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Evercore Partners Reports Record Full Year 2011 Results; Quarterly Dividend of $0.20 Per Share
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Highlights

  • Full Year Financial Summary
    - Record Adjusted Pro Forma Net Revenues of $520.4 million, up 40% compared to 2010
    - Record Adjusted Pro Forma Net Income from Continuing Operations of $63.1 million, up 66% compared to 2010, or $1.48 per share
    - U.S. GAAP Net Revenues of $524.3 million, up 39% compared to 2010
    - U.S. GAAP Net Income from Continuing Operations of $7.9 million, down 16% compared to 2010, or $0.27 per share
  • Fourth Quarter Financial Summary
    - Adjusted Pro Forma Net Revenues of $111.6 million, up 10% compared to Q4 2010
    - Adjusted Pro Forma Net Income from Continuing Operations of $14.1 million, up 29% compared to Q4 2010, or $0.32 per share
    - U.S. GAAP Net Revenues of $112.8 million, up 11% compared to Q4 2010
    - U.S. GAAP Net Income (Loss) from Continuing Operations of ($3) thousand, down from $3.5 million in Q4 2010
  • Investment Banking
    - Record Full Year Net Revenues and Operating Income
    - Advised on the two largest advisory transactions and four of the 10 largest announced energy transactions of 2011
    - Substantially augmented international capabilities – more than 50% of fourth quarter net revenues from clients outside the U.S.; highest level in Firm history
    - Added 14 advisory Senior Managing Directors in U.S. and Europe
  • Investment Management
    - Record Full Year Net Revenues and Operating Income
    - Acquired a 45% interest in ABS Investment Management ($3.5 billion in AUM)
    - Assets Under Management were $13.0 billion
  • Repurchased 1,587,000 shares in the year and 366,000 shares during the quarter
  • Quarterly dividend of $0.20 per share

NEW YORK--(BUSINESS WIRE)--Feb. 2, 2012-- Evercore Partners Inc. (NYSE: EVR) today announced that its Adjusted Pro Forma Net Revenues were $520.4 million for the twelve months ended December 31, 2011, compared to $372.9 million for the twelve months ended December 31, 2010. Adjusted Pro Forma Net Revenues were $111.6 million for the three months ended December 31, 2011, compared to $101.6 million and $163.1 million for the three months ended December 31, 2010 and September 30, 2011, respectively. Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $63.1 million, or $1.48 per share, for the twelve months ended December 31, 2011, compared to $38.1 million, or $0.95 per share, for the twelve months ended December 31, 2010. Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $14.1 million, or $0.32 per share, for the three months ended December 31, 2011, compared to $10.9 million, or $0.27 per share, for the three months ended December 31, 2010 and $19.8 million, or $0.46 per share, for the three months ended September 30, 2011.

U.S. GAAP Net Revenues were $524.3 million for the twelve months ended December 31, 2011, compared to $375.9 million for the twelve months ended December 31, 2010. U.S. GAAP Net Revenues were $112.8 million for the three months ended December 31, 2011, compared to $101.5 million and $163.2 million for the three months ended December 31, 2010 and September 30, 2011, respectively. U.S. GAAP Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $7.9 million, or $0.27 per share, for the twelve months ended December 31, 2011, compared to $9.5 million, or $0.41 per share, for the twelve months ended December 31, 2010. U.S. GAAP Net Income (Loss) from Continuing Operations Attributable to Evercore Partners Inc. was ($3) thousand for the three months ended December 31, 2011, compared to $3.5 million, or $0.14 per share, for the three months ended December 31, 2010 and $2.0 million, or $0.06 per share, for the three months ended September 30, 2011.

The Adjusted Pro Forma compensation ratio for the trailing twelve months was 59%, down from 61% in 2010 and 60% for the twelve months ended September 30, 2011. The Adjusted Pro Forma compensation ratio for the three months ended December 31, 2011 was 56%, compared to 61% for the same period in 2010 and 62% for the three months ended September 30, 2011. The U.S. GAAP trailing twelve-month compensation ratio of 68% compares to 66% in 2010 and 68% for the twelve months ended September 30, 2011. The U.S. GAAP compensation ratio for the three months ended December 31, 2011, December 31, 2010 and September 30, 2011 was 66%, 66% and 70%, respectively.

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.

“2011 was a year of milestones for Evercore. Through strong teamwork among our professionals, we served a record number of clients, reinforcing our strong culture of excellence and integrity,” said Ralph Schlosstein, President and Chief Executive Officer. “We delivered record results in each of our businesses with strong top line and bottom line growth. In Investment Banking, we consistently gained market share while maintaining high levels of productivity. We invested in the future growth of our business, significantly expanding our capacity to serve clients in Europe and in strategically important industries, including energy and technology. Our early stage businesses in both Investment Banking and Investment Management are steadily increasing revenues and moving towards the black. We also continued our program of inorganic expansion, welcoming Lexicon into our Investment Banking business in the third quarter and ABS Investment Management, a leading fund of equity hedge funds manager, to Evercore at the end of the year. At the same time, we maintained our focus on delivering value to our shareholders. Our full year compensation ratio declined for the third consecutive year and our operating margins exceeded 20% in 2011, the highest level since 2007. We acquired 1.6 million shares of stock in treasury stock transactions, more than offsetting the dilutive effect of bonus equity awards, and increased our dividend for the third consecutive year. These accomplishments and the dedicated work of our team have created strong momentum as we enter 2012, and we look forward to another strong year.”

“The past year demonstrated that Evercore has become one of the strongest and most consistent investment banking firms in the world,” said Roger Altman, Executive Chairman. “We have had an exceptional record in recruiting. The Firm’s global reach has widened impressively, as we added a presence in India and South Korea last year. Our brand has never been stronger. In light of these factors, it’s not surprising that we had a record result in 2011.”

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

               
U.S. GAAP
Three Months Ended % Change vs. Twelve Months Ended
December 31, September 30, December 31, September 30, December 31, December 31, December 31,
2011 2011 2010 2011 2010 2011 2010 % Change
(dollars in thousands)
Net Revenues $ 112,781 $ 163,181 $ 101,452 (31 %) 11 % $ 524,264 $ 375,905 39 %
Operating Income (Loss) $ (1,009 ) $ 13,442 $ 9,658 NM NM $ 35,812 $ 36,860 (3 %)

Net Income (Loss) from Continuing

Operations Attributable to Evercore

Partners Inc. $ (3 ) $ 1,957 $ 3,519 NM NM $ 7,918 $ 9,471 (16 %)

Diluted Earnings Per Share from

 

Continuing Operations

$ - $ 0.06 $ 0.14 NM NM $ 0.27 $ 0.41 (34 %)
Compensation Ratio 66 % 70 % 66 % 68 % 66 %
Operating Margin (1 %) 8 % 10 % 7 % 10 %
Adjusted Pro Forma
Three Months Ended % Change vs. Twelve Months Ended
December 31, September 30, December 31, September 30, December 31, December 31, December 31,
2011 2011 2010 2011 2010 2011 2010 % Change
(dollars in thousands)
Net Revenues $ 111,624 $ 163,094 $ 101,622 (32 %) 10 % $ 520,352 $ 372,944 40 %
Operating Income $ 19,605 $ 33,383 $ 17,166 (41 %) 14 % $ 105,845 $ 67,026 58 %
Net Income from Continuing

Operations Attributable to Evercore

Partners Inc.

$ 14,067 $ 19,792 $ 10,924 (29 %) 29 % $ 63,129 $ 38,122 66 %

Diluted Earnings Per Share from

Continuing Operations

$ 0.32 $ 0.46 $ 0.27 (30 %) 19 % $ 1.48 $ 0.95 56 %
Compensation Ratio 56 % 62 % 61 % 59 % 61 %
Operating Margin 18 % 20 % 17 % 20 % 18 %

The above U.S. GAAP and Adjusted Pro Forma results present the continuing operations of the Company, which exclude amounts related to Evercore Asset Management (“EAM”), whose operations were discontinued during the fourth quarter of 2011. During the fourth quarter of 2011, the Company announced its plan to liquidate EAM’s business, resulting in a $1.0 million charge related to the write-off of EAM’s intangible assets in the third quarter of 2011. The Company completed the liquidation of EAM prior to December 31, 2011. See page A-1 for the full financial results of the Company including its discontinued operations.

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 from continuing operations 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

Investment Banking had a record year in 2011. Net revenues of $421.4 million increased 42% in comparison to 2010, while operating income of $95.6 million increased by 45%. Operating margins increased to 23%. The Company significantly expanded its ability to serve clients during the year through the addition of new partners and the acquisition of Lexicon Partners. For the year, the Company earned advisory fees from 245 clients (183 in 2010), including fees in excess of $1 million from 94 clients (62 in 2010). The Company had 60 Investment Banking Senior Managing Directors at December 31, 2011.

  Adjusted Pro Forma
Three Months Ended   Twelve Months Ended
December 31,   September 30,   December 31, December 31,   December 31,
2011 2011 2010 2011 2010
(dollars in thousands)
Net Revenues:
Investment Banking $ 89,485 $ 138,121 $ 75,653 $ 419,654 $ 292,001
Other Revenue, net   816     230     460     1,765     4,085  
Net Revenues   90,301     138,351     76,113     421,419     296,086  
 
Expenses:
Employee Compensation and Benefits 49,008 85,945 47,604 249,731 178,376
Non-compensation Costs   22,543     21,301     14,563     76,111     51,990  
Total Expenses   71,551     107,246     62,167     325,842     230,366  
 
Operating Income $ 18,750   $ 31,105   $ 13,946   $ 95,577   $ 65,720  
 
Compensation Ratio 54 % 62 % 63 % 59 % 60 %
Operating Margin 21 % 22 % 18 % 23 % 22 %
 
 
U.S. GAAP
Three Months Ended Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2011 2011 2010 2011 2010
(dollars in thousands)
Net Revenues:
Investment Banking $ 92,854 $ 139,995 $ 77,137 $ 430,597 $ 301,931
Other Revenue, net   (251 )   (829 )   (590 )   (2,473 )   (84 )
Net Revenues   92,603     139,166     76,547     428,124     301,847  
 
Expenses:
Employee Compensation and Benefits 61,304 98,059 51,986 294,070 195,908
Non-compensation Costs 30,032 25,660 16,532 95,513 63,812
Special Charges   1,268     2,626     -     3,894     -  
Total Expenses   92,604     126,345     68,518     393,477     259,720  
 
Operating Income (Loss) $ (1 ) $ 12,821   $ 8,029   $ 34,647   $ 42,127  
 
Compensation Ratio 66 % 70 % 68 % 69 % 65 %
Operating Margin (0 %) 9 % 10 % 8 % 14 %

Evercore’s Investment Banking segment reported net revenues this quarter of $90.3 million, up 19% from Q4 2010 but down 35% from last quarter’s record. Operating Income of $18.8 million increased 34% compared to Q4 2010 and decreased 40% compared to Q3 2011.

Revenues

Revenues were $89.5 million in the fourth quarter, an 18% increase in comparison with the prior year’s quarter and a 35% decrease in comparison with the prior quarter. Investment Banking earned advisory fees from 127 clients in the fourth quarter (91 in Q4 2010), and fees in excess of $1 million from 26 clients during Q4 2011 (20 in Q4 2010). During the quarter we advised on several of the most prominent announced transactions, including Kinder Morgan’s acquisition of El Paso, ITOCHU on its acquisition of Samson Investment Corporation and Forsakrings AB Skandia’s sale to Livforsakrings AB Skandia. The Institutional Equities business continued to gain traction with clients, both in terms of research coverage and fee-paying clients and the Private Funds Group closed three capital raises during the quarter.

Expenses

For the three months ended December 31, 2011, compensation costs were $49.0 million, an increase of 3% from Q4 2010 and a decrease of 43% from Q3 2011. The trailing twelve-month compensation ratio was 59%, down from 60% in Q4 2010 and 61% in Q3 2011. For the three months ended December 31, 2011, Evercore’s Investment Banking compensation ratio was 54%, versus the compensation ratio reported for the three months ended December 31, 2010 and September 30, 2011 of 63% and 62%, respectively.

Non-compensation costs for the three months ended December 31, 2011 of $22.5 million increased from the same period last year and in comparison to last quarter. The ratio of non-compensation costs to revenue for the three and twelve months ended December 31, 2011 were 25% and 18%, respectively. The increase in costs was attributable to the inclusion of Lexicon personnel in our consolidated results, the addition of other experienced personnel and higher occupancy and travel costs reflecting our growth.

New Business Update

The Institutional Equities business is now composed of 67 professionals. The Research team has expanded the number of companies under coverage to 227 and the sales force has now opened accounts with 234 clients. For the three months ended December 31, 2011 the business generated $4.7 million in revenues, a 7% increase over the prior quarter. Expenses were $10.5 million for the quarter, an increase of 13% in comparison to the prior quarter due to a full quarter’s effect of recent headcount growth.

Investment Management

Investment Management also had a record year in 2011, reporting net revenues and operating income of $98.9 million and $10.3 million, respectively. The operating margin of 10% for fiscal 2011 increased five-fold in comparison to the year ended December 31, 2010. Investment Management continued to expand its client service capability in 2011, adding a Midwest coverage team at Evercore Wealth Management and completing its investment in ABS Investment Management, a leading fund of equity hedge funds managers with $3.5 billion of AUM, in December 2011. At December 31, 2011 Investment Management had $13.0 billion of AUM.

  Adjusted Pro Forma
Three Months Ended   Twelve Months Ended
December 31,   September 30,   December 31, December 31,   December 31,
  2011     2011     2010     2011     2010  
Net Revenues: (dollars in thousands)
Investment Management Revenues $ 21,251 $ 24,557 $ 25,362 $ 98,375 $ 73,885
Other Revenue, net   72     186     147     558     2,973  
Net Revenues   21,323     24,743     25,509     98,933     76,858  
 
Expenses:
Employee Compensation and Benefits 13,022 14,834 14,274 58,235 48,540
Non-compensation Costs   7,446     7,631     8,015     30,430     27,012  
Total Expenses   20,468     22,465     22,289     88,665     75,552  
 
Operating Income $ 855   $ 2,278   $ 3,220   $ 10,268   $ 1,306  
 
Compensation Ratio 61 % 60 % 56 % 59 % 63 %
Operating Margin 4 % 9 % 13 % 10 % 2 %
 
U.S. GAAP
Three Months Ended Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
  2011     2011     2010     2011     2010  
Net Revenues: (dollars in thousands)
Investment Management Revenues $ 21,007 $ 24,723 $ 25,646 $ 99,161 $ 74,610
Other Revenue, net   (829 )   (708 )   (741 )   (3,021 )   (552 )
Net Revenues   20,178     24,015     24,905     96,140     74,058  
 
Expenses:
Employee Compensation and Benefits 13,576 15,575 15,026 63,610 51,829
Non-compensation Costs   7,610     7,819     8,250     31,365     27,496  
Total Expenses   21,186     23,394     23,276     94,975     79,325  
 
Operating Income (Loss) $ (1,008 ) $ 621   $ 1,629   $ 1,165   $ (5,267 )
 
Compensation Ratio 67 % 65 % 60 % 66 % 70 %
Operating Margin (5 %) 3 % 7 % 1 % (7 %)

Investment Management Net Revenues of $21.3 million for the quarter decreased 16% and 14% from Q4 2010 and Q3 2011, respectively. Operating income of $0.9 million for the fourth quarter decreased relative to last year’s fourth quarter due primarily to realized and unrealized gains in last year’s quarter from the private equity portfolio. AUM of $13.0 billion represents a decrease of 1% from Q3 2011 on net outflows of $0.8 billion, partially offset by $0.6 billion of market appreciation, and a decrease of 23% from the prior year end.

Revenues

Investment Management Revenue Components          
Adjusted Pro Forma
Three Months Ended Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
  2011     2011     2010     2011     2010  
Management Fees (dollars in thousands)
Wealth Management $ 4,137 $ 3,927 $ 2,894 $ 15,296 $ 9,826
Institutional Asset Management (1) 13,828 16,016 17,304 65,220 48,542
Private Equity   2,437     1,678     1,915     7,544     8,396  
Total Management Fees   20,402     21,621     22,113     88,060     66,764  
 
Realized and Unrealized Gains (Losses)
Institutional Asset Management 871 1,269 1,670 4,297 5,546
Private Equity   (348 )   1,728     1,711     6,200     2,148  
Total Realized and Unrealized Gains (Losses)   523     2,997     3,381     10,497     7,694  
 
Equity in Affiliate Managers (2)   326     (61 )   (132 )   (182 )   (573 )
Investment Management Revenues $ 21,251   $ 24,557   $ 25,362   $ 98,375   $ 73,885  
(1) Management fees from Institutional Asset Management were $13.9 million, $16.1 million and $65.8 million for the three months ended December 31, 2011, September 30, 2011 and twelve months ended December 31, 2011, respectively, on a U.S. GAAP basis, excluding the reduction of revenues for client-related expenses.
(2) Equity in Pan, G5 and ABS on a U.S. GAAP basis are reclassified from Investment Management Revenue to Income (Loss) from Equity Method Investments.

Management and Investment Advisory fees of $20.4 million decreased for the three months ended December 31, 2011 compared to the same period of 2010, as higher management fees in Private Equity were offset by lower AUM in Institutional Asset Management. Management fees earned in the fourth quarter declined in comparison to the fees earned in the third quarter of 2011 reflecting the decline in AUM reported at the end of the third quarter.

Expenses

Fourth quarter expenses decreased 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 December 31, 2011.

Other U.S. GAAP Expenses

Evercore’s Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. for the three and twelve months ended December 31, 2011 was higher than U.S. GAAP as a result of the exclusion of expenses associated with the vesting of IPO equity awards and awards granted in conjunction with the Lexicon acquisition and 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. 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 twelve months ended December 31, 2010 and the three months ended September 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 December 31, 2011 and 2010 and September 30, 2011 the gain (loss) allocated to noncontrolling interests was as follows:

  Net Gain (Loss) Allocated to Noncontrolling Interests
Three Months Ended   Twelve Months Ended
December 31,   September 30,   December 31, December 31,   December 31,
2011 2011 2010 2011 2010

Segment

(dollars in thousands)
Investment Banking (1) $ (2,112 ) $ (1,754 ) $ (2,752 ) $ (5,553 ) $ (4,678 )
Investment Management (1)   (1 )   822     661     2,616     974  
Total $ (2,113 ) $ (932 ) $ (2,091 ) $ (2,937 ) $ (3,704 )
(1) The difference between Adjusted Pro Forma and U.S. GAAP Noncontrolling Interests relates primarily to intangible amortization expense which is eliminated for ETC.

Income Taxes

For the three and twelve months ended December 31, 2011, Evercore’s Adjusted Pro Forma effective tax rate was 32.2% and 38.6%, respectively, compared to 42.0% for the three and twelve months ended December 31, 2010.

For the three and twelve months ended December 31, 2011, Evercore’s U.S. GAAP effective tax rate was approximately (143.2%) and 61.9%, respectively, compared to 46.2% and 44.6% for the three and twelve months ended December 31, 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 $264.2 million at December 31, 2011. Current assets exceed current liabilities by $180.5 million at December 31, 2011. Amounts due related to the Long-Term Notes Payable were $99.7 million at December 31, 2011.

During the quarter the Company repurchased approximately 366,000 shares at an average cost of $27.39 per share.

Dividend

On January 31, 2012, the Board of Directors of Evercore declared a quarterly dividend of $0.20 per share to be paid on March 9, 2012 to common stockholders of record on February 24, 2012.

Conference Call

Investors and analysts may participate in the live conference call by dialing (866) 831-6291 (toll-free domestic) or (617) 213-8860 (international); passcode: 36614063. 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: 55939850. 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, subsequent quarterly reports on Form 10-Q, current reports in Form 8-K and Registration Statements. 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 A-1
Three and Twelve Months Ended December 31, 2011 and 2010  
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 A-6
and Twelve Months ended December 31, 2011 (Unaudited)  
Adjusted Pro Forma Segment Reconciliation to U.S. GAAP for the Three A-7
Months ended September 30, 2011 (Unaudited)  
Adjusted Pro Forma Segment Reconciliation to U.S. GAAP for the Three A-8
and Twelve Months ended December 31, 2010 (Unaudited)  
Notes to Unaudited Condensed Consolidated Adjusted Pro Forma A-9
Financial Data  
 
EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2011 AND 2010
(dollars in thousands, except per share data)
(UNAUDITED)
       
Three Months Ended December 31, Twelve Months Ended December 31,
  2011     2010     2011     2010  
 
Revenues
Investment Banking Revenue $ 92,854 $ 77,137 $ 430,597 $ 301,931
Investment Management Revenue 21,007 25,646 99,161 74,610
Other Revenue   2,895     4,120     13,897     22,205  
Total Revenues 116,756 106,903 543,655 398,746
Interest Expense (1)   3,975     5,451     19,391     22,841  
Net Revenues   112,781     101,452     524,264     375,905  
 
Expenses
Employee Compensation and Benefits 74,880 67,012 357,680 247,737
Occupancy and Equipment Rental 6,730 5,183 23,497 18,081
Professional Fees 8,112 7,699 33,516 28,035
Travel and Related Expenses 7,387 4,771 23,172 16,475
Communications and Information Services 2,755 1,715 8,303 5,664
Depreciation and Amortization 6,864 3,361 17,746 9,921
Special Charges 1,268 - 3,894 -
Acquisition and Transition Costs 1,153 278 3,465 3,399
Other Operating Expenses   4,641     1,775     17,179     9,733  
Total Expenses   113,790     91,794     488,452     339,045  
 

Income (Loss) Before Income (Loss) from Equity Method

Investments and Income Taxes

(1,009 ) 9,658 35,812 36,860
Income (Loss) from Equity Method Investments   255     (116 )   919     (557 )
Income (Loss) Before Income Taxes (754 ) 9,542 36,731 36,303
Provision for Income Taxes   1,080     4,413     22,724     16,177  
Net Income (Loss) from Continuing Operations   (1,834 )   5,129     14,007     20,126  
 
Discontinued Operations
Income (Loss) from Discontinued Operations (1,443 ) (799 ) (4,198 ) (2,618 )
Provision (Benefit) for Income Taxes 61 (41 ) (722 ) (297 )
Net Income (Loss) Attributable to Noncontrolling Interest   (851 )   (526 )   (2,510 )   (1,804 )
Net Income (Loss) from Discontinued Operations   (653 )   (232 )   (966 )   (517 )
 
Net Income (Loss) (2,487 ) 4,897 13,041 19,609
Net Income (Loss) Attributable to Noncontrolling Interest   (1,831 )   1,610     6,089     10,655  
Net Income (Loss) Attributable to Evercore Partners Inc. $ (656 ) $ 3,287   $ 6,952   $ 8,954  
 
Net Income (Loss) Attributable to Evercore
Partners Inc. Common Shareholders:
From Continuing Operations $ (24 ) $ 3,498 $ 7,834 $ 9,397
From Discontinued Operations   (653 )   (232 )   (966 )   (517 )
Net Income (Loss) Attributable to Evercore Partners Inc. $ (677 ) $ 3,266   $ 6,868   $ 8,880  
 
Weighted Average Shares of Class A Common
Stock Outstanding:
Basic 28,609 21,892 26,019 19,655
Diluted 28,609 25,353 29,397 22,968
 

Basic Net Income (Loss) Per Share Attributable to Evercore

Partners Inc. Common Shareholders:

From Continuing Operations $ - $ 0.16 $ 0.30 $ 0.47
From Discontinued Operations   (0.02 )   (0.01 )   (0.04 )   (0.02 )
Net Income Attributable to Evercore Partners Inc. $ (0.02 ) $ 0.15   $ 0.26   $ 0.45  
 

Diluted Net Income (Loss) Per Share Attributable to Evercore

Partners Inc. Common Shareholders:

From Continuing Operations $ - $ 0.14 $ 0.27 $ 0.41
From Discontinued Operations   (0.02 )   (0.01 )   (0.04 )   (0.02 )
Net Income (Loss) Attributable to Evercore Partners Inc. $ (0.02 ) $ 0.13   $ 0.23   $ 0.39  

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, 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 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 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 other professional fees in connection with the Lexicon acquisition.

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 Twelve Months Ended

December 31,

September 30,

December 31,

December 31,

December 31,

 

2011

   

2011

    2010     2011    

2010

 
Net Revenues - U.S. GAAP (a) $ 112,781 $ 163,181 $ 101,452 $ 524,264 $ 375,905
Client Related Expenses (1) (3,380 ) (2,235 ) (1,652 ) (12,648 ) (10,098 )
Income (Loss) from Equity Method Investments (2) 255 195 (116 ) 919 (557 )
Interest Expense on Long-term Debt (3)   1,968     1,953     1,938     7,817     7,694  
Net Revenues - Adjusted Pro Forma (a) $ 111,624   $ 163,094   $ 101,622   $ 520,352   $ 372,944  
 
Compensation Expense - U.S. GAAP (a) $ 74,880 $ 113,634 $ 67,012 $ 357,680 $ 247,737
Amortization of LP Units and Certain Other Awards (4) (5,961 ) (5,126 ) (5,134 ) (23,707 ) (20,821 )
IPO Related Restricted Stock Unit Awards (5) - - - (11,389 ) -
Acquisition Related Compensation Charges (6)   (6,889 )   (7,729 )   -     (14,618 )   -  
Compensation Expense - Adjusted Pro Forma (a) $ 62,030   $ 100,779   $ 61,878   $ 307,966   $ 226,916  
 
Operating Income (Loss) - U.S. GAAP (a) $ (1,009 ) $ 13,442 $ 9,658 $ 35,812 $ 36,860
Income (Loss) from Equity Method Investments (2)   255     195     (116 )   919     (557 )
Pre-Tax Income (Loss) - U.S. GAAP (a) (754 ) 13,637 9,542 36,731 36,303
Amortization of LP Units and Certain Other Awards (4) 6,279 5,321 5,134 24,220 20,821
IPO Related Restricted Stock Unit Awards (5) - - - 11,389 -
Acquisition Related Compensation Charges (6) 6,889 7,729 - 14,618 -
Special Charges (7) 1,268 2,626 - 3,894 -
Intangible Asset Amortization (8)   3,955     2,117     552     7,176     2,208  
Pre-Tax Income - Adjusted Pro Forma (a) 17,637 31,430 15,228 98,028 59,332
Interest Expense on Long-term Debt (3)   1,968     1,953     1,938     7,817     7,694  
Operating Income - Adjusted Pro Forma (a) $ 19,605   $ 33,383   $ 17,166   $ 105,845   $ 67,026  
 
Provision for Income Taxes - U.S. GAAP (a) $ 1,080 $ 11,144 $ 4,413 $ 22,724 $ 16,177
Income Taxes (9)   4,603     1,426     1,982     15,112     8,737  
Provision for Income Taxes - Adjusted Pro Forma (a) $ 5,683   $ 12,570   $ 6,395   $ 37,836   $ 24,914  
 
Net Income (Loss) from Continuing Operations (a) $ (1,834 ) $ 2,493 $ 5,129 $ 14,007 $ 20,126
Net Income (Loss) Attributable to Noncontrolling Interest (a)   (1,831 )   536     1,610     6,089     10,655  

Net Income (Loss) from Continuing Operations Attributable to Evercore

Partners Inc. - U.S. GAAP (a)

(3 ) 1,957 3,519 7,918 9,471
Amortization of LP Units and Certain Other Awards (4) 6,279 5,321 5,134 24,220 20,821
IPO Related Restricted Stock Unit Awards (5) - - - 11,389 -
Acquisition Related Compensation Charges (6) 6,889 7,729 - 14,618 -
Special Charges (7) 1,268 2,626 - 3,894 -
Intangible Asset Amortization (8) 3,955 2,117 552 7,176 2,208
Income Taxes (9) (4,603 ) (1,426 ) (1,982 ) (15,112 ) (8,737 )
Noncontrolling Interest (10)   282     1,468     3,701     9,026     14,359  

Net Income from Continuing Operations Attributable to Evercore Partners Inc. -

Adjusted Pro Forma (a) $ 14,067   $ 19,792   $ 10,924   $ 63,129   $ 38,122  
 
Diluted Shares Outstanding - U.S. GAAP 28,609 31,235 25,353 29,397 22,968
Warrants (11) 844 - - - -
Vested Partnership Units (11) 6,475 6,444 9,795 7,918 11,914
Unvested Partnership Units (11) 4,389 4,447 4,540 4,473 4,540
Unvested Restricted Stock Units - Event Based (11) 12 12 633 276 633
Acquisition Related Share Issuance (6) 2,018 815 - 569 -
Unvested Restricted Stock - Service Based (11)   1,552     -     -     -     -  
Diluted Shares Outstanding - Adjusted Pro Forma   43,899     42,953     40,321     42,633     40,055  
 

Key Metrics: (b)

Diluted Earnings Per Share from Continuing Operations - U.S. GAAP (c) $ (0.00 ) $ 0.06 $ 0.14 $ 0.27 $ 0.41
Diluted Earnings Per Share from Continuing Operations - Adjusted Pro Forma (c) $ 0.32 $ 0.46 $ 0.27 $ 1.48 $ 0.95
 
Compensation Ratio - U.S. GAAP 66 % 70 % 66 % 68 % 66 %
Compensation Ratio - Adjusted Pro Forma 56 % 62 % 61 % 59 % 61 %
 
Operating Margin - U.S. GAAP -1 % 8 % 10 % 7 % 10 %
Operating Margin - Adjusted Pro Forma 18 % 20 % 17 % 20 % 18 %
 
Effective Tax Rate - U.S. GAAP -143 % 82 % 46 % 62 % 45 %
Effective Tax Rate - Adjusted Pro Forma 32 % 40 % 42 % 39 % 42 %
(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 December 31, 2011, September 30, 2011 and December 31, 2010, respectively, and $84 and $74 of accretion for the twelve months ended December 31, 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
December 31,  

September 30,

 

December 31,

  2011    

2011

   

2010

 
Net Revenues - U.S. GAAP $ 524,264 $ 512,935 $ 375,905
Client Related Expenses (1) (12,648 ) (10,920 ) (10,098 )
Income (Loss) from Equity Method Investments (2) 919 548 (557 )
Interest Expense on Long-term Debt (3)   7,817     7,787     7,694  
Net Revenues - Adjusted Pro Forma $ 520,352   $ 510,350   $ 372,944  
 
Compensation Expense - U.S. GAAP $ 357,680 $ 349,812 $ 247,737
Amortization of LP Units and Certain Other Awards (4) (23,707 ) (22,880 ) (20,821 )
IPO Related Restricted Stock Unit Awards (5) (11,389 ) (11,389 ) -
Acquisition Related Compensation Charges (6)   (14,618 )   (7,729 )   -  
Compensation Expense - Adjusted Pro Forma $ 307,966   $ 307,814   $ 226,916  
 
Compensation Ratio - U.S. GAAP (a) 68 % 68 % 66 %
Compensation Ratio - Adjusted Pro Forma (a) 59 % 60 % 61 %
 
Investment Banking
Twelve Months Ended
December 31,

September 30,

December 31,

  2011    

2011

   

2010

 
Net Revenues - U.S. GAAP $ 428,124 $ 412,068 $ 301,847
Client Related Expenses (1) (12,044 ) (10,246 ) (9,946 )
Income from Equity Method Investments (2) 1,101 1,188 16
Interest Expense on Long-term Debt (3)   4,238     4,221     4,169  
Net Revenues - Adjusted Pro Forma $ 421,419   $ 407,231   $ 296,086  
 
Compensation Expense - U.S. GAAP $ 294,070 $ 284,752 $ 195,908
Amortization of LP Units and Certain Other Awards (4) (20,815 ) (19,790 ) (17,532 )
IPO Related Restricted Stock Unit Awards (5) (8,906 ) (8,906 ) -
Acquisition Related Compensation Charges (6)   (14,618 )   (7,729 )   -  
Compensation Expense - Adjusted Pro Forma $ 249,731   $ 248,327   $ 178,376  
 
Compensation Ratio - U.S. GAAP (a) 69 % 69 % 65 %
Compensation Ratio - Adjusted Pro Forma (a) 59 % 61 % 60 %
(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 TWELVE MONTHS ENDED DECEMBER 31, 2011
(dollars in thousands)
(UNAUDITED)
       
Investment Banking Segment
Three Months Ended December 31, 2011 Twelve Months Ended December 31, 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

$ 89,485 $ 3,369 (1)(2) $ 92,854 $ 419,654 $ 10,943 (1)(2) $ 430,597
Other Revenue, net   816     (1,067 ) (3)   (251 )   1,765     (4,238 ) (3)   (2,473 )
Net Revenues   90,301     2,302     92,603     421,419     6,705     428,124  
 
Expenses:

Employee Compensation

and Benefits 49,008 12,296 (4)(5)(6) 61,304 249,731 44,339 (4)(5)(6) 294,070
Non-compensation Costs 22,543 7,489 (4)(8) 30,032 76,111 19,402 (4)(8) 95,513
Special Charges   -     1,268  

(7)

  1,268     -     3,894   (7)   3,894  
Total Expenses   71,551     21,053     92,604     325,842     67,635     393,477  
 

Operating Income (Loss)

from Continuing

Operations $ 18,750   $ (18,751 ) $ (1 ) $ 95,577   $ (60,930 ) $ 34,647  
 
Compensation Ratio (a) 54 % 66 % 59 % 69 %
Operating Margin (a) 21 % (0 %) 23 % 8 %
 
Investment Management Segment
Three Months Ended December 31, 2011 Twelve Months Ended December 31, 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 $ 21,251 $ (244 ) (1)(2) $ 21,007 $ 98,375 $ 786 (1)(2) $ 99,161
Other Revenue, net   72     (901 ) (3)   (829 )   558     (3,579 ) (3)   (3,021 )
Net Revenues   21,323     (1,145 )   20,178     98,933     (2,793 )   96,140  
 
Expenses:

Employee Compensation

and Benefits 13,022 554 (4)(5) 13,576 58,235 5,375 (4)(5) 63,610
Non-compensation Costs   7,446     164   (8)   7,610     30,430     935   (8)   31,365  
Total Expenses   20,468     718     21,186     88,665     6,310     94,975  
 

Operating Income (Loss)

from Continuing

Operations $ 855   $ (1,863 ) $ (1,008 ) $ 10,268   $ (9,103 ) $ 1,165  
 
Compensation Ratio (a) 61 % 67 % 59 % 66 %
Operating Margin (a) 4 % (5 %) 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 SEPTEMBER 30, 2011
(dollars in thousands)
(UNAUDITED)
   
Investment Banking Segment
Three Months Ended September 30, 2011

Non-GAAP

Adjusted Pro

U.S. GAAP

Forma Basis

Adjustments Basis
Net Revenues:

Investment Banking

Revenue $ 138,121 $ 1,874 (1)(2) $ 139,995
Other Revenue, net   230     (1,059 ) (3)   (829 )
Net Revenues   138,351     815     139,166  
 
Expenses:

Employee Compensation

and Benefits 85,945 12,114 (4)(5)(6) 98,059
Non-compensation Costs 21,301 4,359 (4)(8) 25,660
Special Charges   -     2,626   (7)   2,626  
Total Expenses   107,246     19,099     126,345  
 

Operating Income from

Continuing Operations

$ 31,105   $ (18,284 ) $ 12,821  
 
Compensation Ratio (a) 62 % 70 %
Operating Margin (a) 22 % 9 %
 
Investment Management Segment
Three Months Ended September 30, 2011

Non-GAAP

Adjusted Pro

U.S. GAAP

Forma Basis

Adjustments Basis
Net Revenues:

Investment Management

Revenue $ 24,557 $ 166 (1)(2) $ 24,723
Other Revenue, net   186     (894 ) (3)   (708 )
Net Revenues   24,743     (728 )   24,015  
 
Expenses:

Employee Compensation

and Benefits 14,834 741 (4)(5) 15,575
Non-compensation Costs   7,631     188   (8)   7,819  
Total Expenses   22,465     929     23,394  
 

Operating Income from

Continuing Operations

$ 2,278   $ (1,657 ) $ 621  
 
Compensation Ratio (a) 60 % 65 %
Operating Margin (a) 9 % 3 %
(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 TWELVE MONTHS ENDED DECEMBER 31, 2010
(dollars in thousands)
(UNAUDITED)
       
Investment Banking Segment
Three Months Ended December 31, 2010 Twelve Months Ended December 31, 2010

 

 

Non-GAAP

U.S.

Non-GAAP

Adjusted Pro

GAAP

Adjusted Pro

U.S. GAAP

Forma Basis

Adjustments Basis

Forma Basis

Adjustments Basis
Net Revenues:

Investment Banking

Revenue $ 75,653 $ 1,484 (1)(2) $ 77,137 $ 292,001 $ 9,930 (1)(2) $ 301,931
Other Revenue, net   460     (1,050 ) (3)   (590 )   4,085     (4,169 ) (3)   (84 )
Net Revenues   76,113     434     76,547     296,086     5,761     301,847  
 
Expenses:

Employee Compensation

and Benefits 47,604 4,382 (4) 51,986 178,376 17,532 (4) 195,908
Non-compensation Costs   14,563     1,969   (8)   16,532     51,990     11,822   (8)   63,812  
Total Expenses   62,167     6,351     68,518     230,366     29,354     259,720  
 

Operating Income from

Continuing Operations

$ 13,946   $ (5,917 ) $ 8,029   $ 65,720   $ (23,593 ) $ 42,127  
 
Compensation Ratio (a) 63 % 68 % 60 % 65 %
Operating Margin (a) 18 % 10 % 22 % 14 %
 
Investment Management Segment
Three Months Ended December 31, 2010 Twelve Months Ended December 31, 2010

 

 

Non-GAAP

U.S.

Non-GAAP

Adjusted Pro

GAAP

Adjusted Pro

U.S. GAAP

Forma Basis

Adjustments Basis

Forma Basis

Adjustments Basis
Net Revenues:

Investment Management

Revenue $ 25,362 $ 284 (1)(2) $ 25,646 $ 73,885 $ 725 (1)(2) $ 74,610
Other Revenue, net   147     (888 ) (3)   (741 )   2,973     (3,525 ) (3)   (552 )
Net Revenues   25,509     (604 )   24,905     76,858     (2,800 )   74,058  
 
Expenses:

Employee Compensation

and Benefits 14,274 752 (4) 15,026 48,540 3,289 (4) 51,829
Non-compensation Costs   8,015     235   (8)   8,250     27,012     484   (8)   27,496  
Total Expenses   22,289     987     23,276     75,552     3,773     79,325  
 

Operating Income (Loss)

from Continuing

Operations $ 3,220   $ (1,591 ) $ 1,629   $ 1,306   $ (6,573 ) $ (5,267 )
 
Compensation Ratio (a) 56 % 60 % 63 % 70 %
Operating Margin (a) 13 % 7 % 2 % (7 %)
(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.
(8) Non-compensation Costs on an Adjusted Pro Forma basis reflect the following adjustments;
  Three Months Ended December 31, 2011
Investment   Investment   Total  

 

  U.S.
Banking Management Segments

Adjustments

GAAP
Occupancy and Equipment Rental $ 5,389 $ 1,341 $ 6,730 $ - $ 6,730
Professional Fees 5,003 1,460 6,463 1,649 (1) 8,112
Travel and Related Expenses 5,379 594 5,973 1,414 (1) 7,387
Communications and Information Services 2,232 483 2,715 40 (1) 2,755
Depreciation and Amortization 1,265 1,644 2,909 3,955 (8a) 6,864
Acquisition and Transition Costs 225 928 1,153 - 1,153
Other Operating Expenses   3,050   996   4,046   595 (1)   4,641

Total Non-compensation Costs from

Continuing Operations

$ 22,543 $ 7,446 $ 29,989 $ 7,653 $ 37,642
 
Three Months Ended September 30, 2011
Investment Investment Total U.S.
Banking Management Segments Adjustments 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
 
Three Months Ended December 31, 2010
Investment Investment Total U.S.
Banking Management Segments Adjustments GAAP
Occupancy and Equipment Rental $ 3,705 $ 1,478 $ 5,183 $ - $ 5,183
Professional Fees 4,546 2,329 6,875 824 (1) 7,699
Travel and Related Expenses 3,541 558 4,099 672 (1) 4,771
Communications and Information Services 1,228 446 1,674 41 (1) 1,715
Depreciation and Amortization 1,094 1,715 2,809 552 (8a) 3,361
Acquisition and Transition Costs 273 5 278 - 278
Other Operating Expenses   176   1,484   1,660   115 (1)   1,775

Total Non-compensation Costs from

Continuing Operations

$ 14,563 $ 8,015 $ 22,578 $ 2,204 $ 24,782
 
Twelve Months Ended December 31, 2011
Investment Investment Total U.S.
Banking Management Segments Adjustments GAAP
Occupancy and Equipment Rental $ 17,135 $ 6,362 $ 23,497 $ - $ 23,497
Professional Fees 19,486 7,931 27,417 6,099 (1) 33,516
Travel and Related Expenses 15,918 2,226 18,144 5,028 (1) 23,172
Communications and Information Services 6,301 1,848 8,149 154 (1) 8,303
Depreciation and Amortization 3,921 6,649 10,570 7,176 (8a) 17,746
Acquisition and Transition Costs 2,192 1,273 3,465 - 3,465
Other Operating Expenses   11,158   4,141   15,299   1,880 (1)   17,179

Total Non-compensation Costs from

Continuing Operations

$ 76,111 $ 30,430 $ 106,541 $ 20,337 $ 126,878
 
Twelve Months Ended December 31, 2010
Investment Investment Total U.S.
Banking Management Segments Adjustments GAAP
Occupancy and Equipment Rental $ 12,832 $ 5,249 $ 18,081 $ - $ 18,081
Professional Fees 14,174 7,861 22,035 6,000 (1) 28,035
Travel and Related Expenses 11,191 1,624 12,815 3,660 (1) 16,475
Communications and Information Services 4,177 1,360 5,537 127 (1) 5,664
Depreciation and Amortization 3,414 4,299 7,713 2,208 (8a) 9,921
Acquisition and Transition Costs 1,456 1,943 3,399 - 3,399
Other Operating Expenses   4,746   4,676   9,422   311 (1)   9,733

Total Non-compensation Costs from

Continuing Operations

$ 51,990 $ 27,012 $ 79,002 $ 12,306 $ 91,308
(8a)   Reflects 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 32% and 39% for the three and twelve months ended December 31, 2011, respectively. 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.

Source: Evercore Partners Inc.

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