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Segment Operating Results
6 Months Ended
Jun. 30, 2016
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 31, 2015, the Company deconsolidated the assets and liabilities of Atalanta Sosnoff, which was in the Investment Management segment, and accounted for its interest as an equity method investment from that date forward.
The Company’s segment information for the three and six months ended June 30, 2016 and 2015 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 in 2015 associated with deferred consideration, retention awards and related compensation for Lexicon employees.
Special Charges - Includes expenses in 2015 primarily related to separation benefits and costs associated with the termination of certain contracts within the Company’s Evercore ISI business, as well as the finalization of a matter associated with the wind-down of the Company’s U.S. Private Equity business.
Acquisition and Transition Costs - Includes costs incurred in connection with acquisitions and other ongoing business development initiatives, primarily comprised of professional fees for legal and other services, as well as the reversal of a provision for certain settlements in 2016 previously established in the fourth quarter of 2015.
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 six months ended June 30, 2016.
The following information presents each segment’s contribution.
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Investment Banking
 
 
 
 
 
 
 
Net Revenues (1)
$
328,157

 
$
244,377

 
$
567,870

 
$
460,957

Operating Expenses
246,916

 
194,271

 
439,180

 
365,635

Other Expenses (2)
23,404

 
22,802

 
58,432

 
55,037

Operating Income
57,837

 
27,304

 
70,258

 
40,285

Income from Equity Method Investments
290

 
803

 
18

 
766

Pre-Tax Income
$
58,127

 
$
28,107

 
$
70,276

 
$
41,051

Identifiable Segment Assets
$
964,009

 
$
848,750

 
$
964,009

 
$
848,750

Investment Management
 
 
 
 
 
 
 
Net Revenues (1)
$
22,499

 
$
23,719

 
$
40,499

 
$
45,122

Operating Expenses
17,300

 
19,819

 
31,514

 
39,775

Other Expenses (2)
431

 
93

 
513

 
3,523

Operating Income
4,768

 
3,807

 
8,472

 
1,824

Income from Equity Method Investments
1,374

 
1,195

 
2,933

 
2,339

Pre-Tax Income
$
6,142

 
$
5,002

 
$
11,405

 
$
4,163

Identifiable Segment Assets
$
342,641

 
$
450,797

 
$
342,641

 
$
450,797

Total
 
 
 
 
 
 
 
Net Revenues (1)
$
350,656

 
$
268,096

 
$
608,369

 
$
506,079

Operating Expenses
264,216

 
214,090

 
470,694

 
405,410

Other Expenses (2)
23,835

 
22,895

 
58,945

 
58,560

Operating Income
62,605

 
31,111

 
78,730

 
42,109

Income from Equity Method Investments
1,664

 
1,998

 
2,951

 
3,105

Pre-Tax Income
$
64,269

 
$
33,109

 
$
81,681

 
$
45,214

Identifiable Segment Assets
$
1,306,650

 
$
1,299,547

 
$
1,306,650

 
$
1,299,547


(1)
Net revenues include Other Revenue, net, allocated to the segments as follows:
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Investment Banking (A)
$
983

 
$
(2,173
)
 
$
70

 
$
(3,231
)
Investment Management (B)
244

 
(786
)
 
(185
)
 
(1,464
)
Total Other Revenue, net
$
1,227

 
$
(2,959
)
 
$
(115
)
 
$
(4,695
)
(A)
Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and the line of credit of $2,876 and $4,354 for the three and six months ended June 30, 2016, respectively, and $1,793 and $3,437 for the three and six months ended June 30, 2015, respectively.
(B)
Investment Management Other Revenue, net, includes interest expense on the Notes Payable and the line of credit of $670 for the six months ended June 30, 2016 and $959 and $1,912 for the three and six months ended June 30, 2015, respectively.
(2)
Other Expenses are as follows:
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Investment Banking
 
 
 
 
 
 
 
Amortization of LP Units / Interests and Certain Other Awards
$
20,738

 
$
18,193

 
$
52,497

 
$
44,143

Other Acquisition Related Compensation Charges

 
952

 

 
1,537

Special Charges

 
(139
)
 

 
2,151

Acquisition and Transition Costs
(733
)
 
906

 
(733
)
 
1,390

Fair Value of Contingent Consideration
581

 

 
687

 

Intangible Asset and Other Amortization
2,818

 
2,890

 
5,981

 
5,816

Total Investment Banking
23,404

 
22,802

 
58,432

 
55,037

Investment Management
 
 
 
 
 
 
 
Special Charges

 

 

 
3,348

Acquisition and Transition Costs
404

 
11

 
404

 
11

Intangible Asset and Other Amortization
27

 
82

 
109

 
164

Total Investment Management
431

 
93

 
513

 
3,523

Total Other Expenses
$
23,835

 
$
22,895

 
$
58,945

 
$
58,560


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 June 30,
 
For the Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Net Revenues: (1)
 
 
 
 
 
 
 
United States
$
218,945

 
$
203,186

 
$
392,855

 
$
365,008

Europe and Other
120,470

 
56,927

 
192,681

 
128,138

Latin America
10,014

 
10,942

 
22,948

 
17,628

Total
$
349,429

 
$
271,055

 
$
608,484

 
$
510,774

(1) Excludes Other Revenue and Interest Expense.
The Company’s total assets are located in the following geographical areas:
 
June 30, 2016
 
December 31, 2015
Total Assets:
 
 
 
United States
$
997,936

 
$
1,135,570

Europe and Other
222,940

 
221,358

Latin America
85,774

 
122,243

Total
$
1,306,650

 
$
1,479,171