Segment Operating Results

12 Months Ended

Dec. 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 October 31, 2014, the Company acquired the operating businesses of ISI, which is included in the Investment Banking 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, 2014, 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 the following:

• Amortization of LP Units and Certain Other Awards - Includes amortization costs associated with the modification and vesting of Class A LP Units and certain other awards, and the vesting of Class E LP Units issued in conjunction with the acquisition of ISI.

• Other Acquisition Related Compensation Charges - Includes compensation charges associated with deferred consideration, retention awards and related compensation for Lexicon employees.

• Special Charges - Includes expenses primarily related to separation benefits and certain exit costs related to combining the equities business upon the ISI acquisition during 2014, a provision recorded in 2014 against contingent consideration due on the 2013 disposition of Pan, the write-off of intangible assets in 2013 from the Company’s acquisition of Morse, Williams and Company, Inc. and charges incurred in connection with exiting facilities in the UK in 2012.

• Intangible Asset and Other Amortization - Includes amortization of intangible assets and other purchase accounting-related amortization associated with certain acquisitions.

• Professional Fees - Includes professional fees associated with share-based awards resulting from an increase in share price, which is required upon change in employment status.

• Acquisition and Transition Costs - Includes professional fees for legal and other services incurred during 2014 related to the Company’s acquisition of all of the outstanding equity interests of the operating businesses of ISI.

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,
	2014		2013		2012
Investment Banking
Net Revenues (1)	$	819,637	$	670,785	$	565,219
Operating Expenses	632,927		516,921		444,510
Other Expenses (2)	25,109		33,740		50,774
Operating Income	161,601		120,124		69,935
Income from Equity Method Investments	495		2,906		2,258
Pre-Tax Income from Continuing Operations	$	162,096	$	123,030	$	72,193
Identifiable Segment Assets	$	934,648	$	693,890	$	624,977
Investment Management
Net Revenues (1)	$	96,221	$	94,643	$	77,154
Operating Expenses	86,547		81,885		78,876
Other Expenses (2)	328		2,707		2,678
Operating Income (Loss)	9,346		10,051		(4,400		)
Income from Equity Method Investments	4,685		5,420		2,594
Pre-Tax Income (Loss) from Continuing Operations	$	14,031	$	15,471	$	(1,806	)
Identifiable Segment Assets	$	511,908	$	486,893	$	520,241
Total
Net Revenues (1)	$	915,858	$	765,428	$	642,373
Operating Expenses	719,474		598,806		523,386
Other Expenses (2)	25,437		36,447		53,452
Operating Income	170,947		130,175		65,535
Income from Equity Method Investments	5,180		8,326		4,852
Pre-Tax Income from Continuing Operations	$	176,127	$	138,501	$	70,387
Identifiable Segment Assets	$	1,446,556	$	1,180,783	$	1,145,218

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

	For the Years Ended December 31,
	2014			2013			2012
Investment Banking (A)	$	(1,722	)	$	3,979		$	(3,019	)
Investment Management (B)	(2,530		)	(1,116		)	(2,636		)
Total Other Revenue, net	$	(4,252	)	$	2,863		$	(5,655	)

(A) Investment Banking Other Revenue, net, includes interest expense on the Senior Notes of $4,470, $4,386 and $4,312for the years ended December 31, 2014, 2013 and 2012, 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 $3,770, $3,702 and $3,643for the years ended December 31, 2014, 2013 and 2012, 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,
	2014		2013		2012
Investment Banking
Amortization of LP Units and Certain Other Awards	$	3,399	$	17,817	$	18,601
Other Acquisition Related Compensation Charges	7,939		15,923		28,163
Special Charges	4,893		—		662
Intangible Asset and Other Amortization	2,494		—		3,348
Professional Fees	1,672		—		—
Acquisition and Transition Costs	4,712		—		—
Total Investment Banking	25,109		33,740		50,774
Investment Management
Amortization of LP Units and Certain Other Awards	—		2,209		2,350
Special Charges	—		170		—
Intangible Asset and Other Amortization	328		328		328
Total Investment Management	328		2,707		2,678
Total Other Expenses	$	25,437	$	36,447	$	53,452

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,
	2014		2013		2012
Net Revenues: (1)
United States	$	608,631	$	532,615	$	452,594
Europe and Other	248,815		145,267		151,261
Latin America	62,664		84,683		44,173
Total	$	920,110	$	762,565	$	648,028

(1) Excludes Other Revenue and Interest Expense.

The Company’s total assets are located in the following geographical areas:

	For the Years Ended December 31,
	2014		2013
Total Assets:
United States	$	1,099,363	$	899,602
Europe and Other	160,934		131,847
Latin America	186,259		149,334
Total	$	1,446,556	$	1,180,783