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Lazard Ltd Reports Operating Results (10-Q)

November 01, 2012 | About:
10qk

10qk

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Lazard Ltd (LAZ) filed Quarterly Report for the period ended 2012-09-30.

Lazard Ltd has a market cap of $3.55 billion; its shares were traded at around $29.52 with a P/E ratio of 33.9 and P/S ratio of 1.9. The dividend yield of Lazard Ltd stocks is 2.8%.

Highlight of Business Operations:

Net revenue in the 2012 period decreased $34 million, or 7%, with operating revenue decreasing $23 million, or 5%, respectively, as compared to the 2011 period. Fee revenue from investment banking and other advisory activities decreased $30 million, or 12%, primarily due to a $28 million, or 14%, decline in M&A and Strategic Advisory fee revenue. This decrease primarily resulted from lower average fees for assignments with fees greater than $1 million. Money management fees increased $2 million, or 1%, during the 2012 period primarily due to an $8 billion, or 5%, increase in average AUM, generally reflecting market appreciation, offset by a shift in the product mix of AUM. In the aggregate, interest income, other revenue and interest expense contributed to a decrease in net revenue of $5 million as compared to the corresponding period in 2011, primarily due to an $18 million gain on extinguishment of debt in the 2011 period, and a decrease in referral fees from LFCM Holdings in the 2012 period, with such items partially offset by net investment gains in the 2012 period.

Net revenue in the 2012 period decreased $26 million, or 2%, with operating revenue decreasing $18 million, or 1%, respectively, as compared to the 2011 period. Fee revenue from investment banking and other advisory activities increased $20 million, or 3%, reflecting increases in M&A and Strategic Advisory fee revenue of $26 million, or 5%, and Restructuring fee revenue of $13 million, or 10%, partially offset by a decrease in Other Advisory fee revenue of $19 million, or 32%. The increase in M&A and Strategic Advisory fee revenue was driven by the strong performance of Lazard Middle Market and the overall breadth and volume of our global M&A and Sovereign Advisory businesses. Higher fees were earned from our top 10 clients during the 2012 period, reflecting the closing of several significant M&A and sovereign and government advisory transactions. Although global corporate restructuring activity continues its industry-wide decline, the increase in Restructuring fee revenue in the 2012 period was driven by an increase in the average fee per assignment, most of which was attributable to the first quarter of 2012. Money management fees decreased $38 million, or 6%, during the 2012 period, due to a $0.5 billion, or 0.4%, decrease in average AUM and a change in the product mix of AUM. In the aggregate, interest income, other revenue and interest expense contributed to a decrease in net revenue of $9 million as compared to the corresponding period in 2011, primarily due to an $18 million gain on extinguishment of debt in the 2011 period and a decrease in referral fees from LFCM Holdings in the 2012 period, with such items partially offset by net investment gains in the 2012 period.

Compensation and benefits expense in the 2012 period increased $76 million, or 9%, compared to the corresponding prior year period, which, in part, reflected a $22 million first quarter 2012 charge associated with staff reductions, representing severance costs and benefit payments, $7 million of which related to the acceleration of unrecognized amortization expense of deferred incentive compensation previously granted to individuals being terminated. Also contributing to the increase was a higher level of amortization of deferred incentive compensation awards and increased salaries and benefits. Adjusted compensation and benefits expense (which excludes certain items, and which we believe allows for improved comparability between interim periods, as described above), increased $45 million, or 5%, when compared to the 2011 period. The ratio of adjusted compensation and benefits expense to operating revenue was 62.7% for the 2012 period, which compares to 58.7% and 62.0% for the first nine months and full year of 2011, respectively. The ratio of adjusted compensation and benefits expense to operating revenue for the 2012 period assumed, based on current market conditions, a ratio of awarded compensation and benefits expense to operating revenue of approximately 60% for the full year of 2012, as compared to 61.7% for the full year of 2011. As described above, when analyzing compensation and benefits expense on a full year basis, we believe that awarded compensation and benefits expense provides the most meaningful basis for comparison of compensation and benefits expense between present, historical and future years.

Operating income in the 2012 period (including the above-mentioned charges relating to staff reductions aggregating $25 million) decreased $121 million, or 48%, as compared to operating income in the 2011 period. Operating income, as a percentage of net revenue, was 9.5%, as compared to 18.2% in the 2011 period. Earnings from operations declined $78 million, or 27%, when compared to the 2011 period, and, as a percentage of operating revenue, was 15.4%, as compared to 20.7% in the 2011 period.

Asset Management net revenue increased $2 million, or 1%, as compared to the 2011 period. Management fees increased $2 million, or 1%, as compared to the 2011 period, driven primarily by a 5% increase in average AUM, generally reflecting market appreciation, offset by a shift in the product mix of AUM. Incentive fees, principally consisting of traditional long-only strategies, increased $1 million, or 13%, as compared to the 2011 period. Other revenue decreased $1 million, or 12%, as compared to the 2011 period, primarily due to a decline in commissions and custody fees.

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