Segment Operating Results

9 Months Ended

Sep. 30, 2015

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.

The Company’s segment information for the three and nine months ended September 30, 2015 and 2014 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/Interests and Certain Other Awards - Includes amortization costs associated with the vesting of Class E LP Units and Class G and H LP Interests issued in conjunction with the acquisition of ISI and certain other related awards.

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

• Special Charges - Includes expenses in 2015 primarily related to an impairment charge associated with the impairment of goodwill in the Company's Institutional Asset Management reporting unit, separation benefits and costs associated with the termination of certain contracts within the Company’s Evercore ISI business and the finalization of a matter associated with the wind-down of the Company’s U.S. Private Equity business. Special Charges also includes expenses in 2014 related to termination benefits, primarily consisting of cash severance and the acceleration of the vesting of restricted stock units, as well as the write-off of leasehold improvements in the Institutional Equities business.

• Professional Fees - Includes expense associated with share based awards resulting from increases in the share price, which is required upon change in employment status.

• Acquisition and Transition Costs - Includes professional fees for legal and other services incurred related to the Company’s acquisition of all of the outstanding equity interests of the operating businesses of ISI, as well as costs related to transitioning ISI’s infrastructure.

• Fair Value of Contingent Consideration - Includes expense associated with changes in the fair value of contingent consideration issued to the sellers of certain of the Company’s acquisitions.

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

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

No client accounted for more than 10% of the Company’s consolidated Net Revenues for the three and nine months endedSeptember 30, 2015.

The following information presents each segment’s contribution.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Investment Banking
Net Revenues (1)	$	285,918		$	203,028		$	746,875		$	522,202
Operating Expenses	220,565			156,549			586,200			410,832
Other Expenses (2)	30,131			8,828			85,168			16,279
Operating Income	35,222			37,651			75,507			95,091
Income (Loss) from Equity Method Investments	(528		)	(48		)	238			455
Pre-Tax Income	$	34,694		$	37,603		$	75,745		$	95,546
Identifiable Segment Assets	$	919,000		$	719,351		$	919,000		$	719,351
Investment Management
Net Revenues (1)	$	23,033		$	24,133		$	68,155		$	71,768
Operating Expenses	18,275			22,356			58,050			63,518
Other Expenses (2)	28,082			82			31,605			246
Operating Income (Loss)	(23,324		)	1,695			(21,500		)	8,004
Income from Equity Method Investments	1,457			1,150			3,796			2,926
Pre-Tax Income (Loss)	$	(21,867	)	$	2,845		$	(17,704	)	$	10,930
Identifiable Segment Assets	$	411,389		$	504,400		$	411,389		$	504,400
Total
Net Revenues (1)	$	308,951		$	227,161		$	815,030		$	593,970
Operating Expenses	238,840			178,905			644,250			474,350
Other Expenses (2)	58,213			8,910			116,773			16,525
Operating Income	11,898			39,346			54,007			103,095
Income from Equity Method Investments	929			1,102			4,034			3,381
Pre-Tax Income	$	12,827		$	40,448		$	58,041		$	106,476
Identifiable Segment Assets	$	1,330,389		$	1,223,751		$	1,330,389		$	1,223,751

(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,
	2015			2014			2015			2014
Investment Banking (A)	$	357		$	850		$	(2,874	)	$	(731	)
Investment Management (B)	(779		)	(644		)	(2,243		)	(1,725		)
Total Other Revenue, net	$	(422	)	$	206		$	(5,117	)	$	(2,456	)

(A) Investment Banking Other Revenue, net, includes interest expense on the Senior Notes, subordinated borrowings and line of credit of $1,452 and $4,889for the three and nine months ended September 30, 2015, respectively, and $1,134 and $3,344for the three and nine months ended September 30, 2014, respectively.

(B) Investment Management Other Revenue, net, includes interest expense on the Senior Notes and line of credit of $962 and $2,874for the three and nine months ended September 30, 2015, respectively, and $956 and $2,820for the three and nine months ended September 30, 2014, respectively.

(2) Other Expenses are as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Investment Banking
Amortization of LP Units / Interests and Certain Other Awards	$	21,980	$	—	$	66,123	$	—
Other Acquisition Related Compensation Charges	—		592		1,537		6,371
Special Charges	—		3,732		2,151		3,732
Professional Fees	—		—		—		1,672
Acquisition and Transition Costs	538		4,122		1,928		4,122
Fair Value of Contingent Consideration	2,797		—		2,797		—
Intangible Asset and Other Amortization	4,816		382		10,632		382
Total Investment Banking	30,131		8,828		85,168		16,279
Investment Management
Special Charges	28,000		—		31,348		—
Acquisition and Transition Costs	—		—		11		—
Intangible Asset and Other Amortization	82		82		246		246
Total Investment Management	28,082		82		31,605		246
Total Other Expenses	$	58,213	$	8,910	$	116,773	$	16,525

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,
	2015		2014		2015		2014
Net Revenues: (1)
United States	$	238,231	$	127,478	$	603,239	$	377,907
Europe and Other	61,838		89,146		189,976		173,931
Latin America	9,304		10,331		26,932		44,588
Total	$	309,373	$	226,955	$	820,147	$	596,426

(1) Excludes Other Revenue and Interest Expense.

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

	September 30, 2015		December 31, 2014
Total Assets:
United States	$	1,004,390	$	1,099,363
Europe and Other	198,251		160,934
Latin America	127,748		186,259
Total	$	1,330,389	$	1,446,556