 | ||||
Granted |
92,728 | 92,728 | ||||||
Settled |
| (54,293 | ) | |||||
Forfeited |
(1,320 | ) | (1,908 | ) | ||||
Amortization |
(57,287 | ) | | |||||
Change in fair value related to: |
||||||||
Increase in fair value of underlying investments |
| 6,004 | ||||||
Adjustment for estimated forfeitures |
| 6,527 | ||||||
Other |
(551) | (1,559 | ) | |||||
|
|
|
|
|||||
Balance, September 30, 2014 |
$ | 94,003 | $ | 209,921 | ||||
|
|
|
|
Prepaid Compensation Asset |
Compensation Liability |
|||||||
Balance, January 1, 2013 |
$ | 47,445 | $ | 97,593 | ||||
Granted |
72,217 | 72,217 | ||||||
Settled |
| (22,903 | ) | |||||
Forfeited |
(765 | ) | (985 | ) | ||||
Amortization |
(44,195 | ) | | |||||
Change in fair value related to: |
||||||||
Increase in fair value of underlying investments |
| 7,767 | ||||||
Adjustment for estimated forfeitures |
| 3,175 | ||||||
Other |
(217 | ) | (558 | ) | ||||
|
|
|
|
|||||
Balance, September 30, 2013 |
$ | 74,485 | $ | 156,306 | ||||
|
|
|
|
The amortization of the prepaid compensation asset will generally be recognized over a weighted average period of approximately 1.7 years subsequent to September 30, 2014.
The following is a summary of the impact of LFI and other similar deferred compensation arrangements on compensation and benefits expense within the accompanying condensed consolidated statements of operations for the three month and nine month periods ended September 30, 2014 and 2013:
Three Months Ended
September 30, |
Nine Months
Ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Amortization, net of forfeitures (a) |
$ | 21,310 | $ | 15,049 | $ | 63,226 | $ | 47,150 | ||||||||
Change in the fair value of underlying investments |
(5,528 | ) | 7,519 | 6,004 | 7,767 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 15,782 | $ | 22,568 | $ | 69,230 | $ | 54,917 | ||||||||
|
|
|
|
|
|
|
|
(a) | Includes charges relating to the cost saving initiatives of $2,665 for the nine month period ended September 30, 2013 (see Note 14 of Notes to Condensed Consolidated Financial Statements). |
33
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
13. | EMPLOYEE BENEFIT PLANS |
The Company provides retirement and other post-retirement benefits to certain of its employees through defined benefit pension plans (the pension plans) and, in the U.S., a partially funded contributory post-retirement plan covering qualifying U.S. employees (the medical plan and together with the pension plans, the post-retirement plans). The Company also offers defined contribution plans to its employees. The post-retirement plans generally provide benefits to participants based on average levels of compensation. Expenses related to the Companys employee benefit plans are included in compensation and benefits expense on the condensed consolidated statements of operations.
Employer Contributions to Pension PlansThe Companys funding policy for its U.S. and non-U.S. pension plans is to fund when required or when applicable upon an agreement with the plans trustees (the Trustees). Management also evaluates from time to time whether to make voluntary contributions to the plans.
On April 30, 2012, the Company and the Trustees of the U.K. pension plans concluded the December 31, 2010 triennial valuations of the plans. In connection with such valuations and a previously negotiated agreement with the Trustees, the Company and the Trustees agreed upon pension funding terms (the agreement) pursuant to which the Company agreed to make plan contributions of 1 million British pounds during each year from 2012 through 2020 inclusive and to make annual contributions of 1 million British pounds into an account security arrangement during each year from 2014 through 2020 inclusive. It was further agreed that, to the extent that the value of the plans assets falls short of the funding target for June 1, 2020 that has been agreed upon with the Trustees, the assets from the account security arrangement would be released into the plans at that date. Additionally, the Company agreed to fund the expenses of administering the plans, including certain regulator levies and the cost of other professional advisors to the plans. The terms of the agreement are subject to adjustment based on the results of subsequent triennial valuations, the first of which is currently underway. The aggregate amount in the account security arrangement was approximately $18,200 and $16,900 at September 30, 2014 and December 31, 2013, respectively, and has been recorded in cash deposited with clearing organizations and other segregated cash on the accompanying condensed consolidated statements of financial condition. Income on the account security arrangement accretes to the Company and is recorded in interest income.
34
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
The following table summarizes the components of net periodic benefit cost (credit) related to the Companys post-retirement plans for the three month and nine month periods ended September 30, 2014 and 2013:
Pension Plans | Medical Plan | |||||||||||||||
Three Months Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Components of Net Benefit Cost (Credit): |
||||||||||||||||
Service cost |
$ | 267 | $ | 315 | $ | 7 | $ | 12 | ||||||||
Interest cost |
7,636 | 6,744 | 49 | 46 | ||||||||||||
Expected return on plan assets |
(8,253 | ) | (6,701 | ) | | | ||||||||||
Amortization of: |
||||||||||||||||
Prior service cost |
708 | 708 | | | ||||||||||||
Net actuarial loss (gain) |
1,096 | 919 | (131 | ) | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net benefit cost (credit) |
$ | 1,454 | $ | 1,985 | $ | (75 | ) | $ | 58 | |||||||
|
|
|
|
|
|
|
|
Pension Plans | Medical Plan | |||||||||||||||
Nine Months Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Components of Net Benefit Cost (Credit): |
||||||||||||||||
Service cost |
$ | 718 | $ | 938 | $ | 24 | $ | 39 | ||||||||
Interest cost |
22,807 | 20,193 | 146 | 137 | ||||||||||||
Expected return on plan assets |
(24,560 | ) | (20,090 | ) | | | ||||||||||
Amortization of: |
||||||||||||||||
Prior service cost |
2,176 | 2,114 | | | ||||||||||||
Net actuarial loss (gain) |
3,325 | 2,745 | (396 | ) | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net benefit cost (credit) |
$ | 4,466 | $ | 5,900 | $ | (226 | ) | $ | 176 | |||||||
|
|
|
|
|
|
|
|
14. | COST SAVING INITIATIVES |
In October 2012, the Company announced cost saving initiatives (the Cost Saving Initiatives) relating to the Companys operations. These initiatives include streamlining our corporate structure and consolidating support functions; realigning our investments into areas with potential for the greatest long-term return; the settlement of certain contractual obligations; reducing occupancy costs; and creating greater flexibility to retain and attract the best people and invest in new growth areas.
Expenses associated with the implementation of the Cost Saving Initiatives were completed during the second quarter of 2013. The Company incurred these expenses, by segment, as reflected in the tables below:
Financial Advisory |
Asset Management |
Corporate | Total | |||||||||||||
Nine Month Period Ended September 30, 2013: |
||||||||||||||||
Compensation and benefits |
$ | 45,746 | $ | 236 | $ | 5,417 | $ | 51,399 | ||||||||
Other |
2,033 | (1 | ) | 11,272 | 13,304 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 47,779 | $ | 235 | $ | 16,689 | $ | 64,703 | ||||||||
|
|
|
|
|
|
|
|
35
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
Financial Advisory |
Asset Management |
Corporate | Total | |||||||||||||
Cumulative October 2012 Through |
||||||||||||||||
Compensation and benefits |
$ | 121,879 | $ | 12,292 | $ | 17,215 | $ | 151,386 | ||||||||
Other |
3,432 | 732 | 11,729 | 15,893 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 125,311 | $ | 13,024 | $ | 28,944 | $ | 167,279 | ||||||||
|
|
|
|
|
|
|
|
Activity related to the obligations pursuant to the Cost Saving Initiatives during the nine month period ended September 30, 2014 was as follows:
Accrued Compensation and Benefits |
Other Liabilities |
Total | ||||||||||
Balance, January 1, 2014 |
$ | 11,860 | $ | 5,356 | $ | 17,216 | ||||||
Less: |
||||||||||||
Settlements |
(9,815 | ) | (150 | ) | (9,965 | ) | ||||||
|
|
|
|
|
|
|||||||
Balance, September 30, 2014 |
$ | 2,045 | $ | 5,206 | $ | 7,251 | ||||||
|
|
|
|
|
|
15. | INCOME TAXES |
As a result of its indirect investment in Lazard Group, Lazard Ltd, through certain of its subsidiaries, is subject to U.S. federal income taxes on a portion of Lazard Groups operating income. Although a portion of Lazard Groups income is subject to U.S. federal income taxes, Lazard Group primarily operates in the U.S. as a limited liability company that is treated as a partnership for U.S. federal income tax purposes. As a result, Lazard Groups income from its U.S. operations is generally not subject to U.S. federal income taxes because such income is attributable to its partners. In addition, Lazard Group is subject to New York City Unincorporated Business Tax (UBT), which is attributable to Lazard Groups operations apportioned to New York City. UBT is incremental to the U.S. federal statutory tax rate. Outside the U.S., Lazard Group operates principally through subsidiary corporations that are subject to local income taxes.
The Company recorded income tax provisions of $23,792 and $58,614 for the three month and nine month periods ended September 30, 2014, respectively, and $18,370 and $31,335 for the three month and nine month periods ended September 30, 2013, respectively, representing effective tax rates of 20.9%, 18.3%, 22.6% and 21.8%, respectively. The difference between the U.S. federal statutory rate of 35.0% and the effective tax rates reflected above principally relates to (i) Lazard Group primarily operating as a limited liability company in the U.S., (ii) taxes payable to foreign jurisdictions that are not offset against U.S. income taxes, (iii) foreign source income (loss) not subject to U.S. income taxes (including interest on intercompany financings), (iv) change in the U.S. federal valuation allowance affecting the provision for income taxes, (v) Lazard Groups income from U.S. operations attributable to noncontrolling interests, and (vi) U.S. state and local taxes (primarily UBT), which are incremental to the U.S. federal statutory tax rate.
Substantially all of Lazards foreign operations are conducted in pass-through entities for U.S. income tax purposes and the Company provides for U.S. income taxes on a current basis for substantially all of those earnings. The repatriation of prior earnings attributable to non-pass-through entities would not result in the recognition of a material amount of additional U.S. income taxes.
36
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
Tax Receivable Agreement
The redemption of partnership interests that were held by former and current managing directors of the Company (including the Companys executive officers) in connection with the Companys separation and recapitalization that occurred in May 2005, and the subsequent exchanges of LAZ-MD Holdings exchangeable interests for shares of Class A common stock, have resulted in increases in the tax basis of the tangible and/or intangible assets of Lazard Group. The tax receivable agreement dated as of May 10, 2005 with LFCM Holdings requires the Company to pay LFCM Holdings 85% of the cash savings, if any, in U.S. federal, state and local income tax or franchise tax that the Company actually realizes as a result of these increases in tax basis. The Company records provisions for payments under the tax receivable agreement to the extent they are probable and estimable. For the three month and nine month periods ended September 30, 2014, the Company recorded a provision (benefit) pursuant to tax receivable agreement on the condensed consolidated statements of operations of $(176) and $9,064, respectively (no provision was required for the three month and nine month periods ended September 30, 2013), with the liability related thereto included within related party payables on the condensed consolidated statement of financial condition (see Note 17 of Notes to Condensed Consolidated Financial Statements).
16. | NET INCOME PER SHARE OF CLASS A COMMON STOCK |
The Companys basic and diluted net income per share calculations for the three month and nine month periods ended September 30, 2014 and 2013 are computed as described below.
Basic Net Income Per Share
Numeratorutilizes net income attributable to Lazard Ltd for the respective periods, plus applicable adjustments to such net income associated with the inclusion of shares of Class A common stock issuable on a non-contingent basis.
Denominatorutilizes the weighted average number of shares of Class A common stock outstanding for the respective periods, plus applicable adjustments to such shares associated with shares of Class A common stock issuable on a non-contingent basis.
Diluted Net Income Per Share
Numeratorutilizes net income attributable to Lazard Ltd for the respective periods as in the basic net income per share calculation described above, plus, to the extent applicable and dilutive, (i) changes in net income attributable to noncontrolling interests resulting from assumed Class A common stock issuances in connection with share-based incentive compensation and, on an as-if-exchanged basis, amounts applicable to LAZ-MD Holdings exchangeable interests and (ii) income tax related to (i) above.
Denominatorutilizes the weighted average number of shares of Class A common stock outstanding for the respective periods as in the basic net income per share calculation described above, plus, to the extent dilutive, the incremental number of shares of Class A common stock required to settle share-based incentive compensation and LAZ-MD Holdings exchangeable interests, using the treasury stock method or the as-if-exchanged basis, as applicable.
37
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
The calculations of the Companys basic and diluted net income per share and weighted average shares outstanding for the three month and nine month periods ended September 30, 2014 and 2013 are presented below:
Three Months
Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net income attributable to Lazard Ltd |
$88,859 | $60,282 | $254,893 | $106,995 | ||||||||||||
Add (deduct) - adjustment associated with Class A common stock issuable on a non-contingent basis |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to Lazard Ltd - basic |
88,859 | 60,282 | 254,893 | 106,995 | ||||||||||||
Add - dilutive effect, as applicable, of: |
||||||||||||||||
Adjustments to income relating to interest expense and changes in net income attributable to noncontrolling interests resulting from assumed Class A common stock issuances in connection with share-based incentive compensation and exchangeable interests, net of tax |
(3 | ) | 316 | 604 | 787 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to Lazard Ltd - diluted |
$88,856 | $60,598 | $255,497 | $107,782 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average number of shares of Class A common stock outstanding |
121,800,294 | 121,441,956 | 121,954,428 | 119,797,545 | ||||||||||||
Add - adjustment for shares of Class A common stock issuable on a non-contingent basis |
406,620 | 757,998 | 412,204 | 758,502 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average number of shares of Class A common stock outstanding - basic |
122,206,914 | 122,199,954 | 122,366,632 | 120,556,047 | ||||||||||||
Add - dilutive effect, as applicable, of: |
||||||||||||||||
Weighted average number of incremental shares of Class A common stock issuable from share-based incentive compensation and exchangeable interests |
11,359,770 | 12,042,190 | 11,356,144 | 12,617,953 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average number of shares of Class A common stock outstanding - diluted |
133,566,684 | 134,242,144 | 133,722,776 | 133,174,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to Lazard Ltd per share of Class A common stock: |
||||||||||||||||
Basic |
$0.73 | $0.49 | $2.08 | $0.89 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
$0.67 | $0.45 | $1.91 | $0.81 | ||||||||||||
|
|
|
|
|
|
|
|
38
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
17. | RELATED PARTIES |
Amounts receivable from, and payable to, related parties are set forth below:
September 30, 2014 |
December 31, 2013 |
|||||||
Receivables |
||||||||
LFCM Holdings |
$ | 139 | $ | 7,794 | ||||
Other |
|
391 |
|
126 | ||||
|
|
|
|
|||||
Total |
$ |
530 |
|
$ | 7,920 | |||
|
|
|
|
|||||
Payables |
||||||||
LFCM Holdings |
$ |
11,754 |
|
$ | 4,300 | |||
Other |
|
198 |
|
731 | ||||
|
|
|
|
|||||
Total |
$ |
11,952 |
|
$ | 5,031 | |||
|
|
|
|
LFCM Holdings
LFCM Holdings owned and operated the capital markets business and fund management activities, as well as other specified non-operating assets and liabilities, that were transferred to it by Lazard Group (referred to as the separated businesses) in May 2005 and is owned by former and current managing directors of the Company (including the Companys executive officers). In addition to the master separation agreement, dated as of May 10, 2005, by and among Lazard Ltd, Lazard Group, LAZ-MD Holdings and LFCM Holdings (the master separation agreement), which effected the separation and recapitalization that occurred in May 2005, LFCM Holdings entered into certain agreements that addressed various business matters associated with the separation, including agreements related to administrative and support services (the administrative services agreement). In addition, LFCM Holdings and Lazard Group entered into a business alliance agreement (the business alliance agreement) and a license agreement (the license agreement). Certain of these agreements are described in more detail in the Companys Form 10-K.
In the third quarter of 2014, the Company entered into arrangements with LFCM Holdings and certain of its subsidiaries (LFCM) pursuant to which, among other things, the Company has acquired certain assets from LFCM relating to its convertible securities business, the business alliance provided for in the business alliance agreement has been terminated, and LFCM has relinquished certain license rights previously granted under the license agreement. In addition, LFCM surrendered certain leasehold interests, including leasehold improvements, to the Company, and was relieved of obligations to pay related sublease rent. See Note 10 of Notes to Condensed Consolidated Financial Statements. The Company does not believe that any of these arrangements will have a material effect on its consolidated financial position or results of operations.
The acquired assets will facilitate the execution of exchange offers and other transactions related to financial advice provided by the Companys convertible securities practice group. In addition, the Company may act as an underwriter in public offerings and other distributions of securities from time to time, primarily relating to its Financial Advisory business.
For the three month and nine month periods ended September 30, 2014, amounts recorded by Lazard Group relating to the administrative services agreement amounted to $220 and $812, respectively, and net referral fees for underwriting, private placement, M&A and restructuring transactions under the business alliance agreement amounted to $54 and $795, respectively. For the three month and nine month periods ended September 30, 2013,
39
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
amounts recorded by Lazard Group relating to the administrative services agreement amounted to $534 and $1,466, respectively, and net referral fees for underwriting, private placement, M&A and restructuring transactions under the business alliance agreement amounted to $1,633 and $1,163, respectively. Amounts relating to the administrative services agreement are reported as reductions to operating expenses. Net referral fees for underwriting transactions under the business alliance agreement are reported in revenue-other. Net referral fees for private placement, M&A and restructuring transactions under the business alliance agreement are reported in advisory fee revenue.
Receivables from LFCM Holdings and its subsidiaries as of September 30, 2014 and December 31, 2013 include $139 and $3,112, respectively, related to administrative and support services and other receivables which include sublease income and reimbursement of expenses incurred on behalf of LFCM Holdings, and, at December 31, 2013, $4,682 related to referral fees for underwriting and private placement transactions. Payables to LFCM Holdings and its subsidiaries at September 30, 2014 and December 31, 2013 include $1,427 and $3,051, respectively, relating to referral fees for Financial Advisory and other transactions, and, at September 30, 2014 and December 31, 2013, $10,327 and $1,249, respectively, related to obligations pursuant to the tax receivable agreement (see Note 15 of Notes to Condensed Consolidated Financial Statements).
Other
Other payables at December 31, 2013 primarily relate to referral fees for M&A and restructuring transactions with MBA Lazard Holdings S.A. and its affiliates, an Argentina-based group in which the Company has a 50% ownership interest.
LAZ-MD Holdings
Lazard Group provides certain administrative and support services to LAZ-MD Holdings through the administrative services agreement. Lazard Group charges LAZ-MD Holdings for these services based on Lazard Groups cost allocation methodology and, for the three month and nine month periods ended September 30, 2014, such charges amounted to $250 and $750, respectively. For the three month and nine month periods ending September 30, 2013, such charges amounted to $250 and $750, respectively.
18. | REGULATORY AUTHORITIES |
LFNY is a U.S. registered broker-dealer and is subject to the net capital requirements of Rule 15c3-1 under the Exchange Act. Under the basic method permitted by this rule, the minimum required net capital, as defined, is a specified fixed percentage (6 2/3%) of total aggregate indebtedness recorded in LFNYs Financial and Operational Combined Uniform Single (FOCUS) report filed with the Financial Industry Regulatory Authority (FINRA), or $100, whichever is greater. At September 30, 2014, LFNYs regulatory net capital was $180,909, which exceeded the minimum requirement by $178,043.
Certain U.K. subsidiaries of the Company, including LCL, Lazard Fund Managers Limited and Lazard Asset Management Limited (the U.K. Subsidiaries) are regulated by the Financial Conduct Authority. At September 30, 2014, the aggregate regulatory net capital of the U.K. Subsidiaries was $91,003, which exceeded the minimum requirement by $72,842.
CFLF, under which asset management and commercial banking activities are carried out in France, is subject to regulation by the ACPR for its banking activities conducted through its subsidiary, LFB. The
40
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
investment services activities of the Paris group, exercised through LFB and other subsidiaries of CFLF, primarily LFG (asset management), also are subject to regulation and supervision by the Autorité des Marchés Financiers. At September 30, 2014, the consolidated regulatory net capital of CFLF was $139,613, which exceeded the minimum requirement set for regulatory capital levels by $102,948. In addition, pursuant to the consolidated supervision rules in the European Union, LFB, in particular, as a French credit institution, is required to be supervised by a regulatory body, either in the U.S. or in the European Union. During the third quarter of 2013, the Company and the ACPR agreed on terms for the consolidated supervision of LFB and certain other non-financial advisory European subsidiaries of the Company (referred to herein, on a combined basis, as the combined European regulated group) under such rules. Under this new supervision, the combined European regulated group is required to comply with periodic financial, regulatory net capital and other reporting obligations. Additionally, the combined European regulated group, together with our European financial advisory entities, is required to perform an annual risk assessment and provide certain other information on a periodic basis, including financial reports and information relating to financial performance, balance sheet data and capital structure (which is similar to the information that the Company had already been providing informally). This new supervision under, and provision of information to, the ACPR became effective December 31, 2013.
Certain other U.S. and non-U.S. subsidiaries are subject to various capital adequacy requirements promulgated by various regulatory and exchange authorities in the countries in which they operate. At September 30, 2014, for those subsidiaries with regulatory capital requirements, their aggregate net capital was $100,054, which exceeded the minimum required capital by $72,757.
At September 30, 2014, each of these subsidiaries individually was in compliance with its regulatory capital requirements.
Any new or expanded rules and regulations that may be adopted in countries in which we operate (including regulations that have not yet been proposed) could affect us in other ways.
19. | SEGMENT INFORMATION |
The Companys reportable segments offer different products and services and are managed separately as different levels and types of expertise are required to effectively manage the segments transactions. Each segment is reviewed to determine the allocation of resources and to assess its performance. The Companys principal operating activities are included in two business segments as described in Note 1 above - Financial Advisory and Asset Management. In addition, as described in Note 1 above, the Company records selected other activities in its Corporate segment.
The Companys segment information for the three month and nine month periods ended September 30, 2014 and 2013 is prepared using the following methodology:
| Revenue and expenses directly associated with each segment are included in determining operating income. |
| Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other factors. |
| Segment assets are based on those directly associated with each segment, and include an allocation of certain assets relating to various segments, based on the most relevant measures applicable, including headcount, square footage and other factors. |
41
LAZARD LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(UNAUDITED)
(dollars in thousands, except for per share data, unless otherwise noted)
The Company allocates investment gains and losses, interest income and interest expense among the various segments based on the segment in which the underlying asset or liability is reported.
Each segments operating expenses include (i) compensation and benefits expenses incurred directly in support of the businesses and (ii) other operating expenses, which include directly incurred expenses for occupancy and equipment, marketing and business development, technology and information services, professional services, fund administration and outsourced services and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, human resources, legal, facilities management and senior management activities.
Management evaluates segment results based on net revenue and operating income (loss) and believes that the following information provides a reasonable representation of each segments contribution with respect to net revenue, operating income (loss) and total assets:
Three Months
Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||
2014 | 2013(a) | 2014 | 2013(a) | |||||||||||||||
Financial Advisory |
Net Revenue | $ | 291,089 | $ | 233,842 | $ | 847,354 | $ | 665,611 | |||||||||
Operating Expenses | 255,230 | 218,015 | 754,449 | 674,689 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Operating Income (Loss) | $ | 35,859 | $ | 15,827 | $ | 92,905 | $ | (9,078 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||||
Asset Management |
Net Revenue | $ | 291,967 | $ | 252,094 | $ | 848,695 | $ | 741,618 | |||||||||
Operating Expenses | 191,501 | 168,895 | 552,499 | 511,526 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Operating Income | $ | 100,466 | $ | 83,199 | $ | 296,196 | $ | 230,092 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Corporate |
Net Revenue (Expense) | $ | (16,845 | ) | $ | (5,582 | ) | $ | (29,542 | ) | $ | (34,567 | ) | |||||
Operating Expenses | 5,768 | 12,326 | 39,687 | 42,794 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Operating Loss | $ | (22,613 | ) | $ | (17,908 | ) | $ | (69,229 | ) | $ | (77,361 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||||