Evercore Partners Reports Third Quarter 2011 Results; Quarterly Dividend of $0.20 Per Share

Highlights

Third Quarter Financial Summary
  -- Record Adjusted Pro Forma Net Revenues of $163.9 million, up 32% compared to Q3 2010
  -- Record Adjusted Pro Forma Net Income of $19.7 million, or $0.46 per share, up 35% compared to Q3 2010
  -- U.S. GAAP Net Revenues of $163.9 million, up 33% compared to Q3 2010
  -- U.S. GAAP Net Income of $1.8 million, or $0.06 per share

Year-to-Date Financial Summary
  -- Adjusted Pro Forma Net Revenues of $411.0 million, up 50% compared to the same period in 2010
  -- Adjusted Pro Forma Net Income of $48.9 million, or $1.16 per share, up 81% compared to the same period in 2010
  -- U.S. GAAP Net Revenues of $413.8 million, up 50% compared to the same period in 2010
  -- U.S. GAAP Net Income of $7.6 million, or $0.26 per share

Investment Banking
  -- Continued to advise on the largest and most prominent announced M&A transactions, including advising:
      • Kinder Morgan on its $39 billion acquisition of El Paso
      • Kraft Foods on the pending spinoff of its North American grocery business
      • McGraw-Hill on its planned split into separate Global Markets and Education businesses
      • The Bureau of National Affairs on its sale to Bloomberg

  -- Added talented senior bankers including Tim Carlson in Energy, Tim Main in Financial Services and Sean Murphy in Health Care
  -- Closed our acquisition of Lexicon Partners on August 19

Investment Management
  -- Assets Under Management were $13.6 billion decreasing 19% from June 30, 2011

Capital Management
  -- Quarterly dividend increased 11% to $0.20 per share effective the fourth quarter of 2011. Repurchased 733,000 shares in the quarter

NEW YORK--()--Evercore Partners Inc. (NYSE: EVR) today announced that its Adjusted Pro Forma Net Revenues were a record $163.9 million for the three months ended September 30, 2011, compared to $123.7 million and $141.0 million for the three months ended September 30, 2010 and June 30, 2011, respectively. Adjusted Pro Forma Net Revenues were $411.0 million for the nine months ended September 30, 2011, compared to $273.6 million for the nine months ended September 30, 2010. Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. was a record $19.7 million, or $0.46 per share, for the three months ended September 30, 2011, compared to $14.6 million, or $0.38 per share, for the three months ended September 30, 2010 and $17.8 million, or $0.43 per share, for the three months ended June 30, 2011. Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. was $48.9 million, or $1.16 per share, for the nine months ended September 30, 2011, compared to $27.0 million, or $0.68 per share, for the nine months ended September 30, 2010.

U.S. GAAP Net Revenues were $163.9 million for the three months ended September 30, 2011, compared to $123.7 million and $142.0 million for the three months ended September 30, 2010 and June 30, 2011, respectively. U.S. GAAP Net Revenues were $413.8 million for the nine months ended September 30, 2011, compared to $276.7 million for the nine months ended September 30, 2010. U.S. GAAP Net Income Attributable to Evercore Partners Inc. was $1.8 million, or $0.06 per share, for the three months ended September 30, 2011, compared to $3.5 million, or $0.17 per share, for the three months ended September 30, 2010 and $2.3 million, or $0.08 per share, for the three months ended June 30, 2011. U.S. GAAP Net Income Attributable to Evercore Partners Inc. was $7.6 million, or $0.26 per share, for the nine months ended September 30, 2011, compared to $5.7 million, or $0.25 per share, for the nine months ended September 30, 2010.

The Adjusted Pro Forma compensation ratio for the three months ended September 30, 2011 was 62%, compared to 62% for the same period in 2010 and 59% for the three months ended June 30, 2011. The Adjusted Pro Forma compensation ratio for the trailing twelve months was 61%, up slightly from the same period in 2010 and consistent with the twelve months ended June 30, 2011. The U.S. GAAP compensation ratio for the three months ended September 30, 2011, September 30, 2010 and June 30, 2011 was 70%, 66% and 71%, respectively. The U.S. GAAP trailing twelve-month compensation ratio of 69% compares to 65% for the same period in 2010 and 68% for the twelve months ended June 30, 2011.

Evercore’s quarterly results may fluctuate significantly due to the timing and amount of transaction fees earned, as well as other factors. Accordingly, financial results in any particular quarter may not be representative of future results over a longer period of time.

“Our third quarter clearly demonstrates the potential of the Evercore franchise. We delivered record quarterly revenues and earnings for the second consecutive quarter, while continuing to invest in our core business. We closed on our acquisition of Lexicon Partners on August 19 and have substantially completed the operational integration of that business. While the market environment is clearly challenging, our team continues to work actively with clients to find the opportunities that these markets inevitably create,” said Ralph Schlosstein, President and Chief Executive Officer. “Operationally we remain focused on our core priorities: serving our clients with excellence and integrity, adding exceptional talent to our team, and making continued progress improving the financial performance of our early stage businesses.”

“This was a dynamic quarter for Evercore’s investment banking business. Our client base expanded again; we added key new banking personnel; and we again advised on the largest transactions. And, the Evercore brand has never been stronger,” said Roger Altman, Executive Chairman. “I am especially happy with the build-out and success of our energy banking platform in Houston. Advising on both the Kinder Morgan and Southern Union announced mergers was remarkable.”

 

Consolidated U.S. GAAP and Adjusted Pro Forma Selected Financial Data (Unaudited)

 
      U.S. GAAP
Three Months Ended     % Change vs.     Nine Months Ended
September 30, 2011   June 30, 2011   September 30, 2010 June 30, 2011   September 30, 2010 September 30, 2011   September 30, 2010   % Change
(dollars in thousands)
Net Revenues $ 163,943 $ 141,991 $ 123,718 15 % 33 % $ 413,779 $ 276,709 50 %
Operating Income $ 11,724 $ 11,167 $ 17,696 5 % (34 %) $ 34,066 $ 25,383 34 %
Net Income Attributable to Evercore Partners Inc. $ 1,759 $ 2,261 $ 3,530 (22 %) (50 %) $ 7,608 $ 5,667 34 %
Diluted Earnings Per Share $ 0.06 $ 0.08 $ 0.17 (25 %) (65 %) $ 0.26 $ 0.25 4 %
Compensation Ratio 70 % 71 % 66 % 69 % 66 %
Operating Margin 7 % 8 % 14 % 8 % 9 %
 
Adjusted Pro Forma
Three Months Ended % Change vs. Nine Months Ended
September 30, 2011 June 30, 2011 September 30, 2010 June 30, 2011 September 30, 2010 September 30, 2011 September 30, 2010 % Change
(dollars in thousands)
Net Revenues $ 163,856 $ 140,951 $ 123,706 16 % 32 % $ 411,024 $ 273,578 50 %
Operating Income $ 32,672 $ 31,079 $ 25,036 5 % 31 % $ 84,556 $ 48,137 76 %
Net Income Attributable to Evercore Partners Inc. $ 19,713 $ 17,787 $ 14,648 11 % 35 % $ 48,876 $ 27,039 81 %
Diluted Earnings Per Share $ 0.46 $ 0.43 $ 0.38 7 % 21 % $ 1.16 $ 0.68 71 %
Compensation Ratio 62 % 59 % 62 % 61 % 61 %
Operating Margin 20 % 22 % 20 % 21 % 18 %
 

Throughout the discussion of Evercore’s business segments, information is presented on an Adjusted Pro Forma basis, which is an unaudited 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 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. Evercore 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. For more information about the Adjusted Pro Forma basis of reporting used by management to evaluate the performance of Evercore and each line of business, including reconciliations of U.S. GAAP results to an Adjusted Pro Forma basis, see pages A-2 through A-10 included in Annex I. These Adjusted Pro Forma amounts are allocated to the Company’s two business segments: Investment Banking and Investment Management.

Business Line Reporting

A discussion of Adjusted Pro Forma revenues and expenses is presented below for the Investment Banking and Investment Management segments. Unless otherwise stated, all of the financial measures presented in this discussion are Adjusted Pro Forma measures. For a reconciliation of the Adjusted Pro Forma segment data to U.S. GAAP results, see pages A-2 to A-10 in Annex I.

Investment Banking

Evercore’s Investment Banking segment reported record net revenues this quarter of $138.4 million, up 38% from Q3 2010 and 23% from last quarter. Operating Income of $31.1 million increased 20% and 16% when compared to Q3 2010 and Q2 2011, respectively.

         
Adjusted Pro Forma
Three Months Ended     Nine Months Ended

September 30,

2011

 

June 30,

2011

 

September 30,

2010

September 30,

2011

 

September 30,

2010

(dollars in thousands)
Net Revenues:
Investment Banking $ 138,121 $ 111,847 $ 99,563 $ 330,169 $ 216,348
Other Revenue, net   230     339     435     949     3,625  
Net Revenues   138,351     112,186     99,998     331,118     219,973  
 
Expenses:
Employee Compensation and Benefits 85,945 67,303 60,847 200,723 130,772
Non-compensation Costs   21,301     18,054     13,315     53,568     37,427  
Total Expenses   107,246     85,357     74,162     254,291     168,199  
 
Operating Income $ 31,105   $ 26,829   $ 25,836   $ 76,827   $ 51,774  
 
Compensation Ratio 62 % 60 % 61 % 61 % 59 %
Operating Margin 22 % 24 % 26 % 23 % 24 %
 
U.S. GAAP
Three Months Ended Nine Months Ended

September 30,

2011

June 30,

2011

September 30,

2010

September 30,

2011

September 30,

2010

(dollars in thousands)
Net Revenues:
Investment Banking $ 139,995 $ 114,696 $ 101,367 $ 337,743 $ 224,794
Other Revenue, net   (829 )   (720 )   (607 )   (2,222 )   506  
Net Revenues   139,166     113,976     100,760     335,521     225,300  
 
Expenses:
Employee Compensation and Benefits 98,059 81,345 64,948 232,766 143,922
Non-compensation Costs 25,660 21,506 15,588 65,481 47,280
Special Charges   2,626     -     -     2,626     -  
Total Expenses   126,345     102,851     80,536     300,873     191,202  
 
Operating Income $ 12,821   $ 11,125   $ 20,224   $ 34,648   $ 34,098  
 
Compensation Ratio 70 % 71 % 64 % 69 % 64 %
Operating Margin 9 % 10 % 20 % 10 % 15 %
 

Revenues

Investment Banking revenues were a record and increased 39% in comparison with the prior year’s quarter and 23% in comparison with the prior quarter. Investment Banking earned advisory fees from 112 clients in the third quarter compared to 85 in Q3 2010, and fees in excess of $1 million from 26 clients during Q3 2011, compared to 15 in Q3 2010. During the quarter we advised on several of the most prominent announced strategic transactions including Kraft Foods’ spinoff of its North American grocery business, McGraw-Hill on its planned separation into Global Markets and Education businesses, SPX on its acquisition of Clyde Union and the Bureau of National Affairs’ sale to Bloomberg, and completed two underwriting assignments in the United States. The Institutional Equities business continued to gain traction with institutional clients, both in terms of research coverage and fee-paying clients and the Private Funds Group closed capital raises for three clients during the quarter.

Expenses

Compensation costs for the Investment Banking segment for the three months ended September 30, 2011 were $85.9 million, an increase of 41% and 28% from Q3 2010 and Q2 2011, respectively. For the three months ended September 30, 2011, Evercore’s Investment Banking compensation ratio was 62%, versus the compensation ratio reported for the three months ended September 30, 2010 and June 30, 2011 of 61% and 60%, respectively. The trailing twelve-month compensation ratio was 61%, up from 58% in Q3 2010 and equal to 61% in Q2 2011.

Non-compensation costs for the three months ended September 30, 2011 of $21.3 million increased from the same period last year and in comparison to last quarter. The ratio of non-compensation costs to revenue for both the quarter and year-to-date periods were 15% and 16%, respectively. The increase in costs was attributable to the inclusion of Lexicon in our consolidated results, the addition of experienced personnel and higher occupancy and travel costs reflecting our growth.

Operating margins were 22% and 23% for the three and nine month periods ended September 30, 2011.

New Business Update

The Institutional Equities business is now composed of 66 professionals. The Research team has expanded the number of companies under coverage to 200 and the sales force has now opened accounts with 209 clients. For the three months ended September 30, 2011 the business generated $4.4 million in revenues, as secondary revenues increased 27% from the second quarter and capital markets revenues were $0.5 million, a decline of 79% from the second quarter. Expenses were $9.3 million for the quarter, an increase of 19% in comparison to the prior quarter, driven by the addition of five professionals.

Investment Management

The Investment Management segment reported Operating Income of $1.6 million in the third quarter, up significantly from last year’s quarter due primarily to an increase in realized and unrealized gains from the private equity portfolio. Assets Under Management (AUM) decreased 19% from Q2 2011 to $13.6 billion on net outflows of $1.2 billion and $2.0 billion of market depreciation.

     
Adjusted Pro Forma
Three Months Ended     Nine Months Ended

September 30,

2011

 

June 30,

2011

 

September 30,

2010

September 30,

2011

 

September 30,

2010

Net Revenues: (dollars in thousands)
Investment Management Revenues $ 25,317 $ 28,627 $ 23,412 $ 79,413 $ 50,758
Other Revenue, net   188     138     296     493     2,847  
Net Revenues   25,505     28,765     23,708     79,906     53,605  
 
Expenses:
Employee Compensation and Benefits 16,005 16,369 16,456 48,242 37,291
Non-compensation Costs   7,933     8,146     8,052     23,935     19,951  
Total Expenses   23,938     24,515     24,508     72,177     57,242  
 
Operating Income (Loss) $ 1,567   $ 4,250   $ (800 ) $ 7,729   $ (3,637 )
 
Compensation Ratio 63 % 57 % 69 % 60 % 70 %
Operating Margin 6 % 15 % (3 %) 10 % (7 %)
 
U.S. GAAP
Three Months Ended Nine Months Ended

September 30,

2011

June 30,

2011

September 30,

2010

September 30,

2011

September 30,

2010

Net Revenues: (dollars in thousands)
Investment Management Revenues $ 25,483 $ 28,771 $ 23,543 $ 80,443 $ 51,199
Other Revenue, net   (706 )   (756 )   (585 )   (2,185 )   210  
Net Revenues   24,777     28,015     22,958     78,258     51,409  
 
Expenses:
Employee Compensation and Benefits 16,746 19,633 17,319 53,063 39,828
Non-compensation Costs 8,153 8,340 8,167 24,802 20,296
Special Charges   975     -     -     975     -  
Total Expenses   25,874     27,973     25,486     78,840     60,124  
 
Operating Income (Loss) $ (1,097 ) $ 42   $ (2,528 ) $ (582 ) $ (8,715 )
 
Compensation Ratio 68 % 70 % 75 % 68 % 77 %
Operating Margin (4 %) 0 % (11 %) (1 %) (17 %)
 
 
 

Revenues

                   
Investment Management Revenue Components
Adjusted Pro Forma
Three Months Ended Nine Months Ended

September 30,

2011

June 30,

2011

September 30,

2010

September 30,

2011

September 30,

2010

Management Fees (dollars in thousands)
Wealth Management $ 3,927 $ 3,764 $ 2,573 $ 11,159 $ 6,932
Institutional Asset Management (1) 16,776 18,346 17,035 53,681 33,473
Private Equity   1,678     1,714     2,301     5,107     6,481  
Total Management Fees   22,381     23,824     21,909     69,947     46,886  
 
Realized and Unrealized Gains (Losses)
Institutional Asset Management 1,269 990 1,092 3,426 3,876
Private Equity   1,728     3,878     542     6,548     437  
Total Realized and Unrealized Gains (Losses)   2,997     4,868     1,634     9,974     4,313  
 
Equity in Affiliate Managers (2)   (61 )   (65 )   (131 )   (508 )   (441 )
Investment Management Revenues $ 25,317   $ 28,627   $ 23,412   $ 79,413   $ 50,758  
    (1) Management fees from Institutional Asset Management were $16.9 million, $18.4 million and $54.2 million for the three months ended September 30, 2011, June 30, 2011 and nine months ended September 30, 2011, respectively, on a U.S. GAAP basis, excluding the reduction of revenues for client-related expenses.


(2) Equity in Pan and G5 on a U.S. GAAP basis are reclassified from Investment Management Revenue to Income (Loss) from Equity Method Investments.

 

Fees earned from the management of client portfolios and other investment advisory services of $22.4 million increased for the three months ended September 30, 2011 compared to the same period of 2010, as growth in AUM within Wealth Management was offset by lower management fees from Private Equity. Management fees earned in the third quarter declined in comparison to the fees earned in the second quarter of 2011 reflecting the decline in AUM reported at the end of the second quarter.

Expenses

Third quarter expenses declined modestly in comparison to last quarter. Non-compensation costs included $1.6 million related to the amortization of acquired intangible assets for the three months ended September 30, 2011.

Recent Developments

After careful consideration EAM, a 51% owned institutional asset manager, has decided to wind down its business. Over the coming three months the EAM team will be working closely with clients to assure that all assets are returned in an efficient and professional manner. At September 30, 2011 EAM managed approximately $430 million of assets for its clients.

The Company continues to evaluate new investment opportunities and invest in the growth of its Investment Management affiliates, including the recently announced launch of a Midwest office for Evercore Wealth Management.

Other U.S. GAAP Expenses

Evercore’s Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. for the three and nine months ended September 30, 2011 was higher than U.S. GAAP as a result of the exclusion of expenses associated with IPO equity awards and awards granted in conjunction with the Lexicon acquisition; certain business acquisition related costs, including certain Lexicon costs that are included for U.S. GAAP purposes because such costs were contingent upon the closing of the acquisition; and charges associated with the decision to wind down EAM. In addition, for Adjusted Pro Forma purposes, client related expenses and expenses associated with revenue-sharing engagements with third parties have been presented as a reduction from Revenues and Non-compensation costs. Further details of these expenses, as well as an explanation of similar expenses for the three and nine months ended September 30, 2010 and the three months ended June 30, 2011, are included in Annex I, pages A-2 to A-10.

Noncontrolling Interests

Noncontrolling Interests in certain subsidiaries are owned by the principals and strategic investors in these businesses. Evercore’s equity ownership percentages in these businesses range from 51% to 86%. For the periods ended September 30, 2011 and 2010 and June 30, 2011 the gain (loss) allocated to noncontrolling interests was as follows:

        Net Gain (Loss) Allocated to Noncontrolling Interests
Three Months Ended     Nine Months Ended

September 30,

2011

 

June 30,

2011

 

September 30,

2010

September 30,

2011

 

September 30,

2010

Segment

(dollars in thousands)
Investment Banking (1) $ (1,754 ) $ (973 ) $ (1,282 ) $ (3,441 ) $ (1,926 )
Investment Management (1)   474     662     39     1,792     (532 )
Total $ (1,280 ) $ (311 ) $ (1,243 ) $ (1,649 ) $ (2,458 )
    (1) The difference between Adjusted Pro Forma and U.S. GAAP Noncontrolling Interests relates primarily to intangible amortization expense which is eliminated for ETC and EAM.
 

Income Taxes

For the three and nine months ended September 30, 2011, Evercore’s Adjusted Pro Forma effective tax rate was approximately 40%, compared to 42% for the three and nine months ended September 30, 2010.

For the three and nine months ended September 30, 2011, Evercore’s U.S. GAAP effective tax rate was approximately 89% and 60%, respectively, compared to 49% and 46% for the three and nine months ended September 30, 2010, respectively. The effective tax rate for U.S. GAAP purposes reflects significant adjustments relating to the tax treatment of certain compensation transactions, as well as the noncontrolling interest associated with Evercore LP Units.

Balance Sheet

The Company continues to maintain a strong balance sheet, holding cash, cash equivalents and marketable securities of $307.1 million at September 30, 2011. Current assets exceed current liabilities by $238.3 million at September 30, 2011. Amounts due related to the Long-Term Notes Payable were $99.3 million at September 30, 2011.

During the quarter the Company repurchased approximately 733,000 shares at an average cost of $25.04 per share.

Dividend

On October 25, 2011 the Board of Directors of Evercore declared a quarterly dividend of $0.20 per share to be paid on December 9, 2011 to common stockholders of record on November 25, 2011.

Conference Call

Investors and analysts may participate in the live conference call by dialing (800) 591-6945 (toll-free domestic) or (617) 614-4911 (international); passcode: 96479676. Please register at least 10 minutes before the conference call begins. A replay of the call will be available for one week via telephone starting approximately one hour after the call ends. The replay can be accessed at (888) 286-8010 (toll-free domestic) or (617) 801-6888 (international); passcode: 34863079. A live webcast of the conference call will be available on the Investor Relations section of Evercore’s website at www.evercore.com. The webcast will be archived on Evercore’s website for 30 days after the call.

About Evercore Partners

Evercore Partners is a leading independent investment banking advisory firm. Evercore’s Investment Banking business advises its clients on mergers, acquisitions, divestitures, restructurings, financings, public offerings, private placements and other strategic transactions and also provides institutional investors with high quality research, sales and trading execution that is free of the conflicts created by proprietary activities; Evercore’s Investment Management business comprises wealth management, institutional asset management and private equity investing. Evercore serves a diverse set of clients around the world from its offices in New York, Boston, Chicago, Houston, Los Angeles, Minneapolis, San Francisco, Washington D.C., London, Aberdeen, Scotland, Mexico City and Monterrey, Mexico, Hong Kong and Rio de Janeiro and São Paulo, Brazil. More information about Evercore can be found on the Company’s website at www.evercore.com.

Basis of Alternative Financial Statement Presentation

Adjusted Pro Forma results are a non-GAAP measure. 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 better reflect management’s view of operating results. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. A reconciliation of U.S. GAAP results to Adjusted Pro Forma results is presented in the tables included in Annex I.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which reflect our current views with respect to, among other things, Evercore’s operations and financial performance. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. All statements other than statements of historical fact included in this presentation are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in Evercore’s business. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Evercore believes these factors include, but are not limited to, those described under “Risk Factors” discussed in Evercore’s Annual Report on Form 10-K for the year ended December 31, 2010 and subsequent quarterly reports on Form 10-Q. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Evercore to predict all risks and uncertainties, nor can Evercore assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and Evercore does not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. Evercore undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

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, 2011 and 2010   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, 2011 (Unaudited)   A-6
Adjusted Pro Forma Segment Reconciliation to U.S. GAAP for the Three Months ended June 30, 2011 (Unaudited)   A-7
Adjusted Pro Forma Segment Reconciliation to U.S. GAAP for the Three and Nine Months ended September 30, 2010 (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, 2011 AND 2010
(dollars in thousands, except per share data)
(UNAUDITED)
             
Three Months Ended September 30, Nine Months Ended September 30,
2011 2010 2011 2010
 
REVENUES
Investment Banking Revenue $ 139,995 $ 101,367 $ 337,743 $ 224,794
Investment Management Revenue 25,483 23,543 80,443 51,199
Other Revenue   3,038     4,661     11,009   18,106  
TOTAL REVENUES 168,516 129,571 429,195 294,099
Interest Expense (1)   4,573     5,853     15,416   17,390  
NET REVENUES   163,943     123,718     413,779   276,709  
 
EXPENSES
Employee Compensation and Benefits 114,805 82,267 285,829 183,750
Occupancy and Equipment Rental 6,039 5,129 16,956 13,087
Professional Fees 9,505 5,935 25,724 20,651
Travel and Related Expenses 5,871 4,441 15,884 11,790
Communications and Information Services 1,678 1,455 5,860 4,246
Depreciation and Amortization 4,918 3,379 10,980 6,677
Special Charges 3,601 - 3,601 -
Acquisition and Transition Costs 1,178 385 2,312 3,121
Other Operating Expenses   4,624     3,031     12,567   8,004  
TOTAL EXPENSES   152,219     106,022     379,713   251,326  
 
INCOME BEFORE INCOME (LOSS) FROM EQUITY METHOD INVESTMENTS AND INCOME TAXES 11,724 17,696 34,066 25,383
Income (Loss) from Equity Method Investments   195     (131 )   664   (441 )
INCOME BEFORE INCOME TAXES 11,919 17,565 34,730 24,942
Provision for Income Taxes   10,626     8,547     20,861   11,508  
NET INCOME 1,293 9,018 13,869 13,434
Net Income (Loss) Attributable to Noncontrolling Interest   (466 )   5,488     6,261   7,767  
NET INCOME ATTRIBUTABLE TO EVERCORE PARTNERS INC. $ 1,759   $ 3,530   $ 7,608 $ 5,667  
 
Net Income Attributable to Evercore Partners Inc. Common Shareholders $ 1,738 $ 3,509 $ 7,545 $ 5,614
 
Weighted Average Shares of Class A Common Stock Outstanding:
Basic 28,967 18,973 25,146 18,901
Diluted 31,235 21,091 28,534 22,086
Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders:
Basic $ 0.06 $ 0.18 $ 0.30 $ 0.30
Diluted $ 0.06 $ 0.17 $ 0.26 $ 0.25
1   Includes interest expense on long-term debt and interest expense on short-term repurchase agreements.
 

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, and other IPO related restricted stock unit awards, 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 in Employee Compensation and Benefits, resulting from the modification of Evercore LP Units, which will vest 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 these 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.

 
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, EAM 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 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. The Company has also reflected the write-off of intangible assets associated with its planned exit of Evercore Asset Management.

 
4.

Client Related Expenses. The Company has reflected the reclassification of client related expenses, expenses associated with revenue sharing engagements with third parties and provisions for uncollected receivables, as a reduction of revenue. 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 (Loss) from Equity Method Investments. The Adjusted Pro Forma results present Income (Loss) from Equity Method Investments within Revenue as the Company’s Management believes it is a more meaningful presentation.

 
 
EVERCORE PARTNERS INC.
U.S. GAAP RECONCILIATION TO ADJUSTED PRO FORMA
(dollars in thousands)
(UNAUDITED)
               
Three Months Ended Nine Months Ended

September 30,

2011

June 30,

2011

September 30,

2010

September 30,

2011

September 30,

2010

Net Revenues - U.S. GAAP $ 163,943 $ 141,991 $ 123,718 $ 413,779 $ 276,709
Client Related Expenses (1) (2,235 ) (3,062 ) (1,804 ) (9,268 ) (8,446 )
Income (Loss) from Equity Method Investments (2) 195 69 (131 ) 664 (441 )
Interest Expense on Long-term Debt (3)   1,953     1,953     1,923     5,849     5,756  
Net Revenues - Adjusted Pro Forma $ 163,856   $ 140,951   $ 123,706   $ 411,024   $ 273,578  
 
Compensation Expense - U.S. GAAP $ 114,805 $ 100,978 $ 82,267 $ 285,829 $ 183,750
Amortization of LP Units and Certain Other Awards (4) (5,126 ) (5,917 ) (4,964 ) (17,746 ) (15,687 )
IPO Related Restricted Stock Unit Awards (5) - (11,389 ) - (11,389 ) -
Acquisition Related Compensation Charges (6)   (7,729 )   -     -     (7,729 )   -  
Compensation Expense - Adjusted Pro Forma $ 101,950   $ 83,672   $ 77,303   $ 248,965   $ 168,063  
 
Operating Income (Loss) - U.S. GAAP $ 11,724 $ 11,167 $ 17,696 $ 34,066 $ 25,383
Income (Loss) from Equity Method Investments (2)   195     69     (131 )   664     (441 )
Pre-Tax Income (Loss) - U.S. GAAP 11,919 11,236 17,565 34,730 24,942
Amortization of LP Units and Certain Other Awards (4) 5,321 5,917 4,964 17,941 15,687
IPO Related Restricted Stock Unit Awards (5) - 11,389 - 11,389 -
Acquisition Related Compensation Charges (6) 7,729 - - 7,729 -
Special Charges (7) 3,601 - - 3,601 -
Intangible Asset Amortization (8)   2,149     584     584     3,317     1,752  
Pre-Tax Income - Adjusted Pro Forma 30,719 29,126 23,113 78,707 42,381
Interest Expense on Long-term Debt (3)   1,953     1,953     1,923     5,849     5,756  
Operating Income - Adjusted Pro Forma $ 32,672   $ 31,079   $ 25,036   $ 84,556   $ 48,137  
 
Provision (Benefit) for Income Taxes - U.S. GAAP $ 10,626 $ 5,977 $ 8,547 $ 20,861 $ 11,508
Income Taxes (9)   1,660     5,673     1,161     10,619     6,292  
Provision for Income Taxes - Adjusted Pro Forma $ 12,286   $ 11,650   $ 9,708   $ 31,480   $ 17,800  
 
Net Income Attributable to Evercore Partners Inc. - U.S. GAAP $ 1,759 $ 2,261 $ 3,530 $ 7,608 $ 5,667
Amortization of LP Units and Certain Other Awards (4) 5,321 5,917 4,964 17,941 15,687
IPO Related Restricted Stock Unit Awards (5) - 11,389 - 11,389 -
Acquisition Related Compensation Charges (6) 7,729 - - 7,729 -
Special Charges (7) 3,601 - - 3,601 -
Intangible Asset Amortization (8) 2,149 584 584 3,317 1,752
Income Taxes (9) (1,660 ) (5,673 ) (1,161 ) (10,619 ) (6,292 )
Noncontrolling Interest (10)   814     3,309     6,731     7,910     10,225  
Net Income Attributable to Evercore Partners Inc. - Adjusted Pro Forma $ 19,713   $ 17,787   $ 14,648   $ 48,876   $ 27,039  
 
Diluted Shares Outstanding - U.S. GAAP 31,235 27,364 21,091 28,534 22,086
Vested Partnership Units (11) 6,444 9,193 12,473 8,404 12,627
Unvested Partnership Units (11) 4,447 4,496 4,540 4,489 4,540
Unvested Restricted Stock Units - Event Based (11) 12 511 639 365 639
Acquisition Related Share Issuance (6)   815     -     -     243     -  
Diluted Shares Outstanding - Adjusted Pro Forma   42,953     41,564     38,743     42,035     39,892  
 

Key Metrics: (a)

Diluted Earnings Per Share - U.S. GAAP (b) $ 0.06 $ 0.08 $ 0.17 $ 0.26 $ 0.25
Diluted Earnings Per Share - Adjusted Pro Forma (b) $ 0.46 $ 0.43 $ 0.38 $ 1.16 $ 0.68
 
Compensation Ratio - U.S. GAAP 70 % 71 % 66 % 69 % 66 %
Compensation Ratio - Adjusted Pro Forma 62 % 59 % 62 % 61 % 61 %
 
Operating Margin - U.S. GAAP 7 % 8 % 14 % 8 % 9 %
Operating Margin - Adjusted Pro Forma 20 % 22 % 20 % 21 % 18 %
 
Effective Tax Rate - U.S. GAAP 89 % 53 % 49 % 60 % 46 %
Effective Tax Rate - Adjusted Pro Forma 40 % 40 % 42 % 40 % 42 %
 
(a) Reconciliations of the key metrics from U.S. GAAP to Adjusted Pro Forma are a derivative of the reconciliations of their components above.
(b) 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, 2011, June 30, 2011 and September 30, 2010, respectively, and $63 and $53 of accretion for the nine months ended September 30, 2011 and 2010, respectively, related to the Company's noncontrolling interest in Trilantic Capital Partners.
 
 
EVERCORE PARTNERS INC.
U.S. GAAP RECONCILIATION TO ADJUSTED PRO FORMA
TRAILING TWELVE MONTHS
(dollars in thousands)
(UNAUDITED)
       
Consolidated
Twelve Months Ended

September 30,

2011

June 30,

2011

September 30,

2010

Net Revenues - U.S. GAAP $ 515,967 $ 475,742 $ 386,711
Client Related Expenses (1) (10,920 ) (10,489 ) (10,390 )
Income (Loss) from Equity Method Investments (2) 548 222 (1,269 )
Interest Expense on Long-term Debt (3)   7,787     7,757     7,666  
Net Revenues - Adjusted Pro Forma $ 513,382   $ 473,232   $ 382,718  
 
Compensation Expense - U.S. GAAP $ 353,996 $ 321,458 $ 251,751
Amortization of LP Units and Certain Other Awards (4) (22,880 ) (22,718 ) (20,676 )
IPO Related Restricted Stock Unit Awards (5) (11,389 ) (11,389 ) -
Acquisition Related Compensation Charges (6)   (7,729 )   -     -  
Compensation Expense - Adjusted Pro Forma $ 311,998   $ 287,351   $ 231,075  
 
Compensation Ratio - U.S. GAAP (a) 69 % 68 % 65 %
Compensation Ratio - Adjusted Pro Forma (a) 61 % 61 % 60 %
 
Investment Banking
Twelve Months Ended

September 30,

2011

June 30,

2011

September 30,

2010

Net Revenues - U.S. GAAP $ 412,068 $ 373,662 $ 325,471
Client Related Expenses (1) (10,246 ) (9,920 ) (10,145 )
Income from Equity Method Investments (2) 1,188 932 -
Interest Expense on Long-term Debt (3)   4,221     4,204     4,154  
Net Revenues - Adjusted Pro Forma $ 407,231   $ 368,878   $ 319,480  
 
Compensation Expense - U.S. GAAP $ 284,752 $ 251,641 $ 201,303
Amortization of LP Units and Certain Other Awards (4) (19,790 ) (19,506 ) (17,275 )
IPO Related Restricted Stock Unit Awards (5) (8,906 ) (8,906 ) -
Acquisition Related Compensation Charges (6)   (7,729 )   -     -  
Compensation Expense - Adjusted Pro Forma $ 248,327   $ 223,229   $ 184,028  
 
Compensation Ratio - U.S. GAAP (a) 69 % 67 % 62 %
Compensation Ratio - Adjusted Pro Forma (a) 61 % 61 % 58 %
 

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

 
 
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 Adjusted Pro Forma Basis Adjustments U.S. GAAP Basis Non-GAAP Adjusted Pro Forma Basis Adjustments U.S. GAAP 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 $ 31,105   $ (18,284 ) $ 12,821   $ 76,827   $ (42,179 ) $ 34,648  
 
Compensation Ratio (a) 62 % 70 % 61 % 69 %
Operating Margin (a) 22 % 9 % 23 % 10 %
 
Investment Management Segment
Three Months Ended September 30, 2011 Nine Months Ended September 30, 2011
Non-GAAP Adjusted Pro Forma Basis Adjustments U.S. GAAP Basis Non-GAAP Adjusted Pro Forma Basis Adjustments U.S. GAAP Basis
Net Revenues:
Investment Management Revenue $ 25,317 $ 166 (1)(2) $ 25,483 $ 79,413 $ 1,030 (1)(2) $ 80,443
Other Revenue, net   188     (894 ) (3)   (706 )   493     (2,678 ) (3)   (2,185 )
Net Revenues   25,505     (728 )   24,777     79,906     (1,648 )   78,258  
 
Expenses:
Employee Compensation and Benefits 16,005 741 (4)(5) 16,746 48,242 4,821 (4)(5) 53,063
Non-compensation Costs 7,933 220 (8) 8,153 23,935 867 (8) 24,802
Special Charges   -     975   (7)   975     -     975   (7)   975  
Total Expenses   23,938     1,936     25,874     72,177     6,663     78,840  
 
Operating Income $ 1,567   $ (2,664 ) $ (1,097 ) $ 7,729   $ (8,311 ) $ (582 )
 
Compensation Ratio (a) 63 % 68 % 60 % 68 %
Operating Margin (a) 6 % (4 %) 10 % (1 %)
 

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

 
 
EVERCORE PARTNERS INC.
ADJUSTED PRO FORMA SEGMENT RECONCILIATION TO U.S. GAAP
FOR THE THREE MONTHS ENDED JUNE 30, 2011
(dollars in thousands)
(UNAUDITED)
         
Investment Banking Segment
Three Months Ended June 30, 2011

Non-GAAP Adjusted

Pro Forma Basis

Adjustments U.S. GAAP Basis
Net Revenues:
Investment Banking Revenue $ 111,847 $ 2,849 (1)(2) $ 114,696
Other Revenue, net   339     (1,059 ) (3)   (720 )
Net Revenues   112,186     1,790     113,976  
 
Expenses:
Employee Compensation and Benefits 67,303 14,042

(4)(5)

81,345
Non-compensation Costs   18,054     3,452   (8)   21,506  
Total Expenses   85,357     17,494     102,851  
 
Operating Income $ 26,829   $ (15,704 ) $ 11,125  
 
Compensation Ratio (a) 60 % 71 %
Operating Margin (a) 24 % 10 %
 
Investment Management Segment
Three Months Ended June 30, 2011

Non-GAAP Adjusted

Pro Forma Basis

Adjustments U.S. GAAP Basis
Net Revenues:
Investment Management Revenue $ 28,627 $ 144 (1)(2) $ 28,771
Other Revenue, net   138     (894 ) (3)   (756 )
Net Revenues   28,765     (750 )   28,015  
 
Expenses:
Employee Compensation and Benefits 16,369 3,264

(4)(5)

19,633
Non-compensation Costs   8,146     194   (8)   8,340  
Total Expenses   24,515     3,458     27,973  
 
Operating Income $ 4,250   $ (4,208 ) $ 42  
 
Compensation Ratio (a) 57 % 70 %
Operating Margin (a) 15 % 0 %
 

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

 
 
EVERCORE PARTNERS INC.
ADJUSTED PRO FORMA SEGMENT RECONCILIATION TO U.S. GAAP
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010
(dollars in thousands)
(UNAUDITED)
               
Investment Banking Segment
Three Months Ended September 30, 2010 Nine Months Ended September 30, 2010

Non-GAAP Adjusted

Pro Forma Basis

Adjustments U.S. GAAP Basis

Non-GAAP Adjusted

Pro Forma Basis

Adjustments U.S. GAAP Basis
Net Revenues:
Investment Banking Revenue $ 99,563 $ 1,804 (1) $ 101,367 $ 216,348 $ 8,446 (1) $ 224,794
Other Revenue, net   435     (1,042 ) (3)   (607 )   3,625     (3,119 ) (3)   506  
Net Revenues   99,998     762     100,760     219,973     5,327     225,300  
 
Expenses:
Employee Compensation and Benefits 60,847 4,101 (4) 64,948 130,772 13,150 (4) 143,922
Non-compensation Costs   13,315     2,273   (8)   15,588     37,427     9,853   (8)   47,280  
Total Expenses   74,162     6,374     80,536     168,199     23,003     191,202  
 
Operating Income $ 25,836   $ (5,612 ) $ 20,224   $ 51,774   $ (17,676 ) $ 34,098  
 
Compensation Ratio (a) 61 % 64 % 59 % 64 %
Operating Margin (a) 26 % 20 % 24 % 15 %
 
Investment Management Segment
Three Months Ended September 30, 2010 Nine Months Ended September 30, 2010

Non-GAAP Adjusted

Pro Forma Basis

Adjustments U.S. GAAP Basis

Non-GAAP Adjusted

Pro Forma Basis

Adjustments U.S. GAAP Basis
Net Revenues:
Investment Management Revenue $ 23,412 $ 131 (1)(2) $ 23,543 $ 50,758 $ 441

(2)

$ 51,199
Other Revenue, net   296     (881 ) (3)   (585 )   2,847     (2,637 ) (3)   210  
Net Revenues   23,708     (750 )   22,958     53,605     (2,196 )   51,409  
 
Expenses:
Employee Compensation and Benefits 16,456 863 (4) 17,319 37,291 2,537 (4) 39,828
Non-compensation Costs   8,052     115   (8)   8,167     19,951     345   (8)   20,296  
Total Expenses   24,508     978     25,486     57,242     2,882     60,124  
 
Operating Income (Loss) $ (800 ) $ (1,728 ) $ (2,528 ) $ (3,637 ) $ (5,078 ) $ (8,715 )
 
Compensation Ratio (a) 69 % 75 % 70 % 77 %
Operating Margin (a) (3 %) (11 %) (7 %) (17 %)
 

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

 
 

Notes to Unaudited Condensed Consolidated Adjusted Pro Forma Financial Data

 
(1) The Company has reflected the reclassification of client related expenses and expenses associated with revenue sharing engagements with third parties as a reduction of revenue.
(2) Income (Loss) from Equity Method Investments is included within Revenue as the Company’s Management believes it is a more meaningful 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) The Company incurred expenses from the modification of Evercore LP Units and related awards, which primarily vest over a five-year period.
(5) The Company incurred expenses from the vesting of IPO related restricted stock unit awards relating to the June 2011 offering.
(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.
(7) 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. The Company has also reflected a $1.0 million write-off of intangible assets associated with its planned exit of Evercore Asset Management.
(8) Non-compensation Costs on an Adjusted Pro Forma basis reflect the following adjustments;
               
Three Months Ended September 30, 2011

Investment

Banking

 

Investment

Management

 

Total

Segments

  Adjustments    

U.S. GAAP

Occupancy and Equipment Rental $ 4,331 $ 1,708 $ 6,039 $ - $ 6,039
Professional Fees 6,143 2,555 8,698 807 (1) 9,505
Travel and Related Expenses 4,309 540 4,849 1,022 (1) 5,871
Communications and Information Services 1,185 464 1,649 29 (1) 1,678
Depreciation and Amortization 1,120 1,649 2,769 2,149 (8a) 4,918
Acquisition and Transition Costs 1,053 125 1,178 - 1,178
Other Operating Expenses   3,160   892   4,052   572 (1)   4,624
Total Non-compensation Costs $ 21,301 $ 7,933 $ 29,234 $ 4,579 $ 33,813
 
Three Months Ended June 30, 2011

Investment

Banking

Investment

Management

Total

Segments

Adjustments U.S. GAAP
Occupancy and Equipment Rental $ 3,942 $ 1,794 $ 5,736 $ - $ 5,736
Professional Fees 4,920 2,248 7,168 961 (1) 8,129
Travel and Related Expenses 3,338 611 3,949 1,485 (1) 5,434
Communications and Information Services 1,432 570 2,002 32 (1) 2,034
Depreciation and Amortization 806 1,681 2,487 584 (8a) 3,071
Acquisition and Transition Costs 507 94 601 - 601
Other Operating Expenses   3,109   1,148   4,257   584 (1)   4,841
Total Non-compensation Costs $ 18,054 $ 8,146 $ 26,200 $ 3,646 $ 29,846
 
Three Months Ended September 30, 2010

Investment

Banking

Investment

Management

Total

Segments

Adjustments U.S. GAAP
Occupancy and Equipment Rental $ 3,494 $ 1,635 $ 5,129 $ - $ 5,129
Professional Fees 3,215 2,140 5,355 580 (1) 5,935
Travel and Related Expenses 2,806 525 3,331 1,110 (1) 4,441
Communications and Information Services 1,010 409 1,419 36 (1) 1,455
Depreciation and Amortization 1,105 1,690 2,795 584 (8a) 3,379
Acquisition and Transition Costs 284 101 385 - 385
Other Operating Expenses   1,401   1,552   2,953   78 (1)   3,031
Total Non-compensation Costs $ 13,315 $ 8,052 $ 21,367 $ 2,388 $ 23,755
 
Nine Months Ended September 30, 2011

Investment

Banking

Investment

Management

Total

Segments

Adjustments U.S. GAAP
Occupancy and Equipment Rental $ 11,746 $ 5,210 $ 16,956 $ - $ 16,956
Professional Fees 14,483 6,791 21,274 4,450 (1) 25,724
Travel and Related Expenses 10,539 1,731 12,270 3,614 (1) 15,884
Communications and Information Services 4,069 1,677 5,746 114 (1) 5,860
Depreciation and Amortization 2,656 5,007 7,663 3,317 (8a) 10,980
Acquisition and Transition Costs 1,967 345 2,312 - 2,312
Other Operating Expenses   8,108   3,174   11,282   1,285 (1)   12,567
Total Non-compensation Costs $ 53,568 $ 23,935 $ 77,503 $ 12,780 $ 90,283
 
Nine Months Ended September 30, 2010

Investment

Banking

Investment

Management

Total

Segments

Adjustments U.S. GAAP
Occupancy and Equipment Rental $ 9,127 $ 3,960 $ 13,087 $ - $ 13,087
Professional Fees 9,628 5,847 15,475 5,176 (1) 20,651
Travel and Related Expenses 7,650 1,152 8,802 2,988 (1) 11,790
Communications and Information Services 2,949 1,211 4,160 86 (1) 4,246
Depreciation and Amortization 2,320 2,605 4,925 1,752 (8a) 6,677
Acquisition and Transition Costs 1,183 1,938 3,121 - 3,121
Other Operating Expenses   4,570   3,238   7,808   196 (1)   8,004
Total Non-compensation Costs $ 37,427 $ 19,951 $ 57,378 $ 10,198 $ 67,576
 
(8a)   Reflects expenses associated with amortization of intangible assets acquired in the Protego, Braveheart, SFS, EAM 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 40% for the three and nine months ended September 30, 2011. 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.
(11) Assumes the vesting of all Evercore LP partnership units and IPO related restricted stock unit awards. 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.
 

Contacts

Investors:
Evercore Partners Inc.
Robert B. Walsh, 212-857-3100
Chief Financial Officer
or
Media:
The Abernathy MacGregor Group, for Evercore Partners
Carina Davidson, 212-371-5999

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Investors:
Evercore Partners Inc.
Robert B. Walsh, 212-857-3100
Chief Financial Officer
or
Media:
The Abernathy MacGregor Group, for Evercore Partners
Carina Davidson, 212-371-5999