Lazard Ltd. (LAZ)

LAZ 
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Lazard Ltd. (LAZ)

Q4 2008 Earnings Call Transcript

February 4, 2009 10:00 am ET

Executives

Judi Mackey – IR

Bruce Wasserstein – Chairman and CEO

Steven Golub – Vice Chairman and Chairman of the Financial Advisory Group

Michael Castellano – CFO

Analysts

Devin Ryan – Sandler O'Neill

Guy Moszkowski – Bank of America

Lauren Smith – KBW

Dan Kurke [ph] – Seacliff Capital

Justin Hughes – Philadelphia Financial

Michael Wong – Morningstar Investments

Presentation

Operator

Good day, everyone, and welcome to Lazard's full year and fourth quarter 2008 earnings conference call. This call is being recorded. At this time, all participants are in a listen-only mode. Following the remarks, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator instructions) And at this time, I will turn the call over to Judi Mackey, Lazard's Senior Vice President and Director of Global Communications. Please go ahead.

Judi Mackey

Good morning and thank you for joining this conference call to review Lazard's results for the full year and fourth quarter of 2008. Participating on the call today are Lazard's Chairman and Chief Executive Officer, Bruce Wasserstein; Vice Chairman, Steven Golub; and Chief Financial Officer, Mike Castellano. A replay of this call will be available on our website www.lazard.com beginning today after 1 PM Eastern Standard Time.

Today's call may contain forward-looking statements. And these forward-looking statements are based on our current expectations and projections about future events. They are subject to known and unknown risks, uncertainties, and assumptions. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. These factors include, but are not limited to, those discussed in Lazard's filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Management cannot guarantee future results, the level of activity, performance or achievements.

Moreover, Lazard assumes no responsibility for the accuracy or completeness of any of these forward-looking statements. Investors should not rely upon forward-looking statements as predictions of future events. Lazard is under no duty to update any of these forward-looking statements after the date on which they are made. Further, investors should keep in mind that Lazard's quarterly revenue and profits can fluctuate materially depending on many factors, including the number and size of completed transactions on which we advise, as well as on seasonal factors.

As such, Lazard management believes that annual results are the most meaningful. Accordingly, Lazard's revenue and profit in any particular quarter may not be indicative of future results. It is for this reason that Lazard hosts conference calls twice per year to review our first half and full year results.

I will now turn the call over to Mr. Wasserstein.

Bruce Wasserstein

Thank you for joining us to discuss Lazard’s 2008 full year and fourth quarter results. Today I will discuss our strategy and our focus on long-term growth. This environment is the time of opportunity for Lazard, although this has been a tumultuous year for investment banking. I am pleased that Lazard performed well relative to the industry due to our differentiated intellectual capital approach.

In addition to our M&A activities, we have an increasingly important restructuring and capital structure advisory practice. The impact of market depreciation reduced assets under management, but our Asset Management business had positive net inflows and offered many superior investment strategies for the year. Our strategy is to take the long view and focus on our client relationships as we have for over 160 years. We will reinforce our areas of strength, invest in areas of growth, develop new products, contain costs, and maintain liquidity in order to take advantage of future opportunities.

We intend to continue to hire key professionals on a selected basis and to redeploy employees into areas where we see potential for growth, restructuring and capital structure advisory, financial institutions and other sectors, and selected areas in asset management. During the past year, new hires include a European-based Vice Chairman of Lazard International specializing in healthcare, UK-based managing directors in financial institutions, a European managing director specializing in mining and metals, and European debt advisory professionals in France, Germany, and the UK. Key hires in the US include senior advisory professionals in restructuring and capital markets advisory, the aerospace and defense sector, and the Lazard middle market business, as well as the return of our global head of power, utilities and infrastructure.

Global economic challenges may persist for sometime. Based on our continuing performance and ability to find opportunity in turbulent markets, I remain confident in the strength of our model. For the long term, our growth drivers will be the resurgence of M&A, the continued need for restructuring and capital raising, and our Asset Management business.

Steve Golub will now discuss our core operating businesses in more detail.

Steven Golub

Thank you, Bruce. And good morning, everyone. As Bruce mentioned, I will elaborate on our core operating business, which includes our Financial Advisory and Asset Management businesses. Net income on a fully exchanged basis was $206 million or $1.72 per share diluted for the full year of 2008. These results excluded the after-tax, LAM equity charge and provisions for losses from counterparty defaults of $0.07 per share diluted relating primarily to the bankruptcy filing of one of our prime brokers, all occurring in the third quarter of 2008. Including such counterparty default provisions, our diluted earnings per share was $1.65. These results compare to net income of $322.7 million or $2.77 per share diluted for the full year of 2007.

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