Segment Operating Results

6 Months Ended

Jun. 30, 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 Investment Advisors, LLC (“Mt. Eden”), which is included in the Investment Management segment. On March 15, 2013, the Company consolidated its investment in Pan, which is included in the Investment Management segment.

The Company’s segment information for the three and six months endedJune 30, 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: 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, c) special charges incurred in connection with exiting facilities in the UK and d) compensation charges associated with deferred consideration, retention awards and related compensation for Lexicon employees.

The Company evaluates segment results based on net revenue 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 and six months ended June 30, 2013.

The following information provides a reasonable representation of each segment’s contribution.

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2013		2012			2013		2012
Investment Banking
Net Revenues (1)	$	182,605	$	153,164		$	314,201	$	236,949
Operating Expenses	138,389		118,683			243,455		197,659
Other Expenses (2)	9,456		11,898			19,311		28,005
Operating Income	34,760		22,583			51,435		11,285
Income (Loss) from Equity Method Investments	290		(33		)	460		1,595
Pre-Tax Income	$	35,050	$	22,550		$	51,895	$	12,880
Identifiable Segment Assets	$	562,690	$	486,481		$	562,690	$	486,481
Investment Management
Net Revenues (1)	$	24,841	$	19,333		$	44,667	$	38,346
Operating Expenses	20,943		20,065			41,750		39,315
Other Expenses (2)	596		656			1,346		1,264
Operating Income (Loss)	3,302		(1,388		)	1,571		(2,233		)
Income from Equity Method Investments	725		752			1,311		1,509
Pre-Tax Income (Loss)	$	4,027	$	(636	)	$	2,882	$	(724	)
Identifiable Segment Assets	$	470,273	$	487,377		$	470,273	$	487,377
Total
Net Revenues (1)	$	207,446	$	172,497		$	358,868	$	275,295
Operating Expenses	159,332		138,748			285,205		236,974
Other Expenses (2)	10,052		12,554			20,657		29,269
Operating Income	38,062		21,195			53,006		9,052
Income from Equity Method Investments	1,015		719			1,771		3,104
Pre-Tax Income	$	39,077	$	21,914		$	54,777	$	12,156
Identifiable Segment Assets	$	1,032,963	$	973,858		$	1,032,963	$	973,858

(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,
	2013			2012			2013			2012
Investment Banking (A)	$	(849	)	$	(1,262	)	$	(636	)	$	(1,972	)
Investment Management (B)	(897		)	(703		)	(2,610		)	(1,454		)
Total Other Revenue, net	$	(1,746	)	$	(1,965	)	$	(3,246	)	$	(3,426	)

(A) Investment Banking Other Revenue, net, includes interest expense on the Senior Notes of $1,095 and $2,183for the three and six months ended June 30, 2013, respectively, and $1,075 and $2,145for the three and six months ended June 30, 2012, respectively.

(B) Investment Management Other Revenue, net, includes interest expense on the Senior Notes of $924 and $1,843for the three and six months ended June 30, 2013, respectively, and $909 and $1,813for the three and six months ended June 30, 2012, respectively.

(2) Other Expenses are as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2013		2012		2013		2012
Investment Banking
Amortization of LP Units and Certain Other Awards	$	4,300	$	4,495	$	9,209	$	8,711
Acquisition Related Compensation Charges	5,156		6,352		10,102		15,997
Special Charges	—		662		—		662
Intangible Asset Amortization	—		389		—		2,635
Total Investment Banking	9,456		11,898		19,311		28,005
Investment Management
Amortization of LP Units and Certain Other Awards	514		574		1,182		1,100
Intangible Asset Amortization	82		82		164		164
Total Investment Management	596		656		1,346		1,264
Total Other Expenses	$	10,052	$	12,554	$	20,657	$	29,269

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,
	2013		2012		2013		2012
Net Revenues: (1)
United States	$	157,595	$	131,406	$	248,451	$	201,067
Europe and Other	36,146		35,309		75,617		59,631
Latin America	15,451		7,747		38,046		18,023
Total	$	209,192	$	174,462	$	362,114	$	278,721

(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.