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 September 30, 2016, the Company deconsolidated the assets and liabilities of its Mexican Private Equity business, which was in the Investment Management segment (see Note 8 for further information). 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 nine months ended September 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 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. • 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. One client accounted for more than 10% ( 11% ) of the Company's consolidated Net Revenues for the three months ended September 30, 2016. The following information presents each segment’s contribution. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2016 2015 2016 2015 Investment Banking Net Revenues (1) $ 368,634 $ 285,918 $ 936,504 $ 746,875 Operating Expenses 268,666 220,565 707,846 586,200 Other Expenses (2) 17,422 30,131 75,854 85,168 Operating Income 82,546 35,222 152,804 75,507 Income (Loss) from Equity Method Investments (112 ) (528 ) (94 ) 238 Pre-Tax Income $ 82,434 $ 34,694 $ 152,710 $ 75,745 Identifiable Segment Assets $ 1,114,565 $ 919,000 $ 1,114,565 $ 919,000 Investment Management Net Revenues (1) $ 17,680 $ 23,033 $ 58,179 $ 68,155 Operating Expenses 14,843 18,275 46,357 58,050 Other Expenses (2) 298 28,082 811 31,605 Operating Income (Loss) 2,539 (23,324 ) 11,011 (21,500 ) Income from Equity Method Investments 1,290 1,457 4,223 3,796 Pre-Tax Income (Loss) $ 3,829 $ (21,867 ) $ 15,234 $ (17,704 ) Identifiable Segment Assets $ 347,065 $ 411,389 $ 347,065 $ 411,389 Total Net Revenues (1) $ 386,314 $ 308,951 $ 994,683 $ 815,030 Operating Expenses 283,509 238,840 754,203 644,250 Other Expenses (2) 17,720 58,213 76,665 116,773 Operating Income 85,085 11,898 163,815 54,007 Income from Equity Method Investments 1,178 929 4,129 4,034 Pre-Tax Income $ 86,263 $ 12,827 $ 167,944 $ 58,041 Identifiable Segment Assets $ 1,461,630 $ 1,330,389 $ 1,461,630 $ 1,330,389 (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, 2016 2015 2016 2015 Investment Banking (A) $ 200 $ 357 $ 270 $ (2,874 ) Investment Management (B) 522 (779 ) 337 (2,243 ) Total Other Revenue, net $ 722 $ (422 ) $ 607 $ (5,117 ) (A) Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and the line of credit of $2,592 and $6,946 for the three and nine months ended September 30, 2016, respectively , and $1,452 and $4,889 for the three and nine months ended September 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 nine months ended September 30, 2016 and $962 and $2,874 for the three and nine months ended September 30, 2015, respectively . (2) Other Expenses are as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2016 2015 2016 2015 Investment Banking Amortization of LP Units / Interests and Certain Other Awards $ 13,859 $ 21,980 $ 66,356 $ 66,123 Other Acquisition Related Compensation Charges — — — 1,537 Special Charges — — — 2,151 Acquisition and Transition Costs 41 538 (692 ) 1,928 Fair Value of Contingent Consideration 984 2,797 1,671 2,797 Intangible Asset and Other Amortization 2,538 4,816 8,519 10,632 Total Investment Banking 17,422 30,131 75,854 85,168 Investment Management Special Charges — 28,000 — 31,348 Acquisition and Transition Costs 298 — 702 11 Intangible Asset and Other Amortization — 82 109 246 Total Investment Management 298 28,082 811 31,605 Total Other Expenses $ 17,720 $ 58,213 $ 76,665 $ 116,773 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, 2016 2015 2016 2015 Net Revenues: (1) United States $ 322,128 $ 238,231 $ 714,983 $ 603,239 Europe and Other 54,690 61,838 247,371 189,976 Latin America 8,774 9,304 31,722 26,932 Total $ 385,592 $ 309,373 $ 994,076 $ 820,147 (1) Excludes Other Revenue and Interest Expense. The Company’s total assets are located in the following geographical areas: September 30, 2016 December 31, 2015 Total Assets: United States $ 1,196,511 $ 1,135,570 Europe and Other 179,333 221,358 Latin America 85,786 122,243 Total $ 1,461,630 $ 1,479,171 |