In the fourth quarter of 2012, we repurchased 4.6 million shares of our Class A common stock for $132 million, at an average price of $28.76 per share. This brought total share repurchases in full-year 2012 to $355 million, at an average price of $27.66 per share.
Lazard’s financial position remains strong. Our cash and cash equivalents at December 31, 2012, were $850 million, the majority of which were invested in U.S. Government and agency money market funds. As of December 31, 2012, total stockholders’ equity related to Lazard’s interests was $570 million.
COST SAVING INITIATIVES
In Lazard’s third-quarter 2012 earnings release, the firm announced cost saving initiatives expected to result in approximately $125 million in annual savings from our existing cost base.
The cost saving initiatives are intended to improve the firm’s profitability with minimal impact on revenue growth. Approximately $85 million relates to compensation expenses associated with reduced staffing, and approximately $40 million to non-compensation expense. The cost saving initiatives include: streamlining our corporate structure and consolidating support functions; realigning the firm’s investments into areas with potential for the greatest long-term return; and creating greater flexibility to retain and attract the best people and invest in new growth areas.
Associated implementation expenses are expected to range between $110 million and $130 million and to be primarily compensation-related. The implementation of these initiatives proceeded according to plan during the fourth quarter of 2012, and associated expenses were $103 million in the quarter, with the remainder expected to occur in the first half of 2013. Approximately 75% of the implementation expenses are expected to be paid in cash.
Lazard continues to make progress toward the financial goals announced in April 2012. As of December 31, 2012, we have achieved:
- An awarded compensation-to-operating revenue ratio 1 of 59.4%, down from 62.0% for 2011
- An adjusted non-compensation expense-to-operating revenue ratio 1 of 21.4%, approximately even with 2011.
- An operating margin based on awarded compensation 5 of 19.2%, up from 16.8% for 2011. We are making progress toward our operating margin target of 25% in 2014 based on 2012 activity levels
- Return of capital to shareholders totaling $540 million 3, including $200 million in surplus cash 4 one year ahead of target
We believe our financial discipline is increasing the firm’s operating leverage, putting Lazard in a strong position to benefit from potential revenue growth.