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TheStreet Open House

Evercore Partners Reports Third Quarter 2012 Results; Increases Quarterly Dividend To $0.22 Per Share

Stock quotes in this article: EVR

With respect to any securities offered by any private equity fund referenced herein, such securities have not been and will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

 

ANNEX I

   
Schedule Page Number
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011 A-1
Adjusted Pro Forma:  
Adjusted Pro Forma Results A-2
U.S. GAAP Reconciliation to Adjusted Pro Forma (Unaudited) A-4
Adjusted Pro Forma Segment Reconciliation to U.S. GAAP for the Three and Nine Months ended September 30, 2012 (Unaudited) A-6
Adjusted Pro Forma Segment Reconciliation to U.S. GAAP for the Three Months ended June 30, 2012 (Unaudited) A-7
Adjusted Pro Forma Segment Reconciliation to U.S. GAAP for the Three and Nine Months ended September 30, 2011 (Unaudited) A-8
Notes to Unaudited Condensed Consolidated Adjusted Pro Forma Financial Data A-9
 
 
EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(dollars in thousands, except per share data)
(UNAUDITED)
     
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
 
Revenues
Investment Banking Revenue $ 133,850 $ 139,995 $ 372,771 $ 337,743
Investment Management Revenue 20,434 24,723 60,234 78,154
Other Revenue   2,760   3,036     6,649   11,002  
Total Revenues 157,044 167,754 439,654 426,899
Interest Expense (1)   4,015   4,573     11,330   15,416  
Net Revenues   153,029   163,181     428,324   411,483  
 
Expenses
Employee Compensation and Benefits 101,364 113,634 296,381 282,800
Occupancy and Equipment Rental 8,882 5,976 26,273 16,767
Professional Fees 10,752 9,395 26,080 25,404
Travel and Related Expenses 6,802 5,856 21,183 15,785
Communications and Information Services 2,915 1,574 8,731 5,548
Depreciation and Amortization 3,828 4,886 12,870 10,882
Special Charges - 2,626 662 2,626
Acquisition and Transition Costs - 1,178 148 2,312
Other Operating Expenses   4,241   4,614     12,699   12,538  
Total Expenses   138,784   149,739     405,027   374,662  
 
Income Before Income from Equity Method Investments and Income Taxes 14,245 13,442 23,297 36,821
Income from Equity Method Investments   415   195     3,519   664  
Income Before Income Taxes 14,660 13,637 26,816 37,485
Provision for Income Taxes   7,187   11,144     12,322   21,644  
Net Income from Continuing Operations   7,473   2,493     14,494   15,841  
 
Discontinued Operations
Income (Loss) from Discontinued Operations - (1,718 ) - (2,755 )
Provision (Benefit) for Income Taxes   -   (518 )   -   (783 )
Net Income (Loss) from Discontinued Operations   -   (1,200 )   -   (1,972 )
 
Net Income 7,473 1,293 14,494 13,869
Net Income (Loss) Attributable to Noncontrolling Interest   2,172   (466 )   4,627   6,261  
Net Income Attributable to Evercore Partners Inc. $ 5,301 $ 1,759   $ 9,867 $ 7,608  
 
Net Income (Loss) Attributable to Evercore Partners Inc. Common Shareholders:
From Continuing Operations $ 5,280 $ 1,936 $ 9,804 $ 7,858
From Discontinued Operations   -   (198 )   -   (313 )
Net Income Attributable to Evercore Partners Inc. $ 5,280 $ 1,738   $ 9,804 $ 7,545  
 
Weighted Average Shares of Class A Common Stock Outstanding:
Basic 28,841 28,967 29,063 25,146
Diluted 31,440 31,235 31,973 28,534
 
Basic Net Income (Loss) Per Share Attributable to Evercore Partners Inc. Common Shareholders:
From Continuing Operations $ 0.18 $ 0.06 $ 0.34 $ 0.31
From Discontinued Operations   -   -     -   (0.01 )
Net Income Attributable to Evercore Partners Inc. $ 0.18 $ 0.06   $ 0.34 $ 0.30  
 
Diluted Net Income (Loss) Per Share Attributable to Evercore Partners Inc. Common Shareholders:
From Continuing Operations $ 0.17 $ 0.06 $ 0.31 $ 0.27
From Discontinued Operations   -   -     -   (0.01 )
Net Income Attributable to Evercore Partners Inc. $ 0.17 $ 0.06   $ 0.31 $ 0.26  
 
(1) Includes interest expense on long-term debt and interest expense on short-term repurchase agreements.
 

A-1

 
 

Adjusted Pro Forma Results

 
Throughout the discussion of Evercore’s business segments, information is presented on an Adjusted Pro Forma basis, which is a non-generally accepted accounting principles (“non-GAAP”) measure. Adjusted Pro Forma results begin with information prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), adjusted to exclude certain items and reflect the conversion of vested and unvested Evercore LP Units, other IPO related restricted stock unit awards, as well as Acquisition Related Share Issuances and Unvested Restricted Stock Units granted to Lexicon employees, into Class A shares. Evercore believes that the disclosed Adjusted Pro Forma measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore’s results across several periods and facilitate an understanding of Evercore’s operating results. The Company uses these measures to evaluate its operating performance, as well as the performance of individual employees. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. These Adjusted Pro Forma amounts are allocated to the Company’s two business segments: Investment Banking and Investment Management. The differences between Adjusted Pro Forma and U.S. GAAP results are as follows:
1.  

Assumed Vesting of Evercore LP Units and Exchange into Class A Shares. The Company incurred expenses, primarily, in Employee Compensation and Benefits, resulting from the modification of Evercore LP Units, which will vest generally over a five-year period. The Adjusted Pro Forma results assume these LP Units have vested and have been exchanged for Class A shares. Accordingly, any expense associated with these units and related awards is excluded from Adjusted Pro Forma results and the noncontrolling interest related to these units is converted to controlling interest. The Company’s Management believes that it is useful to provide the per-share effect associated with the assumed conversion of this previously granted but unvested equity, and thus the Adjusted Pro Forma results reflect the vesting of all unvested Evercore LP partnership units and IPO related restricted stock unit awards.

2.

Vesting of Contingently Vested Equity Awards. The Company incurred expenses in Employee Compensation and Benefits, resulting from the vesting of awards issued at the time of the IPO. These awards vest upon the occurrence of specified vesting events rather than merely the passage of time and continued service. In periods prior to the completion of the June 2011 offering, we concluded that it was not probable that the vesting conditions would be achieved. Accordingly, we had not been accruing compensation expense relating to these unvested stock-based awards. The completion of the June 2011 offering resulted in Messrs. Altman, Beutner and Aspe, and trusts benefiting their families and permitted transferees, collectively, ceasing to beneficially own at least 50% of the aggregate Evercore LP partnership units owned by them on the date of the internal reorganization, resulting in the vesting of these awards. The related expense has been excluded from the Adjusted Pro Forma results.

3.

Expenses Associated with Business Combinations. The following expenses resulting from business combinations have been excluded from Adjusted Pro Forma results because the Company’s Management believes that operating performance is more comparable across periods excluding the effects of these acquisition-related charges;

      a.  

Amortization of Intangible Assets. Amortization of intangible assets related to the Protego acquisition, the Braveheart acquisition and the acquisitions of SFS and Lexicon.

b.

Compensation Charges. Expenses for deferred share-based and cash consideration and retention awards associated with the acquisition of Lexicon, as well as base salary adjustments for Lexicon employees for the period preceding the acquisition.

c.

Special Charges. Expenses primarily related to exiting the legacy office space in the UK and expenses related to the charge associated with lease commitments for exited office space in conjunction with the acquisition of Lexicon as well as for an introducing fee in connection with the Lexicon acquisition.

 

A-2

 
4.  

Client Related Expenses. Client related expenses, expenses associated with revenue sharing engagements with third parties and provisions for uncollected receivables, have been classified as a reduction of revenue in the Adjusted Pro Forma presentation. The Company’s Management believes that this adjustment results in more meaningful key operating ratios, such as compensation to net revenues and operating margin.

5.

Income Taxes. Evercore is organized as a series of Limited Liability Companies, Partnerships, a C-Corporation and a Public Corporation and therefore, not all of the Company’s income is subject to corporate-level taxes. As a result, adjustments have been made to the Adjusted Pro Forma earnings to assume that the Company has adopted a conventional corporate tax structure and is taxed as a C-Corporation in the U.S. at the prevailing corporate rates, that all deferred tax assets relating to foreign operations are fully realizable within the structure on a consolidated basis and that adjustments for deferred tax assets related to the ultimate tax deductions for equity-based compensation awards are made directly to stockholders’ equity. This assumption is consistent with the assumption that all Evercore LP Units are vested and exchanged into Class A shares, as discussed in Item 1 above, as the assumed exchange would change the tax structure of the Company.

6.

Presentation of Interest Expense. The Adjusted Pro Forma results present interest expense on short-term repurchase agreements, within the Investment Management segment, in Other Revenues, net, as the Company’s Management believes it is more meaningful to present the spread on net interest resulting from the matched financial assets and liabilities. In addition, Adjusted Pro Forma Investment Banking and Investment Management Operating Income is presented before interest expense on long-term debt, which is included in interest expense on a U.S. GAAP basis.

7.

Presentation of Income from Equity Method Investments. The Adjusted Pro Forma results present Income from Equity Method Investments within Revenue as the Company’s Management believes it is a more meaningful presentation.

 

A-3

 
 
EVERCORE PARTNERS INC.
U.S. GAAP RECONCILIATION TO ADJUSTED PRO FORMA
(dollars in thousands)
(UNAUDITED)
       
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
Net Revenues - U.S. GAAP (a) $ 153,029 $ 172,497 $ 163,181 $ 428,324 $ 411,483
Client Related Expenses (1) (6,193 ) (3,085 ) (2,235 ) (10,914 ) (9,268 )
Income from Equity Method Investments (2) 415 719 195 3,519 664
Interest Expense on Long-term Debt (3)   1,996     1,984     1,953     5,954     5,849  
Net Revenues - Adjusted Pro Forma (a) $ 149,247   $ 172,115   $ 163,094   $ 426,883   $ 408,728  
 
Compensation Expense - U.S. GAAP (a) $ 101,364 $ 114,290 $ 113,634 $ 296,381 $ 282,800
Amortization of LP Units and Certain Other Awards (4) (5,237 ) (5,147 ) (5,126 ) (15,032 ) (17,746 )
IPO Related Restricted Stock Unit Awards (5) - - - - (11,389 )
Acquisition Related Compensation Charges (6)   (6,802 )   (6,352 )   (7,729 )   (22,799 )   (7,729 )
Compensation Expense - Adjusted Pro Forma (a) $ 89,325   $ 102,791   $ 100,779   $ 258,550   $ 245,936  
 
Operating Income - U.S. GAAP (a) $ 14,245 $ 21,195 $ 13,442 $ 23,297 $ 36,821
Income from Equity Method Investments (2)   415     719     195     3,519     664  
Pre-Tax Income - U.S. GAAP (a) 14,660 21,914 13,637 26,816 37,485
Amortization of LP Units and Certain Other Awards (4) 5,462 5,069 5,321 15,273 17,941
IPO Related Restricted Stock Unit Awards (5) - - - - 11,389
Acquisition Related Compensation Charges (6) 6,802 6,352 7,729 22,799 7,729
Special Charges (7) - 662 2,626 662 2,626
Intangible Asset Amortization (8a)   471     471     2,117     3,270     3,221  
Pre-Tax Income - Adjusted Pro Forma (a) 27,395 34,468 31,430 68,820 80,391
Interest Expense on Long-term Debt (3)   1,996     1,984     1,953     5,954     5,849  
Operating Income - Adjusted Pro Forma (a) $ 29,391   $ 36,452   $ 33,383   $ 74,774   $ 86,240  
 
Provision for Income Taxes - U.S. GAAP (a) $ 7,187 $ 9,773 $ 11,144 $ 12,322 $ 21,644
Income Taxes (9)   3,223     3,325     1,426     13,830     10,509  
Provision for Income Taxes - Adjusted Pro Forma (a) $ 10,410   $ 13,098   $ 12,570   $ 26,152   $ 32,153  
 
Net Income from Continuing Operations (a) $ 7,473 $ 12,141 $ 2,493 $ 14,494 $ 15,841
Net Income (Loss) Attributable to Noncontrolling Interest (a)   2,172     4,207     536     4,627     7,920  
Net Income from Continuing Operations Attributable to Evercore Partners Inc. - U.S. GAAP (a) 5,301 7,934 1,957 9,867 7,921
Amortization of LP Units and Certain Other Awards (4) 5,462 5,069 5,321 15,273 17,941
IPO Related Restricted Stock Unit Awards (5) - - - - 11,389
Acquisition Related Compensation Charges (6) 6,802 6,352 7,729 22,799 7,729
Special Charges (7) - 662 2,626 662 2,626
Intangible Asset Amortization (8a) 471 471 2,117 3,270 3,221
Income Taxes (9) (3,223 ) (3,325 ) (1,426 ) (13,830 ) (10,509 )
Noncontrolling Interest (10)   2,462     4,022     1,468     4,736     8,744  
Net Income from Continuing Operations Attributable to Evercore Partners Inc. - Adjusted Pro Forma (a) $ 17,275   $ 21,185   $ 19,792   $ 42,777   $ 49,062  
 
Diluted Shares Outstanding - U.S. GAAP 31,440 31,664 31,235 31,973 28,534
Vested Partnership Units (11a) 7,280 7,559 6,444 7,500 8,404
Unvested Partnership Units (11a) 2,918 2,926 4,447 2,942 4,489
Unvested Restricted Stock Units - Event Based (11a) 12 12 12 12 365
Acquisition Related Share Issuance (11b) 1,106 1,208 815 1,272 243
Unvested Restricted Stock Units - Service Based (11b)   -     78     -     -     -  
Diluted Shares Outstanding - Adjusted Pro Forma   42,756     43,447     42,953     43,699     42,035  
 

Key Metrics: (b)

Diluted Earnings Per Share from Continuing Operations - U.S. GAAP (c) $ 0.17 $ 0.25 $ 0.06 $ 0.31 $ 0.27
Diluted Earnings Per Share from Continuing Operations - Adjusted Pro Forma (c) $ 0.40 $ 0.49 $ 0.46 $ 0.98 $ 1.17
 
Compensation Ratio - U.S. GAAP 66 % 66 % 70 % 69 % 69 %
Compensation Ratio - Adjusted Pro Forma 60 % 60 % 62 % 61 % 60 %
 
Operating Margin - U.S. GAAP 9 % 12 % 8 % 5 % 9 %
Operating Margin - Adjusted Pro Forma 20 % 21 % 20 % 18 % 21 %
 
Effective Tax Rate - U.S. GAAP 49 % 45 % 82 % 46 % 58 %
Effective Tax Rate - Adjusted Pro Forma 38 % 38 % 40 % 38 % 40 %
 
(a) Represents the Company's results from Continuing Operations.
(b) Reconciliations of the key metrics from U.S. GAAP to Adjusted Pro Forma are a derivative of the reconciliations of their components above.
(c) For Earnings Per Share purposes, Net Income Attributable to Evercore Partners Inc. is reduced by $21 of accretion for the three months ended September 30, 2012, June 30, 2012 and September 30, 2011, and $63 of accretion for the nine months ended September 30, 2012 and 2011, related to the Company's noncontrolling interest in Trilantic Capital Partners.
 

A-4

 
 
EVERCORE PARTNERS INC.
U.S. GAAP RECONCILIATION TO ADJUSTED PRO FORMA
TRAILING TWELVE MONTHS
(dollars in thousands)
(UNAUDITED)
Consolidated
Twelve Months Ended
September 30,   June 30,   September 30,
2012 2012 2011
Net Revenues - U.S. GAAP $ 541,105 $ 551,257 $ 512,935
Client Related Expenses (1) (14,294 ) (10,336 ) (10,920 )
Income from Equity Method Investments (2) 3,774 3,554 548
Interest Expense on Long-term Debt (3)   7,922     7,879     7,787  
Net Revenues - Adjusted Pro Forma $ 538,507   $ 552,354   $ 510,350  
 
Compensation Expense - U.S. GAAP $ 371,261 $ 383,531 $ 349,812
Amortization of LP Units and Certain Other Awards (4) (20,993 ) (20,882 ) (22,880 )
IPO Related Restricted Stock Unit Awards (5) - - (11,389 )
Acquisition Related Compensation Charges (6)   (29,688 )   (30,615 )   (7,729 )
Compensation Expense - Adjusted Pro Forma $ 320,580   $ 332,034   $ 307,814  
 
Compensation Ratio - U.S. GAAP (a) 69 % 70 % 68 %
Compensation Ratio - Adjusted Pro Forma (a) 60 % 60 % 60 %
 
Investment Banking
Twelve Months Ended
September 30, June 30, September 30,
  2012     2012     2011  
Net Revenues - U.S. GAAP $ 462,967 $ 468,718 $ 412,068
Client Related Expenses (1) (13,859 ) (9,927 ) (10,246 )
Income from Equity Method Investments (2) 1,324 1,780 1,188
Interest Expense on Long-term Debt (3)   4,294     4,271     4,221  
Net Revenues - Adjusted Pro Forma $ 454,726   $ 464,842   $ 407,231  
 
Compensation Expense - U.S. GAAP $ 319,061 $ 328,346 $ 284,752
Amortization of LP Units and Certain Other Awards (4) (18,743 ) (18,487 ) (19,790 )
IPO Related Restricted Stock Unit Awards (5) - - (8,906 )
Acquisition Related Compensation Charges (6)   (29,688 )   (30,615 )   (7,729 )
Compensation Expense - Adjusted Pro Forma $ 270,630   $ 279,244   $ 248,327  
 
Compensation Ratio - U.S. GAAP (a) 69 % 70 % 69 %
Compensation Ratio - Adjusted Pro Forma (a) 60 % 60 % 61 %
 
(a) Reconciliations of the key metrics from U.S. GAAP to Adjusted Pro Forma are a derivative of the reconciliations of their components above.
 

A-5

 
 
EVERCORE PARTNERS INC.
ADJUSTED PRO FORMA SEGMENT RECONCILIATION TO U.S. GAAP
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012
(dollars in thousands)
(UNAUDITED)
     
Investment Banking Segment
Three Months Ended September 30, 2012 Nine Months Ended September 30, 2012
Non-GAAP Non-GAAP
Adjusted Pro U.S. GAAP Adjusted Pro U.S. GAAP
Forma Basis Adjustments Basis Forma Basis Adjustments Basis
Net Revenues:
Investment Banking Revenue $ 127,588 $ 6,262 (1)(2) $ 133,850 $ 363,605 $ 9,166 (1)(2) $ 372,771
Other Revenue, net   647     (1,082 ) (3)   (435 )   820     (3,227 ) (3)   (2,407 )
Net Revenues   128,235     5,180     133,415     364,425     5,939     370,364  
 
Expenses:
Employee Compensation and Benefits 77,331 11,443 (4)(6) 88,774 221,622 36,135 (4)(6) 257,757
Non-compensation Costs 23,504 6,676 (4)(8) 30,180 72,373 13,826 (4)(8) 86,199
Special Charges   -     -     -     -     662   (7)   662  
Total Expenses   100,835     18,119     118,954     293,995     50,623     344,618  
 
Operating Income from Continuing Operations (a) $ 27,400   $ (12,939 ) $ 14,461   $ 70,430   $ (44,684 ) $ 25,746  
 
Compensation Ratio (b) 60 % 67 % 61 % 70 %
Operating Margin (b) 21 % 11 % 19 % 7 %
 
Investment Management Segment
Three Months Ended September 30, 2012 Nine Months Ended September 30, 2012
Non-GAAP Non-GAAP
Adjusted Pro U.S. GAAP Adjusted Pro U.S. GAAP
Forma Basis Adjustments Basis Forma Basis Adjustments Basis
Net Revenues:
Investment Management Revenue $ 20,918 $ (484 ) (1)(2) $ 20,434 $ 62,005 $ (1,771 ) (1)(2) $ 60,234
Other Revenue, net   94     (914 ) (3)   (820 )   453     (2,727 ) (3)   (2,274 )
Net Revenues   21,012     (1,398 )   19,614     62,458     (4,498 )   57,960  
 
Expenses:
Employee Compensation and Benefits 11,994 596 (4) 12,590 36,928 1,696 (4) 38,624
Non-compensation Costs   7,027     213   (8)   7,240     21,186     599   (8)   21,785  
Total Expenses   19,021     809     19,830     58,114     2,295     60,409  
 
Operating Income (Loss) from Continuing Operations (a) $ 1,991   $ (2,207 ) $ (216 ) $ 4,344   $ (6,793 ) $ (2,449 )
 
Compensation Ratio (b) 57 % 64 % 59 % 67 %
Operating Margin (b) 9 % (1 %) 7 % (4 %)
 
(a) Operating Income (Loss) for U.S. GAAP excludes Income (Loss) from Equity Method Investments.
(b) Reconciliations of the key metrics from U.S. GAAP to Adjusted Pro Forma are a derivative of the reconciliations of their components above.
 

A-6

 
 
EVERCORE PARTNERS INC.
ADJUSTED PRO FORMA SEGMENT RECONCILIATION TO U.S. GAAP
FOR THE THREE MONTHS ENDED JUNE 30, 2012
(dollars in thousands)
(UNAUDITED)
 
Investment Banking Segment
Three Months Ended June 30, 2012
Non-GAAP
Adjusted Pro U.S. GAAP
Forma Basis Adjustments Basis
Net Revenues:
Investment Banking Revenue $ 151,397 $ 3,029 (1)(2) $ 154,426
Other Revenue, net   (187 )   (1,075 ) (3)   (1,262 )
Net Revenues   151,210     1,954     153,164  
 
Expenses:
Employee Compensation and Benefits 89,829 10,925 (4)(6) 100,754
Non-compensation Costs 25,858 3,307 (4)(8) 29,165
Special Charges   -     662   (7)   662  
Total Expenses   115,687     14,894     130,581  
 
Operating Income from Continuing Operations (a) $ 35,523   $ (12,940 ) $ 22,583  
 
Compensation Ratio (b) 59 % 66 %
Operating Margin (b) 23 % 15 %
 
Investment Management Segment
Three Months Ended June 30, 2012
Non-GAAP
Adjusted Pro U.S. GAAP
Forma Basis Adjustments Basis
Net Revenues:
Investment Management Revenue $ 20,699 $ (663 ) (1)(2) $ 20,036
Other Revenue, net   206     (909 ) (3)   (703 )
Net Revenues   20,905     (1,572 )   19,333  
 
Expenses:
Employee Compensation and Benefits 12,962 574 (4) 13,536
Non-compensation Costs   7,014     171   (8)   7,185  
Total Expenses   19,976     745     20,721  
 
Operating Income (Loss) from Continuing Operations (a) $ 929   $ (2,317 ) $ (1,388 )
 
Compensation Ratio (b) 62 % 70 %
Operating Margin (b) 4 % (7 %)
 
(a) Operating Income (Loss) for U.S. GAAP excludes Income (Loss) from Equity Method Investments.
(b) Reconciliations of the key metrics from U.S. GAAP to Adjusted Pro Forma are a derivative of the reconciliations of their components above.
 

A-7

 
EVERCORE PARTNERS INC.
ADJUSTED PRO FORMA SEGMENT RECONCILIATION TO U.S. GAAP
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011
(dollars in thousands)
(UNAUDITED)
     
Investment Banking Segment
Three Months Ended September 30, 2011 Nine Months Ended September 30, 2011
Non-GAAP Non-GAAP
Adjusted Pro U.S. GAAP Adjusted Pro U.S. GAAP
Forma Basis Adjustments Basis Forma Basis Adjustments Basis
Net Revenues:
Investment Banking Revenue $ 138,121 $ 1,874 (1)(2) $ 139,995 $ 330,169 $ 7,574 (1)(2) $ 337,743
Other Revenue, net   230     (1,059 ) (3)   (829 )   949     (3,171 ) (3)   (2,222 )
Net Revenues   138,351     815     139,166     331,118     4,403     335,521  
 
Expenses:
Employee Compensation and Benefits 85,945 12,114 (4)(5)(6) 98,059 200,723 32,043 (4)(5)(6) 232,766
Non-compensation Costs 21,301 4,359 (4)(8) 25,660 53,568 11,913 (4)(8) 65,481
Special Charges   -     2,626   (7)   2,626     -     2,626   (7)   2,626  
Total Expenses   107,246     19,099     126,345     254,291     46,582     300,873  
 
Operating Income from Continuing Operations (a) $ 31,105   $ (18,284 ) $ 12,821   $ 76,827   $ (42,179 ) $ 34,648  
 
Compensation Ratio (b) 62 % 70 % 61 % 69 %
Operating Margin (b) 22 % 9 % 23 % 10 %
 
Investment Management Segment
Three Months Ended September 30, 2011 Nine Months Ended September 30, 2011
Non-GAAP Non-GAAP
Adjusted Pro U.S. GAAP Adjusted Pro U.S. GAAP
Forma Basis Adjustments Basis Forma Basis Adjustments Basis
Net Revenues:
Investment Management Revenue $ 24,557 $ 166 (1)(2) $ 24,723 $ 77,124 $ 1,030 (1)(2) $ 78,154
Other Revenue, net   186     (894 ) (3)   (708 )   486     (2,678 ) (3)   (2,192 )
Net Revenues   24,743     (728 )   24,015     77,610     (1,648 )   75,962  
 
Expenses:
Employee Compensation and Benefits 14,834 741 (4)(5) 15,575 45,213 4,821 (4)(5) 50,034
Non-compensation Costs   7,631     188   (8)   7,819     22,984     771   (8)   23,755  
Total Expenses   22,465     929     23,394     68,197     5,592     73,789  
 
Operating Income from Continuing Operations (a) $ 2,278   $ (1,657 ) $ 621   $ 9,413   $ (7,240 ) $ 2,173  
 
Compensation Ratio (b) 60 % 65 % 58 % 66 %
Operating Margin (b) 9 % 3 % 12 % 3 %
 

(a) Operating Income for U.S. GAAP excludes Income (Loss) from Equity Method Investments.

(b) Reconciliations of the key metrics from U.S. GAAP to Adjusted Pro Forma are a derivative of the reconciliations of their components above.

 

A-8

 
 

Notes to Unaudited Condensed Consolidated Adjusted Pro Forma Financial Data

 
For further information on these Adjusted Pro Forma adjustments, see page A-2.
 
(1)   Client related expenses, expenses associated with revenue sharing engagements with third parties and provisions for uncollected receivables, have been reclassified as a reduction of revenue in the Adjusted Pro Forma presentation.
(2) Income from Equity Method Investments has been reclassified to Revenue in the Adjusted Pro Forma presentation.
(3) Interest Expense on Long-term Debt is excluded from the Adjusted Pro Forma Investment Banking and Investment Management segment results and is included in Interest Expense in the segment results on a U.S. GAAP Basis.
(4) Expenses incurred from the modification of Evercore LP Units and related awards, which primarily vest over a five-year period, are excluded from the Adjusted Pro Forma presentation.
(5) Expenses incurred from the vesting of IPO related restricted stock unit awards relating to the June 2011 offering are excluded from the Adjusted Pro Forma presentation.
(6) Expenses for deferred share-based and cash consideration and retention awards associated with the acquisition of Lexicon, as well as base salary adjustments for Lexicon employees for the period preceding the acquisition, are excluded from the Adjusted Pro Forma presentation.
(7) Expenses related to exiting the legacy office space in the UK and expenses related to the charge associated with lease commitments for exited office space in conjunction with the acquisition of Lexicon, as well as for an introducing fee in connection with the Lexicon acquisition, are excluded from the Adjusted Pro Forma presentation.
(8) Non-compensation Costs on an Adjusted Pro Forma basis reflect the following adjustments:
 
 

A-9

 
 
Three Months Ended September 30, 2012
Investment   Investment   Total  
Banking Management Segments Adjustments U.S. GAAP
Occupancy and Equipment Rental $ 7,271 $ 1,611 $ 8,882 $ - $ 8,882
Professional Fees 5,422 2,133 7,555 3,197 (1) 10,752
Travel and Related Expenses 3,331 499 3,830 2,972 (1) 6,802
Communications and Information Services 2,427 407 2,834 81 (1) 2,915
Depreciation and Amortization 1,706 1,651 3,357 471 (8a) 3,828
Other Operating Expenses   3,347   726   4,073   168 (1)   4,241
Total Non-compensation Costs from Continuing Operations $ 23,504 $ 7,027 $ 30,531 $ 6,889 $ 37,420
 
Three Months Ended June 30, 2012
Investment Investment Total
Banking Management Segments Adjustments U.S. GAAP
Occupancy and Equipment Rental $ 7,604 $ 1,542 $ 9,146 $ - $ 9,146
Professional Fees 4,943 1,961 6,904 1,368 (1) 8,272
Travel and Related Expenses 5,870 564 6,434 1,214 (1) 7,648
Communications and Information Services 2,431 563 2,994 34 (1) 3,028
Depreciation and Amortization 1,559 1,650 3,209 471 (8a) 3,680
Acquisition and Transition Costs 23 52 75 - 75
Other Operating Expenses   3,428   682   4,110   391 (1)   4,501
Total Non-compensation Costs from Continuing Operations $ 25,858 $ 7,014 $ 32,872 $ 3,478 $ 36,350
 
Three Months Ended September 30, 2011
Investment Investment Total
Banking Management Segments Adjustments U.S. GAAP
Occupancy and Equipment Rental $ 4,331 $ 1,645 $ 5,976 $ - $ 5,976
Professional Fees 6,143 2,445 8,588 807 (1) 9,395
Travel and Related Expenses 4,309 525 4,834 1,022 (1) 5,856
Communications and Information Services 1,185 360 1,545 29 (1) 1,574
Depreciation and Amortization 1,120 1,649 2,769 2,117 (8a) 4,886
Acquisition and Transition Costs 1,053 125 1,178 - 1,178
Other Operating Expenses   3,160   882   4,042   572 (1)   4,614
Total Non-compensation Costs from Continuing Operations $ 21,301 $ 7,631 $ 28,932 $ 4,547 $ 33,479
 
Nine Months Ended September 30, 2012
Investment Investment Total
Banking Management Segments Adjustments U.S. GAAP
Occupancy and Equipment Rental $ 21,469 $ 4,804 $ 26,273 $ - $ 26,273
Professional Fees 15,063 5,965 21,028 5,052 (1) 26,080
Travel and Related Expenses 14,237 1,636 15,873 5,310 (1) 21,183
Communications and Information Services 7,078 1,471 8,549 182 (1) 8,731
Depreciation and Amortization 4,615 4,985 9,600 3,270 (8a) 12,870
Acquisition and Transition Costs 42 106 148 - 148
Other Operating Expenses   9,869   2,219   12,088   611 (1)   12,699
Total Non-compensation Costs from Continuing Operations $ 72,373 $ 21,186 $ 93,559 $ 14,425 $ 107,984
 
Nine Months Ended September 30, 2011
Investment Investment Total
Banking Management Segments Adjustments U.S. GAAP
Occupancy and Equipment Rental $ 11,746 $ 5,021 $ 16,767 $ - $ 16,767
Professional Fees 14,483 6,471 20,954 4,450 (1) 25,404
Travel and Related Expenses 10,539 1,632 12,171 3,614 (1) 15,785
Communications and Information Services 4,069 1,365 5,434 114 (1) 5,548
Depreciation and Amortization 2,656 5,005 7,661 3,221 (8a) 10,882
Acquisition and Transition Costs 1,967 345 2,312 - 2,312
Other Operating Expenses   8,108   3,145   11,253   1,285 (1)   12,538
Total Non-compensation Costs from Continuing Operations $ 53,568 $ 22,984 $ 76,552 $ 12,684 $ 89,236
 

A-10

 
(8a)   The exclusion from the Adjusted Pro Forma presentation of expenses associated with amortization of intangible assets acquired in the Protego, Braveheart, SFS and Lexicon acquisitions.
(9) Evercore is organized as a series of Limited Liability Companies, Partnerships, a C-Corporation and a Public Corporation and therefore, not all of the Company’s income is subject to corporate level taxes. As a result, adjustments have been made to decrease Evercore’s effective tax rate to approximately 38% for the three and nine months ended September 30, 2012. These adjustments assume that the Company has adopted a conventional corporate tax structure and is taxed as a C-Corporation in the U.S. at the prevailing corporate rates, that all deferred tax assets relating to foreign operations are fully realizable within the structure on a consolidated basis and that, historically, adjustments for deferred tax assets related to the ultimate tax deductions for equity-based compensation awards are made directly to stockholders’ equity.
(10) Reflects adjustment to eliminate noncontrolling interest related to all Evercore LP partnership units which are assumed to be converted to Class A common stock in the Adjusted Pro Forma presentation.
(11a) Assumes the vesting of all Evercore LP partnership units and IPO related restricted stock unit awards in the Adjusted Pro Forma presentation. In the computation of outstanding common stock equivalents for U.S. GAAP net income per share, the unvested Evercore LP partnership units are anti-dilutive and the IPO related restricted stock unit awards are excluded from the calculation prior to the June 2011 offering.
(11b) Assumes the vesting of all Acquisition Related Share Issuance and Unvested Restricted Stock Units granted to Lexicon employees in the Adjusted Pro Forma presentation. In the computation of outstanding common stock equivalents for U.S. GAAP, these Shares and Restricted Stock Units are reflected using the Treasury Stock Method.
 

A-11

 




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