Segment Operating Results

12 Months Ended

Dec. 31, 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, which is included in the Investment Management segment. On December 3, 2013, the Company sold its investment in Pan and the results are presented within Discontinued Operations. The following segment information reflects the Company's results from its continuing operations.

The Company’s segment information for the years ended December 31, 2013, 2012 and 2011 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) charges associated with the vesting of Event-based Awards, c) the amortization of intangible assets associated with certain acquisitions, d) Special Charges incurred related to the impairment of intangible assets from Morse, Williams and Company, Inc. in 2013, Special Charges incurred in connection with exiting facilities in the UK in 2012 and Special Charges related to the Lexicon acquisition, including the exiting of facilities for office space in the UK, an introducing fee as well as other professional fees incurred by Lexicon in 2011 and e) compensation charges associated with deferred consideration, retention awards and related compensation for Lexicon employees.

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

The following information presents each segment’s contribution.

	For the Years Ended December 31,
	2013		2012			2011
Investment Banking
Net Revenues (1)	$	670,785	$	565,219		$	428,124
Operating Expenses	516,921		444,510			337,886
Other Expenses (2)	33,740		50,774			55,591
Operating Income	120,124		69,935			34,647
Income from Equity Method Investments	2,906		2,258			1,101
Pre-Tax Income from Continuing Operations	$	123,030	$	72,193		$	35,748
Identifiable Segment Assets	$	693,890	$	624,977		$	530,008
Investment Management
Net Revenues (1)	$	94,643	$	77,154		$	96,140
Operating Expenses	81,885		78,876			89,269
Other Expenses (2)	2,707		2,678			5,706
Operating Income (Loss)	10,051		(4,400		)	1,165
Income (Loss) from Equity Method Investments	5,420		2,594			(182		)
Pre-Tax Income (Loss) from Continuing Operations	$	15,471	$	(1,806	)	$	983
Identifiable Segment Assets	$	486,893	$	520,241		$	513,584
Total
Net Revenues (1)	$	765,428	$	642,373		$	524,264
Operating Expenses	598,806		523,386			427,155
Other Expenses (2)	36,447		53,452			61,297
Operating Income	130,175		65,535			35,812
Income from Equity Method Investments	8,326		4,852			919
Pre-Tax Income from Continuing Operations	$	138,501	$	70,387		$	36,731
Identifiable Segment Assets	$	1,180,783	$	1,145,218		$	1,043,592

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

	For the Years Ended December 31,
	2013			2012			2011
Investment Banking (A)	$	3,979		$	(3,019	)	$	(2,473	)
Investment Management (B)	(1,116		)	(2,636		)	(3,021		)
Total Other Revenue, net	$	2,863		$	(5,655	)	$	(5,494	)

(A) Investment Banking Other Revenue, net, includes interest expense on the Senior Notes of $4,386, $4,312 and $4,238for the years ended December 31, 2013, 2012 and 2011, respectively, and changes in amounts due pursuant to the Company's tax receivable agreement of $5,524 for the year ended December 31, 2013.

(B) Investment Management Other Revenue, net, includes interest expense on the Senior Notes of $3,702, $3,643 and $3,579for the years ended December 31, 2013, 2012 and 2011, respectively, and changes in amounts due pursuant to the Company's tax receivable agreement of $1,381 for the year ended December 31, 2013.

(2) Other Expenses are as follows:

	For the Years Ended December 31,
	2013		2012		2011
Investment Banking
Amortization of LP Units and Certain Other Awards	$	17,817	$	18,601	$	21,328
Vesting of Event-based Awards	—		—		8,906
Acquisition Related Compensation Charges	15,923		28,163		14,618
Special Charges	—		662		3,894
Intangible Asset Amortization	—		3,348		6,845
Total Investment Banking	33,740		50,774		55,591
Investment Management
Amortization of LP Units and Certain Other Awards	2,209		2,350		2,892
Vesting of Event-based Awards	—		—		2,483
Special Charges	170		—		—
Intangible Asset Amortization	328		328		331
Total Investment Management	2,707		2,678		5,706
Total Other Expenses	$	36,447	$	53,452	$	61,297

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 Years Ended December 31,
	2013		2012		2011
Net Revenues: (1)
United States	$	532,615	$	452,594	$	387,063
Europe and Other	145,267		151,261		112,049
Latin America	84,683		44,173		30,646
Total	$	762,565	$	648,028	$	529,758

(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.