Current Report

UNITED STATES

SECURITIES EXCHANGE COMMISSION

Washington, DC 20549

 


FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2007

 


EVERCORE PARTNERS INC.

(Exact name of registrant as specified in its charter)

 

Delaware   001-32975   20-4748747

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

55 East 52nd Street

New York, New York

  10055
(Address of principal executive offices)   (Zip Code)

(212) 857-3100

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Item 2.02. Results of Operations and Financial Condition

On August 7, 2007, Evercore Partners Inc. issued a press release announcing financial results for its second quarter ended June 30, 2007.

A copy of the press release is attached hereto as Exhibit 99.1. All information in the press release is furnished but not filed.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

99.1     Press release of Evercore Partners Inc. dated August 7, 2007.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    EVERCORE PARTNERS INC.
Date: August 7, 2007    

/s/ Adam B. Frankel

     

By:

Title:

 

Adam B. Frankel

General Counsel

Press release of Evercore Partners Inc.

Exhibit 99.1

EVERCORE PARTNERS REPORTS RECORD RESULTS FOR THE

QUARTER ENDED JUNE 30, 2007 AND INCREASES QUARTERLY

DIVIDEND TO $0.12 PER SHARE

Highlights

 

 

Net revenues of $65.9 million and adjusted pro forma net income of $15.5 million for the three month period ended June 30, 2007

 

 

U.S. GAAP net loss of $44.2 million resulting in part from an equity-based compensation charge of $126.0 million associated with the vesting of 6.0 million shares and units that occurred as a result of the May equity offering

 

 

Robust advisory pipeline

 

 

Announced 3 New Senior Managing Directors for Advisory and 1 New Senior Managing Director for Investment Management

NEW YORK, August 7, 2007 – Evercore Partners Inc. (NYSE: EVR) today announced that for the three months ended June 30, 2007, Evercore’s net revenues were $65.9 million and its net loss was $44.2 million or $4.68 per share, compared to net revenues of $43.5 million and net income of $24.7 million for the same period in 2006. Net revenues increased 74.4% to $155.4 million for the six months ended June 30, 2007 from $89.1 million for the six months ended June 30, 2006. Evercore reported a net loss of $40.0 million, or $4.98 per share, for the six months ended June 30, 2007 compared to net income of $50.6 million for the six months ended June 30, 2006.

Evercore’s reported results reflect the previously disclosed non-cash equity-based compensation expense of $126.0 million associated with the vesting of employee equity awards due to the successful completion of Evercore’s equity offering in May 2007. Through this $117.4 million offering, Evercore raised $44.2 million of new capital.

For the three months ended June 30, 2007, Evercore’s adjusted pro forma net income was $15.5 million or $0.47 per share, compared to adjusted pro forma net income of $7.8 million or $0.24 per share for the same period in 2006. Adjusted pro forma net income increased 107.1% to $32.5 million, or $0.99 per share, for the six months ended June 30, 2007, compared to $15.7 million, or $0.49 per share, for the six months ended June 30, 2006.

During the six month period, Evercore announced three new Senior Managing Directors for its Advisory Business and one new Senior Managing Director for the Investment Management business. The Company expects to announce four additional Senior Managing Director hires in the second half of 2007, all in Europe. Evercore also announced the promotion of Brian Roberts to Senior Managing Director in its Advisory business. The associated direct compensation and recruiting costs for the six months ended June 30, 2007 were $4.2 million ($2.5 million after tax) and $1.0 million ($0.6 million after tax), respectively. In addition, in order to accommodate Evercore’s growth the Company incurred incremental facilities costs of approximately $2.1 million ($1.3 million after tax) during the second quarter 2007 in connection with the expansion and consolidation of its facilities in New York City. These costs are expected to recur during the third quarter.

 

1


The following table (1) provides an overview of the Company’s results:

 

     Six Months Ended June 30,  
     (dollars in thousands, except per share data)  
     (unaudited)  
     U.S. GAAP     Adjusted Pro Forma  
     2006     2007     %     2006     2007     %  
     Predecessor     Successor     Change     Predecessor     Successor     Change  

Net Revenues:

            

Advisory

   $ 72,570     $ 140,792     94.0 %   $ 78,405     $ 140,792     79.6 %

Investment Management

   $ 16,246     $ 12,317     (24.2 %)   $ 12,664     $ 12,317     (2.7 %)

Other - Net

   $ 300     $ 2,299     666.3 %   $ 619     $ 2,299     271.4 %
                                    

Net Revenues

   $ 89,116     $ 155,408     74.4 %   $ 91,688     $ 155,408     69.5 %

Pre-Tax Income (Loss)

   $ 52,484     $ (79,550 )   N/A     $ 28,143     $ 54,264     92.8 %

Pre-Tax Margin

     58.9 %     (51.2 %)       30.7 %     34.9 %  

Net Income

   $ 50,601     $ (39,953 )   N/A     $ 15,676     $ 32,472     107.1 %

EPS

     N/A     $ (4.98 )   N/A     $ 0.49     $ 0.99     102.0 %
     Three Months Ended June 30,  
     (dollars in thousands, except per share data)  
     (unaudited)  
     U.S. GAAP     Adjusted Pro Forma  
     2006     2007     %     2006     2007     %  
     Predecessor     Successor     Change     Predecessor     Successor     Change  

Net Revenues:

            

Advisory

   $ 40,173     $ 56,846     41.5 %   $ 43,719     $ 56,846     30.0 %

Investment Management

   $ 3,138     $ 7,848     150.1 %   $ 3,883     $ 7,848     102.1 %

Other - Net

   $ 179     $ 1,218     580.4 %   $ 335     $ 1,218     263.6 %
                                    

Net Revenues

   $ 43,490     $ 65,912     51.6 %   $ 47,937     $ 65,912     37.5 %

Pre-Tax Income (Loss)

   $ 25,564     $ (103,646 )   N/A     $ 14,030     $ 25,913     84.7 %

Pre-Tax Margin

     58.8 %     N/A         29.3 %     39.3 %  

Net Income

   $ 24,653     $ (44,174 )   N/A     $ 7,814     $ 15,506     98.5 %

EPS

     N/A     $ (4.68 )   N/A     $ 0.24     $ 0.47     95.8 %

 

(1)

See “Basis of Alternative Financial Statement Presentations” on page 10 and Annex I for a detailed discussion of the differences in the calculation of the Company’s results prepared in accordance with U.S. GAAP and on an Adjusted Pro Forma basis. Any financial measure other than U.S. GAAP results should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP.

Evercore’s revenues and net income can fluctuate materially depending on the number, size and timing of the completed transactions on which it advised, the number and size of Investment Management gains or losses and other factors. Accordingly, the revenues and net income in any particular quarter may not be indicative of future results. Evercore believes that annual results are the most meaningful.

 

2


Business Overview

“We achieved record results during the period,” said Roger Altman, Co-Chairman and Co-Chief Executive Officer, Evercore. “All facets of our Advisory business are performing well and we had our most successful recruiting period at the partner level, adding a series of proven producers to cover key industries around the world, including energy, health care and consumer. We continue to believe the long-term fundamentals underlying our business are sound.”

“Our Investment Management business had a successful first half of the year,” said Austin M. Beutner, President and Co-Chief Executive Officer, Evercore. “We experienced strong underlying performance in our private equity portfolio and we continue to see attractive realization and investment opportunities. Both of our public securities businesses, EAM and PCB, are doing well and continue to attract new investors. They are both on track to achieve breakeven later this year and make a positive earnings contribution in 2008.”

Revenues

Advisory

The increase in adjusted pro forma Advisory net revenues for the six months ended June 30, 2007 as compared to the same period in 2006 was primarily attributable to a larger number of revenue generating clients and a larger average size of success fees. In addition, Evercore continued to benefit from strong revenue growth from its European operations.

Transactions completed in the second quarter 2007 on which Evercore advised included:

 

   

Smiths Group PLC on the sale of its Aerospace division to General Electric

 

   

Realogy on its leveraged buy-out by Apollo Management

 

   

Novelis on its sale to Hindalco

 

   

Aquila on the sale of its Electric Operations assets to Mid-Kansas Electric Co.

 

   

The Copley Press on its sale of nine publications to GateHouse Media

Among the transactions announced in the second quarter 2007 on which Evercore is advising are:

 

   

First Data Corp. on its sale to Kohlberg Kravis Roberts

 

   

Apax Partners and OMERS Capital Partners on their acquisition of Thomson Learning Inc.

 

   

Alliance Data Systems on its sale to The Blackstone Group

 

   

International Securities Exchange on its sale to Eurex

The Restructuring group continues to perform well having recently been involved in a number of noteworthy mandates, including Northwest Airlines and Tower Automotive.

 

3


According to Thomson Financial, for the first six months of 2007, Evercore ranked 12th among all financial institutions in U.S. announced deals. Among boutiques, Evercore was the number one ranked firm as measured in U.S. announced transactions and completed transactions. Evercore continues to advise on deals in increasingly diverse industries, including the automotive, media, education, financial services, metals and mining, and energy sectors.

Investment Management

The historical Combined Statements of Income for the period prior to the August 10, 2006 initial public offering (IPO) included the results of the general partners of the private equity funds Evercore currently manages. Following the IPO, the Company does not consolidate the results of the general partners of the private equity funds as they were not contributed as part of the formation transaction. However, through its equity interest in the general partner of Evercore Capital Partners II (ECP II) and the Discovery Fund, Evercore recognizes as revenue 8% to 9% of any carried interest from these funds plus the pro rata share of realized and unrealized gains and losses associated with capital invested.

Evercore expects it will be entitled to 100% of any management fees and portfolio company fees earned in relation to any future private equity funds it manages. The Company also expects to consolidate the general partners of any future private equity funds it manages. Accordingly, it expects to record as revenue 100% of any carried interest and realized or unrealized gains (or losses) on investments earned by these entities. However, the Company expects to allocate to its Senior Managing Directors and other employees, through the direct interests these individuals will hold, a significant percentage of any such carried interest. In addition, these individuals will be entitled to any such gains (or losses) on investment based on the amount of the general partners’ capital they contribute in respect of any such future fund. Unlike Evercore Capital Partners I, where the Company made no direct investment or ECP II where the Company’s direct investment is less than 2% of total capital committed, the Company intends to make significant capital commitments to any future private equity fund it manages.

 

4


Evercore’s Investment Management Revenues were comprised of the following:

 

     Six Months Ended June 30,  
     (dollars in thousands)  
     (unaudited)  
     U.S. GAAP     Adjusted Pro Forma  
     2006     2007     %     2006     2007     %  
     Predecessor     Successor     Change     Predecessor     Successor     Change  
Private Equity:             

Management and Portfolio Company Fees

   $ 11,673     $ 7,114     (39.1 %)   $ 12,003     $ 7,114     (40.7 %)

Realized and Unrealized Gains/Losses (Includes Carried Interest)

   $ 4,942     $ 3,922     (20.6 %)   $ —       $ 3,922     N/A  
                                    
   $ 16,615     $ 11,036     (33.6 %)   $ 12,003     $ 11,036     (8.1 %)
                                    
Public Securities:             

Management Fee

   $ —       $ 1,495     N/A     $ 1,030     $ 1,495     45.1 %

Realized and Unrealized Gains/Losses (Includes Seed Capital)

   $ (369 )   $ (214 )   42.0 %   $ (369 )   $ (214 )   42.0 %
                                    
   $ (369 )   $ 1,281     N/A     $ 661     $ 1,281     93.8 %
                                    

Investment Management Revenue

   $ 16,246     $ 12,317     (24.2 %)   $ 12,664     $ 12,317     (2.7 %)
                                    
     Three Months Ended June 30,  
     (dollars in thousands)  
     (unaudited)  
     U. S. GAAP     Adjusted Pro Forma  
     2006     2007     %     2006     2007     %  
     Predecessor     Successor     Change     Predecessor     Successor     Change  
Private Equity:             

Management and Portfolio Company Fees

   $ 3,681     $ 3,500     (4.9 %)   $ 3,846     $ 3,500     (9.0 %)

Realized and Unrealized Gains/Losses (Includes Carried Interest)

   $ (174 )   $ 3,971     N/A     $ —       $ 3,971     N/A  
                                    
   $ 3,507     $ 7,471     113.0 %   $ 3,846     $ 7,471     94.3 %
                                    
Public Securities:             

Management Fee

   $ —       $ 757     N/A     $ 406     $ 757     86.0 %

Realized and Unrealized Gains/Losses (Includes Seed Capital)

   $ (369 )   $ (380 )   (3.0 %)   $ (369 )   $ (380 )   (3.0 %)
                                    
   $ (369 )   $ 377     202.2 %   $ 37     $ 377     918.9 %
                                    

Investment Management Revenue

   $ 3,138     $ 7,848     150.1 %   $ 3,883     $ 7,848     102.1 %
                                    

Six Months ended June 30, 2007

On an adjusted pro forma basis, Investment Management revenues decreased 2.7% in the six months ended June 30, 2007 when compared with the same period in 2006. This was driven by a decline in private equity revenue partially offset by an increase in Evercore’s public securities revenue.

 

   

Private equity adjusted pro forma revenue decreased from $12.0 million in the first half of 2006 to $11.0 million in the first half of 2007. The overall decline is due to the non- recurrence of portfolio company fees associated with investment activity in the first half of 2006, which was partially offset by increases in the carrying value of two portfolio companies due to positive fundamentals.

 

5


   

Public securities adjusted pro forma revenue increased from $0.7 million to $1.3 million for the six months ended June 30, 2007 versus the same period last year. This increase is attributable to strong growth in assets under management in the U.S. under Evercore Asset Management or EAM and in Mexico under Protego Casa de Bolsa or PCB, partially offset by investment losses on Evercore’s capital in EAM’s recently seeded U.S. fund.

Three Months ended June 30, 2007

On an adjusted pro forma basis, Investment Management revenues increased 102.1% from $3.9 million in the three month period ended June 30, 2006 to $7.8 million for the three month period ended June 30, 2007. The increase is primarily driven by strong investment performance in the private equity business.

 

   

Private equity adjusted pro forma revenue increased from $3.8 million in the second quarter 2006 to $7.5 million in the second quarter 2007 due to increases in the carrying value of two portfolio companies based on strong underlying fundamental performance.

 

   

Public securities revenue increased from $0.04 million in the three months ended June 30, 2006 to $0.4 million in the three months ended June 30, 2007 due to increases in fees earned on increased assets under management partially offset by investment losses on Evercore’s capital in EAM’s recently seeded U.S. fund.

As of June 30, 2007, the carrying value of Evercore’s direct investments in its private equity funds totaled $13.5 million. No additional investments were made during the three or six month periods in 2007.

As of June 30, 2007 assets under management in Evercore’s public securities business in the U.S. and Mexico (EAM and PCB) increased to $505 million and $422 million, respectively.

 

6


Expenses

Operating Expenses

Evercore’s operating expenses for the six months and three months ended June 30, 2007 and 2006 were as follows:

 

     Six Months Ended June 30,  
     (dollars in thousands)  
     (unaudited)  
     U.S. GAAP     Adjusted Pro Forma  
     2006     2007     %     2006     2007     %  
     Predecessor     Successor     Change     Predecessor     Successor     Change  

Compensation Expenses

   $ 16,852     $ 198,799     N/A     $ 44,612     $ 72,891     63.4 %

% of Net Revenue

     18.9 %     127.9 %       48.7 %     46.9 %  

Non-compensation Expenses

   $ 19,780     $ 36,159     82.8 %   $ 18,933     $ 28,253     49.2 %

% of Net Revenue

     22.2 %     23.3 %       20.6 %     18.2 %  
     Three Months Ended June 30,  
     (dollars in thousands)  
     (unaudited)  
     U.S. GAAP     Adjusted Pro Forma  
     2006     2007     %     2006     2007     %  
     Predecessor     Successor     Change     Predecessor     Successor     Change  

Compensation Expenses

   $ 8,093     $ 151,176     N/A     $ 23,695     $ 25,268     6.6 %

% of Net Revenue

     18.6 %     229.4 %       49.4 %     38.3 %  

Non-compensation Expenses

   $ 9,833     $ 18,382     86.9 %   $ 10,212     $ 14,731     44.3 %

% of Net Revenue

     22.6 %     27.9 %       21.3 %     22.3 %  

 

7


Compensation and Benefits

Because Evercore operated as a series of limited liability companies prior to its IPO, payments for services rendered by Evercore’s Senior Managing Directors generally were accounted for as distributions of members’ capital, rather than compensation expenses. As a result, Evercore’s pre-IPO compensation and benefits expenses do not reflect a large portion of payments for services rendered by Evercore’s Senior Managing Directors and do not fairly reflect the operating costs Evercore incurs as a public company. As a corporation, Evercore includes all payments for services rendered by its Senior Managing Directors in compensation and benefit expenses.

Evercore’s compensation expense is generally based upon revenue and can fluctuate materially in any particular quarter depending upon the amount of revenue recognized as well as other factors. Accordingly, the amount of compensation expense recognized in any particular quarter may not be indicative of compensation expense in a future period.

Evercore’s adjusted pro forma compensation and benefit expense for the six months and three months ended June 30, 2007 was $72.9 million and $25.3 million, respectively.

The Company has targeted total employee compensation and benefits awarded to employees (excluding for these purposes certain compensation and benefits awards associated with new business initiatives or vesting of partnership units and equity based awards that vested in conjunction with the May 2007 follow-on-offering) at a level not to exceed 50% of revenue (excluding for these purposes any revenue associated with carried interest and reimbursable expenses). The Company retains the ability to exceed its compensation and benefits award target, change the target or change how the target is calculated at any time.

The Company changed its annual compensation program during the second quarter of 2007 to include stock based compensation awards as a component of the annual bonus awards for Senior Managing Directors and other employees. These equity awards will be subject to annual vesting requirements over a four year period beginning at the date of grant which is expected to occur in early 2008. The effect of this program will be that approximately 25% of Evercore’s annual bonus amounts will be awarded in equity. The Co-CEO’s intend to receive 50% of their annual incentive bonus awards in equity.

This program builds on the practice begun in 2006 of awarding a portion of non-partners annual bonus in the form of equity. This further aligns our employees’ interest with those of our stockholders and the inclusion of the equity compensation is in line with the practice of our peers. Pursuant to our previously adopted policies under SFAS 123 (R), the expense associated with these awards will be recognized over the service period for such awards.

Increasing the number of high caliber Senior Managing Directors is critical to the Company’s growth efforts. Typically, Evercore hires new Senior Managing Directors in the middle of a calendar year, but the new hires do not begin to generate significant revenue until the following calendar year. The Company expects new Senior Managing Directors to be accretive to earnings by the second calendar year after joining the firm. Evercore has announced the hiring or promotion of five new Senior Managing Directors in the first half of 2007 and expects to announce four additional Senior Managing Director hires in the second half of 2007, all in Europe. Evercore’s new Senior Managing Directors are:

 

8


Brian Roberts (promotion)    Advisory – US    Technology
Francois Maisonrouge    Advisory – US    Health Care
Stephen Schaible    Advisory – US    Energy
Mark Vander Ploeg    Advisory – US    Consumer
James Matthews    Investment Management –US   

As a result of its recruiting program, the Company expects to record significant compensation expenses associated with new Senior Managing Director hires that could cause Evercore to exceed its compensation and benefits expense target in 2007. The Company expects such increased expenses, to the extent incurred, to have a material and adverse impact on its near-term margins and profitability. The incremental compensation expense recognized relating to the newly recruited Senior Managing Directors who began employment during the six months ended June 30, 2007 was $4.2 million. Had this expense not been incurred Evercore’s adjusted pro forma compensation ratio (compensation expense to net revenue) of 46.9% would have been 44.2% for the six month period.

As a result of Evercore’s May 2007 follow-on offering, 4,853,165 unvested partnership units vested and 1,013,754 Restricted Stock Units vested and 90,606 shares of Restricted Stock vested. Based on this vesting, Evercore recorded a non-cash equity-based compensation charge of $126.0 million.

As of June 30, 2007, Evercore’s total headcount was 268 employees, compared with 130 as of June 30, 2006. Three of Evercore’s Advisory Senior Managing Director hires have joined or are joining the firm after June 30, 2007 and therefore are not reflected in the table below.

 

     As of June 30,
     2006   

2007

U.S.

  

2007

Evercore
Mexico

  

2007

Evercore
Europe

  

2007

Total

Headcount:               

Senior Managing Directors:

              

Advisory

   13    14    6    2    22

Investment Management

   7    8    1    1    10

Corporate

   2    3          3

Other Employees:

              

Other Professionals and Support Staff

   108    132    92    9    233
                        

Total

   130    157    99    12    268

Non-Compensation Expenses

Adjusted pro forma non-compensation expense was $28.3 million for the six months ended June 30, 2007, an increase of 49.2% compared to $18.9 million for the six months ended June 30, 2006. For the three months ended June 30, 2007, adjusted pro forma non-compensation expense

 

9


was $14.7 million, an increase of 44.3% compared to $10.2 million for the corresponding period in 2006. The period-over-period increase was attributable to the following factors: additional facility expenses associated with the Company’s expanded space in New York and transition costs related to the move into that space, incremental costs associated with Sarbanes-Oxley compliance, regulatory reporting and other costs incurred as a public company, and recruitment fees associated with the hiring of additional Senior Managing Directors. Additionally, a portion of the non-compensation expense increase is associated with expenses incurred by Evercore Europe in the first half of 2007.

Income Taxes

Prior to the IPO, Evercore was not subject to federal income taxes, but was subject to New York City unincorporated business tax and New York City general corporation taxes. As a result of the IPO, the operating business entities of Evercore were restructured and a portion of Evercore’s income is subject to U.S. federal income taxes. For the six months ended June 30, 2007 Evercore’s effective tax rate was approximately 40% reflecting Evercore’s income subject to U.S. federal, foreign, state and local taxes. The adjusted pro forma effective tax rate was approximately 43% for the same period in 2006. The decrease in the effective tax rate principally reflects the benefit of a higher proportion of Evercore’s income earned in foreign jurisdictions which is not subject to state and local taxes, coupled with favorable state tax law changes.

Dividend

The Board of Directors of Evercore declared a quarterly dividend of $0.12 per share to be paid on September 14, 2007 to common stockholders of record on August 31, 2007.

Basis of Alternative Financial Statement Presentations

The Predecessor Company results represent the results of the combined entities known as Evercore Holdings prior to the IPO. The Successor Company results represent the consolidated results of Evercore Partners Inc. and its subsidiaries subsequent to the Company’s IPO on August 10, 2006. Both the Predecessor and Successor Company results have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

Adjusted pro forma results are provided principally to give additional information about the per-share effect of previously issued but unvested equity and to exclude charges associated with Evercore’s line of credit, amortization of intangible assets acquired with Protego and Braveheart and the compensation charge resulting from equity awards that vested in conjunction with Evercore’s May 2007 follow-on-offering.

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 prior and subsequent to the IPO. 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, as well as a description of how management believes the adjusted pro forma results provide useful information in evaluating Evercore’s ongoing operations.

 

10


Conference Call

Evercore will host a conference call to discuss its results for the six months and quarter ended June 30, 2007 on Tuesday, August 7, 2007, at 8:30 a.m. Eastern Daylight Time with access available via the Internet and telephone. Investors and analysts may participate in the live conference call by dialing 888-562-3356 (toll-free domestic) or 973-582-2700 (international); passcode: 9071540. 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 877-519-4471 (toll-free domestic) or 973-341-3080 (international); passcode: 9071540. A live webcast of the conference call will be available on the Investor Relations section of Evercore’s Web site at www.evercore.com. The webcast will be archived on the Web site for 30 days after the call.

About Evercore Partners

Evercore Partners is a leading investment banking boutique and investment company. Evercore’s Advisory business counsels its clients on mergers, acquisitions, divestitures, restructurings and other strategic transactions. Evercore’s Investment Management business manages private equity funds and traditional asset management services for sophisticated institutional investors. Evercore serves a diverse set of clients around the world from its offices in New York, Los Angeles, San Francisco, London, England, Mexico City and Monterrey, Mexico. More information about Evercore can be found on the Company’s Web site at www.evercore.com.

#             #            #

Forward-Looking Statements

This discussion 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. Such forward-looking statements are subject to various risks and uncertainties. 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, 2006. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary

 

11


statements that are included in this discussion. 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.

 

Investor Contact:   

Robert B. Walsh

  

Chief Financial Officer, Evercore Partners

  

212-857-3100

Media Contact:   

Kenny Juarez or Chuck Dohrenwend

  

The Abernathy MacGregor Group, for Evercore Partners

  

212-371-5999

 

12


ANNEX I

 

Schedule

  

Page

Number

GAAP:

  
  Unaudited Condensed Combined/Consolidated Statements of Income for the Six Months Ended June 30, 2006 and 2007    A-1
  Unaudited Condensed Combined/Consolidated Statements of Income for the Three Months Ended June 30, 2006 and 2007    A-2
Adjusted Pro Forma:   
  Adjusted Pro Forma Results and Adjusted Pro Forma Net Income (Loss) per Common Stock    A-3
  Unaudited Condensed Consolidated Adjusted Pro Forma Statements of Income for the Six Months Ended June 30, 2007    A-5
  Unaudited Condensed Consolidated Adjusted Pro Forma Statements of Income for the Three Months Ended June 30, 2007    A-6
  Unaudited Condensed Combined/Consolidated Adjusted Pro Forma Statements of Income for the Six Months Ended June 30, 2006    A-7
  Unaudited Condensed Combined/Consolidated Adjusted Pro Forma Statements of Income for the Three Months Ended June 30, 2006    A-8
  Notes to Unaudited Condensed Combined/Consolidated Adjusted Pro Forma Statements of Income    A-9

 

ANNEX I


EVERCORE PARTNERS INC.

CONDENSED COMBINED/CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(UNAUDITED)

 

    

For the Six

Months Ended

June 30, 2006

   

For the Six

Months Ended

June 30, 2007

 
     Predecessor     Successor  

REVENUES

    

Advisory Revenue

   $ 72,570     $ 140,792  

Investment Management Revenue

     16,246       12,317  

Interest Income and Other Revenue

     300       8,228  
                

TOTAL REVENUES

     89,116       161,337  

Interest Expense

     —         5,929  
                

NET REVENUES

     89,116       155,408  
                

EXPENSES

    

Compensation and Benefits

     16,852       198,799  

Occupancy and Equipment Rental

     1,828       5,628  

Professional Fees

     10,721       12,197  

Travel and Related Expenses

     3,493       4,269  

Financing Costs

     880       1,068  

Communications and Information Services

     1,225       —    

Depreciation and Amortization

     545       8,785  

Other Operating Expenses

     1,088       4,212  
                

TOTAL EXPENSES

     36,632       234,958  
                

INCOME BEFORE INCOME TAXES AND MINORITY INTEREST

     52,484       (79,550 )

Provision for Income Taxes

     1,884       5,578  

Minority Interest

     (1 )     (45,175 )
                

NET INCOME (LOSS)

   $ 50,601     $ (39,953 )
                

Net Loss Available to Holders of Shares of Class A Common Stock:

     $ (39,953 )

Weighted Average Shares of Class A Common Stock Outstanding:

    

Basic

       8,019  

Diluted

       8,019  

Net Loss Available to Holders of Shares of Class A Common Stock Per Share:

    

Basic

     $ (4.98 )

Diluted

     $ (4.98 )

 

A-1


EVERCORE PARTNERS INC.

CONDENSED COMBINED/CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(UNAUDITED)

 

    

For the Three

Months Ended

June 30, 2006

  

For the Three

Months Ended

June 30, 2007

 
     Predecessor    Successor  

REVENUES

     

Advisory Revenue

   $ 40,173    $ 56,846  

Investment Management Revenue

     3,138      7,848  

Interest Income and Other Revenue

     179      4,799  
               

TOTAL REVENUES

     43,490      69,493  

Interest Expense

     —        3,581  
               

NET REVENUES

     43,490      65,912  
               

EXPENSES

     

Compensation and Benefits

     8,093      151,176  

Occupancy and Equipment Rental

     990      3,985  

Professional Fees

     5,053      5,269  

Travel and Related Expenses

     1,642      2,394  

Financing Costs

     631      —    

Communications and Information Services

     464      620  

Depreciation and Amortization

     283      4,104  

Other Operating Expenses

     770      2,010  
               

TOTAL EXPENSES

     17,926      169,558  
               

INCOME BEFORE INCOME TAXES AND MINORITY INTEREST

     25,564      (103,646 )

Provision for Income Taxes

     905      643  

Minority Interest

     6      (60,115 )
               

NET INCOME (LOSS)

   $ 24,653    $ (44,174 )
               

Net Loss Available to Holders of Shares of Class A Common Stock:

      $ (44,174 )

Weighted Average Shares of Class A Common Stock Outstanding:

     

Basic

        9,432  

Diluted

        9,432  

Net Loss Available to Holders of Shares of Class A Common Stock Per Share:

     

Basic

      $ (4.68 )

Diluted

      $ (4.68 )

 

A-2


Adjusted Pro Forma Results and Adjusted Pro Forma Net Income (Loss) per Common Stock

The adjusted pro forma results reflect the following adjustments as shown in the table below:

Exclusion of financing costs for the line of credit. The line of credit was used for additional working capital. The line of credit was repaid out of a portion of the proceeds of the IPO and terminated concurrently with the IPO. Management believes that after the IPO it will rely on other sources of funding to fund working capital and thus excluding financing costs associated with the line of credit facilitates a meaningful comparison of its non-compensation expenses prior and subsequent to the IPO.

Exclusion of amortization of intangible assets acquired with Protego and Braveheart. The Protego acquisition was undertaken in contemplation of the IPO and substantially all of these charges were recognized by December 31, 2006. The Braveheart acquisition occurred on December 19, 2006. Management believes that these charges are not reflective of ongoing operations, and therefore exclusion of these charges enhances understanding of the Company’s operating performance.

Exclusion of compensation charges associated with the vesting of contingently vesting LP and Stock Based Awards. Evercore issued partnership units and stock based awards which vest upon the occurrence of specified vesting events. In periods prior to the completion of the follow-on 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 partnership units or stock-based awards. The completion of our May 2007 follow-on offering resulted in Messrs. Altman, Beutner and Aspe, and trusts benefiting their families and permitted transferees, collectively, ceasing to beneficially own at least 90% of the aggregate Evercore LP partnership units owned by them on the date of the internal reorganization resulting in the vesting of certain partnership units and stock based awards. The vesting of these awards resulted in a non-cash compensation expense of $126.0 million that was recognized in the second quarter. Management believes that the expense is neither reflective of ongoing compensation expense nor meaningful when comparing prior periods. Therefore, exclusion of these charges enhances the understanding of the Company’s operating performance.

Tax effect of prior adjustments. Prior to the IPO, the Company was a collection of limited liability companies, partnership and sub-chapter S entities which are not subject to federal income taxes. As a result of the IPO, the operating business entities of the Company were restructured and a portion of the Company’s income is subject to U.S. federal income taxes. Thus the prior three adjustments also need to be tax effected.

Vesting of unvested equity. Management believes that it is useful to provide the per-share effect associated with the vesting of previously granted but unvested equity, and thus the adjusted pro forma results reflect the vesting of all unvested Evercore LP partnership units and stock based awards. However, management has concluded that at the current time it is not probable that the conditions relating to the vesting of the remaining unvested partnership units or stock based awards will be achieved or satisfied.

 

A-3


The unaudited condensed combined/consolidated adjusted pro forma financial information is included for informational purposes only and does not purport to reflect the results of operations or financial position of Evercore that would have occurred had we operated as a public company during the periods presented. The unaudited condensed combined/consolidated adjusted pro forma financial information should not be relied upon as being indicative of Evercore’s results of operations or financial condition had the transactions contemplated in connection with the internal reorganization been completed on the dates assumed. The unaudited condensed combined/consolidated adjusted pro forma financial information also does not project the results of operations or financial position for any future period or date.

 

A-4


CONDENSED CONSOLIDATED ADJUSTED PRO FORMA STATEMENTS OF INCOME

Six Months Ended June 30, 2007

(dollars in thousands, except per share data)

(UNAUDITED)

 

     Evercore
Partners Inc.
Successor
    Adjustments for
One Time
Expenses
   

Evercore

Partners Inc.
Adjusted
Pro Forma

 

Adjusted Net Income

      

Advisory Revenue

   $ 140,792       —       $ 140,792  

Investment Management Revenue

     12,317       —         12,317  

Interest Income and Other Revenue

     8,228       —         8,228  
                        

Total Revenues

     161,337       —         161,337  

Interest Expense

     5,929       —         5,929  
                        

Net Revenues

     155,408       —         155,408  

Compensation and Benefits

     198,799       (125,908 )(p)     72,891  

Professional Fees

     12,197       —         12,197  

Other Operating Expense

     16,056       —         16,056  

Amortization of Intangibles

     7,906       (7,906 )(l)     —    
                        

Total Expenses

     234,958       (133,814 )     101,144  
                        

Income Before Minority Interest and Income Tax

     (79,550 )     133,814       54,264  

Provision for Income Taxes

     5,578       16,214 (m)     21,792  
                        

Income Before Minority Interest

     (85,128 )     117,600       32,472  

Minority Interest

     (45,175 )     45,175 (n)     —    
                        

Net Income

   $ (39,953 )   $ 72,425     $ 32,472  
                        

Adjusted Class A Common Stock Outstanding

      

Basic and Diluted Weighted Average Shares of Class A Common Stock Outstanding

     8,027       3,074 (o)     11,101  

Currently Vested Partnership Units

     —         15,342 (o)     15,342  

Unvested Partnership Units

     —         4,854 (o)     4,854  

Treasury Stock

     (8 )     —   (o)     (8 )

Unvested Restricted Stock Units

     —         1,409 (o)     1,409  

Unvested Restricted Stock

     —         59 (o)     59  
                        

Total Shares

     8,019       24,738       32,757  
                        

Net Income/(Loss) per Share:

      

Basic

   $ (4.98 )     $ 0.99  

Diluted

   $ (4.98 )     $ 0.99  

 

A-5


CONDENSED CONSOLIDATED ADJUSTED PRO FORMA STATEMENTS OF INCOME

THREE MONTHS ENDED JUNE 30, 2007

(dollars in thousands, except per share data)

(UNAUDITED)

 

     Evercore
Partners Inc.
Successor
    Adjustments for
One Time Expenses
    Evercore
Partners Inc.
Adjusted
Pro Forma
 

Adjusted Net Income

      

Advisory Revenue

   $ 56,846       —       $ 56,846  

Investment Management Revenue

     7,848       —         7,848  

Interest Income and Other Revenue

     4,799       —         4,799  
                        

Total Revenues

     69,493       —         69,493  

Interest Expense

     3,581       —         3,581  
                        

Net Revenues

     65,912       —         65,912  

Compensation and Benefits

     151,176       (125,908 )(p)     25,268  

Professional Fees

     5,269       —         5,269  

Other Operating Expense

     9,462       —         9,462  

Amortization of Intangibles

     3,651       (3,651 )(l)     —    
                        

Total Expenses

     169,558       (129,559 )     39,999  
                        

Income Before Minority Interest and Income Tax

     (103,646 )     129,559       25,913  

Provision for Income Taxes

     643       9,764 (m)     10,407  
                        

Income Before Minority Interest

     (104,289 )     119,795       15,506  

Minority Interest

     (60,115 )     60,115 (n)     —    
                        

Net Income

   $ (44,174 )   $ 59,680     $ 15,506  
                        

Adjusted Class A Common Stock Outstanding

      

Basic and Diluted Weighted Average Shares of Class A Common Stock Outstanding

     9,447       2,049 (o)     11,496  

Currently Vested Partnership Units

     —         15,342 (o)     15,342  

Unvested Partnership Units

     —         4,854 (o)     4,854  

Treasury Stock

     (15 )     —   (o)     (15 )

Unvested Restricted Stock Units

     —         1,455 (o)     1,455  

Unvested Restricted Stock

     —         48 (o)     48  
                        

Total Shares

     9,432       23,748       33,180  
                        

Net Income/(Loss) per Share:

      

Basic

   $ (4.68 )     $ 0.47  

Diluted

   $ (4.68 )     $ 0.47  

 

A-6


CONDENSED COMBINED/CONSOLIDATED ADJUSTED PRO FORMA STATEMENTS OF INCOME

SIX MONTHS ENDED JUNE 30, 2006

(dollars in thousands, except per share data)

(UNAUDITED)

 

    Predecessor     Adjustments for
Formation
    Acquired Company
Combination
Adjustments (c)
    Pro-Forma
Adjustments
for the IPO
    Adjustments for
One Time Expenses
    Adjusted
Pro Forma
Adjusted Net Income            

Advisory Revenue

  $ 72,570     $ —       $ 5,835     $ —       $ —       $ 78,405

Investment Management Revenue

    16,246       (4,943 )(a)     1,361       —         —         12,664

Interest Income and Other Revenue

    300       —         4,349       —         —         4,649
           

Total Revenues

    89,116       (4,943 )     11,545       —         —         95,718

Interest Expense

    —         —         4,030       —           4,030
                                             

Net Revenues

    89,116       (4,943 )     7,515       —         —         91,688
                                             

Compensation and Benefits

    16,852       —         4,270       23,490 (g)     —         44,612

Professional Fees

    10,721       —         592       (2,404 )(h)     —         8,909

Other Operating Expense

    9,059       (26 )(a)     2,216       —         (1,225 )(k)     10,024

Amortization of Intangibles

    —         —         9,998 (d)     —         (9,998 )(l)     —  
                                             

Total Expenses

    36,632       (26 )     17,076       21,086       (11,223 )     63,545
                                             

Income Before Minority Interest and Income Tax

    52,484       (4,917 )     (9,561 )     (21,086 )     11,223       28,143

Provision for Income Taxes

    1,884       (106 )(b)     439 (e)     646 (i)     9,604 (m)     12,467
                                             

Income Before Minority Interest

    50,600       (4,811 )     (10,000 )     (21,732 )     1,619       15,676

Minority Interest

    (1 )     1 (a)     (255 )(f)     11,232 (j)     (10,977 )(n)     —  
                                             

Net Income

  $ 50,601     $ (4,812 )   $ (9,745 )   $ (32,964 )   $ 12,596     $ 15,676
                                             

Adjusted Class A Common Stock Outstanding

           

Basic and Diluted Weighted Average Shares of Class A Common Stock Outstanding

            —         6,726

Currently Vested Partnership Units

            13,433 (o)     13,433

Unvested Partnership Units

            9,708 (o)     9,708

Treasury Stock

            —   (o)     —  

Unvested Restricted Stock Units

            2,089 (o)     2,089

Unvested Restricted Stock

            —   (o)     —  
                     

Total Shares

            25,230       31,956
                     

Net Income per Share:

           

Basic

            $ 0.49

Diluted

            $ 0.49

 

A-7


CONDENSED COMBINED/CONSOLIDATED ADJUSTED PRO FORMA STATEMENTS OF INCOME

THREE MONTHS ENDED JUNE 30, 2006

(dollars in thousands, except per share data)

(UNAUDITED)

 

    Predecessor   Adjustments for
Formation
    Acquired Company
Combination
Adjustments (c)
    Pro-Forma
Adjustments
for the IPO
    Adjustments for
One Time Expenses
    Adjusted
Pro
Forma
Adjusted Net Income            

Advisory Revenue

  $ 40,173   $ —       $ 3,546     $ —       $ —       $ 43,719

Investment Management Revenue

    3,138     173 (a)     572       —         —         3,883

Interest Income and Other Revenue

    179     —         3,125       —         —         3,304
                                           

Total Revenues

    43,490     173       7,243       —         —         50,906

Interest Expense

    —       —         2,969       —           2,969
                                           

Net Revenues

    43,490     173       4,274       —         —         47,937
                                           

Compensation and Benefits

    8,093     —         2,691       12,911 (g)     —         23,695

Professional Fees

    5,053     —         —         (300 )(h)     —         4,753

Other Operating Expense

    4,780     (11 )(a)     1,321       —         (631 )(k)     5,459

Amortization of Intangibles

    —       —         4,999 (d)     —         (4,999 )(l)     —  
                                           

Total Expenses

    17,926     (11 )     9,011       12,611       (5,630 )     33,907
                                           

Income Before Minority Interest and Income Tax

    25,564     184       (4,737 )     (12,611 )     5,630       14,030

Provision for Income Taxes

    905     (35 )(b)     238 (e)     314 (i)     4,794 (m)     6,216
                                           

Income Before Minority Interest

    24,659     219       (4,975 )     (12,925 )     836       7,814

Minority Interest

    6     (6 )(a)     (137 )(f)     5,587 (j)     (5,450 )(n)     —  
                                           

Net Income

  $ 24,653   $ 225     $ (4,838 )   $ (18,512 )   $ 6,286     $ 7,814
                                           
Adjusted Class A Common Stock Outstanding            

Basic and Diluted Weighted Average Shares of Class A Common Stock Outstanding

            —         6,726

Currently Vested Partnership Units

            13,433 (o)     13,433

Unvested Partnership Units

            9,708 (o)     9,708

Unvested Restricted Stock Units

            2,089 (o)     2,089
                     

Total Shares

            25,230       31,956
                     

Net Income per Share:

           

Basic

            $ 0.24

Diluted

            $ 0.24

 

A-8


Notes to Unaudited Condensed Combined/Consolidated Adjusted Pro Forma Statements of Income (dollars in thousands, except per share data):

 

(a) Adjustment reflects the elimination of the historical results of operations for the general partners of the Evercore Capital Partners I, Evercore Capital Partners II and Evercore Ventures funds and certain other entities through which Messrs. Altman and Beutner have invested capital in the Evercore Capital Partners I fund, specifically, Evercore Founders LLC and Evercore Founders Cayman Limited, which were not contributed to Evercore LP. For the six months and three months ended June 30, 2006, this adjustment reflects $4,943 and ($173), respectively, of net gains associated with carried interest.

 

(b) Adjustment reflects the tax impact on Evercore LP’s New York City Unincorporated Business Tax, or “UBT,” associated with adjustments for the formation transaction, including the New York City tax impact of converting the subchapter S corporations to limited liability companies. Since the entities that form Evercore have been limited liability companies, partnerships or sub-chapter S entities, Evercore’s income was not subject to U.S. federal and state income taxes. Taxes related to income earned by limited liability companies and partnerships represent obligations of the individual Senior Managing Directors. Income taxes shown on Evercore Partners Inc.’s historical combined consolidated statements of income are attributable to the New York City UBT, attributable to Evercore’s operations apportioned to New York City.

 

A-9


(c) To include the pre-acquisition results, the following balances reflect the historical financial results for Braveheart and Protego for the periods ended June 30, 2006.

 

    

January 1,

2006 -
June 30,
2006

   

January 1,

2006 -
June 30,
2006

   

January 1,

2006 -
June 30,

2006

   

January 1,

2006 -

June 30,

2006

   

April 1,

2006 -
June 30,

2006

   

April 1,

2006 -
June 30,
2006

   

April 1,

2006 -
June 30,

2006

   

April 1,

2006 -

June 30,

2006

 
     Braveheart     Protego     Acquisition     Acquired Company     Braveheart     Protego     Acquisition     Acquired Company  
     Historical     Historical     Adjustments*     Combination
Adjustments
    Historical     Historical     Adjustments*     Combination
Adjustments
 

Advisory Revenue

     —       $ 5,835       —       $ 5,835       —       $ 3,546       —       $ 3,546  

Investment Management Revenue

     —         1,361       —         1,361       —         572       —         572  

Interest Income and Other Revenue

     —         4,349       —         4,349       —         3,125       —         3,125  
                                                                

Gross Revenues

     —         11,545       —         11,545       —         7,243       —         7,243  
     —         —         —         —         —         —         —         —    

Interest Expense

     —         4,030       —         4,030       —         2,969       —         2,969  
     —         —         —         —         —         —         —         —    
                                                                

Net Revenues

     —         7,515       —         7,515       —         4,274       —         4,274  
                                                                
     —         —         —         —         —         —         —         —    

Compensation and Benefits

   $ 429       3,841       —         4,270     $ 429       2,262       —         2,691  

Professional Fees

     —         592       —         592       —         —         —         —    

Other Operating Expense

     674       1,542       —         2,216       559       762       —         1,321  

Amortization of Intangibles

     —         —       $ 9,998       9,998       —         —       $ 4,999       4,999  
                                                                

Total Expenses

     1,103       5,975       9,998       17,076       988       3,024       4,999       9,011  
                                                                
     —         —         —         —         —         —         —         —    

Income Before Minority Interest and Income Tax

     (1,103 )     1,540       (9,998 )     (9,561 )     (988 )     1,250       (4,999 )     (4,737 )

Provision for Income Taxes

     (331 )     770       —         439       (296 )     534       —         238  
                                                                

Income Before Minority Interest

     (772 )     770       (9,998 )     (10,000 )     (692 )     716       (4,999 )     (4,975 )

Minority Interest

     —         (416 )     161       (255 )     —         (224 )     87       (137 )
                                                                

Net Income

   $ (772 )   $ 1,186     $ (10,159 )   $ (9,745 )   $ (692 )   $ 940     $ (5,086 )   $ (4,838 )
                                                                

 

* See footnotes (d), (e) and (f) for discussion of adjustments.

 

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(d) Reflects the amortization of intangible assets acquired in conjunction with the purchase of Protego with an estimated useful life ranging from 0.5 years to five years and in conjunction with the purchase of Braveheart with an estimated useful life ranging from one to six years. The intangible assets with finite useful lives include the following asset types: client backlog and relationships, broker dealer license and, for Protego only, non-competition and non-solicitation agreements.

 

(e) For tax purposes, no tax benefit will be realized related to the intangible assets acquired by Evercore LP in conjunction with the Protego acquisition. However, a tax benefit was realized by Evercore Partners Inc. upon consummation of the IPO and the acquisition of Braveheart. See Footnote (i) under “Notes to Unaudited Combined/Condensed Consolidated Adjusted Pro Forma Statements of Income.”

 

(f) Reflects an adjustment to eliminate a minority interest of 19% in Protego’s asset management subsidiary that Evercore acquired as part of the Protego acquisition.

 

(g) Historically the entities that form Evercore were limited liability companies, partnerships or sub-chapter S entities. Accordingly, payments for services rendered by Evercore’s Senior Managing Directors generally were accounted for as distributions of members’ capital rather than as compensation expense. Following the IPO, management has included all payments for services rendered by the Senior Managing Directors in compensation and benefits expense. In connection with the IPO, the Company targeted total employee compensation and benefits expense at a level not to exceed 50% of net revenue (excluding for these purposes, any revenue associated with gains or losses on investments, carried interest or reimbursable expenses). The Company retains the ability to exceed the target, change the target or how the target is calculated, and starting in 2007, the Company no longer excludes gains or losses on investments from revenues used to calculate its compensation and benefits expense target.

 

    

Six Months

Ended
June 30,
2006

   

Three Months

Ended
June 30,

2006

 

Pre formation Net Revenues (1)

   $ 91,688     $ 47,937  

Less: Expense Reimbursements

     (2,463 )     (547 )
                
     89,225       47,390  

Pro Forma Compensation

     44,612       23,695  

Historical Compensation and Benefits

     (21,122 )     (10,784 )
                

Compensation and Benefits Expense Adjustment

   $ 23,490     $ 12,911  
                

 

  (1) Pre formation Net Revenues have been adjusted for carried interest and realized and unrealized gain/loss on investments for the pre-IPO period as discussed in Note (a) above.

 

(h) Reflects non-recurring expenses associated with IPO and related internal reorganization transactions.

 

(i) As a limited liability company, partnership or sub-chapter S entity, Evercore was generally not subject to income taxes except in foreign and local jurisdictions. For these adjusted pro forma financial statements, a provision for corporate income taxes at the actual pre-IPO effective tax rate of approximately 44% for 2006, which assumes the highest statutory rates apportioned to each state, local and/or foreign tax jurisdiction and reflected net of U.S. federal tax benefit, was used. There is no current foreign tax increase or benefits assumed with the Protego acquisition as it relates to the effective tax rate. However, Evercore Partners Inc. will realize deferred tax increases or benefits upon the Protego and Braveheart acquisitions as it relates to the tax amortization of goodwill over a 15 year straight-line basis and Braveheart intangibles. The holders of partnership units in Evercore LP, including Evercore Partners Inc., will incur U.S. federal, state and local income taxes on their proportionate share of any net taxable income of Evercore LP. In accordance with the partnership agreement pursuant to which Evercore LP is governed, management intend to cause Evercore LP to make pro rata cash distributions to Evercore’s Senior Managing Directors and Evercore Partners Inc. for purposes of funding their tax obligations in respect of the income of Evercore LP that is allocated to them.

 

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(j) Reflects an adjustment to record the 67.3% minority interest ownership of Evercore’s Senior Managing Directors in Evercore LP relating to their vested partnership units, reflecting 6,518,558 shares of Class A common stock assumed outstanding for the six and three months ended June 30, 2006. Partnership units of Evercore LP are, subject to certain limitations, exchangeable into shares of Class A common stock of Evercore Partners Inc. on a one-for-one basis. Evercore Partners Inc.’s interest in Evercore LP is within the scope of EITF 04-5. Although Evercore Partners Inc. has a minority economic interest in Evercore LP, it will have a majority voting interest and control the management of Evercore LP. Additionally, although the limited partners have an economic majority of Evercore LP, they do not have the right to dissolve the partnership or substantive kick-out rights or participating rights, and therefore lack the ability to control Evercore LP. Accordingly, Evercore consolidates Evercore LP and records minority interest for the economic interest in Evercore LP held directly by the Senior Managing Directors.

 

(k) Adjustment for financing costs used for additional working capital. The line of credit was repaid out of a portion of the proceeds received from the IPO.

 

(l) Reflects expenses associated with amortization of intangible assets acquired in the Protego and Braveheart acquisitions.

 

(m) An adjustment has been made to increase Evercore’s effective tax rate to approximately 40% for 2007 and 44% for 2006. For further discussion see footnote (i).

 

(n) Reflects adjustment to eliminate minority interest as all common stock equivalents are assumed to be converted to Class A common stock.

 

(o) Reflects on a weighted average basis the vesting of unvested but outstanding common stock equivalents, which are assumed to vest and convert to Class A common stock for the purposes of these adjusted pro forma results. In the computation of outstanding common stock equivalents for U.S. GAAP net income per share, the unvested Evercore LP partnership units and restricted stock units issued in conjunction with the IPO are excluded from the calculation.

 

(p) Adjustment for reduction of compensation associated with one time vesting of stock based awards related to the follow-on offering.

 

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