Segment Operating Results

3 Months Ended

Mar. 31, 2014

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 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 three months ended March 31, 2014 and 2013 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 and c) 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.

No clients accounted for more than 10% of the Company’s consolidated Net Revenues for the three months ended March 31, 2014.

The following information presents each segment’s contribution.

	For the Three Months Ended March 31,
	2014			2013
Investment Banking
Net Revenues (1)	$	127,851		$	131,596
Operating Expenses	105,532			105,066
Other Expenses (2)	3,214			9,855
Operating Income	19,105			16,675
Income (Loss) from Equity Method Investments	(310		)	170
Pre-Tax Income from Continuing Operations	$	18,795		$	16,845
Identifiable Segment Assets	$	590,956		$	526,549
Investment Management
Net Revenues (1)	$	21,262		$	21,035
Operating Expenses	19,571			20,710
Other Expenses (2)	82			750
Operating Income (Loss)	1,609			(425		)
Income from Equity Method Investments	551			586
Pre-Tax Income from Continuing Operations	$	2,160		$	161
Identifiable Segment Assets	$	453,961		$	449,940
Total
Net Revenues (1)	$	149,113		$	152,631
Operating Expenses	125,103			125,776
Other Expenses (2)	3,296			10,605
Operating Income	20,714			16,250
Income from Equity Method Investments	241			756
Pre-Tax Income from Continuing Operations	$	20,955		$	17,006
Identifiable Segment Assets	$	1,044,917		$	976,489

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

	For the Three Months Ended March 31,
	2014			2013
Investment Banking (A)	$	(653	)	$	213
Investment Management (B)	(653		)	(402		)
Total Other Revenue, net	$	(1,306	)	$	(189	)

(A) Investment Banking Other Revenue, net, includes interest expense on the Senior Notes of $1,105 and $1,088for the three months ended March 31, 2014 and 2013, respectively.

(B) Investment Management Other Revenue, net, includes interest expense on the Senior Notes of $932 and $919for the three months ended March 31, 2014 and 2013, respectively.

(2) Other Expenses are as follows:

	For the Three Months Ended March 31,
	2014		2013
Investment Banking
Amortization of LP Units and Certain Other Awards	$	—	$	4,909
Acquisition Related Compensation Charges	3,214		4,946
Total Investment Banking	3,214		9,855
Investment Management
Amortization of LP Units and Certain Other Awards	—		668
Intangible Asset Amortization	82		82
Total Investment Management	82		750
Total Other Expenses	$	3,296	$	10,605

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 March 31,
	2014		2013
Net Revenues: (1)
United States	$	107,927	$	90,856
Europe and Other	36,788		39,369
Latin America	5,704		22,595
Total	$	150,419	$	152,820

(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.