þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, 2016 | ||
OR | ||
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to . |
Delaware | 51-0500737 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
300 Park Avenue New York, New York | 10022 (ZIP Code) |
(Address of Principal Executive Offices) |
Large accelerated filer þ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ |
(Do not check if a smaller reporting company) |
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Exhibits |
As of | |||||||
September 30, | December 31, | ||||||
2016 | 2015 | ||||||
(unaudited) | |||||||
Assets | |||||||
Cash and cash equivalents ($4.9 million and $4.7 million restricted from use at September 30, 2016 and December 31, 2015, respectively) | $ | 55,819 | $ | 69,962 | |||
Advisory fees receivable, net of allowance for doubtful accounts of $0.0 million and $0.3 million at September 30, 2016 and December 31, 2015, respectively | 76,630 | 64,430 | |||||
Other receivables | 3,805 | 5,470 | |||||
Property and equipment, net of accumulated depreciation of $59.8 million at September 30, 2016 and $58.5 million at December 31, 2015 | 9,225 | 9,783 | |||||
Investments in merchant banking funds | 3,469 | 3,575 | |||||
Goodwill | 214,982 | 209,024 | |||||
Deferred tax asset, net | 53,983 | 56,072 | |||||
Other assets | 9,371 | 5,522 | |||||
Total assets | $ | 427,284 | $ | 423,838 | |||
Liabilities and Equity | |||||||
Compensation payable | $ | 20,793 | $ | 22,133 | |||
Accounts payable and accrued expenses | 10,733 | 9,858 | |||||
Current income taxes payable | 15,800 | 19,020 | |||||
Bank revolving loan payable | 62,500 | 39,800 | |||||
Bank term loans payable | 16,875 | 33,750 | |||||
Contingent obligation due selling unitholders of Cogent | 15,069 | 13,647 | |||||
Deferred tax liability | 3,317 | 1,580 | |||||
Total liabilities | 145,087 | 139,788 | |||||
Common stock, par value $0.01 per share; 100,000,000 shares authorized, 41,372,501 and 40,511,209 shares issued as of September 30, 2016 and December 31, 2015, respectively; 29,241,017 and 29,325,374 shares outstanding as of September 30, 2016 and December 31, 2015, respectively | 414 | 405 | |||||
Restricted stock units | 72,105 | 84,969 | |||||
Additional paid-in capital | 734,586 | 697,607 | |||||
Exchangeable shares of subsidiary; 257,156 shares issued as of September 30, 2016 and December 31, 2015; 32,804 shares outstanding as of September 30, 2016 and December 31, 2015 | 1,958 | 1,958 | |||||
Retained earnings | 102,794 | 109,860 | |||||
Accumulated other comprehensive income (loss) | (26,640 | ) | (28,405 | ) | |||
Treasury stock, at cost, par value $0.01 per share; 12,131,484 and 11,185,835 shares as of September 30, 2016 and December 31, 2015, respectively | (603,714 | ) | (583,038 | ) | |||
Stockholders’ equity | 281,503 | 283,356 | |||||
Noncontrolling interests | 694 | 694 | |||||
Total equity | 282,197 | 284,050 | |||||
Total liabilities and equity | $ | 427,284 | $ | 423,838 |
For the Three Months Ended, September 30, | For the Nine Months Ended, September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | |||||||||||||||
Advisory revenues | $ | 76,487 | $ | 50,278 | $ | 233,305 | $ | 185,132 | |||||||
Investment revenues | 91 | 354 | 623 | 725 | |||||||||||
Total revenues | 76,578 | 50,632 | 233,928 | 185,857 | |||||||||||
Expenses | |||||||||||||||
Employee compensation and benefits | 40,746 | 30,703 | 129,362 | 103,724 | |||||||||||
Occupancy and equipment rental | 5,052 | 5,559 | 14,602 | 15,901 | |||||||||||
Depreciation and amortization | 793 | 894 | 2,432 | 2,536 | |||||||||||
Information services | 2,208 | 2,332 | 6,718 | 6,714 | |||||||||||
Professional fees | 1,806 | 1,606 | 5,064 | 5,765 | |||||||||||
Travel related expenses | 3,129 | 3,257 | 8,903 | 8,916 | |||||||||||
Interest expense | 896 | 666 | 2,444 | 1,733 | |||||||||||
Other operating expenses | 2,748 | 4,473 | 8,880 | 11,486 | |||||||||||
Total expenses | 57,378 | 49,490 | 178,405 | 156,775 | |||||||||||
Income before taxes | 19,200 | 1,142 | 55,523 | 29,082 | |||||||||||
Provision for taxes | 6,090 | 458 | 18,428 | 11,376 | |||||||||||
Net income allocated to common stockholders | $ | 13,110 | $ | 684 | $ | 37,095 | $ | 17,706 | |||||||
Average shares outstanding: | |||||||||||||||
Basic | 31,686,347 | 31,196,845 | 31,953,530 | 30,971,658 | |||||||||||
Diluted | 31,693,173 | 31,215,999 | 31,960,892 | 31,023,713 | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.41 | $ | 0.02 | $ | 1.16 | $ | 0.57 | |||||||
Diluted | $ | 0.41 | $ | 0.02 | $ | 1.16 | $ | 0.57 | |||||||
Dividends declared and paid per share | $ | 0.45 | $ | 0.45 | $ | 1.35 | $ | 1.35 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income allocated to common stockholders | $ | 13,110 | $ | 684 | $ | 37,095 | $ | 17,706 | |||||||
Currency translation adjustment, net of tax | 805 | (7,305 | ) | 1,765 | (12,551 | ) | |||||||||
Comprehensive income allocated to common stockholders | $ | 13,915 | $ | (6,621 | ) | $ | 38,860 | $ | 5,155 |
Nine Months Ended September 30, | Year Ended December 31, | ||||||
2016 | 2015 | ||||||
(unaudited) | |||||||
Common stock, par value $0.01 per share | |||||||
Common stock, beginning of the period | $ | 405 | $ | 389 | |||
Common stock issued | 9 | 16 | |||||
Common stock, end of the period | 414 | 405 | |||||
Contingent convertible preferred stock, par value $0.01 per share | |||||||
Contingent convertible preferred stock, beginning of the period | — | 14,446 | |||||
Contingent convertible preferred stock canceled or converted | — | (14,446 | ) | ||||
Contingent convertible preferred stock, end of the period | — | — | |||||
Restricted stock units | |||||||
Restricted stock units, beginning of the period | 84,969 | 90,107 | |||||
Restricted stock units recognized, net of forfeitures | 31,753 | 47,071 | |||||
Restricted stock units delivered | (44,617 | ) | (52,209 | ) | |||
Restricted stock units, end of the period | 72,105 | 84,969 | |||||
Additional paid-in capital | |||||||
Additional paid-in capital, beginning of the period | 697,607 | 596,463 | |||||
Common stock issued and contingently issued common stock | 44,657 | 94,554 | |||||
Contingent convertible preferred stock canceled | — | 14,446 | |||||
Tax (expense) from the delivery of restricted stock units | (7,678 | ) | (7,856 | ) | |||
Additional paid-in capital, end of the period | 734,586 | 697,607 | |||||
Exchangeable shares of subsidiary | |||||||
Exchangeable shares of subsidiary, beginning of the period | 1,958 | 1,958 | |||||
Exchangeable shares of subsidiary delivered | — | — | |||||
Exchangeable shares of subsidiary, end of the period | 1,958 | 1,958 | |||||
Retained earnings | |||||||
Retained earnings, beginning of the period | 109,860 | 141,290 | |||||
Dividends | (46,432 | ) | (58,940 | ) | |||
Tax benefit from payment of restricted stock unit dividends | 2,271 | 1,912 | |||||
Net income allocated to common stockholders | 37,095 | 25,598 | |||||
Retained earnings, end of the period | 102,794 | 109,860 | |||||
Accumulated other comprehensive income (loss) | |||||||
Accumulated other comprehensive income (loss), beginning of the period | (28,405 | ) | (17,969 | ) | |||
Currency translation adjustment, net of tax | 1,765 | (10,436 | ) | ||||
Accumulated other comprehensive income (loss), end of the period | (26,640 | ) | (28,405 | ) | |||
Treasury stock, at cost, par value $0.01 per share | |||||||
Treasury stock, beginning of the period | (583,038 | ) | (571,136 | ) | |||
Repurchased | (20,676 | ) | (11,902 | ) | |||
Treasury stock, end of the period | (603,714 | ) | (583,038 | ) | |||
Total stockholders’ equity | 281,503 | 283,356 | |||||
Noncontrolling interests | |||||||
Noncontrolling interests, beginning of the period | 694 | 694 | |||||
Distributions to noncontrolling interests | — | — | |||||
Noncontrolling interests, end of the period | 694 | 694 | |||||
Total equity | $ | 282,197 | $ | 284,050 |
For the Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Operating activities: | |||||||
Net income allocated to common stockholders | $ | 37,095 | $ | 17,706 | |||
Adjustments to reconcile net income allocated to common stockholders to net cash provided by operating activities: | |||||||
Non-cash items included in net income allocated to common stockholders: | |||||||
Depreciation and amortization | 2,432 | 2,536 | |||||
Net investment (gains) losses | 106 | (24 | ) | ||||
Restricted stock units recognized | 31,753 | 34,967 | |||||
Deferred taxes | (3,068 | ) | (3,351 | ) | |||
Loss on fair value of contingent obligation | 1,422 | 100 | |||||
Changes in operating assets and liabilities: | |||||||
Advisory fees receivable | (12,200 | ) | 10,332 | ||||
Other receivables and assets | (2,184 | ) | 1,820 | ||||
Deferred tax asset, net | 7,679 | 7,892 | |||||
Compensation payable | (1,340 | ) | (14,558 | ) | |||
Accounts payable and accrued expenses | 924 | (6,746 | ) | ||||
Current income taxes payable | (3,220 | ) | 932 | ||||
Net cash provided by operating activities | 59,399 | 51,606 | |||||
Investing activities: | |||||||
Purchases of investments | — | (21 | ) | ||||
Distributions from investments | — | 768 | |||||
Purchases of property and equipment | (1,332 | ) | (1,954 | ) | |||
Cogent acquisition | — | (45,260 | ) | ||||
Net cash used in investing activities | (1,332 | ) | (46,467 | ) | |||
Financing activities: | |||||||
Proceeds from revolving bank loan | 83,229 | 65,020 | |||||
Repayment of revolving bank loan | (60,529 | ) | (55,700 | ) | |||
Proceeds from bank term loans | — | 45,000 | |||||
Repayment of bank term loans | (16,875 | ) | (11,250 | ) | |||
Dividends paid | (46,432 | ) | (44,295 | ) | |||
Purchase of treasury stock | (20,676 | ) | (11,872 | ) | |||
Net tax (cost) from the delivery of restricted stock units and payment of dividend equivalents | (5,408 | ) | (6,368 | ) | |||
Net cash used in financing activities | (66,691 | ) | (19,465 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (5,519 | ) | (1,328 | ) | |||
Net decrease in cash and cash equivalents | (14,143 | ) | (15,654 | ) | |||
Cash and cash equivalents, beginning of period | 69,962 | 50,940 | |||||
Cash and cash equivalents, end of period | $ | 55,819 | $ | 35,286 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | 2,278 | $ | 1,698 | |||
Cash paid for taxes, net of refunds | $ | 19,814 | $ | 14,139 |
For the Nine Months Ended September 30, | ||||
2015 | ||||
(in millions, except per share amounts) (unaudited) | ||||
(pro forma) | ||||
Revenues | $ | 196.3 | ||
Income before taxes | 31.0 | |||
Net income allocated to common stockholders | 18.9 | |||
Diluted earnings per share | $ | 0.59 |
As of September 30, | As of December 31, | ||||||
2016 | 2015 | ||||||
(in thousands, unaudited) | |||||||
Cash | $ | 48,172 | $ | 59,270 | |||
Cash equivalents | 2,702 | 5,946 | |||||
Restricted cash - deferred compensation plan | — | 117 | |||||
Restricted cash - letters of credit | 4,945 | 4,629 | |||||
Total cash and cash equivalents | $ | 55,819 | $ | 69,962 |
As of September 30, | As of December 31, | ||||||
2016 | 2015 | ||||||
(in thousands, unaudited) | |||||||
Investment in GCP I | $ | 1,105 | $ | 1,105 | |||
Investment in GCP II | 779 | 785 | |||||
Investment in Barrow Street | 1,585 | 1,685 | |||||
Total investments in merchant banking funds | $ | 3,469 | $ | 3,575 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(in thousands, unaudited) | |||||||||||||||
Net realized and unrealized gains (losses) on investments in merchant banking funds | $ | (71 | ) | $ | 147 | $ | (59 | ) | $ | 25 | |||||
Interest income | 162 | 207 | 682 | 700 | |||||||||||
Total investment revenues | $ | 91 | $ | 354 | $ | 623 | $ | 725 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of September 30, 2016 | ||||||||||||
(in thousands, unaudited) | |||||||||||||||
Liabilities | |||||||||||||||
Contingent obligation due selling unitholders of Cogent | $ | — | $ | — | $ | 15,069 | $ | 15,069 | |||||||
Total | $ | — | $ | — | $ | 15,069 | $ | 15,069 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of December 31, 2015 | ||||||||||||
(in thousands, unaudited) | |||||||||||||||
Liabilities | |||||||||||||||
Contingent obligation due selling unitholders of Cogent | $ | — | $ | — | $ | 13,647 | $ | 13,647 | |||||||
Total | $ | — | $ | — | $ | 13,647 | $ | 13,647 |
Opening Balance as of July 1, 2016 | Total realized and unrealized gains (losses) included in Net Income | Unrealized gains (losses) included in Other Comprehensive Income | Purchases | Issues | Sales | Settlements | Closing Balance as of September 30, 2016 | Unrealized gains (losses) for Level 3 liabilities outstanding at September 30, 2016 | |||||||||||||||||||||||||||
(in thousands, unaudited) | |||||||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||
Contingent obligation due selling unitholders of Cogent | $ | 15,104 | $ | 35 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 15,069 | $ | 35 | |||||||||||||||||
Total | $ | 15,104 | $ | 35 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 15,069 | $ | 35 |
Opening Balance as of January 1, 2016 | Total realized and unrealized gains (losses) included in Net Income | Unrealized gains (losses) included in Other Comprehensive Income | Purchases | Issues | Sales | Settlements | Closing Balance as of September 30, 2016 | Unrealized gains (losses) for Level 3 liabilities outstanding at September 30, 2016 | |||||||||||||||||||||||||||
(in thousands, unaudited) | |||||||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||
Contingent obligation due selling unitholders of Cogent | $ | 13,647 | $ | (1,422 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 15,069 | $ | (1,422 | ) | |||||||||||||||
Total | $ | 13,647 | $ | (1,422 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 15,069 | $ | (1,422 | ) |
Opening Balance as of July 1, 2015 | Total realized and unrealized gains (losses) included in Net Income | Unrealized gains (losses) included in Other Comprehensive Income | Purchases | Issues | Sales | Settlements | Closing Balance as of September 30, 2015 | Unrealized gains (losses) for Level 3 liabilities outstanding at September 30, 2015 | |||||||||||||||||||||||||||
(in thousands, unaudited) | |||||||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||
Contingent obligation due selling unitholders of Cogent | $ | 13,144 | $ | (100 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 13,244 | $ | (100 | ) | |||||||||||||||
Total | $ | 13,144 | $ | (100 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 13,244 | $ | (100 | ) |
Opening Balance as of January 1, 2015 | Total realized and unrealized gains (losses) included in Net Income | Unrealized gains (losses) included in Other Comprehensive Income | Purchases | Issues | Sales | Settlements | Closing Balance as of September 30, 2015 | Unrealized gains (losses) for Level 3 liabilities outstanding at September 30, 2015 | |||||||||||||||||||||||||||
(in thousands, unaudited) | |||||||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||
Contingent obligation due selling unitholders of Cogent | $ | — | $ | (100 | ) | $ | — | $ | 13,144 | $ | — | $ | — | $ | — | $ | 13,244 | $ | (100 | ) | |||||||||||||||
Total | $ | — | $ | (100 | ) | $ | — | $ | 13,144 | $ | — | $ | — | $ | — | $ | 13,244 | $ | (100 | ) |
Fair Value as of September 30, 2016 | Valuation Technique(s) | Unobservable Input(s) | Range (Weighted Average) | |||||||
(in thousands, unaudited) | ||||||||||
Liabilities | ||||||||||
Contingent obligation due selling unitholders of Cogent | $ | 15,069 | Present value of expected payments | Discount rate | 12 | % | ||||
Forecast revenue | (a) |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(in thousands, except per share amounts, unaudited) | |||||||||||||||
Numerator for basic and diluted EPS — net income allocated to common stockholders | $ | 13,110 | $ | 684 | $ | 37,095 | $ | 17,706 | |||||||
Denominator for basic EPS — weighted average number of shares | 31,686 | 31,197 | 31,954 | 30,972 | |||||||||||
Add — dilutive effect of: | |||||||||||||||
Weighted average number of incremental shares issuable from restricted stock units | 7 | 19 | 7 | 52 | |||||||||||
Denominator for diluted EPS — weighted average number of shares and dilutive potential shares | 31,693 | 31,216 | 31,961 | 31,024 | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.41 | $ | 0.02 | $ | 1.16 | $ | 0.57 | |||||||
Diluted | $ | 0.41 | $ | 0.02 | $ | 1.16 | $ | 0.57 |
(1) | Excludes transactions less than $100,000 and withdrawn/canceled deals. Source: Thomson Financial as of October 24, 2016. |
• | the representation of Airopack Technology Group AG on a placement of debt and equity capital and the acquisition of the remaining 50% stake in Airolux AG; |
• | the acquisition by A. O. Smith Corporation of Aquasana, Inc.; |
• | the acquisition by Cypress Semiconductor Corporation of Broadcom Ltd.'s Wireless Internet of Things (IoT) business unit; |
• | the acquisition by Derma Sciences, Inc. of BioD, LLC; |
• | the acquisition by Digital Realty Trust of eight European data centers from Equinix; |
• | the acquisition by Molina Healthcare, Inc. of Universal American's Total Care Medicaid business; |
• | the representation of New Enterprise Stone & Lime Co., Inc. on $555 million of secured financing; |
• | the sale of Patties Foods Ltd. to Pacific Equity Partners; |
• | the acquisition by Teva Pharmaceuticals Industries Ltd. of Allergan plc's generics business; |
• | the representation of Teva Pharmaceuticals Industries Ltd. on the divestment of the U.S. rights to seventy-nine generic products to eleven different counterparties; and |
• | the sale by Tesco plc of its Dobbies Garden Centres to an investor group led by Midlothian Capital Partners and Hattington Capital. |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
(in millions, unaudited) | |||||||||||
Employee compensation and benefits expenses | $40.7 | $30.7 | $129.4 | $103.7 | |||||||
% of revenues | 53 | % | 61 | % | 55 | % | 56 | % | |||
Non-compensation expenses | 16.6 | 18.8 | 49.0 | 53.1 | |||||||
% of revenues | 22 | % | 37 | % | 21 | % | 29 | % | |||
Total operating expenses | 57.4 | 49.5 | 178.4 | 156.8 | |||||||
% of revenues | 75 | % | 98 | % | 76 | % | 84 | % | |||
Total income before tax | 19.2 | 1.1 | 55.5 | 29.1 | |||||||
Pre-tax profit margin | 25 | % | 2 | % | 24 | % | 16 | % |
Period | Total Number of Shares Repurchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (2) (3) | |||||||||
Jul | 50,000 | $ | 19.88 | 50,000 | $ | 69,005,842 | |||||||
Aug | 317,070 | 20.52 | 317,070 | 62,500,020 | |||||||||
Sept | 7,178 | 22.94 | 7,178 | 62,335,357 | |||||||||
Total | 374,248 | 374,248 | $ | 62,335,357 |
(1) | Excludes 13,099 shares we are deemed to have repurchased in the third quarter of 2016 at an average price of $19.73 per share, or $0.3 million, from employees in conjunction with the payment of tax liabilities in respect of stock delivered to employees in settlement of restricted stock units. |
(2) | Effective January 27, 2016, the Board of Directors authorized the repurchase of up to $75,000,000 of our common stock during the period January 1, 2016 to December 31, 2016. |
(3) | The value of the shares repurchased for the nine months ended September 30, 2016 excludes 319,194 shares we are deemed to have repurchased at an average price of $25.10 per share, or $8.0 million, from employees in conjunction with tax liabilities in respect of stock delivered to employees in settlement of restricted stock units. |
Exhibit Number | Description | |
31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1* | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2* | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | Interactive data files pursuant to Rule 405 of Regulation S-T. |
* | This information is furnished and not filed herewith for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934. |
GREENHILL & CO., INC. | ||
By: | /s/ SCOTT L. BOK | |
Scott L. Bok | ||
Chief Executive Officer | ||
By: | /s/ HAROLD J. RODRIGUEZ, JR. | |
Harold J. Rodriguez, Jr. | ||
Chief Financial Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Greenhill & Co., Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Scott L. Bok | ||
Scott L. Bok | ||
Chief Executive Officer | ||
Date: | October 26, 2016 |
1. | I have reviewed this quarterly report on Form 10-Q of Greenhill & Co., Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Harold J. Rodriguez, Jr. | ||
Harold J. Rodriguez, Jr. | ||
Chief Financial Officer | ||
Date: | October 26, 2016 |
(1) | The report of the Company on Form 10-Q for the quarterly period ending September 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Scott L. Bok | |
Scott L. Bok | |
Chief Executive Officer |
(1) | The report of the Company on Form 10-Q for the quarterly period ending September 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Harold J. Rodriguez, Jr. | |
Harold J. Rodriguez, Jr. | |
Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
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Sep. 30, 2016 |
Oct. 20, 2016 |
|
Document Documentand Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | GHL | |
Entity Registrant Name | GREENHILL & CO INC | |
Entity Central Index Key | 0001282977 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 29,244,279 |
Condensed Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Millions |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Cash and cash equivalents, restricted from use | $ 4.9 | $ 4.7 |
Advisory fees receivable, allowance for doubtful accounts | 0.0 | 0.3 |
Property and equipment, accumulated depreciation | $ 59.8 | $ 58.5 |
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (shares) | 41,372,501 | 40,511,209 |
Common stock, shares outstanding (shares) | 29,241,017 | 29,325,374 |
Exchangeable shares of subsidiary, shares issued (shares) | 257,156 | 257,156 |
Exchangeable shares of subsidiary, shares outstanding (shares) | 32,804 | 32,804 |
Treasury stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Treasury stock, shares (shares) | 12,131,484 | 11,185,835 |
Condensed Consolidated Statements of Income (unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Revenues | ||||
Advisory revenues | $ 76,487 | $ 50,278 | $ 233,305 | $ 185,132 |
Investment revenues | 91 | 354 | 623 | 725 |
Total revenues | 76,578 | 50,632 | 233,928 | 185,857 |
Expenses | ||||
Employee compensation and benefits | 40,746 | 30,703 | 129,362 | 103,724 |
Occupancy and equipment rental | 5,052 | 5,559 | 14,602 | 15,901 |
Depreciation and amortization | 793 | 894 | 2,432 | 2,536 |
Information services | 2,208 | 2,332 | 6,718 | 6,714 |
Professional fees | 1,806 | 1,606 | 5,064 | 5,765 |
Travel related expenses | 3,129 | 3,257 | 8,903 | 8,916 |
Interest expense | 896 | 666 | 2,444 | 1,733 |
Other operating expenses | 2,748 | 4,473 | 8,880 | 11,486 |
Total expenses | 57,378 | 49,490 | 178,405 | 156,775 |
Income before taxes | 19,200 | 1,142 | 55,523 | 29,082 |
Provision for taxes | 6,090 | 458 | 18,428 | 11,376 |
Net income allocated to common stockholders | $ 13,110 | $ 684 | $ 37,095 | $ 17,706 |
Average shares outstanding: | ||||
Basic (shares) | 31,686,347 | 31,196,845 | 31,953,530 | 30,971,658 |
Diluted (shares) | 31,693,173 | 31,215,999 | 31,960,892 | 31,023,713 |
Earnings per share: | ||||
Basic (usd per share) | $ 0.41 | $ 0.02 | $ 1.16 | $ 0.57 |
Diluted (usd per share) | 0.41 | 0.02 | 1.16 | 0.57 |
Dividends declared and paid per share (usd per share) | $ 0.45 | $ 0.45 | $ 1.35 | $ 1.35 |
Condensed Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income allocated to common stockholders | $ 13,110 | $ 684 | $ 37,095 | $ 17,706 |
Currency translation adjustment, net of tax | 805 | (7,305) | 1,765 | (12,551) |
Comprehensive income allocated to common stockholders | $ 13,915 | $ (6,621) | $ 38,860 | $ 5,155 |
Condensed Consolidated Statements of Changes in Equity (Parenthetical) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Treasury stock, par value (usd per share) | 0.01 | 0.01 |
Common Stock | ||
Common stock, par value (usd per share) | 0.01 | 0.01 |
Contingent Convertible Preferred Stock | ||
Contingent convertible preferred stock, par value (usd per share) | 0.01 | 0.01 |
Treasury Stock | ||
Treasury stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Organization |
9 Months Ended |
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Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Greenhill & Co., Inc., a Delaware corporation, together with its subsidiaries (collectively, the “Company”), is a leading independent investment bank focused on providing financial and strategic advice on significant domestic and cross-border mergers and acquisitions, divestitures, restructurings, financings and capital raising and other transactions to a diverse client base, including corporations, partnerships, institutions and governments. The Company acts for clients located throughout the world from its offices located in the United States, United Kingdom, Germany, Sweden, Australia, Japan, Hong Kong, Singapore, Canada and Brazil. The Company's wholly-owned subsidiaries provide advisory services in various jurisdictions. Our most significant operating entities include: Greenhill & Co., LLC (“G&Co”), Greenhill & Co. International LLP (“GCI”), Greenhill & Co. Australia Pty Limited (“Greenhill Australia”) and Greenhill Cogent, LP ("Greenhill Cogent"). G&Co is engaged in investment banking activities principally in the United States. G&Co is registered as a broker-dealer with the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”), and is licensed in all 50 states and the District of Columbia. GCI is engaged in investment banking activities in the United Kingdom, and is subject to regulation by the U.K. Financial Conduct Authority (“FCA”). Greenhill Australia engages in investment banking activities in Australia and New Zealand and is licensed and subject to regulation by the Australian Securities and Investment Commission (“ASIC”). Greenhill Cogent is engaged in capital advisory services to institutional investors principally in the United States and is registered as a broker-dealer with the SEC and FINRA. See "Note 3 — Acquisition". The Company also operates in other locations throughout the world which are subject to regulation by other governmental and regulatory bodies and self-regulatory authorities. |
Summary of Significant Accounting Policies |
9 Months Ended |
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Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Financial Information These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP), which require management to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and these footnotes, including investment valuations, compensation accruals and other matters. Management believes that the estimates used in preparing its condensed consolidated financial statements are reasonable and prudent. Actual results could differ materially from those estimates. Certain reclassifications have been made to prior year information to conform to current year presentation. The condensed consolidated financial statements of the Company include all consolidated accounts of Greenhill & Co., Inc. and all other entities in which the Company has a controlling interest after eliminations of all significant inter-company accounts and transactions. In accordance with the accounting pronouncements related to consolidation of variable interest entities, the Company consolidates the general partners of certain merchant banking funds in which it has control. The general partners account for their investments in these merchant banking funds under the equity method of accounting. As such, the general partners record their proportionate shares of income (loss) from the underlying merchant banking funds. As the merchant banking funds follow investment company accounting, and generally record all their assets and liabilities at fair value, the general partners’ investment in these merchant banking funds represents estimations of fair value. The Company does not consolidate the merchant banking funds since the Company, through its general partner and limited partner interests, does not have control as the limited partners have certain rights to remove the general partner by a simple majority vote of unaffiliated third-party investors. These condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2015 included in the Company's Annual Report on Form 10-K filed with the SEC. The condensed consolidated financial information as of December 31, 2015 has been derived from audited consolidated financial statements not included herein. The results of operations for interim periods are not necessarily indicative of results for the entire year. Revenue Recognition Advisory Revenues It is the Company's accounting policy to recognize revenue when (i) there is persuasive evidence of an arrangement with a client, (ii) the agreed-upon services have been completed and delivered to the client or the transaction or events noted in the engagement letter are determined to be substantially complete, (iii) fees are fixed and determinable, and (iv) collection is reasonably assured. The Company recognizes advisory fee revenues for mergers and acquisitions or financing advisory and restructuring engagements when the services related to the underlying transactions are completed in accordance with the terms of the engagement letter and all other requirements for revenue recognition are satisfied. The Company recognizes capital advisory fees from primary capital raising transactions at the time of the client's acceptance of capital or capital commitments to a fund in accordance with the terms of the engagement letter. Generally, fee revenue is determined based upon a fixed percentage of capital committed to the fund. For multiple closings, revenue is recognized at each interim closing based on the amount of capital committed at each closing at the fixed fee percentage. At the final closing, revenue is recognized at the fixed percentage for the amount of capital committed since the last interim closing. The Company recognizes capital advisory fees from secondary market transactions at the time the sale or transfer of the capital interest is completed in accordance with the terms of the engagement letter. Generally, fee revenue is determined based upon a fixed percentage of the transaction value. While the majority of the Company's fee revenue is earned at the conclusion of a transaction or closing of a fund, on-going retainer fees, substantially all of which relate to non-success based strategic advisory and financing advisory and restructuring assignments, are also earned and recognized as advisory fee revenue over the period in which the related service is rendered. The Company’s clients reimburse certain expenses incurred by the Company in the conduct of advisory engagements. Expenses are reported net of such client reimbursements. Client reimbursements totaled $1.4 million and $0.9 million for the three months ended September 30, 2016 and 2015, respectively, and $4.6 million and $4.2 million for the nine months ended September 30, 2016 and 2015, respectively. Investment Revenues Investment revenues consist of gains (or losses) on the Company's investments in certain merchant banking funds and interest income. The Company recognizes revenue on its investments in merchant banking funds based on its allocable share of realized and unrealized gains (or losses) reported by such funds. Cash and Cash Equivalents The Company’s cash and cash equivalents consist of (i) cash held on deposit with financial institutions, (ii) cash equivalents and (iii) restricted cash. The Company maintains its cash and cash equivalents with financial institutions with high credit ratings. The Company considers all highly liquid investments with a maturity date of three months or less, when purchased, to be cash equivalents. Cash equivalents primarily consist of money market funds and overnight deposits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. See "Note 4 — Cash and Cash Equivalents". Advisory Fees Receivables Receivables are stated net of an allowance for doubtful accounts. The estimate for the allowance for doubtful accounts is derived by the Company by utilizing past client transaction history and an assessment of the client’s creditworthiness. The Company did not record a bad debt expense for the three month periods ended September 30, 2016 and September 30, 2015. For the nine month periods ended September 30, 2016 and 2015 the Company recorded bad debt expense of $0.4 million and $0.3 million, respectively. Included in the advisory fees receivable balance at September 30, 2016 and December 31, 2015 were $30.7 million and $32.4 million, respectively, of long term receivables related to primary capital advisory engagements which are generally paid in installments over a period of three years. Included as a component of investment revenues on the condensed consolidated statements of income is interest income related to primary capital advisory engagements of $0.1 million and $0.2 million for the three month periods ended September 30, 2016 and 2015, respectively, and $0.6 million for each of the nine month periods ended September 30, 2016 and 2015. Credit risk related to advisory fees receivable is disbursed across a large number of clients located in various geographic areas. The Company controls credit risk through credit approvals and monitoring procedures but does not require collateral to support accounts receivable. Investments The Company's investments in merchant banking funds are recorded under the equity method of accounting based upon the Company's proportionate share of the estimated fair value of the underlying merchant banking fund's net assets. The value of merchant banking fund investments in privately held companies is determined by management of the fund after giving consideration to the cost of the security, the pricing of other sales of securities by the portfolio company, the price of securities of other companies comparable to the portfolio company, purchase multiples paid in other comparable third-party transactions, the original purchase price multiple, market conditions, liquidity, operating results and other qualitative and quantitative factors. Discounts may be applied to the funds' privately held investments to reflect the lack of liquidity and other transfer restrictions. Investments in publicly traded securities are valued using quoted market prices discounted for any legal or contractual restrictions on sale. Because of the inherent uncertainty of valuations as well as the discounts applied, the estimated fair values of investments in privately held companies may differ significantly from the values that would have been used had a ready market for the securities existed. The values at which the Company's investments are carried on its condensed consolidated statements of financial condition are adjusted to estimated fair value at the end of each quarter and the volatility in general economic conditions, stock markets and commodity prices may result in significant changes in the estimated fair value of the investments from period to period. Goodwill Goodwill is the cost in excess of the fair value of identifiable net assets at acquisition date. The Company tests its goodwill for impairment at least annually. An impairment loss is triggered if the estimated fair value of an operating unit is less than estimated net book value. Such loss is calculated as the difference between the estimated fair value of goodwill and its carrying value. Goodwill is translated at the rate of exchange prevailing at the end of the periods presented in accordance with the accounting guidance for foreign currency translation. Any translation gain or loss is included in the foreign currency translation adjustment, which is included as a component of other comprehensive income in the condensed consolidated statements of changes in equity. Restricted Stock Units The Company accounts for its share-based compensation payments by recording the fair value of restricted stock units granted to employees as compensation expense. The restricted stock units are generally amortized over a five year service period following the date of grant. Compensation expense is determined based upon the fair market value of the Company’s common stock at the date of grant. As the Company expenses the awards, the restricted stock units recognized are recorded within equity. The restricted stock units are reclassified into common stock and additional paid-in capital upon vesting. The Company records as treasury stock the repurchase of stock delivered to its employees in settlement of tax liabilities incurred upon the vesting of restricted stock units. The Company records dividend equivalent payments on outstanding restricted stock units as a dividend payment and a charge to equity. Earnings per Share The Company calculates basic earnings per share (“EPS”) by dividing net income allocated to common stockholders by the sum of (i) the weighted average number of shares outstanding for the period and (ii) the weighted average number of shares deemed issuable due to the vesting of restricted stock units for accounting purposes. See "Note 9 — Equity". The Company calculates diluted EPS by dividing net income allocated to common stockholders by the sum of (i) basic shares per above and (ii) the dilutive effect of the common stock deliverable pursuant to restricted stock units for which future service is required. Under the treasury method, the number of shares issuable upon the vesting of restricted stock units included in the calculation of diluted EPS is the excess, if any, of the number of shares expected to be issued, less the number of shares that could be purchased by the Company with the proceeds to be received upon settlement at the average market closing price during the reporting period. See "Note 10— Earnings per Share". Provision for Taxes The Company accounts for taxes in accordance with the accounting guidance for income taxes which requires the recognition of tax benefits or expenses on the temporary differences between the financial reporting and tax bases of its assets and liabilities. The Company follows the guidance for income taxes in recognizing, measuring, presenting and disclosing in its financial statements uncertain tax positions taken or expected to be taken on its income tax returns. Income tax expense is based on pre-tax accounting income, including adjustments made for the recognition or derecognition related to uncertain tax positions. The recognition or derecognition of income tax expense related to uncertain tax positions is determined under the guidance, and the Company's policy is to treat interest and penalties related to uncertain tax positions as part of pre-tax income. Deferred tax assets and liabilities are recognized for the future tax attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period of change. Management applies the “more-likely-than-not criteria” when determining tax benefits. Foreign Currency Translation Assets and liabilities denominated in foreign currencies have been translated at rates of exchange prevailing at the end of the periods presented in accordance with the accounting guidance for foreign currency translation. Income and expenses transacted in foreign currency have been translated at average monthly exchange rates during the period. Translation gains and losses are included in the foreign currency translation adjustment, which is included as a component of other comprehensive income (loss) in the condensed consolidated statements of changes in equity. Foreign currency transaction gains and losses are included in the condensed consolidated statements of income. Financial Instruments and Fair Value The Company accounts for financial instruments measured at fair value in accordance with accounting guidance for fair value measurements and disclosures which establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the pronouncement are described below: Basis of Fair Value Measurement Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities that are subject to these disclosures. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3. Transfers between levels are recognized as of the end of the period in which they occur. See "Note 6 — Fair Value of Financial Instruments". Fair Value of Other Financial Instruments The Company believes that the carrying values of all other financial instruments presented in the condensed consolidated statements of financial condition approximate their fair value generally due to their short-term nature and generally negligible credit risk. These fair value measurements would be categorized as Level 2 within the fair value hierarchy. Noncontrolling Interests The Company records the noncontrolling interests of other consolidated entities as equity in the condensed consolidated statements of financial condition. The portion of the consolidated interests in the general partners of certain of the merchant banking funds not held by the Company is presented as noncontrolling interest in equity. See "Note 5 — Investments in Merchant Banking Funds". Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the life of the assets. Amortization of leasehold improvements is computed using the straight-line method over the lesser of the life of the asset or the remaining term of the lease. Estimated useful lives of the Company’s fixed assets are generally as follows: Aircraft – 7 years Equipment – 5 years Furniture and fixtures – 7 years Leasehold improvements – the lesser of 10 years or the remaining lease term Business Information The Company's activities as an investment banking firm constitute a single business segment, with substantially all revenues generated from advisory services, which includes engagements relating to mergers and acquisitions, financing advisory and restructuring, and capital advisory services. The Company generates approximately 0% - 1% of its revenues from its remaining principal investments in merchant banking funds, which it began liquidating several years ago, and interest income. Accounting Developments In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 amends the guidance in former ASC Topic 718, Compensation – Stock Compensation. The standard is effective for public entities for annual reporting periods beginning after December 15, 2016 and the Company will adopt these amendments effective on January 1, 2017. The impact of ASU No. 2016-09 will result in an increase or a decrease to the provision for income taxes for the net tax (cost) from the delivery of restricted stock units, which under the current standard is recorded as an adjustment to retained earnings, and could be material to the results of operations and the classifications of cash flows in future periods depending upon, among other things, the level of earnings and stock price of the Company. In February 2016, the FASB issued ASU No. 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 amends the guidance in former ASC 840, Leases. Management is currently evaluating the impact of the future adoption of ASU 2016-02 on the Company’s consolidated financial statements. The standard is effective for public entities for annual reporting periods beginning after December 15, 2018 and the Company will adopt these amendments effective on January 1, 2019. In May 2014, the FASB issued guidance codified in ASC 606, Revenue Recognition - Revenue from Contracts with Customers, which amends the guidance in former ASC 605, Revenue Recognition. Management is currently evaluating the impact of the future adoption of ASC 606 on the Company’s consolidated financial statements. The guidance originally was scheduled to be effective for fiscal years beginning after December 15, 2016. In August 2015, the FASB issued guidance which defers the effective date of the new recognition standard by one year. The standard is effective for public entities for annual reporting periods beginning after December 15, 2017 and the Company will adopt these amendments effective on January 1, 2018 (which will be retroactively applied to the period beginning January 1, 2016). |
Acquisition |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition | Acquisition On April 1, 2015, the Company acquired 100% ownership of Cogent Partners, LP and affiliates ("Cogent", now known as Greenhill Cogent) (the "Acquisition"). The Acquisition has been accounted for using the purchase method of accounting and the results of operations for Greenhill Cogent have been included in the condensed consolidated statements of income from the date of acquisition. The total purchase price was allocated to the assets acquired and liabilities assumed based on their fair values as of April 1, 2015. The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. The fair value of the identifiable intangible assets acquired, which consisted of Cogent's backlog of client assignments that existed at the time of the closing of the Acquisition, customer relationships, and trade name, has been included in other assets, net of amortization, on the condensed consolidated statement of financial condition. The fair value of the identifiable intangible assets is being amortized on a straight-line basis over the estimated remaining useful life of each asset over periods ranging between one to three years. For the three and nine months ended September 30, 2016, the Company recorded amortization expense of $0.1 million and $0.4 million, respectively, in respect of these assets. For the three and nine months ended September 30, 2015, the Company recorded amortization expense of $0.2 million and $0.4 million, respectively, in respect of these assets. In connection with the Acquisition, the Company agreed to pay to the sellers in the future $18.9 million in cash and 334,048 shares of Greenhill common stock if certain agreed revenue targets are achieved (the "Earnout"). The payment for the Earnout will be made if Greenhill Cogent achieves a revenue target during either the two year period ending on the second anniversary of the closing or the two year period ending on the fourth anniversary of the closing. If the revenue target is achieved, the contingent consideration will be paid on the second or fourth anniversary date of the closing, as applicable. If the revenue target is achieved during both Earnout periods, only one payment will be made at the end of the first Earnout period. If the revenue target is not achieved during either of the two year Earnout periods, a payment will not be made. The fair value of the contingent cash consideration was valued on the date of the Acquisition at $13.1 million and is remeasured quarterly based on a probability weighted present value discount that the revenue target may be achieved. Based on changes in the estimated probability of achievement and present value of the remaining term, for the three months ended September 30, 2016 there was no change in the value of the contingent consideration and for the nine months ended September 30, 2016 the fair value of the contingent consideration increased by $1.4 million. For the three and nine months ended September 30, 2015, the fair value of the contingent consideration increased by $0.1 million based on changes in the estimated probability of achievement and present value of the remaining term. See "Note 6 — Fair Value of Financial Instruments". Set forth below are the Company's summary unaudited pro forma results of operations for the nine months ended September 30, 2015, which includes the historical results of the Company and Cogent and gives effect to the Acquisition as if it had occurred on January 1, 2015. These pro forma results include the actual results of Cogent from January 1, 2015 through March 31, 2015. For the period April 1, 2015 through September 30, 2015, Cogent's results were included in the consolidated results of the Company.
The unaudited pro forma results of operations do not purport to represent what the Company's results of operations would actually have been had the Acquisition occurred on January 1, 2015, or to project the Company's results of operations for any future period. Actual future results may vary considerably based on a variety of factors beyond the Company's control. The pro forma results include (i) compensation and benefits expense based upon a ratio of compensation to total revenues of 54%, which was the actual compensation ratio used by the Company in the pro forma period presented, (ii) the amortization of identifiable intangible assets of Cogent, (iii) the estimated interest expense related to the bank term loan borrowings used to fund the Acquisition, (iv) the elimination of non-recurring revenue and expense items of Cogent which were directly attributable to the Acquisition, and (v) the estimated income tax expense related to Cogent's historical earnings, which as a result of the Acquisition, will be subject to income tax at the effective tax rate of the Company. |
Cash and Cash Equivalents |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents | Cash and Cash Equivalents The carrying values of the Company's cash and cash equivalents are as follows:
The carrying value of the Company's cash equivalents approximates fair value. Cash restricted for the payout of Greenhill Australia's deferred compensation plan was distributed over a 7 year period, which ended in March 2016. A deferred compensation liability relating to the plan of $0.1 million as of December 31, 2015 has been recorded on the condensed consolidated statements of financial condition as a component of compensation payable. Letters of credit are secured by cash held on deposit. |
Investments in Merchant Banking Funds |
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Schedule of Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Merchant Banking Funds | Investments in Merchant Banking Funds The Company has invested in certain previously sponsored merchant banking funds: Greenhill Capital Partners (“GCP I”) and Greenhill Capital Partners II (“GCP II”), which are families of merchant banking funds. In addition, the Company has invested in Barrow Street III, a real estate investment fund ("Barrow Street"). The carrying value of the Company’s investments in merchant banking funds are as follows:
As of September 30, 2016, the Company continues to retain control of GCP I and GCP II and consolidates the results of each such general partner. The investment in GCP I represents an interest in a previously sponsored merchant banking fund and includes $0.1 million at each of September 30, 2016 and December 31, 2015, respectively, related to the noncontrolling interests in the managing general partner of GCP I. The investment in GCP II represents an interest in a previously sponsored merchant banking fund and includes $0.6 million at each of September 30, 2016 and December 31, 2015, respectively, related to the noncontrolling interests in the general partner of GCP II. At September 30, 2016, the Company had no remaining unfunded commitments. Investment revenues The Company’s investment revenues, by source, are as follows:
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments There were no Level 1 or Level 2 assets or liabilities measured in the fair value hierarchy during the three and nine month periods ended September 30, 2016 and 2015. There were no Level 3 assets measured at fair value during the three and nine months ended September 30, 2016 and 2015. The following table sets forth the measurement at fair value on a recurring basis of the contingent cash consideration due the selling unitholders of Cogent related to the Earnout. The liability arose as a result of the Acquisition on April 1, 2015 and is categorized as a Level 3 liability, which is remeasured each quarterly period based on the probability of achieving the target revenue threshold and weighted average discount rate as discussed below. See "Note 3 — Acquisition". Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2016
Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2015
Changes in Level 3 liabilities measured at fair value on a recurring basis for the three and nine month periods ended September 30, 2016 are as follows:
Changes in Level 3 liabilities measured at fair value on a recurring basis for the three and nine month periods ended September 30, 2015 are as follows:
Realized and unrealized gains (losses) are reported as a component of other operating expenses in the condensed consolidated statements of income. The following table presents quantitative information about the significant unobservable inputs utilized by the Company in the fair value measure of Level 3 liabilities measured at fair value on a recurring basis, as of September 30, 2016:
_____________________________________________ (a) The Company's estimate of contingent consideration as of September 30, 2016 was principally based on the acquired business' actual and projected revenue generation for the periods from April 1, 2015 through March 31, 2017 and April 1, 2017 through March 31, 2019. Valuation Processes - Level 3 Measurements - The Company utilizes a valuation technique based on a present value method applied to the probability of achieving a range of potential revenue outcomes. The valuation was conducted by the Company. The Company updates unobservable inputs each reporting period and has a formal process in place to review changes in fair value. Sensitivity Analysis - Level 3 Measurements - The significant unobservable inputs used in determining fair value are the discount rate and forecast revenue information. Significant increases (decreases) in the discount rate would have resulted in a lower (higher) fair value measurement. Significant increases (decreases) in the forecast revenue information would result in a higher (lower) fair value measurement. For all significant unobservable inputs used in the fair value measurement of the Level 3 liabilities, a change in one of the inputs would not necessarily result in a directionally similar change in the other. |
Related Parties |
9 Months Ended |
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Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Parties | Related Parties At September 30, 2016 and December 31, 2015, the Company had no amounts receivable or payable to related parties. The Company subleases airplane and office space to a firm owned by the Chairman of the Company. The Company recognized rent reimbursements of $0.02 million for each of the three month periods ended September 30, 2016 and 2015, and $0.05 million for each of the nine month periods ended September 30, 2016 and 2015, which are included as a reduction of occupancy and equipment rental on the condensed consolidated statements of income. |
Bank Loan Facilities |
9 Months Ended |
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Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Bank Loan Facilities | Bank Loan Facilities At September 30, 2016, the Company had a $70.0 million revolving bank loan facility with a U.S. banking institution to provide for working capital needs and for other general corporate purposes. In March 2016, the borrowing capacity under the revolving loan facility was increased by $20.0 million, from $50.0 million to $70.0 million, and the maturity date was extended to April 30, 2017. Interest on the borrowings is based on the higher of 3.50% or the U.S. Prime Rate and is payable monthly. The weighted average daily borrowings outstanding under the revolving bank loan facility were approximately $52.2 million and $34.4 million for the nine months ended September 30, 2016 and 2015, respectively. The weighted average interest rate was 3.50% and 3.25% for the nine months ended September 30, 2016 and 2015, respectively. In connection with the acquisition of Cogent in April 2015, the Company borrowed $45.0 million, which was comprised of two bank term loan facilities (the "Term Loan Facilities"), each in an original principal amount of $22.5 million. One Term Loan Facility was payable in full on April 30, 2016 (the "One Year Facility") and bore interest at the Prime Rate plus three-quarters of one percent (0.75%) per annum. In April 2016, the One Year Facility was repaid in full. The other Term Loan Facility matures on April 30, 2018 (the "Three Year Facility"), is payable in four equal semi-annual installments beginning on October 31, 2016 and bears interest at the Prime Rate plus one and one-quarter percent (1.25%) per annum, which interest rate will be reduced to the Prime Rate plus three-quarters of one percent (0.75%) per annum when the amount outstanding on the Three Year Facility is $7.5 million or less. The first installment of $5.6 million of the Three Year Facility was repaid in August 2016 and at September 30, 2016, the outstanding principal balance of the Three Year Facility was $16.9 million. Future installments on the Three Year Facility are due on April 30, 2017 and October 31, 2017 and the final installment is due on April 30, 2018. There are no prepayment penalties for the early repayment of either Term Loan Facility. Principal amounts repaid on the Term Loan Facilities cannot be reborrowed. The interest rate applicable to the Term Loan Facilities can never be less than four percent (4.00%) per annum. The weighted average interest rate related to the Term Loan Facilities was 4.67% and 4.33% for the nine months ended September 30, 2016 and 2015, respectively. The revolving and term loan facilities are provided by a U.S. banking institution and are secured by any cash distributed in respect of the Company’s investment in the U.S. based merchant banking funds and cash distributions from G&Co and GCI. In addition, the bank loan facilities have a prohibition on the incurrence of additional indebtedness without the prior approval of the lenders and the Company is required to comply with certain financial and liquidity covenants. At September 30, 2016, the Company was compliant with all loan covenants. |
Equity |
9 Months Ended |
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Sep. 30, 2016 | |
Stockholders' Equity Note [Abstract] | |
Equity | Equity On September 21, 2016, a dividend of $0.45 per share was paid to stockholders of record on September 7, 2016. For the nine months ended September 30, 2016, dividend payments of $1.35 per share were paid to stockholders. Dividends include dividend equivalents of $6.4 million and $5.1 million, which were payable on outstanding restricted stock units for the nine months ended September 30, 2016 and 2015, respectively. During the nine months ended September 30, 2016, 850,367 restricted stock units vested and were issued as common stock of which the Company is deemed to have repurchased 319,194 shares at an average price of $25.10 per share in conjunction with the payment of tax liabilities in respect of stock delivered to its employees in settlement of restricted stock units. In addition, during the nine months ended September 30, 2016, the Company repurchased in open market transactions 626,455 shares of its common stock at an average price of $20.22 per share. During the nine months ended September 30, 2015, 823,639 restricted stock units vested and were issued as common stock of which the Company is deemed to have repurchased 340,112 shares at an average price of $34.91 per share in conjunction with the payment of tax liabilities in respect of stock delivered to its employees in settlement of restricted stock units. |
Earnings per Share |
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Earnings per Share | Earnings per Share The computations of basic and diluted EPS are set forth below:
The weighted number of shares and dilutive potential shares do not include 334,048 shares of common stock, which will be issued to the selling unitholders of Cogent, on the second or fourth anniversary of the Acquisition, as the case may be, if the revenue target related to the Earnout is achieved. In the event that the revenue target is achieved, such shares will be included in the Company’s share count in the period that the target is achieved. If the revenue target is not achieved on either the second or fourth anniversary, such shares of common stock will not be issued. See “Note 3 — Acquisition”. |
Income Taxes |
9 Months Ended |
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Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company's effective tax rate varies depending on the jurisdiction in which the income is earned. Certain foreign sourced income is taxed at a lower effective rate than U.S. income. Under the requirements of ASC 740, the Company intends to indefinitely reinvest its non-U.S. subsidiaries earnings outside the United States and does not provide for residual U.S. tax on these earnings. The Company believes it is more likely than not that the deferred tax asset, which relates principally to compensation expense deducted for book purposes but not yet deducted for tax purposes, will be realized as offsets to: (i) the realization of its deferred tax liabilities and (ii) future taxable income. Any gain or loss resulting from the translation of deferred taxes for foreign affiliates is included in the foreign currency translation adjustment incorporated as a component of other comprehensive income, net of tax, in the condensed consolidated statements of changes in equity and the condensed consolidated statements of comprehensive income. The Company's income tax returns are routinely examined by the U.S. federal, U.S. state, and international tax authorities. The Company regularly assesses its tax positions with respect to applicable income tax issues for open tax years in each respective jurisdiction in which the Company operates. As of September 30, 2016, the Company does not believe the resolution of any current ongoing income tax examinations will have a material adverse impact on the financial position of the Company. |
Regulatory Requirements |
9 Months Ended |
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Sep. 30, 2016 | |
Regulatory Capital Requirements [Abstract] | |
Regulatory Requirements | Regulatory Requirements Certain subsidiaries of the Company are subject to various regulatory requirements in the United States, United Kingdom, Australia and certain other jurisdictions, which specify, among other requirements, minimum net capital requirements for registered broker-dealers. G&Co is subject to the SEC’s Uniform Net Capital requirements under Rule 15c3-1 (the “Rule”), which specifies, among other requirements, minimum net capital requirements for registered broker-dealers. The Rule requires G&Co to maintain a minimum net capital of the greater of $5,000 or 1/15 of aggregate indebtedness, as defined in the Rule. As of September 30, 2016, G&Co’s net capital was $1.9 million, which exceeded its requirement by $1.2 million. G&Co’s aggregate indebtedness to net capital ratio was 5.6 to 1 at September 30, 2016. Certain distributions and other capital withdrawals of G&Co are subject to certain notifications and restrictive provisions of the Rule. GCI is subject to capital requirements of the FCA. Greenhill Australia is subject to capital requirements of the ASIC. Greenhill Cogent is subject to capital requirements of the SEC and the FCA. We are also subject to certain regulatory capital requirements in other jurisdictions. As of September 30, 2016, GCI, Greenhill Australia, Greenhill Cogent and our other regulated operations were in compliance with local capital adequacy requirements. |
Subsequent Events |
9 Months Ended |
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Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Company evaluates subsequent events through the date on which the financial statements are issued. On October 20, 2016, the Board of Directors of the Company declared a quarterly dividend of $0.45 per share. The dividend will be payable on December 21, 2016 to the common stockholders of record on December 7, 2016. |
Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Business Description and Basis of Presentation [Text Block] | Business Information The Company's activities as an investment banking firm constitute a single business segment, with substantially all revenues generated from advisory services, which includes engagements relating to mergers and acquisitions, financing advisory and restructuring, and capital advisory services. The Company generates approximately 0% - 1% of its revenues from its remaining principal investments in merchant banking funds, which it began liquidating several years ago, and interest income. |
Basis of Financial Information | Basis of Financial Information These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP), which require management to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and these footnotes, including investment valuations, compensation accruals and other matters. Management believes that the estimates used in preparing its condensed consolidated financial statements are reasonable and prudent. Actual results could differ materially from those estimates. Certain reclassifications have been made to prior year information to conform to current year presentation. The condensed consolidated financial statements of the Company include all consolidated accounts of Greenhill & Co., Inc. and all other entities in which the Company has a controlling interest after eliminations of all significant inter-company accounts and transactions. In accordance with the accounting pronouncements related to consolidation of variable interest entities, the Company consolidates the general partners of certain merchant banking funds in which it has control. The general partners account for their investments in these merchant banking funds under the equity method of accounting. As such, the general partners record their proportionate shares of income (loss) from the underlying merchant banking funds. As the merchant banking funds follow investment company accounting, and generally record all their assets and liabilities at fair value, the general partners’ investment in these merchant banking funds represents estimations of fair value. The Company does not consolidate the merchant banking funds since the Company, through its general partner and limited partner interests, does not have control as the limited partners have certain rights to remove the general partner by a simple majority vote of unaffiliated third-party investors. These condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2015 included in the Company's Annual Report on Form 10-K filed with the SEC. The condensed consolidated financial information as of December 31, 2015 has been derived from audited consolidated financial statements not included herein. The results of operations for interim periods are not necessarily indicative of results for the entire year. |
Revenue Recognition | Revenue Recognition Advisory Revenues It is the Company's accounting policy to recognize revenue when (i) there is persuasive evidence of an arrangement with a client, (ii) the agreed-upon services have been completed and delivered to the client or the transaction or events noted in the engagement letter are determined to be substantially complete, (iii) fees are fixed and determinable, and (iv) collection is reasonably assured. The Company recognizes advisory fee revenues for mergers and acquisitions or financing advisory and restructuring engagements when the services related to the underlying transactions are completed in accordance with the terms of the engagement letter and all other requirements for revenue recognition are satisfied. The Company recognizes capital advisory fees from primary capital raising transactions at the time of the client's acceptance of capital or capital commitments to a fund in accordance with the terms of the engagement letter. Generally, fee revenue is determined based upon a fixed percentage of capital committed to the fund. For multiple closings, revenue is recognized at each interim closing based on the amount of capital committed at each closing at the fixed fee percentage. At the final closing, revenue is recognized at the fixed percentage for the amount of capital committed since the last interim closing. The Company recognizes capital advisory fees from secondary market transactions at the time the sale or transfer of the capital interest is completed in accordance with the terms of the engagement letter. Generally, fee revenue is determined based upon a fixed percentage of the transaction value. While the majority of the Company's fee revenue is earned at the conclusion of a transaction or closing of a fund, on-going retainer fees, substantially all of which relate to non-success based strategic advisory and financing advisory and restructuring assignments, are also earned and recognized as advisory fee revenue over the period in which the related service is rendered. The Company’s clients reimburse certain expenses incurred by the Company in the conduct of advisory engagements. Expenses are reported net of such client reimbursements. Client reimbursements totaled $1.4 million and $0.9 million for the three months ended September 30, 2016 and 2015, respectively, and $4.6 million and $4.2 million for the nine months ended September 30, 2016 and 2015, respectively. Investment Revenues Investment revenues consist of gains (or losses) on the Company's investments in certain merchant banking funds and interest income. The Company recognizes revenue on its investments in merchant banking funds based on its allocable share of realized and unrealized gains (or losses) reported by such funds. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company’s cash and cash equivalents consist of (i) cash held on deposit with financial institutions, (ii) cash equivalents and (iii) restricted cash. The Company maintains its cash and cash equivalents with financial institutions with high credit ratings. The Company considers all highly liquid investments with a maturity date of three months or less, when purchased, to be cash equivalents. Cash equivalents primarily consist of money market funds and overnight deposits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. |
Advisory Fees Receivables | Advisory Fees Receivables Receivables are stated net of an allowance for doubtful accounts. The estimate for the allowance for doubtful accounts is derived by the Company by utilizing past client transaction history and an assessment of the client’s creditworthiness. The Company did not record a bad debt expense for the three month periods ended September 30, 2016 and September 30, 2015. For the nine month periods ended September 30, 2016 and 2015 the Company recorded bad debt expense of $0.4 million and $0.3 million, respectively. Included in the advisory fees receivable balance at September 30, 2016 and December 31, 2015 were $30.7 million and $32.4 million, respectively, of long term receivables related to primary capital advisory engagements which are generally paid in installments over a period of three years. Included as a component of investment revenues on the condensed consolidated statements of income is interest income related to primary capital advisory engagements of $0.1 million and $0.2 million for the three month periods ended September 30, 2016 and 2015, respectively, and $0.6 million for each of the nine month periods ended September 30, 2016 and 2015. Credit risk related to advisory fees receivable is disbursed across a large number of clients located in various geographic areas. The Company controls credit risk through credit approvals and monitoring procedures but does not require collateral to support accounts receivable. |
Investments | Investments The Company's investments in merchant banking funds are recorded under the equity method of accounting based upon the Company's proportionate share of the estimated fair value of the underlying merchant banking fund's net assets. The value of merchant banking fund investments in privately held companies is determined by management of the fund after giving consideration to the cost of the security, the pricing of other sales of securities by the portfolio company, the price of securities of other companies comparable to the portfolio company, purchase multiples paid in other comparable third-party transactions, the original purchase price multiple, market conditions, liquidity, operating results and other qualitative and quantitative factors. Discounts may be applied to the funds' privately held investments to reflect the lack of liquidity and other transfer restrictions. Investments in publicly traded securities are valued using quoted market prices discounted for any legal or contractual restrictions on sale. Because of the inherent uncertainty of valuations as well as the discounts applied, the estimated fair values of investments in privately held companies may differ significantly from the values that would have been used had a ready market for the securities existed. The values at which the Company's investments are carried on its condensed consolidated statements of financial condition are adjusted to estimated fair value at the end of each quarter and the volatility in general economic conditions, stock markets and commodity prices may result in significant changes in the estimated fair value of the investments from period to period. |
Goodwill | Goodwill Goodwill is the cost in excess of the fair value of identifiable net assets at acquisition date. The Company tests its goodwill for impairment at least annually. An impairment loss is triggered if the estimated fair value of an operating unit is less than estimated net book value. Such loss is calculated as the difference between the estimated fair value of goodwill and its carrying value. Goodwill is translated at the rate of exchange prevailing at the end of the periods presented in accordance with the accounting guidance for foreign currency translation. Any translation gain or loss is included in the foreign currency translation adjustment, which is included as a component of other comprehensive income in the condensed consolidated statements of changes in equity. |
Restricted Stock Units | Restricted Stock Units The Company accounts for its share-based compensation payments by recording the fair value of restricted stock units granted to employees as compensation expense. The restricted stock units are generally amortized over a five year service period following the date of grant. Compensation expense is determined based upon the fair market value of the Company’s common stock at the date of grant. As the Company expenses the awards, the restricted stock units recognized are recorded within equity. The restricted stock units are reclassified into common stock and additional paid-in capital upon vesting. The Company records as treasury stock the repurchase of stock delivered to its employees in settlement of tax liabilities incurred upon the vesting of restricted stock units. The Company records dividend equivalent payments on outstanding restricted stock units as a dividend payment and a charge to equity. |
Earnings per Share | Earnings per Share The Company calculates basic earnings per share (“EPS”) by dividing net income allocated to common stockholders by the sum of (i) the weighted average number of shares outstanding for the period and (ii) the weighted average number of shares deemed issuable due to the vesting of restricted stock units for accounting purposes. See "Note 9 — Equity". The Company calculates diluted EPS by dividing net income allocated to common stockholders by the sum of (i) basic shares per above and (ii) the dilutive effect of the common stock deliverable pursuant to restricted stock units for which future service is required. Under the treasury method, the number of shares issuable upon the vesting of restricted stock units included in the calculation of diluted EPS is the excess, if any, of the number of shares expected to be issued, less the number of shares that could be purchased by the Company with the proceeds to be received upon settlement at the average market closing price during the reporting period. |
Provision for Taxes | Provision for Taxes The Company accounts for taxes in accordance with the accounting guidance for income taxes which requires the recognition of tax benefits or expenses on the temporary differences between the financial reporting and tax bases of its assets and liabilities. The Company follows the guidance for income taxes in recognizing, measuring, presenting and disclosing in its financial statements uncertain tax positions taken or expected to be taken on its income tax returns. Income tax expense is based on pre-tax accounting income, including adjustments made for the recognition or derecognition related to uncertain tax positions. The recognition or derecognition of income tax expense related to uncertain tax positions is determined under the guidance, and the Company's policy is to treat interest and penalties related to uncertain tax positions as part of pre-tax income. Deferred tax assets and liabilities are recognized for the future tax attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period of change. Management applies the “more-likely-than-not criteria” when determining tax benefits. |
Foreign Currency Translation | Foreign Currency Translation Assets and liabilities denominated in foreign currencies have been translated at rates of exchange prevailing at the end of the periods presented in accordance with the accounting guidance for foreign currency translation. Income and expenses transacted in foreign currency have been translated at average monthly exchange rates during the period. Translation gains and losses are included in the foreign currency translation adjustment, which is included as a component of other comprehensive income (loss) in the condensed consolidated statements of changes in equity. Foreign currency transaction gains and losses are included in the condensed consolidated statements of income. |
Financial Instruments and Fair Value | Financial Instruments and Fair Value The Company accounts for financial instruments measured at fair value in accordance with accounting guidance for fair value measurements and disclosures which establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the pronouncement are described below: Basis of Fair Value Measurement Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities that are subject to these disclosures. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3. Transfers between levels are recognized as of the end of the period in which they occur. See "Note 6 — Fair Value of Financial Instruments". Fair Value of Other Financial Instruments The Company believes that the carrying values of all other financial instruments presented in the condensed consolidated statements of financial condition approximate their fair value generally due to their short-term nature and generally negligible credit risk. These fair value measurements would be categorized as Level 2 within the fair value hierarchy. |
Noncontrolling Interests | Noncontrolling Interests The Company records the noncontrolling interests of other consolidated entities as equity in the condensed consolidated statements of financial condition. The portion of the consolidated interests in the general partners of certain of the merchant banking funds not held by the Company is presented as noncontrolling interest in equity. |
Property and Equipment | Property and Equipment Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the life of the assets. Amortization of leasehold improvements is computed using the straight-line method over the lesser of the life of the asset or the remaining term of the lease. Estimated useful lives of the Company’s fixed assets are generally as follows: Aircraft – 7 years Equipment – 5 years Furniture and fixtures – 7 years Leasehold improvements – the lesser of 10 years or the remaining lease term |
Accounting Developments | Accounting Developments In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 amends the guidance in former ASC Topic 718, Compensation – Stock Compensation. The standard is effective for public entities for annual reporting periods beginning after December 15, 2016 and the Company will adopt these amendments effective on January 1, 2017. The impact of ASU No. 2016-09 will result in an increase or a decrease to the provision for income taxes for the net tax (cost) from the delivery of restricted stock units, which under the current standard is recorded as an adjustment to retained earnings, and could be material to the results of operations and the classifications of cash flows in future periods depending upon, among other things, the level of earnings and stock price of the Company. In February 2016, the FASB issued ASU No. 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 amends the guidance in former ASC 840, Leases. Management is currently evaluating the impact of the future adoption of ASU 2016-02 on the Company’s consolidated financial statements. The standard is effective for public entities for annual reporting periods beginning after December 15, 2018 and the Company will adopt these amendments effective on January 1, 2019. In May 2014, the FASB issued guidance codified in ASC 606, Revenue Recognition - Revenue from Contracts with Customers, which amends the guidance in former ASC 605, Revenue Recognition. Management is currently evaluating the impact of the future adoption of ASC 606 on the Company’s consolidated financial statements. The guidance originally was scheduled to be effective for fiscal years beginning after December 15, 2016. In August 2015, the FASB issued guidance which defers the effective date of the new recognition standard by one year. The standard is effective for public entities for annual reporting periods beginning after December 15, 2017 and the Company will adopt these amendments effective on January 1, 2018 (which will be retroactively applied to the period beginning January 1, 2016). |
Acquisition (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition, Pro Forma Information | Set forth below are the Company's summary unaudited pro forma results of operations for the nine months ended September 30, 2015, which includes the historical results of the Company and Cogent and gives effect to the Acquisition as if it had occurred on January 1, 2015. These pro forma results include the actual results of Cogent from January 1, 2015 through March 31, 2015. For the period April 1, 2015 through September 30, 2015, Cogent's results were included in the consolidated results of the Company.
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Cash and Cash Equivalents (Tables) |
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Cash and cash equivalents | The carrying values of the Company's cash and cash equivalents are as follows:
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Investments in Merchant Banking Funds (Tables) |
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Carrying Value of Investments in Merchant Banking Funds | The carrying value of the Company’s investments in merchant banking funds are as follows:
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Investment Revenues by Source | The Company’s investment revenues, by source, are as follows:
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements, Recurring and Nonrecurring | The following table sets forth the measurement at fair value on a recurring basis of the contingent cash consideration due the selling unitholders of Cogent related to the Earnout. The liability arose as a result of the Acquisition on April 1, 2015 and is categorized as a Level 3 liability, which is remeasured each quarterly period based on the probability of achieving the target revenue threshold and weighted average discount rate as discussed below. See "Note 3 — Acquisition". Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2016
Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2015
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Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | Changes in Level 3 liabilities measured at fair value on a recurring basis for the three and nine month periods ended September 30, 2016 are as follows:
Changes in Level 3 liabilities measured at fair value on a recurring basis for the three and nine month periods ended September 30, 2015 are as follows:
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Fair Value Inputs, Liabilities, Quantitative Information | The following table presents quantitative information about the significant unobservable inputs utilized by the Company in the fair value measure of Level 3 liabilities measured at fair value on a recurring basis, as of September 30, 2016:
_____________________________________________ (a) The Company's estimate of contingent consideration as of September 30, 2016 was principally based on the acquired business' actual and projected revenue generation for the periods from April 1, 2015 through March 31, 2017 and April 1, 2017 through March 31, 2019. |
Earnings per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computations of Basic and Diluted Earnings Per Share | The computations of basic and diluted EPS are set forth below:
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Organization (Details) |
Sep. 30, 2016
state
|
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of states in which the entity is licensed (state) | 50 |
Acquisition - Pro Forma Results (Details) - Cogent Partners, LP $ / shares in Units, $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2015
USD ($)
$ / shares
| |
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | |
Revenues | $ 196.3 |
Income before taxes | 31.0 |
Net income allocated to common stockholders | $ 18.9 |
Diluted earnings per share (usd per share) | $ / shares | $ 0.59 |
Cash and Cash Equivalents (Details) - USD ($) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2016 |
Sep. 30, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Dec. 31, 2014 |
|
Restricted Cash and Cash Equivalents Items [Line Items] | |||||
Cash | $ 48,172 | $ 59,270 | |||
Cash equivalents | 2,702 | 5,946 | |||
Restricted cash | 4,900 | 4,700 | |||
Total cash and cash equivalents | 55,819 | 69,962 | $ 35,286 | $ 50,940 | |
Distribution period (years) | 7 years | ||||
Deferred compensation liability | 100 | ||||
Deferred compensation plan | |||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||
Restricted cash | 0 | 117 | |||
Letter of Credit | |||||
Restricted Cash and Cash Equivalents Items [Line Items] | |||||
Restricted cash | $ 4,945 | $ 4,629 |
Investments in Merchant Banking Funds - Carrying Value of Investments in Merchant Banking Funds (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Investments in and Advances to Affiliates [Line Items] | ||
Investments in merchant banking funds | $ 3,469 | $ 3,575 |
GCP I | ||
Investments in and Advances to Affiliates [Line Items] | ||
Investments in merchant banking funds | 1,105 | 1,105 |
GCP II | ||
Investments in and Advances to Affiliates [Line Items] | ||
Investments in merchant banking funds | 779 | 785 |
Investment in Barrow Street | ||
Investments in and Advances to Affiliates [Line Items] | ||
Investments in merchant banking funds | $ 1,585 | $ 1,685 |
Investments in Merchant Banking Funds - Additional Information (Details) - USD ($) $ in Millions |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
GCP I | ||
Fair Value, Measurement Inputs, Disclosure [Line Items] | ||
Investment related to noncontrolling interests | $ 0.1 | $ 0.1 |
GCP II | ||
Fair Value, Measurement Inputs, Disclosure [Line Items] | ||
Investment related to noncontrolling interests | $ 0.6 | $ 0.6 |
Investments in Merchant Banking Funds - Investment Revenues (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Principal Transaction Revenue [Line Items] | ||||
Net realized and unrealized gains (losses) on investments in merchant banking funds | $ (106) | $ 24 | ||
Interest income | $ 162 | $ 207 | 682 | 700 |
Total investment revenues | 91 | 354 | 623 | 725 |
Merchant Banking Funds | ||||
Principal Transaction Revenue [Line Items] | ||||
Net realized and unrealized gains (losses) on investments in merchant banking funds | $ (71) | $ 147 | $ (59) | $ 25 |
Related Parties - Additional Information (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Related Party Transactions [Abstract] | |||||
Receivables (payables) to related parties | $ 0 | $ 0 | $ 0 | ||
Tenant reimbursements | $ 20,000 | $ 20,000 | $ 50,000 | $ 50,000 |
Equity - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 21, 2016 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Stockholders Equity Note [Line Items] | |||||
Dividends declared and paid per share (usd per share) | $ 0.45 | $ 0.45 | $ 0.45 | $ 1.35 | $ 1.35 |
Dividend equivalents paid | $ 6.4 | $ 5.1 | |||
Common Stock | |||||
Stockholders Equity Note [Line Items] | |||||
Common stock repurchased (shares) | 626,455 | ||||
Common stock repurchased, average price per share (usd per share) | $ 20.22 | ||||
Common Stock | |||||
Stockholders Equity Note [Line Items] | |||||
Repurchased shares for award (shares) | 319,194 | 340,112 | |||
Average repurchase price of shares for award (usd per share) | $ 25.10 | $ 34.91 | |||
Restricted Stock Units | |||||
Stockholders Equity Note [Line Items] | |||||
Restricted stock units vested and issued as common stock (shares) | 850,367 | 823,639 |
Regulatory Requirements - Additional Information (Details) |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Regulatory Capital Requirements [Abstract] | |
Minimum net capital required | $ 5,000 |
Description of minimum net capital requirements | The greater of $5,000 or 1/15 of aggregate indebtedness |
Minimum net capital requirements (percent) | 6.67% |
Net capital | $ 1,900,000 |
Excess net capital | $ 1,200,000 |
Aggregate indebtedness to net capital ratio (percent) | 5.6 |
Subsequent Events - Additional Information (Details) - Subsequent Event |
Oct. 20, 2016
$ / shares
|
---|---|
Subsequent Event [Line Items] | |
Subsequent event, description | The Board of Directors of the Company declared a quarterly dividend |
Dividends declared per common share (usd per share) | $ 0.45 |
Dividend payable date | Dec. 21, 2016 |
Dividend record date | Dec. 07, 2016 |
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