Segment Operating Results

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Operating Results

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 as well as services related to securities underwriting, private fund placement services and commissions for agency-based equity trading services and equity research. Investment Management includes advising third-party investors in the Institutional Asset Management, Wealth Management and Private Equity sectors. On December 28, 2012, the Company, through EWM, acquired Mt. Eden Investment Advisors, LLC (“Mt. Eden”), which is included in the Investment Management segment. The Company has determined Pan met the criteria to be classified as Held for Sale and to be presented within Discontinued Operations. The following segment information reflects the Company's results from its continuing operations.

The Company’s segment information for the three and nine months endedSeptember 30, 2013 and 2012 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, square footage and other performance and time-based 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 and vesting of LP Units and certain other awards, b) the amortization of intangible assets associated with certain acquisitions, c) Special Charges incurred in connection with exiting facilities in the UK and d) compensation charges associated with deferred consideration, retention awards and related compensation for Lexicon employees.

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

One client accounted for more than 10% of the Company’s consolidated Net Revenues for the three months ended September 30, 2013.

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

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2013		2012			2013		2012
Investment Banking
Net Revenues (1)	$	163,645	$	133,415		$	477,846	$	370,364
Operating Expenses	126,472		106,897			369,927		304,556
Other Expenses (2)	7,427		12,057			26,738		40,062
Operating Income	29,746		14,461			81,181		25,746
Income (Loss) from Equity Method Investments	—		(200		)	460		1,395
Pre-Tax Income from Continuing Operations	$	29,746	$	14,261		$	81,641	$	27,141
Identifiable Segment Assets	$	611,266	$	519,000		$	611,266	$	519,000
Investment Management
Net Revenues (1)	$	23,683	$	19,614		$	68,910	$	57,960
Operating Expenses	20,968		19,152			61,853		58,467
Other Expenses (2)	593		678			1,939		1,942
Operating Income (Loss)	2,122		(216		)	5,118		(2,449		)
Income from Equity Method Investments	562		615			1,873		2,124
Pre-Tax Income (Loss) from Continuing Operations	$	2,684	$	399		$	6,991	$	(325	)
Identifiable Segment Assets	$	492,075	$	509,764		$	492,075	$	509,764
Total
Net Revenues (1)	$	187,328	$	153,029		$	546,756	$	428,324
Operating Expenses	147,440		126,049			431,780		363,023
Other Expenses (2)	8,020		12,735			28,677		42,004
Operating Income	31,868		14,245			86,299		23,297
Income from Equity Method Investments	562		415			2,333		3,519
Pre-Tax Income from Continuing Operations	$	32,430	$	14,660		$	88,632	$	26,816
Identifiable Segment Assets	$	1,103,341	$	1,028,764		$	1,103,341	$	1,028,764

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2013			2012			2013			2012
Investment Banking (A)	$	(330	)	$	(435	)	$	(966	)	$	(2,407	)
Investment Management (B)	(555		)	(820		)	(1,854		)	(2,274		)
Total Other Revenue, net	$	(885	)	$	(1,255	)	$	(2,820	)	$	(4,681	)

(A) Investment Banking Other Revenue, net, includes interest expense on the Senior Notes of $1,098 and $3,281for the three and nine months ended September 30, 2013, respectively, and $1,082 and $3,227for the three and nine months ended September 30, 2012, respectively.

(B) Investment Management Other Revenue, net, includes interest expense on the Senior Notes of $927 and $2,770for the three and nine months ended September 30, 2013, respectively, and $914 and $2,727for the three and nine months ended September 30, 2012, respectively.

(2) Other Expenses are as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012		2013		2012
Investment Banking
Amortization of LP Units and Certain Other Awards	$	4,304	$	4,866	$	13,513	$	13,577
Acquisition Related Compensation Charges	3,123		6,802		13,225		22,799
Special Charges	—		—		—		662
Intangible Asset Amortization	—		389		—		3,024
Total Investment Banking	7,427		12,057		26,738		40,062
Investment Management
Amortization of LP Units and Certain Other Awards	511		596		1,693		1,696
Intangible Asset Amortization	82		82		246		246
Total Investment Management	593		678		1,939		1,942
Total Other Expenses	$	8,020	$	12,735	$	28,677	$	42,004

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 and managed in the following geographical areas:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2013		2012		2013		2012
Net Revenues: (1)
United States	$	131,499	$	114,018	$	379,950	$	315,085
Europe and Other	37,465		30,860		112,331		90,491
Latin America	19,249		9,406		57,295		27,429
Total	$	188,213	$	154,284	$	549,576	$	433,005

(1) Excludes Other Revenue and Interest Expense.

The substantial majority of the Company’s long-lived assets are located in the United States and the United Kingdom.