Segment Operating Results

12 Months Ended

Dec. 31, 2011

Segment Operating Results [Abstract]

Segment Operating Results

Note 22 – Segment Operating Results

Business Segments – The Company's business results are categorized into the following two segments: Investment Banking and Investment Management. Investment Banking includes providing advice to clients on significant mergers, acquisitions, divestitures and other strategic corporate transactions. During 2010, the Investment Banking segment (formerly called the Advisory segment) expanded to include services related to securities underwriting, private fund placement services and commissions for agency-based equity trading services and equity research. During 2011, the Investment Banking segment expanded to include the acquisition of Lexicon. Investment Management includes advising third-party investors in the Institutional Asset Management, Wealth Management and Private Equity sectors.

The Company's segment information for the years ended December 31, 2011, 2010 and 2009 is prepared using the following methodology:

• Revenue, expenses and income (loss) from equity method investments directly associated with each segment are included in determining pre-tax income.

• Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount and other factors.

• Segment assets are based on those directly associated with each segment, or for certain assets shared across segments, those assets are allocated based on the most relevant measures applicable, including headcount and other factors.

• Investment gains and losses, interest income and interest expense are allocated between the segments based on the segment in which the underlying asset or liability is held.

Each segment's Operating Expenses include: a) employee compensation and benefits expenses that are incurred directly in support of the segment and b) non-compensation expenses, which include expenses for premises and occupancy, professional fees, travel and entertainment, communications and information services, equipment and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, legal, facilities management and senior management activities. Other Expenses include: a) amortization costs associated with the modification of unvested LP Units and certain other awards, b) charges associated with the vesting of Event-based Awards, c) the amortization of intangible assets associated with certain acquisitions, d) compensation charges associated with deferred consideration, retention awards and related compensation for Lexicon employees and e) a charge related to the exiting of a lease commitment for office space, an introducing fee as well as other professional fees incurred by Lexicon.

The Company evaluates segment results based on net revenue and pre-tax income, both including and excluding the impact of the Other Expenses.

The following information provides a reasonable representation of each segment's contribution.

	For the Years Ended December 31,
	2011			2010			2009
Investment Banking
Net Revenues(1)	$	428,124		$	301,847		$	292,634
Operating Expenses		337,886			240,312			204,399
Other Expenses(2)		55,591			19,408			17,728
Operating Income		34,647			42,127			70,507
Income from Equity Method Investments		1,101			16			—
Pre-Tax Income	$	35,748		$	42,143		$	70,507
Identifiable Segment Assets	$	530,008		$	370,329		$	377,303
Investment Management
Net Revenues(1)	$	96,140		$	74,058		$	19,783
Operating Expenses		89,269			75,704			52,233
Other Expenses(2)		5,706			3,621			14,609
Operating Income (Loss)		1,165			(5,267	)		(47,059	)
Income (Loss) from Equity Method Investments		(182	)		(573	)		(1,406	)
Pre-Tax Income (Loss)	$	983		$	(5,840	)	$	(48,465	)
Identifiable Segment Assets	$	513,584		$	527,756		$	513,857
Total
Net Revenues(1)	$	524,264		$	375,905		$	312,417
Operating Expenses		427,155			316,016			256,632
Other Expenses(2)		61,297			23,029			32,337
Operating Income		35,812			36,860			23,448
Income (Loss) from Equity Method Investments		919			(557	)		(1,406	)
Pre-Tax Income	$	36,731		$	36,303		$	22,042
Identifiable Segment Assets	$	1,043,592		$	898,085		$	891,160

(1) Net revenues include Other Revenue, net, allocated to the segments as follows:

	For the Years Ended December 31,
	2011			2010			2009
Investment Banking(A)	$	(2,473	)	$	(84	)	$	(677	)
Investment Management(B)		(3,021	)		(552	)		(1,381	)
Total Other Revenue, net	$	(5,494	)	$	(636	)	$	(2,058	)

(A) Investment Banking Other Revenue, net, includes interest expense on the Senior Notes of $4,238, $4,169, and $2,742 for the years ended December 31, 2011, 2010 and 2009, respectively.

(B) Investment Management Other Revenue, net, includes interest expense on the Senior Notes of $3,579, $3,525 and $4,853 for the years ended December 31, 2011, 2010 and 2009, respectively.

(2) Other Expenses are as follows:

	For the Years Ended December 31,
	2011		2010		2009
Investment Banking
Amortization of LP Units and Certain Other Awards	$	21,328	$	17,532	$	7,910
Vesting of Event-based Awards		8,906		—		—
Acquisition Related Compensation Charges		14,618		—		—
Special Charges		3,894		—		7,942
Intangible Asset Amortization		6,845		1,876		1,876
Total Investment Banking		55,591		19,408		17,728
Investment Management
Amortization of LP Units and Certain Other Awards		2,892		3,289		1,490
Vesting of Event-based Awards		2,483		—		—
Special Charges		—		—		12,187
Acquisition and Transition Costs		—		—		712
Intangible Asset Amortization		331		332		220
Total Investment Management		5,706		3,621		14,609
Total Other Expenses	$	61,297	$	23,029	$	32,337

Geographic Information – The Company manages its business based on the profitability of the enterprise as a whole.

The Company's revenues were derived from clients and private equity funds located in the following geographical areas:

	For the Years Ended December 31,
	2011		2010		2009
Net Revenues:(1)
United States	$	387,063	$	290,693	$	256,104
Europe and Other		112,049		60,605		36,078
Latin America		30,646		25,243		22,293
Total	$	529,758	$	376,541	$	314,475

(1) Excludes Other Revenue and Interest Expense.

Substantially all of the Company's long-lived assets reside in the United States.