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Evercore Reports Second Quarter 2014 Results; Quarterly Dividend of $0.25 Per Share

Highlights

  • Second Quarter Financial Summary
    - U.S. GAAP Net Revenues of $217.7 million, up 5% and 46% compared to Q2 2013 and Q1 2014, respectively
    - U.S. GAAP Net Income from Continuing Operations of $29.7 million, up 35% and 122% compared to Q2 2013 and Q1 2014, respectively, or $0.58 per share, up 32% and 132% compared to Q2 2013 and Q1 2014, respectively
    - Record Adjusted Pro Forma Net Revenues of $217.3 million, up 5% and 46% compared to Q2 2013 and Q1 2014, respectively
    - Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. of $30.7 million, up 4% and 109% compared to Q2 2013 and Q1 2014, respectively, or $0.66 per share, up 2% and 113% compared to Q2 2013 and Q1 2014, respectively
  • Year-to-Date Financial Summary
    - Record U.S. GAAP Net Revenues of $366.8 million, up 2% compared to the same period in 2013
    - U.S. GAAP Net Income from Continuing Operations of $43.1 million, up 37% compared to the same period in 2013, or $0.83 per share, up 36% compared to the same period in 2013
    - Record Adjusted Pro Forma Net Revenues of $366.2 million, up 2% compared to the same period in 2013
    - Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. of $45.4 million, down 2% compared to the same period in 2013, or $0.97 per share, down 4% compared to the same period in 2013
  • Investment Banking
    - In 2014, we continue to advise on many of the largest and most complex transactions:

- The largest European transaction: advising Shire on its $55 billion sale to AbbVie
- The largest defense assignment: advised AstraZeneca relating to Pfizer’s $124 billion unsolicited offer
- The largest U.S. restructuring transaction: advising Energy Future Holdings on its restructuring affecting over $40 billion of debt
- The largest North American real estate follow-on offering: advisor and joint bookrunner on Fibra Uno’s $2.5 billion equity offering
- Advising tw telecom on its $7.3 billion sale to Level 3 Communications
- Advising Dr. B. R. Shetty on the acquisition of Travelex

- Expect to recruit five to six Senior Managing Directors for the year, enhancing our capabilities in the Technology, Media, and Healthcare sectors and extending our Debt Advisory team globally

  • Investment Management
    - Assets Under Management in consolidated businesses were $14.6 billion
  • Returned $113.2 million of capital to shareholders for the first six months, including dividends and repurchases of 1,722,000 shares. Declared quarterly dividend of $0.25 per share

NEW YORK--(BUSINESS WIRE)--Jul. 23, 2014-- Evercore Partners Inc. (NYSE:EVR) today announced that its U.S. GAAP Net Revenues were $217.7 million for the quarter ended June 30, 2014, compared to $206.8 million and $149.1 million for the quarters ended June 30, 2013 and March 31, 2014, respectively. U.S. GAAP Net Revenues were $366.8 million for the six months ended June 30, 2014, compared to $359.4 million for the six months ended June 30, 2013. U.S. GAAP Net Income from Continuing Operations for the second quarter was $29.7 million, or $0.58 per share, compared to $22.1 million, or $0.44 per share, a year ago and $13.4 million, or $0.25 per share, last quarter. U.S. GAAP Net Income from Continuing Operations was $43.1 million, or $0.83 per share, for the six months ended June 30, 2014, compared to $31.3 million, or $0.61 per share, for the same period last year.

Adjusted Pro Forma Net Revenues were a record $217.3 million for the quarter ended June 30, 2014, compared with $206.1 million and $149.0 million for the quarters ended June 30, 2013 and March 31, 2014, respectively. Adjusted Pro Forma Net Revenues were a record $366.2 million for the six months ended June 30, 2014, compared with $359.0 million for the six months ended June 30, 2013. Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $30.7 million, or $0.66 per share, for the second quarter, compared to $29.6 million, or $0.65 per share, a year ago and $14.7 million, or $0.31 per share, last quarter. Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $45.4 million, or $0.97 per share, for the six months ended June 30, 2014, compared to $46.3 million, or $1.01 per share, for the same period last year.

The U.S. GAAP trailing twelve-month compensation ratio of 61.2% compares to 64.5% for the same period in 2013 and 62.4% for the twelve months ended March 31, 2014. The U.S. GAAP compensation ratio for the three months ended June 30, 2014, June 30, 2013 and March 31, 2014 was 59.4%, 63.5% and 61.3%, respectively. The Adjusted Pro Forma compensation ratio for the trailing twelve months was 58.9%, compared to 59.0% for the same period in 2013 and 59.1% for the twelve months ended March 31, 2014. The Adjusted Pro Forma compensation ratio for the current quarter was 58.3%, compared to 58.9% and 59.2% for the quarters ended June 30, 2013 and March 31, 2014, 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.

“We are pleased with our results for the second quarter, as we generated record revenues with a balanced contribution from both our Investment Banking and Investment Management businesses. We continue to realize success in the Advisory marketplace, advising on leading M&A, restructuring, private capital raising and capital markets transactions, as revenues in our Investment Banking business were the second highest in our history. Our Investment Management business continued to grow assets under management, reporting its third highest revenue quarter in our history,” said Ralph Schlosstein, President and Chief Executive Officer. “We continue to invest in our business by adding world-class talent, allowing us to sustain our growth in revenues, earnings and market share, while balancing the cost of these investments on our short and intermediate term operating results. And we continued, in the first six months of 2014, to return our earnings to our shareholders, paying out $20.2 million in dividends and repurchasing 1,722,000 shares, substantially fulfilling in the first six months our commitment to offset the dilution of bonus equity awarded earlier this year.”

“Evercore’s basic strengths were evident in the second quarter,” said Roger Altman, Executive Chairman. “Our brand, our consistently growing talent pool, our globalization and the momentum of certain of our newer businesses were all manifest. And one of our hallmarks, steady recruiting, is on target. We again expect to add five or six new Senior Managing Directors on the Advisory side in 2014.”

 

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

 
        U.S. GAAP
Three Months Ended       % Change vs.       Six Months Ended
June 30,

2014

      March 31,

2014

    June 30,

2013

March 31,

2014

    June 30,

2013

June 30,

2014

      June 30,

2013

      % Change
(dollars in thousands)
Net Revenues $ 217,696 $ 149,113 $ 206,797 46 % 5 % $ 366,809 $ 359,428 2 %
Operating Income $ 43,035 $ 20,714 $ 38,181 108 % 13 % $ 63,749 $ 54,431 17 %
Net Income from Continuing Operations $ 29,686 $ 13,392 $ 22,066 122 % 35 % $ 43,078 $ 31,337 37 %

Diluted Earnings Per Share from

Continuing Operations

$ 0.58 $ 0.25 $ 0.44 132 % 32 % $ 0.83 $ 0.61 36 %
Compensation Ratio 59.4 % 61.3 % 63.5 % 60.2 % 64.9 %
Operating Margin 19.8 % 13.9 % 18.5 % 17.4 % 15.1 %
Adjusted Pro Forma
Three Months Ended % Change vs. Six Months Ended
June 30,

2014

March 31,

2014

June 30,

2013

March 31,

2014

June 30,

2013

June 30,

2014

June 30,

2013

% Change
(dollars in thousands)
Net Revenues $ 217,282 $ 148,958 $ 206,112 46 % 5 % $ 366,240 $ 359,047 2 %
Operating Income $ 51,429 $ 26,388 $ 51,267 95 % % $ 77,817 $ 80,940 (4 %)

Net Income from Continuing

Operations Attributable to Evercore Partners Inc.

$ 30,723 $ 14,726 $ 29,573 109 % 4 % $ 45,449 $ 46,278 (2 %)
Diluted Earnings Per Share from Continuing Operations $ 0.66 $ 0.31 $ 0.65 113 % 2 % $ 0.97 $ 1.01 (4 %)
Compensation Ratio 58.3 % 59.2 % 58.9 % 58.7 % 59.3 %
Operating Margin 23.7 % 17.7 % 24.9 % 21.2 % 22.5 %
 

The U.S. GAAP and Adjusted Pro Forma results present the continuing operations of the Company, which exclude amounts related to Evercore Pan-Asset Capital Management (“Pan”), whose operations were discontinued during the fourth quarter of 2013. 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”), and then those results are 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-11 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

 

Investment Banking

        U.S. GAAP
Three Months Ended     % Change vs.     Six Months Ended
June 30,

2014

    March 31,

2014

    June 30,

2013

March 31,

2014

    June 30,

2013

June 30,

2014

    June 30,

2013

    % Change
(dollars in thousands)
Net Revenues:
Investment Banking Revenues $ 192,251 $ 128,504 $ 183,454 50 % 5 % $ 320,755 $ 314,837 2 %
Other Revenue, net   (928 )   (653 )   (849 ) (42 %) (9 %)   (1,581 )   (636 ) (149 %)
Net Revenues   191,323     127,851     182,605   50 % 5 %   319,174     314,201   2 %
 
Expenses:
Employee Compensation and Benefits 114,622 78,757 117,451 46 % (2 %) 193,379 205,320 (6 %)
Non-compensation Costs   38,366     29,989     30,394   28 % 26 %   68,355     57,446   19 %
Total Expenses   152,988     108,746     147,845   41 % 3 %   261,734     262,766   %
 
Operating Income $ 38,335   $ 19,105   $ 34,760   101 % 10 % $ 57,440   $ 51,435   12 %
 
Compensation Ratio 59.9 % 61.6 % 64.3 % 60.6 % 65.3 %
Operating Margin 20.0 % 14.9 % 19.0 % 18.0 % 16.4 %
        Adjusted Pro Forma
Three Months Ended     % Change vs.     Six Months Ended
June 30,

2014

    March 31,

2014

    June 30,

2013

March 31,

2014

    June 30,

2013

June 30,

2014

    June 30,

2013

    % Change
(dollars in thousands)
Net Revenues:
Investment Banking Revenues $ 188,587 $ 125,667 $ 180,033 50 % 5 % $ 314,254 $ 309,114 2 %
Other Revenue, net   177     532     246   (67 %) (28 %)   709     1,547   (54 %)
Net Revenues   188,764     126,199     180,279   50 % 5 %   314,963     310,661   1 %
 
Expenses:
Employee Compensation and Benefits 112,057 75,543 107,995 48 % 4 % 187,600 186,009 1 %
Non-compensation Costs   32,217     27,462     26,683   17 % 21 %   59,679     51,263   16 %
Total Expenses   144,274     103,005     134,678   40 % 7 %   247,279     237,272   4 %
 
Operating Income $ 44,490   $ 23,194   $ 45,601   92 % (2 %) $ 67,684   $ 73,389   (8 %)
 
Compensation Ratio 59.4 % 59.9 % 59.9 % 59.6 % 59.9 %
Operating Margin 23.6 % 18.4 % 25.3 % 21.5 % 23.6 %
 

For the second quarter, Evercore’s Investment Banking segment reported Net Revenues of $188.8 million, which represents an increase of 5% year-over-year and 50% sequentially. Operating Income of $44.5 million decreased 2% from the second quarter of last year and increased 92% sequentially. Operating Margins were 23.6% in comparison to 25.3% for the second quarter of last year and 18.4% for the first quarter of 2014. For the six months ended June 30, 2014, Investment Banking reported Net Revenues of $315.0 million, an increase of 1% from last year. Year-to-date Operating Income was $67.7 million compared to $73.4 million last year. Year-to-date Operating Margins were 21.5%, compared to 23.6% last year.

Revenues

During the quarter, Investment Banking earned advisory fees from 150 clients (vs. 157 in Q2 2013 and 116 in Q1 2014) and fees in excess of $1 million from 40 transactions (vs. 38 in Q2 2013 and 32 in Q1 2014). For the first six months of the year, Investment Banking earned advisory fees from 215 clients (vs. 214 last year) and fees in excess of $1 million from 72 transactions (vs. 64 last year).

The Institutional Equities business contributed revenues of $11.4 million in the quarter, up 15% and 16%, respectively, in comparison to the first quarter of 2014 and the second quarter of 2013, principally reflecting an increase in underwriting results.

Expenses

Compensation costs were $112.1 million for the second quarter, an increase of 4% year-over-year and 48% sequentially. The trailing twelve-month compensation ratio was 60.2%, up from 59.2% a year ago and down from 60.4% the previous quarter. Evercore’s Investment Banking compensation ratio was 59.4% for the second quarter, down versus the compensation ratio reported for the three months ended June 30, 2013 and March 31, 2014 of 59.9%. Year to-date compensation costs were $187.6 million, an increase of 1% from the prior year.

Non-compensation costs for the current quarter were $32.2 million, up 21% from the same period last year and 17% sequentially. The increase in costs versus the prior year reflects the addition of personnel within the business, increased new business costs associated with higher levels of global transaction activity and higher professional fees associated with a limited number of investment bankers serving under consulting contracts. The ratio of non-compensation costs to net revenue for the current quarter was 17.1%, compared to 14.8% in the same quarter last year and 21.8% in the previous quarter. Year-to-date non-compensation costs were $59.7 million, up 16% from the prior year. The ratio of non-compensation costs to revenue for the six months ended June 30, 2014 was 18.9%, compared to 16.5% last year.

Expenses in the Institutional Equities business were $12.7 million for the second quarter, an increase of 13% from the previous quarter.

 

Investment Management

        U.S. GAAP
Three Months Ended     % Change vs.     Six Months Ended
June 30,

2014

    March 31,

2014

    June 30,

2013

March 31,

2014

    June 30,

2013

June 30,

2014

    June 30,

2013

    % Change
Net Revenues: (dollars in thousands)
Investment Management Revenues $ 26,801 $ 21,915 $ 25,089 22 % 7 % $ 48,716 $ 46,526 5 %
Other Revenue, net   (428 )   (653 )   (897 ) 34 % 52 %   (1,081 )   (1,299 ) 17 %
Net Revenues   26,373     21,262     24,192   24 % 9 %   47,635     45,227   5 %
 
Expenses:
Employee Compensation and Benefits 14,724 12,635 13,926 17 % 6 % 27,359 28,066 (3 %)
Non-compensation Costs   6,949     7,018     6,845   (1 %) 2 %   13,967     14,165   (1 %)
Total Expenses   21,673     19,653     20,771   10 % 4 %   41,326     42,231   (2 %)
 
Operating Income $ 4,700   $ 1,609   $ 3,421   192 % 37 % $ 6,309   $ 2,996   111 %
 
Compensation Ratio 55.8 % 59.4 % 57.6 % 57.4 % 62.1 %
Operating Margin 17.8 % 7.6 % 14.1 % 13.2 % 6.6 %
 
        Adjusted Pro Forma
Three Months Ended     % Change vs.     Six Months Ended
June 30,

2014

    March 31,

2014

    June 30,

2013

March 31,

2014

    June 30,

2013

June 30,

2014

    June 30,

2013

    % Change
Net Revenues: (dollars in thousands)
Investment Management Revenues $ 28,014 $ 22,460 $ 25,806 25 % 9 % $ 50,474 $ 47,842 6 %
Other Revenue, net   504     299     27   69 % NM   803     544   48 %
Net Revenues   28,518     22,759     25,833   25 % 10 %   51,277     48,386   6 %
 
Expenses:
Employee Compensation and Benefits 14,724 12,635 13,412 17 % 10 % 27,359 26,884 2 %
Non-compensation Costs   6,855     6,930     6,755   (1 %) 1 %   13,785     13,951   (1 %)
Total Expenses   21,579     19,565     20,167   10 % 7 %   41,144     40,835   1 %
 
Operating Income $ 6,939   $ 3,194   $ 5,666   117 % 22 % $ 10,133   $ 7,551   34 %
 
Compensation Ratio 51.6 % 55.5 % 51.9 % 53.4 % 55.6 %
Operating Margin 24.3 % 14.0 % 21.9 % 19.8 % 15.6 %
 
Assets Under Management (in millions) (1) $ 14,643 $ 13,880 $ 13,608 5 % 8 % $ 14,643 $ 13,608 8 %
 

(1) Assets Under Management reflect end of period amounts from our consolidated subsidiaries.

For the second quarter, Investment Management reported Net Revenues and Operating Income of $28.5 million and $6.9 million, respectively. Investment Management reported a second quarter Operating Margin of 24.3%. For the six months ended June 30, 2014, InvestmentManagement reported Net Revenues and Operating Income of $51.3 million and $10.1 million,respectively. The year-to-date Operating Margin was 19.8%, compared to 15.6% last year.

As of June 30, 2014, Investment Management reported $14.6 billion of AUM, an increase of 5% from March 31, 2014.

 

Revenues

 
Investment Management Revenue Components
        Adjusted Pro Forma
Three Months Ended     % Change vs.     Six Months Ended
June 30,

2014

    March 31,

2014

    June 30,

2013

March 31,

2014

    June 30,

2013

June 30,

2014

    June 30,

2013

    % Change
Investment Advisory and Management Fees (dollars in thousands)
Wealth Management $ 7,519 $ 7,167 $ 6,565 5 % 15 % $ 14,686 $ 13,114 12 %
Institutional Asset Management (1) 11,491 11,135 11,166 3 % 3 % 22,626 21,539 5 %
Private Equity   2,024   2,025     3,733 % (46 %)   4,049   5,924 (32 %)
Total Investment Advisory and Management Fees   21,034   20,327     21,464 3 % (2 %)   41,361   40,577 2 %
 
Realized and Unrealized Gains (Losses)
Institutional Asset Management 1,732 1,643 1,544 5 % 12 % 3,375 3,349 1 %
Private Equity   4,023   (61 )   2,073 NM 94 %   3,962   2,550 55 %
Total Realized and Unrealized Gains   5,755   1,582     3,617 264 % 59 %   7,337   5,899 24 %
 
Equity in Earnings of Affiliates (2)   1,225   551     725 122 % 69 %   1,776   1,366 30 %
Investment Management Revenues $ 28,014 $ 22,460   $ 25,806 25 % 9 % $ 50,474 $ 47,842 6 %
 

(1) Management fees from Institutional Asset Management were $11.5 million, $11.1 million and $11.2 million for the three months ended June 30, 2014, March 31, 2014 and June 30, 2013, respectively, and $22.6 million and $21.6 million for the six months ended June 30, 2014 and 2013, respectively, on a U.S. GAAP basis, excluding the reduction of revenues for client-related expenses.

(2) Equity in G5 | Evercore - Wealth Management and ABS on a U.S. GAAP basis are reclassified from Investment Management Revenue to Income from Equity Method Investments.

Investment Advisory and Management Fees of $21.0 million for the quarter ended June 30, 2014 decreased compared to the same period a year ago, driven primarily by lower fees in Private Equity, partially offset by higher fees in Wealth Management and Institutional Asset Management. Private Equity fees in the quarter ended June 30, 2013 included $1.4 million of catch-up management fees associated with the final closing of Evercore Mexico Capital Partners III.

Realized and Unrealized Gains of $5.8 million in the quarter increased relative to the prior year; the change relative to the prior period was driven principally by Private Equity gains which by their nature may fluctuate significantly in both timing and amount.

Equity in Earnings of Affiliates of $1.2 million in the quarter increased relative to the prior year and the prior quarter principally as a result of higher income earned in the second quarter of 2014 by ABS and G5 | Evercore.

Expenses

Investment Management’s second quarter expenses were $21.6 million, up 7% compared to the second quarter of 2013 and 10% compared to the previous quarter. Year-to-date Investment Management expenses were $41.1 million, up 1% from a year ago.

Other U.S. GAAP Expenses

Evercore’s Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. for the three and six months ended June 30, 2014 was higher than U.S. GAAP as a result of the exclusion of expenses associated with awards granted in conjunction with the Lexicon acquisition, certain business acquisition-related charges and other professional fees. In addition, for Adjusted Pro Forma purposes, client related expenses 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 six months ended June 30, 2013 and the three months ended March 31, 2014, are included in Annex I, pages A-2 to A-11.

Non-controlling Interests

Non-controlling Interests in certain subsidiaries are owned by the principals and strategic investors in these businesses. Evercore’s equity ownership percentages in these businesses primarily range from 61% to 80%. For the periods ended June 30, 2014, March 31, 2014 and June 30, 2013 the gain (loss) allocated to non-controlling interests was as follows:

 
        Net Gain (Loss) Allocated to Noncontrolling Interests
Three Months Ended       Six Months Ended
June 30,

2014

      March 31,

2014

      June 30,

2013

June 30,

2014

      June 30,

2013

Segment

(dollars in thousands)
Investment Banking (1) $ (667 ) $ (864 ) $ 189 $ (1,531 ) $ 584
Investment Management (1)   1,308     1,417     771   2,725     824
Total $ 641   $ 553   $ 960 $ 1,194   $ 1,408
 

(1) The difference between the above Adjusted Pro Forma and U.S. GAAP Noncontrolling Interests relates primarily to intangible amortization expense for certain acquisitions, and allocations for discontinued operations, which we excluded from the Adjusted Pro Forma results.

We increased our ownership of the Wealth Management business from 51% to 61.5% in the second quarter of 2014.

Income Taxes

For the three and six months ended June 30, 2014, Evercore’s Adjusted Pro Forma effective tax rate was 36.5% and 36.7%, respectively, compared to 38.0% for the three and six months ended June 30, 2013.

For the three and six months ended June 30, 2014, Evercore’s U.S. GAAP effective tax rate was approximately 34.1% and 34.8%, respectively, compared to 43.7% and 44.2% for the three and six months ended June 30, 2013. The effective tax rate for U.S. GAAP purposes for 2014 reflects significant adjustments relating to the tax treatment of non-controlling interest associated with Evercore LP Units, state, local and foreign taxes, and other adjustments. In addition, for 2013, the effective tax rate for U.S. GAAP reflects the tax treatment of compensation transactions related to the vesting of Evercore LP Units, which were fully vested as of December 31, 2013.

Balance Sheet

The Company continues to maintain a strong balance sheet, holding cash, cash equivalents and marketable securities of $229.4 million at June 30, 2014. Current assets exceed current liabilities by $259.0 million at June 30, 2014. Amounts due related to the Long-Term Notes Payable were $104.2 million at June 30, 2014.

Capital Transactions

On July 21, 2014, the Board of Directors of Evercore declared a quarterly dividend of $0.25 per share to be paid on September 12, 2014 to common stockholders of record on August 29, 2014.During the three months ended June 30, 2014 the Company repurchased approximately 572,000 shares at an average cost per share of $54.33, and a total of 1,722,000 shares in the first half of 2014 at an average price of $54.00.

Conference Call

Evercore will host a related conference call beginning at 8:00 a.m. Eastern Time, Wednesday, July 23, 2014, accessible via telephone and the internet. Investors and analysts may participate in the live conference call by dialing (877) 359-9508 (toll-free domestic) or (224) 357-2393 (international); passcode: 75970385. 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 (855) 859-2056 (toll-free domestic) or (404) 537-3406 (international); passcode: 75970385. 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

Evercore 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 equity 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 21 offices in North America, Europe, South America and Asia. 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, 2013, subsequent quarterly reports on Form 10-Q, current reports on 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

Three and Six Months Ended June 30, 2014 and 2013

      A-1
Adjusted Pro Forma:        
Adjusted Pro Forma Results (Unaudited)       A-2
U.S. GAAP Reconciliation to Adjusted Pro Forma (Unaudited)       A-4

U.S. GAAP Segment Reconciliation to Adjusted Pro Forma for the

Three and Six Months ended June 30, 2014 (Unaudited)

      A-6

U.S. GAAP Segment Reconciliation to Adjusted Pro Forma for the

Three Months ended March 31, 2014 (Unaudited)

      A-7

U.S. GAAP Segment Reconciliation to Adjusted Pro Forma for the

Three and Six Months ended June 30, 2013 (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 SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(dollars in thousands, except per share data)
(UNAUDITED)
 
        Three Months Ended June 30,       Six Months Ended June 30,
2014     2013 2014     2013
 
Revenues
Investment Banking Revenue $ 192,251 $ 183,454 $ 320,755 $ 314,837
Investment Management Revenue 26,801 25,089 48,716 46,526
Other Revenue   2,622   1,428     4,691   4,532  
Total Revenues 221,674 209,971 374,162 365,895
Interest Expense (1)   3,978   3,174     7,353   6,467  
Net Revenues   217,696   206,797     366,809   359,428  
 
Expenses
Employee Compensation and Benefits 129,346 131,377 220,738 233,386
Occupancy and Equipment Rental 10,138 8,178 19,622 16,915
Professional Fees 11,988 9,288 20,499 17,133
Travel and Related Expenses 10,098 8,272 17,482 15,450
Communications and Information Services 3,922 3,363 7,295 6,782
Depreciation and Amortization 3,537 3,591 7,358 7,148
Acquisition and Transition Costs 1,016 - 1,116 58
Other Operating Expenses   4,616   4,547     8,950   8,125  
Total Expenses   174,661   168,616     303,060   304,997  
 

Income Before Income from Equity Method Investments and

Income Taxes

43,035 38,181 63,749 54,431
Income from Equity Method Investments   2,038   1,015     2,279   1,771  
Income Before Income Taxes 45,073 39,196 66,028 56,202
Provision for Income Taxes   15,387   17,130     22,950   24,865  
Net Income from Continuing Operations   29,686   22,066     43,078   31,337  
 
Discontinued Operations
Income (Loss) from Discontinued Operations - (119 ) - (1,425 )
Provision (Benefit) for Income Taxes   -   (64 )   -   (477 )
Net Income (Loss) from Discontinued Operations   -   (55 )   -   (948 )
 
Net Income 29,686 22,011 43,078 30,389
Net Income Attributable to Noncontrolling Interest   5,421   5,585     8,245   7,994  
Net Income Attributable to Evercore Partners Inc. $ 24,265 $ 16,426   $ 34,833 $ 22,395  
 

Net Income (Loss) Attributable to Evercore Partners Inc.

Common Shareholders

From Continuing Operations $ 24,265 $ 16,437 $ 34,833 $ 22,894
From Discontinued Operations   -   (32 )   -   (541 )
Net Income Attributable to Evercore Partners Inc. $ 24,265 $ 16,405   $ 34,833 $ 22,353  
 

Weighted Average Shares of Class A Common Stock

Outstanding:

Basic 35,744 31,811 35,208 31,836
Diluted 41,860 37,501 41,781 37,738
 

Basic Net Income (Loss) Per Share Attributable to Evercore

Partners Inc. Common Shareholders:

From Continuing Operations $ 0.68 $ 0.52 $ 0.99 $ 0.72
From Discontinued Operations   -   -     -   (0.02 )
Net Income Attributable to Evercore Partners Inc. $ 0.68 $ 0.52   $ 0.99 $ 0.70  
 

Diluted Net Income (Loss) Per Share Attributable to Evercore

Partners Inc. Common Shareholders:

From Continuing Operations $ 0.58 $ 0.44 $ 0.83 $ 0.61
From Discontinued Operations   -   -     -   (0.02 )
Net Income Attributable to Evercore Partners Inc. $ 0.58 $ 0.44   $ 0.83 $ 0.59  
 

(1) Includes interest expense on long-term debt and interest expense on short-term repurchase agreements.

A -1

Adjusted Pro Forma Results

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

1. Assumed Vesting of Evercore LP Units and Exchange into Class A Shares. The Company incurred expenses, primarily, in Employee Compensation and Benefits, resulting from the modification of Evercore LP Units, which primarily vested over a five-year period ending December 31, 2013. The Adjusted Pro Forma results assume these LP Units have vested and have been exchanged for Class A shares. Accordingly, any expense associated with these units and related awards is excluded from Adjusted Pro Forma results and the noncontrolling interest related to these units is converted to controlling interest. The Company’s Management believes that it is useful to provide the per-share effect associated with the assumed conversion of this previously granted but unvested equity, and thus the Adjusted Pro Forma results reflect the vesting of all unvested Evercore LP partnership units and IPO related restricted stock unit awards.

2. Adjustments Associated with Business Combinations. The following charges 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 acquisition of SFS.

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. GP Investments. Write-off of General Partnership investment balances during the fourth quarter of 2013 associated with the acquisition of Protego.

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

4. Professional Fees. The expense associated with share based awards, which will be settled in Class A Shares and which reflect required adjustments for changes in the Company’s share price due to changes in employment status, is excluded from Adjusted Pro Forma results.

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. In addition, the Adjusted Pro Forma presentation reflects the netting of changes in the Company’s Tax Receivable Agreement against Income Tax Expense.

A-2

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

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

8. Presentation of Income (Loss) from Equity Method Investment in Pan. The Adjusted Pro Forma results from continuing operations exclude the income (loss) from our equity method investment in Pan. The Company’s Management believes this to be a more meaningful presentation.

A -3

 
EVERCORE PARTNERS INC.
U.S. GAAP RECONCILIATION TO ADJUSTED PRO FORMA
(dollars in thousands)
(UNAUDITED)
 
        Three Months Ended     Six Months Ended
June 30,

2014

    March 31,

2014

    June 30,

2013

June 30,

2014

    June 30,

2013

Net Revenues - U.S. GAAP (a) $ 217,696 $ 149,113 $ 206,797 $ 366,809 $ 359,428
Client Related Expenses (1) (4,489 ) (2,533 ) (3,719 ) (7,022 ) (6,233 )
Income from Equity Method Investments (2) 2,038 241 1,015 2,279 1,771
Interest Expense on Long-term Debt (3) 2,037 2,137 2,019 4,174 4,026
Equity Method Investment in Pan (4)   -     -     -     -     55  
Net Revenues - Adjusted Pro Forma (a) $ 217,282   $ 148,958   $ 206,112   $ 366,240   $ 359,047  
 
Compensation Expense - U.S. GAAP (a) $ 129,346 $ 91,392 $ 131,377 $ 220,738 $ 233,386
Amortization of LP Units and Certain Other Awards (6) - - (4,814 ) - (10,391 )
Acquisition Related Compensation Charges (7)   (2,565 )   (3,214 )   (5,156 )   (5,779 )   (10,102 )
Compensation Expense - Adjusted Pro Forma (a) $ 126,781   $ 88,178   $ 121,407   $ 214,959   $ 212,893  
 
Operating Income - U.S. GAAP (a) $ 43,035 $ 20,714 $ 38,181 $ 63,749 $ 54,431
Income from Equity Method Investments (2)   2,038     241     1,015     2,279     1,771  
Pre-Tax Income - U.S. GAAP (a) 45,073 20,955 39,196 66,028 56,202
Equity Method Investment in Pan (4) - - - - 55
Amortization of LP Units and Certain Other Awards (6) - - 4,814 - 10,391
Acquisition Related Compensation Charges (7) 2,565 3,214 5,156 5,779 10,102
Intangible Asset Amortization (8a) 82 82 82 164 164
Professional Fees (8b)   1,672     -     -     1,672     -  
Pre-Tax Income - Adjusted Pro Forma (a) 49,392 24,251 49,248 73,643 76,914
Interest Expense on Long-term Debt (3)   2,037     2,137     2,019     4,174     4,026  
Operating Income - Adjusted Pro Forma (a) $ 51,429   $ 26,388   $ 51,267   $ 77,817   $ 80,940  
 
Provision for Income Taxes - U.S. GAAP (a) $ 15,387 $ 7,563 $ 17,130 $ 22,950 $ 24,865
Income Taxes (9)   2,641     1,409     1,585     4,050     4,363  
Provision for Income Taxes - Adjusted Pro Forma (a) $ 18,028   $ 8,972   $ 18,715   $ 27,000   $ 29,228  
 
Net Income from Continuing Operations- U.S. GAAP (a) $ 29,686 $ 13,392 $ 22,066 $ 43,078 $ 31,337
Net Income Attributable to Noncontrolling Interest (a) (5,421 ) (2,824 ) (5,608 ) (8,245 ) (8,401 )
Equity Method Investment in Pan (4) - - - - 55
Amortization of LP Units and Certain Other Awards (6) - - 4,814 - 10,391
Acquisition Related Compensation Charges (7) 2,565 3,214 5,156 5,779 10,102
Intangible Asset Amortization (8a) 82 82 82 164 164
Professional Fees (8b) 1,672 - - 1,672 -
Adjustment to Tax Receivable Agreement Liability / Income Taxes (9) (2,641 ) (1,409 ) (1,585 ) (4,050 ) (4,363 )
Noncontrolling Interest (10)   4,780     2,271     4,648     7,051     6,993  

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

Adjusted Pro Forma (a)

$ 30,723   $ 14,726   $ 29,573   $ 45,449   $ 46,278  
 
Diluted Shares Outstanding - U.S. GAAP 41,860 41,698 37,501 41,781 37,738
Vested Partnership Units (11a) 4,719 5,085 5,829 4,901 5,925
Unvested Partnership Units (11a) - - 1,441 - 1,441
Unvested Restricted Stock Units - Event Based (11a) 12 12 12 12 12
Acquisition Related Share Issuance (11b)   299     363     626     332     669  
Diluted Shares Outstanding - Adjusted Pro Forma   46,890     47,158     45,409     47,026     45,785  
 

Key Metrics: (b)

Diluted Earnings Per Share from Continuing Operations- U.S. GAAP (c) $ 0.58 $ 0.25 $ 0.44 $ 0.83 $ 0.61
Diluted Earnings Per Share from Continuing Operations- Adjusted Pro Forma (c) $ 0.66 $ 0.31 $ 0.65 $ 0.97 $ 1.01
 
Compensation Ratio - U.S. GAAP 59.4 % 61.3 % 63.5 % 60.2 % 64.9 %
Compensation Ratio - Adjusted Pro Forma 58.3 % 59.2 % 58.9 % 58.7 % 59.3 %
 
Operating Margin - U.S. GAAP 19.8 % 13.9 % 18.5 % 17.4 % 15.1 %
Operating Margin - Adjusted Pro Forma 23.7 % 17.7 % 24.9 % 21.2 % 22.5 %
 
Effective Tax Rate - U.S. GAAP 34.1 % 36.1 % 43.7 % 34.8 % 44.2 %
Effective Tax Rate - Adjusted Pro Forma 36.5 % 37.0 % 38.0 % 36.7 % 38.0 %
 

(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 and $42 of accretion for the three and six months ended June 30, 2013, respectively, related to the Company's noncontrolling interest in Trilantic Capital Partners.

A-4

 
EVERCORE PARTNERS INC.
U.S. GAAP RECONCILIATION TO ADJUSTED PRO FORMA
TRAILING TWELVE MONTHS
(dollars in thousands)
(UNAUDITED)
        Consolidated
Twelve Months Ended
June 30,

2014

    March 31,

2014

    June 30,

2013

Net Revenues - U.S. GAAP $ 772,809 $ 761,910 $ 726,506
Client Related Expenses (1) (16,088 ) (15,318 ) (17,780 )
Income from Equity Method Investments (2) 8,834 7,811 3,519
Interest Expense on Long-term Debt (3) 8,236 8,218 8,023
Equity Method Investment in Pan (4) - - 177
General Partnership Investments (5) 385 385 -
Adjustment to Tax Receivable Agreement Liability (9)   (6,905 )   (6,905 )   -  
Net Revenues - Adjusted Pro Forma $ 767,271   $ 756,101   $ 720,445  
 
Compensation Expense - U.S. GAAP $ 473,146 $ 475,177 $ 468,784
Amortization of LP Units and Certain Other Awards (6) (9,635 ) (14,449 ) (21,310 )
Acquisition Related Compensation Charges (7)   (11,600 )   (14,191 )   (22,268 )
Compensation Expense - Adjusted Pro Forma $ 451,911   $ 446,537   $ 425,206  
 
Compensation Ratio - U.S. GAAP (a) 61.2 % 62.4 % 64.5 %
Compensation Ratio - Adjusted Pro Forma (a) 58.9 % 59.1 % 59.0 %
 
Investment Banking
Twelve Months Ended
June 30,

2014

March 31,

2014

June 30,

2013

Net Revenues - U.S. GAAP $ 675,758 $ 667,040 $ 642,471
Client Related Expenses (1) (16,048 ) (15,282 ) (17,435 )
Income from Equity Method Investments (2) 2,949 2,426 1,123
Interest Expense on Long-term Debt (3) 4,493 4,483 4,350
Adjustment to Tax Receivable Agreement Liability (9)   (5,524 )   (5,524 )   -  
Net Revenues - Adjusted Pro Forma $ 661,628   $ 653,143   $ 630,509  
 
Compensation Expense - U.S. GAAP $ 418,573 $ 421,402 $ 414,687
Amortization of LP Units and Certain Other Awards (6) (8,608 ) (12,908 ) (18,878 )
Acquisition Related Compensation Charges (7)   (11,600 )   (14,191 )   (22,268 )
Compensation Expense - Adjusted Pro Forma $ 398,365   $ 394,303   $ 373,541  
 
Compensation Ratio - U.S. GAAP (a) 61.9 % 63.2 % 64.5 %
Compensation Ratio - Adjusted Pro Forma (a) 60.2 % 60.4 % 59.2 %
 

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

A-5

 
EVERCORE PARTNERS INC.
U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED PRO FORMA
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014
(dollars in thousands)
(UNAUDITED)
 
        Investment Banking Segment
Three Months Ended June 30, 2014       Six Months Ended June 30, 2014
U.S. GAAP Basis     Adjustments    

Non-GAAP

Adjusted Pro

Forma Basis

  U.S. GAAP Basis     Adjustments    

Non-GAAP

Adjusted Pro

Forma Basis

Net Revenues:  
Investment Banking Revenue $ 192,251 $ (3,664 ) (1)(2) $ 188,587 $ 320,755 $ (6,501 ) (1)(2) $ 314,254
Other Revenue, net   (928 )   1,105   (3)   177     (1,581 )   2,290   (3)   709  
Net Revenues   191,323     (2,559 )   188,764     319,174     (4,211 )   314,963  
 
Expenses:
Employee Compensation and Benefits 114,622 (2,565 ) (7) 112,057 193,379 (5,779 ) (7) 187,600
Non-compensation Costs   38,366     (6,149 ) (8)   32,217     68,355     (8,676 ) (8)   59,679  
Total Expenses   152,988     (8,714 )   144,274     261,734     (14,455 )   247,279  
 
Operating Income (a) $ 38,335   $ 6,155   $ 44,490   $ 57,440   $ 10,244   $ 67,684  
 
Compensation Ratio (b) 59.9 % 59.4 % 60.6 % 59.6 %
Operating Margin (b) 20.0 % 23.6 % 18.0 % 21.5 %
 
Investment Management Segment
Three Months Ended June 30, 2014 Six Months Ended June 30, 2014
U.S. GAAP Basis Adjustments

Non-GAAP

Adjusted Pro

Forma Basis

  U.S. GAAP Basis Adjustments

Non-GAAP

Adjusted Pro

Forma Basis

Net Revenues:
Investment Management Revenue $ 26,801 $ 1,213 (1)(2) $ 28,014 $ 48,716 $ 1,758 (1)(2) $ 50,474
Other Revenue, net   (428 )   932   (3)   504     (1,081 )   1,884   (3)   803  
Net Revenues   26,373     2,145     28,518     47,635     3,642     51,277  
 
Expenses:
Employee Compensation and Benefits 14,724 - 14,724 27,359 - 27,359
Non-compensation Costs   6,949     (94 ) (8)   6,855     13,967     (182 ) (8)   13,785  
Total Expenses   21,673     (94 )   21,579     41,326     (182 )   41,144  
 
Operating Income (a) $ 4,700   $ 2,239   $ 6,939   $ 6,309   $ 3,824   $ 10,133  
 
Compensation Ratio (b) 55.8 % 51.6 % 57.4 % 53.4 %
Operating Margin (b) 17.8 % 24.3 % 13.2 % 19.8 %
 

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

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

A-6

 
EVERCORE PARTNERS INC.
U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED PRO FORMA
FOR THE THREE MONTHS ENDED MARCH 31, 2014
(dollars in thousands)
(UNAUDITED)
 
        Investment Banking Segment
Three Months Ended March 31, 2014
U.S. GAAP Basis     Adjustments    

Non-GAAP

Adjusted Pro

Forma Basis

Net Revenues:
Investment Banking Revenue $ 128,504 $ (2,837 ) (1)(2) $ 125,667
Other Revenue, net   (653 )   1,185   (3)   532  
Net Revenues   127,851     (1,652 )   126,199  
 
Expenses:
Employee Compensation and Benefits 78,757 (3,214 ) (7) 75,543
Non-compensation Costs   29,989     (2,527 ) (8)   27,462  
Total Expenses   108,746     (5,741 )   103,005  
 
Operating Income (a) $ 19,105   $ 4,089   $ 23,194  
 
Compensation Ratio (b) 61.6 % 59.9 %
Operating Margin (b) 14.9 % 18.4 %
 
Investment Management Segment
Three Months Ended March 31, 2014
U.S. GAAP Basis Adjustments

Non-GAAP

Adjusted Pro

Forma Basis

Net Revenues:
Investment Management Revenue $ 21,915 $ 545 (1)(2) $ 22,460
Other Revenue, net   (653 )   952   (3)   299  
Net Revenues   21,262     1,497     22,759  
 
Expenses:
Employee Compensation and Benefits 12,635 - 12,635
Non-compensation Costs   7,018     (88 ) (8)   6,930  
Total Expenses   19,653     (88 )   19,565  
 
Operating Income (a) $ 1,609   $ 1,585   $ 3,194  
 
Compensation Ratio (b) 59.4 % 55.5 %
Operating Margin (b) 7.6 % 14.0 %
 

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

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

A-7

 
EVERCORE PARTNERS INC.
U.S. GAAP SEGMENT RECONCILIATION TO ADJUSTED PRO FORMA
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013
(dollars in thousands)
(UNAUDITED)
 
        Investment Banking Segment
Three Months Ended June 30, 2013       Six Months Ended June 30, 2013
U.S. GAAP Basis     Adjustments    

Non-GAAP

Adjusted Pro

Forma Basis

  U.S. GAAP Basis     Adjustments    

Non-GAAP

Adjusted Pro

Forma Basis

Net Revenues:
Investment Banking Revenue $ 183,454 $ (3,421 ) (1)(2) $ 180,033 $ 314,837 $ (5,723 ) (1)(2) $ 309,114
Other Revenue, net   (849 )   1,095   (3)   246     (636 )   2,183   (3)   1,547  
Net Revenues   182,605     (2,326 )   180,279     314,201     (3,540 )   310,661  
 
Expenses:
Employee Compensation and Benefits 117,451 (9,456 ) (6)(7) 107,995 205,320 (19,311 ) (6)(7) 186,009
Non-compensation Costs   30,394     (3,711 ) (6)(8)   26,683     57,446     (6,183 ) (6)(8)   51,263  
Total Expenses   147,845     (13,167 )   134,678     262,766     (25,494 )   237,272  
 
Operating Income (a) $ 34,760   $ 10,841   $ 45,601   $ 51,435   $ 21,954   $ 73,389  
 
Compensation Ratio (b) 64.3 % 59.9 % 65.3 % 59.9 %
Operating Margin (b) 19.0 % 25.3 % 16.4 % 23.6 %
 
Investment Management Segment
Three Months Ended June 30, 2013 Six Months Ended June 30, 2013
U.S. GAAP Basis Adjustments

Non-GAAP

Adjusted Pro

Forma Basis

  U.S. GAAP Basis Adjustments

Non-GAAP

Adjusted Pro

Forma Basis

Net Revenues:
Investment Management Revenue $ 25,089 $ 717 (1)(2) $ 25,806 $ 46,526 $ 1,316 (1)(2)(4) $ 47,842
Other Revenue, net   (897 )   924   (3)   27     (1,299 )   1,843   (3)   544  
Net Revenues   24,192     1,641     25,833     45,227     3,159     48,386  
 
Expenses:
Employee Compensation and Benefits 13,926 (514 ) (6) 13,412 28,066 (1,182 ) (6) 26,884
Non-compensation Costs   6,845     (90 ) (8)   6,755     14,165     (214 ) (8)   13,951  
Total Expenses   20,771     (604 )   20,167     42,231     (1,396 )   40,835  
 
Operating Income (a) $ 3,421   $ 2,245   $ 5,666   $ 2,996   $ 4,555   $ 7,551  
 
Compensation Ratio (b) 57.6 % 51.9 % 62.1 % 55.6 %
Operating Margin (b) 14.1 % 21.9 % 6.6 % 15.6 %
 

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

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

A-8

Notes to Unaudited Condensed Consolidated Adjusted Pro Forma Financial Data

For further information on these Adjusted Pro Forma adjustments, see page A-2.

   
(1) Client related expenses and provisions for uncollected receivables have been reclassified as a reduction of revenue in the Adjusted Pro Forma presentation.
 
(2) Income (Loss) from Equity Method Investments has been reclassified to Revenue in the Adjusted Pro Forma presentation.
 
(3) Interest Expense on Long-term Debt is excluded from the Adjusted Pro Forma Investment Banking and Investment Management segment results and is included in Interest Expense in the segment results on a U.S. GAAP Basis.
 
(4) The Adjusted Pro Forma results from continuing operations exclude the Income (Loss) from our equity method investment in Pan.
 
(5) Write-off of General Partnership investment balances during the fourth quarter of 2013 associated with the acquisition of Protego.
 
(6) Expenses incurred from the modification of Evercore LP Units and related awards, which primarily vested over a five-year period ending December 31, 2013, are excluded from the Adjusted Pro Forma presentation.
 
(7) Expenses for deferred share-based and cash consideration and retention awards associated with the acquisition of Lexicon, as well as base salary adjustments for Lexicon employees for the period preceding the acquisition, are excluded from the Adjusted Pro Forma presentation.
 
(8) Non-compensation Costs on an Adjusted Pro Forma basis reflect the following adjustments:
 

A-9

 
        Three Months Ended June 30, 2014
U.S. GAAP       Adjustments    

Total Segments

   

Investment

Banking

   

Investment

Management

Occupancy and Equipment Rental $ 10,138 $ - $ 10,138 $ 8,437 $ 1,701
Professional Fees 11,988 (3,273 ) (1)(8b) 8,715 6,981 1,734
Travel and Related Expenses 10,098 (2,736 ) (1) 7,362 6,761 601
Communications and Information Services 3,922 (5 ) (1) 3,917 3,389 528
Depreciation and Amortization 3,537 (82 ) (8a) 3,455 1,960 1,495
Acquisition and Transition Costs 1,016 - 1,016 1,016 -
Other Operating Expenses   4,616   (147 ) (1)   4,469   3,673   796

Total Non-compensation Costs from

Continuing Operations

$ 45,315 $ (6,243 ) $ 39,072 $ 32,217 $ 6,855
 
Three Months Ended March 31, 2014
U.S. GAAP Adjustments

Total Segments

Investment

Banking

Investment

Management

Occupancy and Equipment Rental $ 9,484 $ - $ 9,484 $ 7,911 $ 1,573
Professional Fees 8,511 (754 ) (1) 7,757 5,893 1,864
Travel and Related Expenses 7,384 (1,663 ) (1) 5,721 5,111 610
Communications and Information Services 3,373 (5 ) (1) 3,368 2,976 392
Depreciation and Amortization 3,821 (82 ) (8a) 3,739 1,963 1,776
Acquisition and Transition Costs 100 - 100 100 -
Other Operating Expenses   4,334   (111 ) (1)   4,223   3,508   715

Total Non-compensation Costs from

Continuing Operations

$ 37,007 $ (2,615 ) $ 34,392 $ 27,462 $ 6,930
 
Three Months Ended June 30, 2013
U.S. GAAP Adjustments

Total Segments

Investment

Banking

Investment

Management

Occupancy and Equipment Rental $ 8,178 $ - $ 8,178 $ 6,636 $ 1,542
Professional Fees 9,288 (1,948 ) (1) 7,340 5,738 1,602
Travel and Related Expenses 8,272 (1,596 ) (1) 6,676 6,090 586
Communications and Information Services 3,363 (9 ) (1) 3,354 2,930 424
Depreciation and Amortization 3,591 (82 ) (8a) 3,509 1,712 1,797
Other Operating Expenses   4,547   (166 ) (1)   4,381   3,577   804

Total Non-compensation Costs from

Continuing Operations

$ 37,239 $ (3,801 ) $ 33,438 $ 26,683 $ 6,755
 
Six Months Ended June 30, 2014
U.S. GAAP Adjustments

Total Segments

Investment

Banking

Investment

Management

Occupancy and Equipment Rental $ 19,622 $ - $ 19,622 $ 16,348 $ 3,274
Professional Fees 20,499 (4,027 ) (1)(8b) 16,472 12,874 3,598
Travel and Related Expenses 17,482 (4,399 ) (1) 13,083 11,872 1,211
Communications and Information Services 7,295 (10 ) (1) 7,285 6,365 920
Depreciation and Amortization 7,358 (164 ) (8a) 7,194 3,923 3,271
Acquisition and Transition Costs 1,116 - 1,116 1,116 -
Other Operating Expenses   8,950   (258 ) (1)   8,692   7,181   1,511

Total Non-compensation Costs from

Continuing Operations

$ 82,322 $ (8,858 ) $ 73,464 $ 59,679 $ 13,785
 
Six Months Ended June 30, 2013
U.S. GAAP Adjustments

Total Segments

Investment

Banking

Investment

Management

Occupancy and Equipment Rental $ 16,915 $ - $ 16,915 $ 13,724 $ 3,191
Professional Fees 17,133 (2,517 ) (1) 14,616 11,116 3,500
Travel and Related Expenses 15,450 (3,299 ) (1) 12,151 10,989 1,162
Communications and Information Services 6,782 (8 ) (1) 6,774 5,802 972
Depreciation and Amortization 7,148 (164 ) (8a) 6,984 3,398 3,586
Acquisition and Transition Costs 58 - 58 - 58
Other Operating Expenses   8,125   (409 ) (1)   7,716   6,234   1,482

Total Non-compensation Costs from

Continuing Operations

$ 71,611 $ (6,397 ) $ 65,214 $ 51,263 $ 13,951
 

A-10

 
(8a)   The exclusion from the Adjusted Pro Forma presentation of expenses associated with amortization of intangible assets acquired in the SFS acquisition.
 
(8b) The expense associated with share based awards, which will be settled in Class A Shares and which reflect required adjustments for changes in the Company’s share price due to changes in employment status, is excluded from Adjusted Pro Forma results.
 
(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 Evercore’s effective tax rate assuming 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. In addition, the Adjusted Pro Forma presentation reflects the netting of changes in the Company’s Tax Receivable Agreement against Income Tax Expense.
 
(10) Reflects adjustment to eliminate noncontrolling interest related to all Evercore LP partnership units which are assumed to be converted to Class A common stock in the Adjusted Pro Forma presentation.
 
(11a) Assumes the vesting of all Evercore LP partnership units and IPO related restricted stock unit awards in the Adjusted Pro Forma presentation. In the computation of outstanding common stock equivalents for U.S. GAAP net income per share, the unvested Evercore LP partnership units are anti-dilutive.
 
(11b) Assumes the vesting of all Acquisition Related Share Issuance and Unvested Restricted Stock Units granted to Lexicon employees in the Adjusted Pro Forma presentation. In the computation of outstanding common stock equivalents for U.S. GAAP, these Shares and Restricted Stock Units are reflected using the Treasury Stock Method.
 

A-11

Source: Evercore Partners Inc.

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