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Table of Contents                                             



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 _____________________________________________________
(Mark One)
x    
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to         
001-32975
(Commission File Number)
_____________________________________________________
EVERCORE PARTNERS INC.
(Exact name of registrant as specified in its charter)
 _____________________________________________________
Delaware
 
20-4748747
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
55 East 52 nd Street
38th floor
New York, New York 10055
(Address of principal executive offices)
Registrant’s telephone number: (212) 857-3100
_____________________________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
ý
Accelerated filer
o
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨         
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
The number of shares of the registrant’s Class A common stock, par value $0.01 per share, outstanding as of April 26, 2017 was 41,031,197. The number of shares of the registrant’s Class B common stock, par value $0.01 per share, outstanding as of April 26, 2017 was 26 (excluding 74 shares of Class B common stock held by a subsidiary of the registrant).

Table of Contents                                             



Table of Contents
In this report, references to "Evercore", the "Company", "we", "us", "our" refer to Evercore Partners Inc., a Delaware corporation, and its consolidated subsidiaries. Unless the context otherwise requires, references to (1) "Evercore Partners Inc." refer solely to Evercore Partners Inc., and not to any of its consolidated subsidiaries and (2) "Evercore LP" refer solely to Evercore LP, a Delaware limited partnership, and not to any of its consolidated subsidiaries.
 
 
 
Page
 
Item 1.
Item 2.
Item 3.
Item 4.
 
Item 1.
Item 2.
Item 6.
 


2

Table of Contents                                             



PART I. FINANCIAL INFORMATION

Item 1.
Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Financial Statements (Unaudited)
 
 
Page


3

Table of Contents                                             



EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(dollars in thousands, except share data)
 
March 31, 2017
 
December 31, 2016
Assets
 
 
 
Current Assets
 
 
 
Cash and Cash Equivalents
$
351,260

 
$
558,524

Marketable Securities
62,829

 
66,487

Financial Instruments Owned and Pledged as Collateral at Fair Value
34,808

 
18,535

Securities Purchased Under Agreements to Resell
535

 
12,585

Accounts Receivable (net of allowances of $1,806 and $2,751 at March 31, 2017 and December 31, 2016, respectively)
201,013

 
230,522

Receivable from Employees and Related Parties
18,063

 
15,034

Other Current Assets
22,316

 
23,946

Total Current Assets
690,824

 
925,633

Investments
115,630

 
116,633

Deferred Tax Assets
310,018

 
305,424

Furniture, Equipment and Leasehold Improvements (net of accumulated depreciation and amortization of $57,326 and $53,668 at March 31, 2017 and December 31, 2016, respectively)
56,059

 
51,651

Goodwill
164,786

 
160,961

Intangible Assets (net of accumulated amortization of $27,165 and $24,690 at March 31, 2017 and December 31, 2016, respectively)
26,895

 
29,370

Assets Segregated for Bank Regulatory Requirements
10,200

 
10,200

Other Assets
58,350

 
62,474

Total Assets
$
1,432,762

 
$
1,662,346

Liabilities and Equity
 
 
 
Current Liabilities
 
 
 
Accrued Compensation and Benefits
$
132,196

 
$
334,541

Accounts Payable and Accrued Expenses
29,649

 
30,723

Securities Sold Under Agreements to Repurchase
35,368

 
31,150

Payable to Employees and Related Parties
36,461

 
27,366

Taxes Payable
8,647

 
27,321

Other Current Liabilities
11,836

 
12,320

Total Current Liabilities
254,157

 
463,421

Notes Payable
168,158

 
168,097

Subordinated Borrowings
10,550

 
16,550

Amounts Due Pursuant to Tax Receivable Agreements
176,957

 
174,109

Other Long-term Liabilities
38,459

 
56,838

Total Liabilities
648,281

 
879,015

Commitments and Contingencies (Note 15)

 

Equity
 
 
 
Evercore Partners Inc. Stockholders' Equity
 
 
 
Common Stock
 
 
 
Class A, par value $0.01 per share (1,000,000,000 shares authorized, 61,379,390 and 58,292,567 issued at March 31, 2017 and December 31, 2016, respectively, and 41,169,984 and 39,190,856 outstanding at March 31, 2017 and December 31, 2016, respectively)
614

 
582

Class B, par value $0.01 per share (1,000,000 shares authorized, 26 and 24 issued and outstanding at March 31, 2017 and December 31, 2016, respectively)
—

 
—

Additional Paid-In-Capital
1,424,368

 
1,368,122

Accumulated Other Comprehensive Income (Loss)
(49,918
)
 
(50,096
)
Retained Earnings
82,705

 
20,343

Treasury Stock at Cost (20,209,406 and 19,101,711 shares at March 31, 2017 and December 31, 2016, respectively)
(898,036
)
 
(811,653
)
Total Evercore Partners Inc. Stockholders' Equity
559,733

 
527,298

Noncontrolling Interest
224,748

 
256,033

Total Equity
784,481

 
783,331

Total Liabilities and Equity
$
1,432,762

 
$
1,662,346

See Notes to Unaudited Condensed Consolidated Financial Statements.

4

Table of Contents                                             



EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(dollars and share amounts in thousands, except per share data)
 
For the Three Months Ended March 31,
 
2017
 
2016
Revenues
 
 
 
Investment Banking Revenue
$
371,938

 
$
240,626

Investment Management Revenue
16,346

 
18,429

Other Revenue, Including Interest
3,739

 
1,377

Total Revenues
392,023

 
260,432

Interest Expense
4,776

 
2,719

Net Revenues
387,247

 
257,713

Expenses
 
 
 
Employee Compensation and Benefits
205,558

 
179,915

Occupancy and Equipment Rental
13,075

 
10,774

Professional Fees
17,078

 
10,702

Travel and Related Expenses
14,980

 
13,829

Communications and Information Services
10,311

 
10,003

Depreciation and Amortization
5,799

 
6,382

Other Operating Expenses
9,117

 
9,983

Total Expenses
275,918

 
241,588

Income Before Income from Equity Method Investments and Income Taxes
111,329

 
16,125

Income from Equity Method Investments
1,610

 
1,287

Income Before Income Taxes
112,939

 
17,412

Provision for Income Taxes
18,292

 
9,734

Net Income
94,647

 
7,678

Net Income Attributable to Noncontrolling Interest
13,876

 
2,360

Net Income Attributable to Evercore Partners Inc.
$
80,771

 
$
5,318

Net Income Attributable to Evercore Partners Inc. Common Shareholders
$
80,771

 
$
5,318

Weighted Average Shares of Class A Common Stock Outstanding
 
 
 
Basic
40,480

 
39,620

Diluted
45,936

 
44,920

Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders:
 
 
 
Basic
$
2.00

 
$
0.13

Diluted
$
1.76

 
$
0.12

 
 
 
 
Dividends Declared per Share of Class A Common Stock
$
0.34

 
$
0.31

See Notes to Unaudited Condensed Consolidated Financial Statements.

5

Table of Contents                                             



EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in thousands)
 
For the Three Months Ended March 31,
 
2017
 
2016
Net Income
$
94,647

 
$
7,678

Other Comprehensive Income (Loss), net of tax:
 
 
 
Unrealized Gain (Loss) on Marketable Securities and Investments, net
(39
)
 
16

Foreign Currency Translation Adjustment Gain (Loss), net
261

 
(2,217
)
Other Comprehensive Income (Loss)
222

 
(2,201
)
Comprehensive Income
94,869

 
5,477

Comprehensive Income Attributable to Noncontrolling Interest
13,920

 
1,979

Comprehensive Income Attributable to Evercore Partners Inc.
$
80,949

 
$
3,498


See Notes to Unaudited Condensed Consolidated Financial Statements.


6

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EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
(dollars in thousands, except share data)
 
For the Three Months Ended March 31, 2017
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
Other
 
 
 
 
 
 
 
 
 
 
 
Class A Common Stock
 
Paid-In
 
Comprehensive
 
Retained
 
Treasury Stock
 
Noncontrolling
 
Total
 
Shares
 
Dollars
 
Capital
 
Income (Loss)
 
Earnings
 
Shares
 
Dollars
 
Interest
 
Equity
Balance at December 31, 2016
58,292,567

 
$
582

 
$
1,368,122

 
$
(50,096
)
 
$
20,343

 
(19,101,711
)
 
$
(811,653
)
 
$
256,033

 
$
783,331

Net Income
—

 
—

 
—

 
—

 
80,771

 
—

 
—

 
13,876

 
94,647

Other Comprehensive Income
—

 
—

 
—

 
178

 
—

 
—

 
—

 
44

 
222

Treasury Stock Purchases
—

 
—

 
—

 
—

 
—

 
(1,107,695
)
 
(86,383
)
 
—

 
(86,383
)
Evercore LP Units Converted into Class A Common Stock
628,930

 
7

 
23,622

 
—

 
—

 
—

 
—

 
(23,126
)
 
503

Equity-based Compensation Awards
2,457,893

 
25

 
39,678

 
—

 
—

 
—

 
—

 
(21,372
)
 
18,331

Dividends
—

 
—

 
—

 
—

 
(18,409
)
 
—

 
—

 
—

 
(18,409
)
Noncontrolling Interest (Note 12)
—

 
—

 
(7,054
)
 
—

 
—

 
—

 
—

 
(707
)
 
(7,761
)
Balance at March 31, 2017
61,379,390

 
$
614

 
$
1,424,368

 
$
(49,918
)
 
$
82,705

 
(20,209,406
)
 
$
(898,036
)
 
$
224,748

 
$
784,481

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended March 31, 2016
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
Other
 
Retained
 
 
 
 
 
 
 
 
 
Class A Common Stock
 
Paid-In
 
Comprehensive
 
Earnings
 
Treasury Stock
 
Noncontrolling
 
Total
 
Shares
 
Dollars
 
Capital
 
Income (Loss)
 
(Deficit)
 
Shares
 
Dollars
 
Interest
 
Equity
Balance at December 31, 2015
55,249,559

 
$
552

 
$
1,210,742

 
$
(34,539
)
 
$
(27,791
)
 
(15,626,288
)
 
$
(644,412
)
 
$
202,664

 
$
707,216

Net Income
—

 
—

 
—

 
—

 
5,318

 
—

 
—

 
2,360

 
7,678

Other Comprehensive Income (Loss)
—

 
—

 
—

 
(1,820
)
 
—

 
—

 
—

 
(381
)
 
(2,201
)
Treasury Stock Purchases, net
—

 
—

 
—

 
—

 
—

 
(2,331,764
)
 
(108,771
)
 
—

 
(108,771
)
Evercore LP Units Converted into Class A Common Stock
160,044

 
2

 
4,134

 
—

 
—

 
—

 
—

 
(4,136
)
 
—

Equity-based Compensation Awards
2,225,077

 
22

 
30,464

 
—

 
—

 
—

 
—

 
31,760

 
62,246

Dividends and Equivalents
—

 
—

 
1,940

 
—

 
(14,266
)
 
—

 
—

 
—

 
(12,326
)
Noncontrolling Interest (Note 12)
—

 
—

 
(1,257
)
 
—

 
—

 
—

 
—

 
(13,955
)
 
(15,212
)
Balance at March 31, 2016
57,634,680

 
$
576

 
$
1,246,023

 
$
(36,359
)
 
$
(36,739
)
 
(17,958,052
)
 
$
(753,183
)
 
$
218,312

 
$
638,630


See Notes to Unaudited Condensed Consolidated Financial Statements.


7

Table of Contents                                             



EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
 
For the Three Months Ended March 31,
 
2017
 
2016
Cash Flows From Operating Activities
 
 
 
Net Income
$
94,647

 
$
7,678

Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:
 
 
 
Net (Gains) Losses on Investments, Marketable Securities and Contingent Consideration
(1,000
)
 
(1,203
)
Equity Method Investments
(582
)
 
4,731

Equity-Based and Other Deferred Compensation
28,683

 
66,870

Depreciation, Amortization and Accretion
5,860

 
6,382

Bad Debt Expense
351

 
—

Deferred Taxes
(1,362
)
 
178

Decrease (Increase) in Operating Assets:
 
 
 
Marketable Securities
147

 
163

Financial Instruments Owned and Pledged as Collateral at Fair Value
(13,175
)
 
8,319

Securities Purchased Under Agreements to Resell
12,284

 
(111
)
Accounts Receivable
30,415

 
29,229

Receivable from Employees and Related Parties
(3,017
)
 
857

Other Assets
5,111

 
(7,228
)
(Decrease) Increase in Operating Liabilities:
 
 
 
Accrued Compensation and Benefits
(207,556
)
 
(212,762
)
Accounts Payable and Accrued Expenses
(2,696
)
 
(11,764
)
Securities Sold Under Agreements to Repurchase
883

 
(8,261
)
Payables to Employees and Related Parties
9,095

 
3,700

Taxes Payable
(18,673
)
 
(8,355
)
Other Liabilities
(20,674
)
 
9,052

Net Cash Provided by (Used in) Operating Activities
(81,259
)
 
(112,525
)
Cash Flows From Investing Activities
 
 
 
Investments Purchased
(1
)
 
(84
)
Distributions of Private Equity Investments
378

 
3

Marketable Securities:
 
 
 
Proceeds from Sales and Maturities
12,145

 
5,572

Purchases
(7,583
)
 
(8,906
)
Purchase of Furniture, Equipment and Leasehold Improvements
(6,417
)
 
(2,265
)
Net Cash Provided by (Used in) Investing Activities
(1,478
)
 
(5,680
)
Cash Flows From Financing Activities
 
 
 
Issuance of Noncontrolling Interests
60

 
—

Distributions to Noncontrolling Interests
(8,601
)
 
(8,585
)
Short-Term Borrowing
30,000

 
50,000

Repayment of Short-Term Borrowing
(30,000
)
 
—

Repayment of Subordinated Borrowings
(6,000
)
 
—

Payment of Notes Payable - Mizuho
—

 
(120,000
)
Issuance of Notes Payable
—

 
170,000

Debt Issuance Costs
—

 
(103
)
Purchase of Treasury Stock and Noncontrolling Interests
(93,454
)
 
(115,253
)
Dividends - Class A Stockholders
(16,035
)
 
(12,328
)
Net Cash Provided by (Used in) Financing Activities
(124,030
)
 
(36,269
)
Effect of Exchange Rate Changes on Cash
(497
)
 
(2,767
)
Net Increase (Decrease) in Cash and Cash Equivalents
(207,264
)
 
(157,241
)
Cash and Cash Equivalents-Beginning of Period
558,524

 
448,764

Cash and Cash Equivalents-End of Period
$
351,260

 
$
291,523

SUPPLEMENTAL CASH FLOW DISCLOSURE
 
 
 
Payments for Interest
$
6,809

 
$
2,240

Payments for Income Taxes
$
44,580

 
$
19,386

Accrued Dividends
$
2,374

 
$
1,940

Debt Issuance Costs Accrued
$
—

 
$
1,981

Settlement of Contingent Consideration
$
10,780

 
$
—

See Notes to Unaudited Condensed Consolidated Financial Statements.

8

Table of Contents
EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


Note 1 – Organization
Evercore Partners Inc. and subsidiaries (the "Company") is an investment banking and investment management firm, incorporated in Delaware on July 21, 2005 and headquartered in New York, New York. The Company is a holding company which owns a controlling interest in Evercore LP, a Delaware limited partnership ("Evercore LP"). Subsequent to the Company's initial public offering, the Company became the sole general partner of Evercore LP. The Company operates from its offices and through its affiliates in North America, Europe, South America and Asia.
The Investment Banking business includes the advisory business through which the Company provides advice to clients on significant mergers, acquisitions, divestitures and other strategic corporate transactions, with a particular focus on advising prominent multinational corporations and substantial private equity firms on large, complex transactions. The Company also provides restructuring advice to companies in financial transition, as well as to creditors, shareholders and potential acquirers. In addition, the Company provides its clients with capital markets advice, underwrites securities offerings, raises funds for financial sponsors and provides advisory services focused on secondary transactions for private funds interests. The Investment Banking business also includes the Evercore ISI business through which the Company offers macroeconomic, policy and fundamental equity research and agency-based equity securities trading for institutional investors.
The Investment Management business includes the institutional asset management business through which the Company, directly and through affiliates, manages financial assets for sophisticated institutional investors and provides independent fiduciary services to corporate employee benefit plans and high net-worth individuals, the wealth management business through which the Company provides investment advisory and wealth management services for high net-worth individuals and associated entities, and the private equity business which holds interests in entities that manage private equity funds.
Note 2 – Significant Accounting Policies
For a further discussion of the Company's accounting policies, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2016.
Basis of Presentation – The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q. As permitted by the rules and regulations of the United States Securities and Exchange Commission, the unaudited condensed consolidated financial statements contain certain condensed financial information and exclude certain footnote disclosures normally included in audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The accompanying condensed consolidated financial statements are unaudited and are prepared in accordance with U.S. GAAP. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, including normal recurring accruals, necessary to fairly present the accompanying unaudited condensed consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2016. The December 31, 2016 Unaudited Condensed Consolidated Statement of Financial Condition data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2017.
The accompanying unaudited condensed consolidated financial statements of the Company are comprised of the consolidation of Evercore LP and Evercore LP's wholly-owned and majority-owned direct and indirect subsidiaries, including Evercore Group L.L.C. ("EGL"), a registered broker-dealer in the U.S. The Company's policy is to consolidate all subsidiaries in which it has a controlling financial interest, as well as any variable interest entities ("VIEs") where the Company is deemed to be the primary beneficiary, when it has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb significant losses or the right to receive benefits that could potentially be significant to the VIE. The Company reviews factors, including the rights of the equity holders and obligations of equity holders to absorb losses or receive expected residual returns, to determine if the investment is a VIE. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly or indirectly by the Company. The consolidation analysis is generally performed qualitatively. This analysis, which requires judgment, is performed at each reporting date.
In February 2015, Accounting Standards Update ("ASU") No. 2015-02, "Amendments to the Consolidation Analysis," ("ASU 2015-02") was issued. This ASU eliminates the deferral of ASU No. 2010-10, "Amendments for Certain Investment Funds," which allows reporting entities with interests in certain investment funds to follow the consolidation

9

Table of Contents
EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


guidance in Accounting Standards Codification ("ASC") No. 810, "Consolidation," ("ASC 810") and makes other changes to the variable interest model and the voting model. ASU 2015-02 modifies the evaluation performed by reporting entities on limited partnerships and similar entities and also impacts the evaluation performed by reporting entities on VIE determination, and determination of the primary beneficiary of a VIE.
The Company adopted ASU 2015-02 on January 1, 2016. Pursuant to the provisions of ASU 2015-02, Evercore LP is a VIE and the Company is the primary beneficiary. Prior to the adoption of ASU 2015-02, the Company consolidated Evercore LP as a voting interest entity. Specifically, the Company has the majority economic interest in Evercore LP and has decision making authority that significantly affects the economic performance of the entity while the limited partners have no kick-out or substantive participating rights. The assets and liabilities of Evercore LP represent substantially all of the consolidated assets and liabilities of the Company with the exception of U.S. corporate taxes and related items, which are presented on the Company's (Parent Company Only) Condensed Statements of Financial Position in Note 23 to the Company's consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.
International Strategy & Investment (U.K.) Limited ("ISI U.K.") is also a VIE pursuant to ASC 810 and the Company is the primary beneficiary of this VIE. Specifically, the Company provides financial support through a transfer pricing agreement with this entity, which exposes the Company to losses that are potentially significant to the entity, and has decision making authority that significantly affects the economic performance of the entity. Following the adoption of ASU 2015-02, the Company also concluded that Evercore Partners International LLP ("Evercore U.K.") is a VIE and that the Company is the primary beneficiary of this VIE. The Company has the majority economic interest in Evercore U.K. and has decision making authority that significantly affects the economic performance of this entity. The Company included in its Unaudited Condensed Consolidated Statements of Financial Condition ISI U.K. and Evercore U.K. assets of $92,679 and liabilities of $67,079 at March 31, 2017 and assets of $116,958 and liabilities of $90,260 at December 31, 2016.
All intercompany balances and transactions with the Company's subsidiaries have been eliminated upon consolidation.
Note 3 – Recent Accounting Pronouncements
ASU 2014-09 – In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09"). ASU 2014-09 provides amendments to ASC No. 605, "Revenue Recognition" and creates ASC No. 606, "Revenue from Contracts with Customers," which changes the requirements for revenue recognition and amends the disclosure requirements. In August 2015, the FASB issued ASU No. 2015-14, "Deferral of the Effective Date," which provides amendments that defer the effective date of ASU 2014-09 by one year. In April 2016, the FASB issued ASU No. 2016-10, "Identifying Performance Obligations and Licensing," which provides clarification to identifying performance obligations and the licensing implementation guidance in ASU 2014-09. In May 2016, the FASB issued ASU No. 2016-12, "Narrow-Scope Improvements and Practical Expedients," which provides clarification on certain issues identified in the guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition in ASU 2014-09. The amendments in these updates are effective either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption, during interim and annual periods beginning after December 15, 2017, with early adoption permitted beginning after December 15, 2016.
The Company currently anticipates that it will adopt ASU 2014-09 on January 1, 2018 using the modified retrospective method of transition, which requires a cumulative-effect adjustment as of the date of adoption. Based on the Company's initial evaluation of ASU 2014-09, success related advisory fees, for which payment is generally dependent on the closing of a strategic transaction, a financing arrangement or some other defined outcome, will be considered variable consideration as defined by the standard. ASU 2014-09 requires that revenue be recognized when it is probable that variable consideration will not be reversed in a future period. Accordingly, revenue recognition for such fees could be accelerated under ASU 2014-09 in rare circumstances, which will require careful analysis and judgment. Under current U.S. GAAP, the Company recognizes such fees upon closing regardless of the probability of the outcome. In addition, pending the outcome of interpretive guidance (see below), the recognition of certain non-refundable fees received in connection with advisory engagements may be deferred along with deal-related expenses, until success fees are recognized or the transaction is terminated. These non-refundable fees and related expenses are currently recognized over the life of the engagement. The effect of the timing of revenue and expense recognition could be material to any given reporting period. Furthermore, current U.S. GAAP allows expenses related to underwriting transactions to be reflected net in related revenues. The Company's initial evaluation of ASU 2014-09 is that those expenses would be presented gross in the results of operations.
Interpretive guidance on ASU 2014-09 continues to be issued and vetted, in particular by the AICPA industry task force on Broker-Dealers, the AICPA's Revenue Recognition Working Group and the AICPA's Financial Reporting Executive

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


Committee (FinREC). The Company will continue to evaluate this guidance and assess the preliminary views against its initial evaluation.
ASU 2016-01 - In January 2016, the FASB issued ASU No. 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"). ASU 2016-01 provides amendments to ASC No. 825, "Financial Instruments," which change the requirements for certain aspects of recognition, measurement and presentation of financial assets and liabilities and amend the disclosure requirements. The amendments in this update should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values are effective prospectively during interim and annual periods beginning after December 15, 2017, with early adoption not permitted. The Company is currently assessing the impact of the adoption of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2016-02 - In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). ASU 2016-02 supersedes ASC No. 840, "Leases," and includes requirements for the recognition of a right-of-use asset and lease liability on the balance sheet by lessees for those leases classified as operating leases under previous guidance. The amendments in this update are effective using a modified retrospective approach at the beginning of the earliest period presented, during interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company currently anticipates adopting ASU 2016-02 on January 1, 2019 using the modified retrospective approach. The adoption will result in the present value of the Company's lease commitments which have a term in excess of one year being reflected on the Company's Statements of Financial Condition as a long-term fixed asset with a corresponding long-term liability. The Company's lease commitments, as discussed in Note 15, primarily relate to office space. The lease-related assets will be amortized to expense over the life of the leases and the liability, and related interest expense, will be reduced as lease payments are made over the life of the lease. The net impact on the Company's earnings is not expected to be materially different from the current expense related to leases as required under current U.S. GAAP, which is primarily reflected in Occupancy and Equipment Rental expense on the Unaudited Condensed Consolidated Statements of Operations.
ASU 2016-07 - In March 2016, the FASB issued ASU No. 2016-07, "Simplifying the Transition to the Equity Method of Accounting" ("ASU 2016-07"). ASU 2016-07 provides amendments to ASC No. 323, "Investments - Equity Method and Joint Ventures," which simplify the accounting for equity method investments by eliminating the requirement to adjust the investment, results of operations and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments in this update are effective prospectively to increases in the level of ownership interest or degree of influence that results in the adoption of the equity method, during interim and annual periods beginning after December 15, 2016, with early adoption permitted. The adoption of ASU 2016-07 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2016-09 - In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). ASU 2016-09 provides amendments to ASC No. 718, "Compensation - Stock Compensation," which simplify the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this update are effective during interim and annual periods beginning after December 15, 2016, with early adoption permitted. The application of ASU 2016-09 resulted in excess tax benefits from the delivery of Class A common stock ("Class A Shares") under share-based payment arrangements being recognized in the Company's Provision for Income Taxes for the three months ended March 31, 2017, rather than in Additional Paid-In-Capital under prior U.S. GAAP. The Company used the retrospective transition method for the presentation of excess tax benefits on the Statements of Cash Flows; as such, the Company classified excess tax benefits as an operating activity within Taxes Payable on the Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016. The application of ASU 2016-09 will result in greater volatility in the effective tax rate and could be material to the results of operations and the classifications of cash flows in future periods depending upon the level of earnings and stock price of the Company, among other things. See Note 17 for further detail, including the impact of the application of ASU 2016-09 on the current period.
ASU 2016-13 - In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). ASU 2016-13 provides amendments to ASC No. 326, "Financial Instruments - Credit Losses," which amend the guidance on the impairment of financial instruments and adds an impairment model (the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Entities will recognize an allowance for its estimate of expected credit losses as of the end of each reporting period. The amendments in this update are effective during interim and annual periods beginning after December 15, 2019, with early adoption permitted after December 15, 2018. The

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


Company currently uses the specific identification method for establishing credit provisions and write-offs of its trade accounts receivable. The Company currently anticipates adopting ASU 2016-13 on January 1, 2020 and does not anticipate a material difference between the current method and the CECL model.
ASU 2016-15 - In August 2016, the FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"). ASU 2016-15 provides amendments to ASC No. 230, "Statement of Cash Flows," which provide guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amendments in this update are effective retrospectively, or prospectively, if retrospective application is impracticable, during interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2016-18 - In November 2016, the FASB issued ASU No. 2016-18, "Restricted Cash" ("ASU 2016-18"). ASU 2016-18 provides amendments to ASC No. 230, "Statement of Cash Flows," which require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents. The amendments in this update are effective retrospectively during interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2017-01 - In January 2017, the FASB issued ASU No. 2017-01, "Clarifying the Definition of a Business" ("ASU 2017-01"). ASU 2017-01 provides amendments to ASC No. 805, "Business Combinations," which clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update are effective prospectively during interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2017-04 - In January 2017, the FASB issued ASU No. 2017-04, "Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"). ASU 2017-04 provides amendments to ASC No. 350, "Intangibles - Goodwill and Other," which eliminate Step 2 from the goodwill impairment test. Entities should perform their goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The amendments in this update are effective prospectively during interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
Note 4 – Intangible Asset Amortization and Other Business Developments
Intangible Asset Amortization
Expense associated with the amortization of intangible assets for Investment Banking and Investment Management was $2,357 and $118, respectively, for the three months ended March 31, 2017 and $3,215 and $199, respectively, for the three months ended March 31, 2016, included within Depreciation and Amortization expense on the Unaudited Condensed Consolidated Statements of Operations.
Subsequent Events
On May 8, 2017, the Company entered into an agreement to sell its institutional trust and independent fiduciary business, which is a part of its Investment Management segment. Completion of this transaction is expected to occur before the end of 2017. The assets associated with the business to be sold primarily consist of approximately $28,500 of goodwill and the liabilities consist of approximately $400 of deferred revenue.
Note 5 – Related Parties
Investment Management Revenue includes income from related parties earned from the Company's private equity funds for portfolio company fees, management fees, expense reimbursements and realized and unrealized gains and losses of private equity fund investments. Total Investment Management revenues from related parties amounted to $2,394 for the three months ended March 31, 2016.
Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition includes the long-term portion of loans receivable from certain employees of $15,563 and $17,862 as of March 31, 2017 and December 31, 2016, respectively.

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


The Company had $10,550 and $16,550 in subordinated borrowings, principally with an executive officer of the Company, as of March 31, 2017 and December 31, 2016, respectively. In April 2017, the Company repaid $3,751 of the original borrowings. See Note 10 for further information.
Note 6 – Marketable Securities
The amortized cost and estimated fair value of the Company's Marketable Securities as of March 31, 2017 and December 31, 2016 were as follows:
 
March 31, 2017
 
December 31, 2016
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Securities Investments
$
7,123

 
$
5

 
$
4,027

 
$
3,101

 
$
6,470

 
$
—

 
$
3,945

 
$
2,525

Debt Securities Carried by EGL
34,363

 
142

 
—

 
34,505

 
38,392

 
77

 
15

 
38,454

Investment Funds
22,503

 
2,798

 
78

 
25,223

 
23,665

 
1,854

 
11

 
25,508

Total
$
63,989

 
$
2,945

 
$
4,105

 
$
62,829

 
$
68,527

 
$
1,931

 
$
3,971

 
$
66,487

Scheduled maturities of the Company's available-for-sale debt securities within the Securities Investments portfolio as of March 31, 2017 and December 31, 2016 were as follows:
 
March 31, 2017
 
December 31, 2016
 
Amortized
Cost
 
Fair Value
 
Amortized
Cost
 
Fair Value
Due within one year
$
103

 
$
103

 
$
—

 
$
—

Due after one year through five years
1,632

 
1,631

 
1,748

 
1,728

Total
$
1,735

 
$
1,734

 
$
1,748

 
$
1,728

Since the Company has the ability and intent to hold available-for-sale securities until a recovery of fair value is equal to an amount approximating its amortized cost, which may be at maturity, and has not incurred credit losses on its securities, it does not consider such unrealized loss positions to be other-than-temporarily impaired at March 31, 2017.
Securities Investments
Securities Investments include equity and debt securities, which are classified as available-for-sale securities within Marketable Securities on the Unaudited Condensed Consolidated Statements of Financial Condition. These securities are stated at fair value with unrealized gains and losses included in Accumulated Other Comprehensive Income (Loss) and realized gains and losses included in earnings. The Company had net realized losses of ($13) and ($11) for the three months ended March 31, 2017 and 2016, respectively.
Debt Securities Carried by EGL
EGL invests in a fixed income portfolio consisting primarily of municipal bonds. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest, on the Unaudited Condensed Consolidated Statements of Operations, as required for broker-dealers in securities. The Company had net realized and unrealized losses of ($147) and ($163) for the three months ended March 31, 2017 and 2016, respectively.
Investment Funds
The Company invests in a portfolio of exchange traded funds and mutual funds as an economic hedge against the Company's deferred compensation program. See Note 14 for further information. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest, on the Unaudited Condensed Consolidated Statements of Operations. The Company had net realized and unrealized gains (losses) of $1,062 and ($9) for the three months ended March 31, 2017 and 2016, respectively.


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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


Note 7 – Financial Instruments Owned and Pledged as Collateral at Fair Value, Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase
The Company, through Evercore Casa de Bolsa, S.A. de C.V. ("ECB"), enters into repurchase agreements with clients seeking overnight money market returns whereby ECB transfers to the clients Mexican government securities in exchange for cash and concurrently agrees to repurchase the securities at a future date for an amount equal to the cash exchanged plus a stipulated premium or interest factor. ECB deploys the cash received from, and acquires the securities deliverable to, clients under these repurchase arrangements by purchasing securities in the open market, which the Company reflects as Financial Instruments Owned and Pledged as Collateral at Fair Value on the Unaudited Condensed Consolidated Statements of Financial Condition, or by entering into reverse repurchase agreements with unrelated third parties. The Company accounts for these repurchase and reverse repurchase agreements as collateralized financing transactions, which are carried at their contract amounts, which approximate fair value given that the contracts mature the following business day. The Company records a liability on its Unaudited Condensed Consolidated Statements of Financial Condition in relation to repurchase transactions executed with clients as Securities Sold Under Agreements to Repurchase. The Company records as assets on its Unaudited Condensed Consolidated Statements of Financial Condition, Financial Instruments Owned and Pledged as Collateral at Fair Value (where the Company has acquired the securities deliverable to clients under these repurchase arrangements by purchasing securities in the open market) and Securities Purchased Under Agreements to Resell (where the Company has acquired the securities deliverable to clients under these repurchase agreements by entering into reverse repurchase agreements with unrelated third parties). These Mexican government securities had an estimated average time to maturity of approximately 1.0 year, as of March 31, 2017, and are pledged as collateral against repurchase agreements. Generally, collateral is posted equal to the contract value at inception and is subject to market changes. These repurchase agreements are primarily with institutional customer accounts managed by ECB and permit the counterparty to pledge the securities.
ECB has procedures in place to monitor the daily risk limits for positions taken, as well as the credit risk based on the collateral pledged under these agreements against their contract value from inception to maturity date. The daily risk measure is Value at Risk ("VaR"), which is a statistical measure, at a 98% confidence level, of the potential daily losses from adverse market movements in an ordinary market environment based on a historical simulation using the prior year's historical data. ECB's Risk Management Committee (the "Committee") has established a policy to maintain VaR at levels below 0.1% of the value of the portfolio. If at any point in time the threshold is exceeded, ECB personnel are alerted by an automated interface with ECB's trading systems and begin to make adjustments in the portfolio in order to mitigate the risk and bring the portfolio in compliance. Concurrently, ECB personnel must notify the Committee of the variance and the actions taken to reduce the exposure to loss.
In addition to monitoring VaR, ECB periodically performs discrete stress tests to assure that the level of potential losses that would arise from extreme market movements that may not be anticipated by VaR ("Stress Tests") measures are within acceptable levels.
As of March 31, 2017 and December 31, 2016, a summary of the Company's assets, liabilities and collateral received or pledged related to these transactions was as follows:
 
March 31, 2017
 
December 31, 2016
 
Asset
(Liability)
Balance
 
Market Value of
Collateral Received
or (Pledged)
 
Asset
(Liability)
Balance
 
Market Value of
Collateral Received
or (Pledged)
Assets
 
 
 
 
 
 
 
Financial Instruments Owned and Pledged as Collateral at Fair Value
$
34,808

 
 
 
$
18,535

 
 
Securities Purchased Under Agreements to Resell
535

 
$
536

 
12,585

 
$
12,601

Total Assets
$
35,343

 
 
 
$
31,120

 
 
Liabilities
 
 
 
 
 
 
 
Securities Sold Under Agreements to Repurchase
$
(35,368
)
 
$
(35,388
)
 
$
(31,150
)
 
$
(31,155
)
Note 8 – Investments
The Company's investments reported on the Unaudited Condensed Consolidated Statements of Financial Condition consist of investments in private equity partnerships, other investments in unconsolidated affiliated companies, an equity

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


security in a private company and investments in Glisco Manager Holdings LP and Trilantic Capital Partners ("Trilantic"). The Company's investments are relatively high-risk and illiquid assets.
The Company's investments in private equity partnerships consist of investment interests in private equity funds which are voting interest entities. Realized and unrealized gains and losses on the private equity investments are included within Investment Management Revenue.
The Company also has investments in G5 Holdings S.A. ("G5 | Evercore"), ABS Investment Management, LLC ("ABS"), Atalanta Sosnoff Capital, LLC ("Atalanta Sosnoff") and Luminis Partners ("Luminis"), which are voting interest entities. The Company's share of earnings (losses) on its investments in G5 ǀ Evercore, ABS, Atalanta Sosnoff and Luminis are included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations.
Investments in Private Equity
Private Equity Funds
The Company's investments related to private equity partnerships and associated entities include investments in Evercore Capital Partners II, L.P. ("ECP II"), Glisco Partners II, L.P. ("Glisco II"), Glisco Partners III, L.P. ("Glisco III"), Trilantic Capital Partners Associates IV, L.P. ("Trilantic IV") and Trilantic Capital Partners V, L.P. ("Trilantic V"). Portfolio holdings of the private equity funds are carried at fair value. Accordingly, the Company reflects its pro rata share of the unrealized gains and losses occurring from changes in fair value. Additionally, the Company reflects its pro rata share of realized gains, losses and carried interest associated with any investment realizations.
On September 30, 2016, the Company completed the transfer of ownership and control of the Mexican Private Equity business to a newly formed entity, Glisco Partners Inc. ("Glisco"), which is controlled by the principals of the business.
On December 31, 2014, ECP II was terminated. The Company's investment at March 31, 2017 of $933 is comprised of its remaining interest in the general partner, including $852 in cash and $81 in securities. In addition, as of March 31, 2017, Discovery Americas I, L.P. (the "Discovery Fund"), was fully distributed.
A summary of the Company's investment in the private equity funds as of March 31, 2017 and December 31, 2016 was as follows:
 
March 31, 2017
 
December 31, 2016
ECP II
$
933

 
$
933

Discovery Fund
—

 
7,463

Glisco II
6,897

 
6,897

Glisco III
529

 
529

Trilantic IV
286

 
211

Trilantic V
5,210

 
5,709

Total Private Equity Funds
$
13,855

 
$
21,742

Net realized and unrealized gains on private equity fund investments were $339 and $1,367 for the three months ended March 31, 2017 and 2016, respectively. In the event the funds perform poorly, the Company may be obligated to repay certain carried interest previously distributed. As of March 31, 2017, there was no previously distributed carried interest received from the Company's managed funds that was subject to repayment.
General Partners of Private Equity Funds which are VIEs
The Company has concluded that Evercore Partners II, L.L.C. ("EP II L.L.C."), the general partner of ECP II, is a VIE pursuant to ASC 810. The Company owned 8%-9% of the carried interest earned by the general partner of ECP II. The Company's assessment of the design of EP II L.L.C. resulted in the determination that the Company is not acting as an agent for other members of the general partner and is a passive holder of interests in the fund, evidenced by the fact that the Company is a non-voting, non-managing member of the general partner and, therefore, has no authority in directing the management operations of the general partner. Furthermore, the Company does not have the obligation to absorb significant losses or the right to receive benefits that could potentially have a significant impact to EP II L.L.C. Accordingly, the Company has

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


concluded that it is not the primary beneficiary of EP II L.L.C. and has not consolidated EP II L.L.C. in the Company's unaudited condensed consolidated financial statements.
Following the Glisco transaction, the Company concluded that Glisco Capital Partners II, Glisco Capital Partners III and Glisco Manager Holdings LP are VIEs and that the Company is not the primary beneficiary of these VIEs. The Company's assessment of the primary beneficiary of these entities included assessing which parties have the power to significantly impact the economic performance of these entities and the obligation to absorb losses, which could be potentially significant to the entities, or the right to receive benefits from the entities that could be potentially significant. Neither the Company nor its related parties will have the ability to make decisions that significantly impact the economic performance of these entities. Further, as a limited partner in these entities, the Company does not possess substantive participating rights. The Company had assets of $9,743 included in its Unaudited Condensed Consolidated Statements of Financial Condition at March 31, 2017 related to these unconsolidated VIEs, representing the carrying value of the Company's investments in the entities. The Company's exposure to the obligations of these VIEs is generally limited to its investments in these entities. The Company's maximum exposure to loss as of March 31, 2017 was $12,086, which represents the carrying value of the Company's investments in these VIEs, as well as any unfunded commitments to the current funds.
Investment in Trilantic Capital Partners
In 2010, the Company made a limited partnership investment in Trilantic in exchange for 500 Class A limited partnership units of Evercore LP ("Class A LP Units") having a fair value of $16,090. This investment gave the Company the right to invest in Trilantic's current and future private equity funds, beginning with Trilantic Fund IV. The Company accounts for this investment under the cost method, subject to impairment. The Company allocates the cost of this investment to its investments in current and future Trilantic funds as the Company satisfies the capital calls of these funds. The Company bases this allocation on its expectation of Trilantic's future fundraising ability and performance. During the three months ended March 31, 2017, $120 of this investment was allocated to Trilantic Fund V. From 2010 to 2016, $3,280 and $1,178 of this investment was allocated to Trilantic Fund V and IV, respectively. This investment had a balance of $11,512 and $11,632 as of March 31, 2017 and December 31, 2016, respectively. The Company has a $5,000 commitment to invest in Trilantic Fund V, of which $1,989 was unfunded at March 31, 2017. The Company and Trilantic anticipate that the Company will participate in the successor funds to Trilantic Fund V. The Company further anticipates that participation in the successor fund will be at approximately $12,000.
Cost Method Investments
In 2015, the Company received an equity security in a private company with a fair value of $1,079 in exchange for advisory services. This investment is accounted for under the cost method of accounting.
Following the Glisco transaction in 2016, the Company recorded an investment in Glisco Manager Holdings LP representing the fair value of the deferred consideration resulting from this transaction. This investment is accounted for under the cost method of accounting. The Company amortizes the balance of its investment as distributions are received related to the deferred consideration. This investment had a balance of $2,317 and $2,463 as of March 31, 2017 and December 31, 2016, respectively.
Equity Method Investments
A summary of the Company's other investments accounted for under the equity method of accounting as of March 31, 2017 and December 31, 2016 was as follows:
 
March 31, 2017
 
December 31, 2016
G5 ǀ Evercore
$
27,060

 
$
26,016

ABS
39,850

 
38,982

Atalanta Sosnoff
14,457

 
14,719

Luminis
5,500

 
—

Total
$
86,867

 
$
79,717




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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


G5 ǀ Evercore
In 2010, the Company made an investment accounted for under the equity method of accounting in G5 ǀ Evercore. At March 31, 2017, the Company's economic ownership interest in G5 ǀ Evercore was 49%. This investment resulted in losses of ($26) and ($248) for the three months ended March 31, 2017 and 2016, respectively, included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations. In addition, the investment is subject to currency translation from Brazilian Real to the U.S. Dollar.
ABS
In 2011, the Company made an investment accounted for under the equity method of accounting in ABS. At March 31, 2017, the Company's economic ownership interest in ABS was 45%. This investment resulted in earnings of $1,531 and $1,330 for the three months ended March 31, 2017 and 2016, respectively, included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations.
Atalanta Sosnoff
On December 31, 2015, the Company amended the Operating Agreement with Atalanta Sosnoff and deconsolidated its assets and liabilities. The Company accounted for its interest in Atalanta Sosnoff under the equity method of accounting from that date forward. At March 31, 2017, the Company's economic ownership interest in Atalanta Sosnoff was 49%. This investment resulted in earnings of $105 and $205 for the three months ended March 31, 2017 and 2016, respectively, included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations.
Luminis
On January 1, 2017, the Company made an investment accounted for under the equity method of accounting in Luminis. At March 31, 2017, the Company's economic ownership interest in Luminis was 19%.
Other
The Company allocates the purchase price of its equity method investments, in part, to the inherent finite-lived identifiable intangible assets of the investees. The Company's share of the earnings of the investees has been reduced by the amortization of these identifiable intangible assets inherent in the investments of $390 and $880 for the three months ended March 31, 2017 and 2016, respectively.
The Company assesses its equity method investments for impairment annually, or more frequently if circumstances indicate impairment may have occurred.
Note 9 – Fair Value Measurements
ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820") establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily-available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I – Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed derivatives. As required by ASC 820, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.
Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. The estimated fair values of the Corporate Bonds, Municipal Bonds, Other Debt Securities and Securities Investments held at March 31, 2017 and December 31, 2016 are based on prices provided by external pricing services.

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


Level III – Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation.
The following table presents the categorization of investments and certain other financial assets measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016:
 
March 31, 2017
 
Level I
 
Level II
 
Level III
 
Total
Corporate Bonds, Municipal Bonds and Other Debt Securities (1)
$
—

 
$
43,262

 
$
—

 
$
43,262

Securities Investments (1)
4,362

 
1,734

 
—

 
6,096

Investment Funds
25,223

 
—

 
—

 
25,223

Financial Instruments Owned and Pledged as Collateral at Fair Value
34,808

 
—

 
—

 
34,808

Total Assets Measured At Fair Value
$
64,393

 
$
44,996

 
$
—

 
$
109,389

 
 
 
 
 
 
 
 
 
December 31, 2016
 
Level I
 
Level II
 
Level III
 
Total
Corporate Bonds, Municipal Bonds and Other Debt Securities (1)
$
—

 
$
44,630

 
$
—

 
$
44,630

Securities Investments (1)
3,794

 
1,728

 
—

 
5,522

Investment Funds
25,508

 
—

 
—

 
25,508

Financial Instruments Owned and Pledged as Collateral at Fair Value
18,535

 
—

 
—

 
18,535

Total Assets Measured At Fair Value
$
47,837

 
$
46,358

 
$
—

 
$
94,195

(1)
Includes $11,752 and $9,173 of treasury bills, municipal bonds and commercial paper classified within Cash and Cash Equivalents on the Unaudited Condensed Consolidated Statements of Financial Condition as of March 31, 2017 and December 31, 2016, respectively.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.
The Company had no transfers between fair value levels during the three months ended March 31, 2017 or the year ended December 31, 2016.

During the fourth quarter of 2016, the Company determined that the fair value of its equity method investment in Atalanta Sosnoff was $14,730. The fair value of the investment was estimated by utilizing both a market multiple approach and a discounted cash flow methodology based on the adjusted cash flows from operations. The equity method investment was measured at fair value on a non-recurring basis as a Level III asset.
The carrying amount and estimated fair value of the Company's financial instrument assets and liabilities, which are not measured at fair value on the Unaudited Condensed Consolidated Statements of Financial Condition, are listed in the tables below.

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


 
 
 
March 31, 2017
 
Carrying
 
Estimated Fair Value
 
Amount
 
Level I
 
Level II
 
Level III
 
Total
Financial Assets:
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
339,508

 
$
339,508

 
$
—

 
$
—

 
$
339,508

Securities Purchased Under Agreements to Resell
535

 
—

 
535

 
—

 
535

Accounts Receivable
201,013

 
—

 
201,013

 
—

 
201,013

Receivable from Employees and Related Parties
18,063

 
—

 
18,063

 
—

 
18,063

Assets Segregated for Bank Regulatory Requirements
10,200

 
10,200

 
—

 
—

 
10,200

Closely-held Equity Security
1,079

 
—

 
—

 
1,079

 
1,079

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Accounts Payable and Accrued Expenses
$
29,649

 
$
—

 
$
29,649

 
$
—

 
$
29,649

Securities Sold Under Agreements to Repurchase
35,368

 
—

 
35,368

 
—

 
35,368

Payable to Employees and Related Parties
36,461

 
—

 
36,461

 
—

 
36,461

Notes Payable
168,158

 
—

 
168,237

 
—

 
168,237

Subordinated Borrowings
10,550

 
—

 
10,835

 
—

 
10,835

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
Carrying
 
Estimated Fair Value
 
Amount
 
Level I
 
Level II
 
Level III
 
Total
Financial Assets:
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
549,351

 
$
549,351

 
$
—

 
$
—

 
$
549,351

Securities Purchased Under Agreements to Resell
12,585

 
—

 
12,585

 
—

 
12,585

Accounts Receivable
230,522

 
—

 
230,522

 
—

 
230,522

Receivable from Employees and Related Parties
15,034

 
—

 
15,034

 
—

 
15,034

Assets Segregated for Bank Regulatory Requirements
10,200

 
10,200

 
—

 
—

 
10,200

       Closely-held Equity Security
1,079

 
—

 
—

 
1,079

 
1,079

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Accounts Payable and Accrued Expenses
$
30,723

 
$
—

 
$
30,723

 
$
—

 
$
30,723

Securities Sold Under Agreements to Repurchase
31,150

 
—

 
31,150

 
—

 
31,150

Payable to Employees and Related Parties
27,366

 
—

 
27,366

 
—

 
27,366

Notes Payable
168,097

 
—

 
170,251

 
—

 
170,251

Subordinated Borrowings
16,550

 
—

 
16,803

 
—

 
16,803

The following methods and assumptions were used to estimate the fair value of these financial assets and liabilities:
The fair value of the Company's Closely-held Equity Security is based on recent comparable transactions executed by the issuer.
The fair value of the Company's Notes Payable and Subordinated Borrowings is estimated based on a present value analysis utilizing aggregate market yields obtained from independent pricing sources for similar financial instruments.

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


The carrying amounts reported on the Unaudited Condensed Consolidated Statements of Financial Condition for Cash and Cash Equivalents, Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase, Accounts Receivable, Receivable from Employees and Related Parties, Accounts Payable and Accrued Expenses, Payable to Employees and Related Parties and Assets Segregated for Bank Regulatory Requirements approximate fair value due to the short-term nature of these items.
Note 10 – Notes Payable and Subordinated Borrowings
On March 30, 2016, the Company issued an aggregate of $170,000 of senior notes, including: $38,000 aggregate principal amount of its 4.88% Series A senior notes due 2021 (the "Series A Notes"), $67,000 aggregate principal amount of its 5.23% Series B senior notes due 2023 (the "Series B Notes"), $48,000 aggregate principal amount of its 5.48% Series C senior notes due 2026 (the "Series C Notes") and $17,000 aggregate principal amount of its 5.58% Series D senior notes due 2028 (the "Series D Notes" and together with the Series A Notes, the Series B Notes and the Series C Notes, the "Private Placement Notes"), pursuant to a note purchase agreement (the "Note Purchase Agreement") dated as of March 30, 2016, among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933.
Interest on the Private Placement Notes is payable semi-annually and the Private Placement Notes are guaranteed by certain of the Company's domestic subsidiaries. The Company may, at its option, prepay all, or from time to time any part of, the Private Placement Notes (without regard to Series), in an amount not less than 5% of the aggregate principal amount of the Private Placement Notes then outstanding at 100% of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the Private Placement Notes will have the right to require the Company to prepay the entire unpaid principal amounts held by each holder of the Private Placement Notes plus accrued and unpaid interest to the prepayment date. The Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio, a minimum tangible net worth and a minimum interest coverage ratio, and customary events of default. As of March 31, 2017, the Company was in compliance with all of these covenants.
The Company used $120,000 of the net proceeds from the Private Placement Notes to repay outstanding borrowings under the senior credit facility with Mizuho Bank, Ltd. ("Mizuho") on March 30, 2016 and used the remaining net proceeds for general corporate purposes.
Notes Payable is comprised of the following as of March 31, 2017 and December 31, 2016:
 
 
 
 
 
 
Carrying Value (a)
Note
 
Maturity Date
 
Effective Annual Interest Rate
 
March 31, 2017
 
December 31, 2016
Evercore Partners Inc. 4.88% Series A Senior Notes
 
3/30/2021
 
5.16
%
 
$
37,618

 
$
37,597

Evercore Partners Inc. 5.23% Series B Senior Notes
 
3/30/2023
 
5.44
%
 
66,279

 
66,254

Evercore Partners Inc. 5.48% Series C Senior Notes
 
3/30/2026
 
5.64
%
 
47,457

 
47,445

Evercore Partners Inc. 5.58% Series D Senior Notes
 
3/30/2028
 
5.72
%
 
16,804

 
16,801

Total
 
 
 
 
 
$
168,158

 
$
168,097

(a) Carrying value has been adjusted to reflect the presentation of debt issuance costs as a direct reduction from the related liability.
The Company has subordinated borrowings, principally with an executive officer of the Company, due on October 31, 2019. These borrowings have a coupon of 5.5%, payable semi-annually. In February 2017, the Company repaid $6,000 of the original borrowings. The Company had $10,550 and $16,550 in subordinated borrowings pursuant to these agreements as of March 31, 2017 and December 31, 2016, respectively. In April 2017, the Company repaid $3,751 of the original borrowings.
Note 11 – Evercore Partners Inc. Stockholders' Equity
Dividends – The Company's Board of Directors declared on April 24, 2017, a quarterly cash dividend of $0.34 per share, to the holders of record of Class A Shares as of May 26, 2017, which will be paid on June 9, 2017. During the three months ended March 31, 2017, the Company declared and paid or accrued dividends of $0.34 per share, totaling $18,409.

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


Treasury Stock – During the three months ended March 31, 2017, the Company purchased 1,094 Class A Shares primarily from employees at values ranging from $50.90 to $81.52 per share (at an average cost per share of $78.03), primarily for the net settlement of stock-based compensation awards, and 14 Class A Shares at a market value of $74.51 per share pursuant to the Company's share repurchase program. The result of these purchases was an increase in Treasury Stock of $86,383 on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of March 31, 2017.
LP Units – During the three months ended March 31, 2017, 629 LP Units were exchanged for Class A Shares, resulting in an increase to Common Stock and Additional Paid-In-Capital of $7 and $23,622, respectively, on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of March 31, 2017.
Accumulated Other Comprehensive Income (Loss) – As of March 31, 2017, Accumulated Other Comprehensive Income (Loss) on the Company's Unaudited Condensed Consolidated Statement of Financial Condition includes an accumulated Unrealized Gain (Loss) on Marketable Securities and Investments, net, and a Foreign Currency Translation Adjustment Gain (Loss), net, of ($5,859) and ($44,059), respectively.
Note 12 – Noncontrolling Interest
Noncontrolling Interest recorded in the unaudited condensed consolidated financial statements of the Company relates to a 13% interest in Evercore LP, a 38% interest in Evercore Wealth Management ("EWM"), a 39% interest in Evercore Private Capital Advisory L.P. ("PCA") through March 3, 2017, the date the Company purchased an additional 13% interest, and a 26% interest thereafter, a 28% interest in ECB (through January 29, 2016, the date all of the noncontrolling interest was repurchased by the Company) and other private equity partnerships (through September 30, 2016, the date the Company deconsolidated its Mexican Private Equity business). The Noncontrolling Interests for Evercore LP, EWM and PCA have rights, in certain circumstances, to convert into Class A Shares.
Changes in Noncontrolling Interest for the three months ended March 31, 2017 and 2016 were as follows:
 
For the Three Months Ended March 31,
 
2017
 
2016
Beginning balance
$
256,033

 
$
202,664

 
 
 
 
Comprehensive income (loss):
 
 
 
Net Income Attributable to Noncontrolling Interest
13,876

 
2,360

Other comprehensive income (loss)
44

 
(381
)
Total comprehensive income
13,920

 
1,979

 
 
 
 
Evercore LP Units Converted into Class A Shares
(23,126
)
 
(4,136
)
Amortization and Vesting of LP Units/Interests
(21,372
)
 
31,760

 
 
 
 
Other Items:
 
 
 
Distributions to Noncontrolling Interests
(8,601
)
 
(8,585
)
Issuance of Noncontrolling Interest
8,229

 
—

Purchase of Noncontrolling Interest
(261
)
 
(5,225
)
Other, net
(74
)
 
(145
)
Total other items
(707
)
 
(13,955
)
 
 
 
 
Ending balance
$
224,748

 
$
218,312

Other Comprehensive Income - Other comprehensive income (loss) attributed to Noncontrolling Interest includes Unrealized Gain (Loss) on Marketable Securities and Investments, net, of ($8) and $3 for the three months ended March 31, 2017 and 2016, respectively, and Foreign Currency Translation Adjustment Gain (Loss), net, of $52 and ($384) for the three months ended March 31, 2017 and 2016, respectively.

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


Interests Purchased - On March 3, 2017, the Company purchased, at fair value, an additional 13% of PCA for $7,071, resulting in a decrease to Noncontrolling Interest of $261 and a decrease to Additional Paid-In Capital of $6,810, on the Company's Unaudited Condensed Consolidated Statement of Financial Condition for the three months ended March 31, 2017.
On January 29, 2016, the Company purchased, at fair value, all of the noncontrolling interest in ECB for $6,482 resulting in a decrease to Noncontrolling Interest of $5,225 and a decrease to Additional Paid-In Capital of $1,257, on the Company's Unaudited Condensed Consolidated Statement of Financial Condition for the three months ended March 31, 2016.
Note 13 – Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders
The calculations of basic and diluted net income per share attributable to Evercore Partners Inc. common shareholders for the three months ended March 31, 2017 and 2016 are described and presented below.
 
For the Three Months Ended March 31,
 
2017
 
2016
Basic Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders
 
 
 
Numerator:
 
 
 
Net income attributable to Evercore Partners Inc. common shareholders
$
80,771

 
$
5,318

Denominator:
 
 
 
Weighted average Class A Shares outstanding, including vested restricted stock units ("RSUs")
40,480

 
39,620

Basic net income per share attributable to Evercore Partners Inc. common shareholders
$
2.00

 
$
0.13

Diluted Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders
 
 
 
Numerator:
 
 
 
Net income attributable to Evercore Partners Inc. common shareholders
$
80,771

 
$
5,318

Noncontrolling interest related to the assumed exchange of LP Units for Class A Shares
(a)

 
(a)

Associated corporate taxes related to the assumed elimination of Noncontrolling Interest described above
(a)

 
(a)

Diluted net income attributable to Evercore Partners Inc. common shareholders
$
80,771

 
$
5,318

Denominator:
 
 
 
Weighted average Class A Shares outstanding, including vested RSUs
40,480

 
39,620

Assumed exchange of LP Units for Class A Shares
(a)

 
(a)

Additional shares of the Company's common stock assumed to be issued pursuant to non-vested RSUs and deferred consideration, as calculated using the Treasury Stock Method
2,881

 
1,887

Shares that are contingently issuable (b)
2,575

 
3,413

Diluted weighted average Class A Shares outstanding
45,936

 
44,920

Diluted net income per share attributable to Evercore Partners Inc. common shareholders
$
1.76

 
$
0.12

(a)
The Company has outstanding LP Units in its subsidiary, Evercore LP, which give the holders the right to receive Class A Shares upon exchange on a one-for-one basis. During the three months ended March 31, 2017 and 2016, the LP Units were antidilutive and consequently the effect of their exchange into Class A Shares has been excluded from the calculation of diluted net income per share attributable to Evercore Partners Inc. common shareholders. The units that would have been included in the denominator of the computation of diluted net income per share attributable to Evercore Partners Inc. common shareholders if the effect would have been dilutive were 6,098 and 6,413 for the three months ended March 31, 2017 and 2016, respectively. The adjustment to the numerator, diluted net income attributable to Class A common

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


shareholders, if the effect would have been dilutive, would have been $11,389 and $1,311 for the three months ended March 31, 2017 and 2016, respectively. In computing this adjustment, the Company assumes that all vested Class A LP Units and all Class E limited partnership units of Evercore LP ("Class E LP Units") are converted into Class A Shares, that all earnings attributable to those shares are attributed to Evercore Partners Inc. and, that it has adopted a conventional corporate tax structure and is taxed as a C Corporation in the U.S. at prevailing corporate tax rates. The Company does not anticipate that the LP Units will result in a dilutive computation in future periods.
(b)
At March 31, 2017 and 2016, the Company has outstanding Class G and H limited partnership interests of Evercore LP ("Class G and H LP Interests") which are contingently exchangeable into Class E LP Units, and ultimately Class A Shares, as well as outstanding Class I-P units of Evercore LP ("Class I-P Units") which are contingently exchangeable into Class I limited partnership units of Evercore LP ("Class I LP Units"), and ultimately Class A Shares, as they are subject to certain performance thresholds being achieved. See Note 14 for a further discussion. For the purposes of calculating diluted net income per share attributable to Evercore Partners Inc. common shareholders, the Company's Class G and H LP Interests and Class I-P LP Units will be included in diluted weighted average Class A Shares outstanding as of the beginning of the period in which all necessary performance conditions have been satisfied. If all necessary performance conditions have not been satisfied by the end of the period, the number of shares that will be included in diluted weighted average Class A Shares outstanding will be based on the number of shares that would be issuable if the end of the reporting period were the end of the performance period. The Interests/Units that were assumed to be converted to an equal number of Class A Shares for purposes of computing diluted EPS were 2,575 and 3,413 for the three months ended March 31, 2017 and 2016, respectively.
The shares of Class B common stock have no right to receive dividends or a distribution on liquidation or winding up of the Company. The shares of Class B common stock do not share in the earnings of the Company and no earnings are allocable to such class. Accordingly, basic and diluted net income per share of Class B common stock have not been presented.
Note 14 – Share-Based and Other Deferred Compensation
Acquisition-related LP Units
Equities business - In conjunction with the acquisition of the operating businesses of International Strategy & Investment ("ISI") in 2014, the Company issued Evercore LP units and interests which have been treated as compensation, including 710 vested Class E LP Units and an allocation of the value, attributed to post-combination service, of 710 Class E LP Units that were unvested and vest ratably on October 31, 2015, 2016 and 2017 and become exchangeable once vested. The units will become exchangeable into Class A Shares of the Company subject to certain liquidated damages and continued employment provisions. Compensation expense related to Class E LP Units was $4,756 and $5,613 for the three months ended March 31, 2017 and 2016, respectively.
The Company also issued 538 vested and 540 unvested Class G LP Interests, which vest ratably on February 15, 2016, 2017 and 2018, and 2,044 vested and 2,051 unvested Class H LP Interests, which will vest ratably on February 15, 2018, 2019 and 2020. The Company's vested Class G and Class H LP Interests will become exchangeable into Class A Shares of the Company subject to the achievement of certain performance targets. The Company's vested Class G LP Interests become exchangeable in February 2016, 2017 and 2018 if certain earnings before interest and taxes, excluding underwriting, ("Management Basis EBIT") margin thresholds within a range of 12% to 16%, are achieved for the calendar year preceding the date the interests become exchangeable. The Company's vested Class H LP Interests will become exchangeable in February 2018, 2019 and 2020 if certain average Management Basis EBIT and Management Basis EBIT margin thresholds, within ranges of $8,000 to $48,000 and 7% to 17%, respectively, are achieved for the three calendar years preceding the date the interests become exchangeable. In the event of death, disability or termination of employment without cause, unvested Class G and H LP Interests will be canceled or may vest based on determination of expected performance, based on a decision by Management.
In February 2017 and 2016, 368 and 371 Class G LP Interests achieved their performance targets and were converted to the same number of Class E LP Units, respectively.
Based on Evercore ISI's results for the first three months of 2017 as well as the Company's revised outlook for the Evercore ISI business, including strategic decisions to increase the compensation ratio for this business, the Company determined that the achievement of the remaining performance thresholds for the remaining Class G LP Interests was no longer probable at March 31, 2017 and that the achievement of the remaining performance thresholds for certain of the Class H LP Interests was no longer probable at March 31, 2017. This determination assumes a Management Basis EBIT margin of 11.7%

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


and an annual Management Basis EBIT of $26,904 being achieved in 2017 and a Management Basis EBIT margin of 14.0% and an annual Management Basis EBIT of $34,357 being achieved in 2018 and 2019 for Evercore ISI, which would result in 2,030 Class H LP Interests vesting and becoming exchangeable into Class E LP Units. For the three months ended March 31, 2016, the Company had determined that the achievement of certain of the remaining performance thresholds for the Class G and H LP Interests was probable and assumed a Management Basis EBIT margin of 16.2% and an annual Management Basis EBIT of $36,900 being achieved over the performance period for Evercore ISI. Accordingly, $26,224 of expense was reversed for the three months ended March 31, 2017 and $26,051 of expense was recorded for the three months ended March 31, 2016, for the Class G and H LP Interests.
The life to date actual accrued expense related to unvested Class H LP Interests as of March 31, 2017 was $56,251, which would be reversed if the actual performance fell below, or is deemed probable of falling below, the minimum thresholds prior to vesting. Conversely, assuming the maximum thresholds for the Class G and H LP Interests were considered probable of achievement at March 31, 2017, an additional $76,086 of expense would have been incurred for the three months ended March 31, 2017 and the remaining expense to be accrued over the future vesting period extending from April 1, 2017 to February 15, 2020 would be $103,449. In that circumstance, the total number of remaining Class G and H LP Interests that would vest and become exchangeable to Class E LP Units would be 4,572.
During the first quarter of 2017, the Company modified the terms of 19 Class E LP Units, 14 Class G LP Interests and 162 Class H LP Interests. The modification resulted in expense of ($3,022), reflecting the reversal of all previous expense related to these awards and the subsequent amortization of the awards at the modified grant date fair value of $14,891. These awards will be amortized ratably until June 30, 2017.
Stock Incentive Plan
During 2016, the Company's stockholders approved the Amended and Restated 2016 Evercore Partners Inc. Stock Incentive Plan (the "2016 Plan"). The 2016 Plan, among other things, authorizes an additional 10,000 shares of the Company's Class A Shares. The 2016 Plan permits the Company to grant to key employees, directors and consultants incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, RSUs and other awards based on the Company's Class A Shares. The Company intends to use newly-issued Class A Shares to satisfy any awards under the 2016 Plan and its predecessor plan. Class A Shares underlying any award granted under the 2016 Plan that expire, terminate or are canceled or satisfied for any reason without being settled in stock again become available for awards under the plans. The total shares available to be granted in the future under the 2016 Plan was 7,455 as of March 31, 2017.
The Company also grants, at its discretion, dividend equivalents, in the form of unvested RSU awards, or cash dividends, concurrently with the payment of dividends to the holders of Class A Shares, on all unvested RSU grants awarded in conjunction with annual bonuses as well as new hire awards.
The Company estimates forfeitures in the aggregate compensation cost to be amortized over the requisite service period of its awards. The Company periodically monitors its estimated forfeiture rate and adjusts its assumptions to the actual occurrence of forfeited awards. A change in estimated forfeitures is recognized through a cumulative catch-up adjustment in the period of the change. 
Equity Grants
During the three months ended March 31, 2017, pursuant to the 2016 Plan, the Company granted employees 2,477 RSUs that are Service-based Awards. Service-based Awards granted during the three months ended March 31, 2017 had grant date fair values of $78.48 to $81.52 per share. During the three months ended March 31, 2017, 2,297 Service-based Awards vested and 26 Service-based Awards were forfeited. Compensation expense related to Service-based Awards was $38,742 and $28,762 for the three months ended March 31, 2017 and 2016, respectively.
Executive Chairman
In November 2016, in conjunction with the appointment of the Executive Chairman, the Company issued the following awards:
The Company granted a restricted cash award with a target payment amount of $35,000, of which $11,000 is scheduled to vest on March 1, 2019 and $6,000 is scheduled to vest on each of the first four anniversaries of March 1, 2019, provided that the Executive Chairman continues to remain employed through each such vesting date, subject to vesting upon specified termination events (including retirement, upon satisfying certain eligibility criteria, on or following May 1, 2019, subject to a

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


six month prior written notice requirement) or a change in control. The Company has the discretion to increase (by an amount up to $35,000) or decrease (by an amount up to $8,750) the total amount payable under this award. Compensation expense related to this award was $1,188 for the three months ended March 31, 2017.
The Company granted 900 RSUs with a grant date fair value of $65.38 per share, of which 18% vested on December 31, 2016 and were fully expensed during the year ended December 31, 2016. An additional 14% of these RSUs vest on each of March 1, 2018, 2019, 2020 and 2021, and 26% on March 1, 2022, provided that the Executive Chairman continues to remain employed through the applicable vesting date, subject to vesting upon specified termination events (including retirement, upon satisfying certain eligibility criteria, on or following January 15, 2022, subject to a one year prior written notice requirement) or a change in control. These awards will be expensed ratably over the remaining vesting period. Compensation expense, included in compensation expense related to Service-based Awards above, related to this award was $2,302 for the three months ended March 31, 2017.
The Company issued 400 Class I-P Units. These Class I-P Units convert into a specified number of Class I LP Units, which are exchangeable on a one-for-one basis to Class A Shares, contingent on the achievement of certain market and service conditions, subject to vesting upon specified termination events (including retirement, upon satisfying certain eligibility criteria, on or following January 15, 2022, subject to a one year prior written notice requirement) or a change in control. These Class I-P Units are segregated into two groups of 200 units each, with share price threshold vesting conditions which are required to exceed a certain level for 20 consecutive trading days (which were met as of March 31, 2017). The Company determined the fair value of the award to be $24,412 and is expensing the award ratably over the implied service period, which ends on March 1, 2022. As the award contains market-based conditions, the entire expense will be recognized if the award does not vest for any reason other than the service conditions. Compensation expense related to this award was $1,139 for the three months ended March 31, 2017.
Deferred Cash Program
The Company's deferred compensation program provided participants the ability to elect to receive a portion of their deferred compensation in cash, which is indexed to a notional investment portfolio and vests ratably over four years and requires payment upon vesting. The Company granted $3,750, $41,147 and $3,926 of deferred cash awards pursuant to the deferred compensation program during 2017, 2016 and 2012, respectively. Compensation expense related to this deferred compensation program was $3,210 and $2,560 for the three months ended March 31, 2017 and 2016, respectively.
Long-term Incentive Plan
The Company's Long-term Incentive Plan provides for incentive compensation awards to Advisory Senior Managing Directors, excluding executive officers of the Company, who exceed defined benchmark results over four-year performance periods beginning January 1, 2013 and January 1, 2017. These awards, which aggregate $36,541 of liabilities on the Unaudited Condensed Consolidated Statement of Financial Condition as of March 31, 2017, will be paid, in cash or Class A Shares, at the Company's discretion, in three equal installments in the first quarter of 2017, 2018 and 2019 (for the performance period beginning on January 1, 2013) and in the first quarter of 2021, 2022 and 2023 (for the performance period beginning on January 1, 2017), subject to employment at the time of payment. These awards are subject to retirement eligibility requirements. The Company periodically assesses the probability of the benchmarks being achieved and expenses the probable payout over the requisite service period of the award. The compensation expense related to these awards was $5,858 and $3,739 for the three months ended March 31, 2017 and 2016, respectively. In conjunction with this plan, the Company distributed cash payments of $19,401 for the three months ended March 31, 2017.
Employee Loans Receivable
Periodically, the Company provides new and existing employees with cash payments in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements ranging from one to five years. Generally, the terms of these awards include a requirement of either full or partial repayment of these awards based on the terms of their employment agreements with the Company. In circumstances where the employee meets the Company's minimum credit standards, the Company amortizes these awards to compensation expense over the relevant service period which is generally the period they are subject to forfeiture. Compensation expense related to these awards was $4,172 and $4,832 for the three months ended March 31, 2017 and 2016, respectively. The remaining unamortized amount of these awards was $32,594 as of March 31, 2017.


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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


Separation Benefits
The Company granted separation benefits to certain employees, resulting in expense included in Employee Compensation and Benefits of approximately $609 and $2,028 for the three months ended March 31, 2017 and 2016, respectively. In conjunction with these arrangements, the Company distributed cash payments of $111 and $1,139 for the three months ended March 31, 2017 and 2016, respectively.
Note 15 – Commitments and Contingencies
For a further discussion of the Company's commitments, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2016.
Operating Leases – The Company leases office space under non-cancelable lease agreements, which expire on various dates through 2025. The Company reflects lease expense over the lease terms on a straight-line basis. Occupancy lease agreements, in addition to base rentals, generally are subject to escalation provisions based on certain costs incurred by the landlord. Occupancy and Equipment Rental on the Unaudited Condensed Consolidated Statements of Operations includes occupancy rental expense relating to operating leases of $9,517 and $7,985 for the three months ended March 31, 2017 and 2016, respectively.
Private Equity – As of March 31, 2017, the Company had unfunded commitments for capital contributions of $4,392 to private equity funds. These commitments will be funded as required through the end of each private equity fund's investment period, subject to certain conditions. Such commitments are satisfied in cash and are generally required to be made as investment opportunities are consummated by the private equity funds.
Under the terms of the acquisition agreement for Protego Casa de Bolsa, S.A. de C.V., the Company was obligated to pay the partners that sold Protego 90% of the return proceeds and performance fees received from Protego's investment in the general partner of the Discovery Fund. Beginning in 2014, the Company received distributions from Discovery Americas Associated L.P., the general partner of the Discovery Fund. Accordingly, as of March 31, 2017, the Company recorded Goodwill of $13,515 pursuant to this agreement. The Company’s investment in the Discovery Fund was fully distributed as of March 31, 2017. See Note 8 for further information.
Lines of Credit
On June 24, 2016, Evercore Partners Services East L.L.C. ("East") entered into a loan agreement with PNC Bank, National Association ("PNC") for a revolving credit facility in an aggregate principal amount of up to $30,000, to be used for working capital and other corporate activities. This facility is secured by East's accounts receivable and the proceeds therefrom, as well as certain assets of EGL, including certain of EGL's accounts receivable. In addition, the agreement contains certain reporting covenants as well as certain debt covenants that prohibit East and the Company from incurring other indebtedness subject to specified exceptions. Drawings under this facility bear interest at the prime rate. The facility matures on June 23, 2017, subject to an extension agreed to between East and PNC. On February 2, 2017, East drew down $30,000 on this facility, which was repaid on March 10, 2017.
Other Commitments
In addition, the Company enters into commitments to pay contingent consideration related to certain of its acquisitions. At March 31, 2017, the Company had a remaining commitment for contingent consideration related to its acquisition of Kuna & Co. KG in 2015.
Contingencies
In the normal course of business, from time to time the Company and its affiliates are involved in judicial or regulatory proceedings, arbitration or mediation concerning matters arising in connection with the conduct of its businesses, including contractual and employment matters. In addition, Mexican, United Kingdom, Hong Kong, Singapore, Canadian and United States government agencies and self-regulatory organizations, as well as state securities commissions in the United States, conduct periodic examinations and initiate administrative proceedings regarding the Company's business, including, among other matters, accounting and operational matters, that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer, investment advisor, or its directors, officers or employees. In view of the inherent difficulty of determining whether any loss in connection with such matters is probable and whether the amount of such loss can be reasonably estimated, particularly in cases where claimants seek substantial or indeterminate damages or where

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


investigations and proceedings are in the early stages, the Company cannot estimate the amount of such loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, fine, penalty or other relief, if any, might be. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that it is not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company. Provisions for losses are established in accordance with ASC 450, "Contingencies" when warranted. Once established, such provisions are adjusted when there is more information available or when an event occurs requiring a change.
On September 19, 2016, EGL was named as a defendant in the First Amended and Supplemented Verified Class Action Complaint (the "Complaint"), filed in the Chancery Court of the State of Delaware in a case entitled City of Daytona Beach Police and Fire Pension Fund v. ExamWorks Group, Inc., et al. (C.A. No. 12481-VCL). The Complaint was brought on behalf of a purported class consisting of all ExamWorks common stockholders and purports to assert a claim against EGL for aiding and abetting breaches of fiduciary duties by ExamWorks officers and directors in connection with a merger transaction between ExamWorks and affiliates of Leonard Green & Partners, L.P. that was agreed to on April 26, 2016 and consummated on July 27, 2016. The Complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys' fees. The parties reached an agreement in principle to settle the case prior to trial which would result in no liability to EGL.  The settlement is subject to appropriate documentation and court approval.
Note 16 – Regulatory Authorities
EGL is a U.S. registered broker-dealer and is subject to the net capital requirements of Rule 15c3-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Under the Alternative Net Capital Requirement, EGL's minimum net capital requirement is $250. EGL's regulatory net capital as of March 31, 2017 and December 31, 2016 was $112,489 and $119,644, respectively, which exceeded the minimum net capital requirement by $112,239 and $119,394, respectively.
Certain other non-U.S. subsidiaries are subject to various securities and banking regulations and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. These subsidiaries are in excess of their local capital adequacy requirements at March 31, 2017.
Evercore Trust Company, N.A. ("ETC"), which is limited to fiduciary activities, is regulated by the Office of the Comptroller of the Currency ("OCC") and is a member bank of the Federal Reserve System. The Company, Evercore LP and ETC are subject to written agreements with the OCC that, among other things, require the Company and Evercore LP to (1) maintain at least $5,000 in Tier 1 capital in ETC (or such other amount as the OCC may require), (2) maintain liquid assets in ETC in an amount at least equal to the greater of $3,500 or 90 days coverage of ETC's operating expenses and (3) provide at least $10,000 of certain collateral held in a segregated account at a third-party depository institution. The collateral is included in Assets Segregated for Bank Regulatory Requirements on the Unaudited Condensed Consolidated Statements of Financial Condition. The Company was in compliance with the aforementioned agreements as of March 31, 2017.
Note 17 – Income Taxes
The Company's Provision for Income Taxes was $18,292 and $9,734 for the three months ended March 31, 2017 and 2016, respectively. The effective tax rate was 16% and 56% for the three months ended March 31, 2017 and 2016, respectively. The effective tax rate for the three months ended March 31, 2017 reflects the application of ASU 2016-09, which was adopted effective January 1, 2017. ASU 2016-09 requires that the tax deduction associated with the appreciation in the Company's share price upon vesting of employee share-based awards above the original grant price be reflected in income tax expense. The application of ASU 2016-09 resulted in excess tax benefits from the delivery of Class A common stock under share-based payment arrangements of ($22,957) being recognized in the Company's Provision for Income Taxes for the three months ended March 31, 2017, and resulted in a reduction in the effective tax rate of 20 percentage points for the period. The effective tax rate for the three months ended March 31, 2017 and 2016 also reflects the effect of certain nondeductible expenses, including expenses related to Class E LP Units and Class G and H LP Interests, as well as the noncontrolling interest associated with LP Units and other adjustments.
The Company reported an increase in deferred tax assets of $21 associated with changes in Unrealized Gain (Loss) on Marketable Securities and a decrease of $140 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the three months ended March 31, 2017. The Company reported a decrease in deferred tax assets of $8 associated with changes in Unrealized Gain (Loss) on Marketable Securities and an increase of $1,183 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the three months ended March 31, 2016.

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


As of March 31, 2017, the Company had no unrecognized tax benefits.
The Company classifies interest relating to tax matters and tax penalties as a component of income tax expense in its Unaudited Condensed Consolidated Statements of Operations.
Note 18 – Segment Operating Results
Business Segments – The Company's business results are categorized into the following two segments: Investment Banking and Investment Management. Investment Banking includes providing advice to clients on significant mergers, acquisitions, divestitures and other strategic corporate transactions, as well as services related to securities underwriting, private placement services and commissions for agency-based equity trading services and equity research. Investment Management includes advising third-party investors in the Institutional Asset Management, Wealth Management and Private Equity sectors. On September 30, 2016, the Company deconsolidated the assets and liabilities of its Mexican Private Equity business, which was in the Investment Management segment.
The Company's segment information for the three months ended March 31, 2017 and 2016 is prepared using the following methodology:
•
Revenue, expenses and income (loss) from equity method investments directly associated with each segment are included in determining pre-tax income.
•
Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other performance and time-based factors.
•
Segment assets are based on those directly associated with each segment, or for certain assets shared across segments; those assets are allocated based on the most relevant measures applicable, including headcount and other factors.
•
Investment gains and losses, interest income and interest expense are allocated between the segments based on the segment in which the underlying asset or liability is held.
Each segment's Operating Expenses include: a) employee compensation and benefits expenses that are incurred directly in support of the segment and b) non-compensation expenses, which include expenses for premises and occupancy, professional fees, travel and entertainment, communications and information services, equipment and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, legal, facilities management and senior management activities.
Other Expenses include the following:
•
Amortization of LP Units/Interests and Certain Other Awards - Includes amortization costs or the reversal of expenses associated with the vesting of Class E LP Units and Class G and H LP Interests issued in conjunction with the acquisition of ISI and certain other related awards.
•
Fair Value of Contingent Consideration - Includes expense associated with changes in the fair value of contingent consideration issued to the sellers of certain of the Company's acquisitions.
•
Intangible Asset and Other Amortization - Includes amortization of intangible assets and other purchase accounting-related amortization associated with certain acquisitions.
The Company evaluates segment results based on net revenues and pre-tax income, both including and excluding the impact of the Other Expenses.
One client accounted for more than 10% (14%) of the Company's consolidated Net Revenues for the three months ended March 31, 2017.
The following information presents each segment's contribution.

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


 
For the Three Months Ended March 31,
 
2017
 
2016
Investment Banking
 
 
 
Net Revenues (1)
$
370,770

 
$
239,713

Operating Expenses
281,592

 
192,264

Other Expenses (2)
(18,979
)
 
35,028

Operating Income
108,157

 
12,421

Income (Loss) from Equity Method Investments
(149
)
 
(272
)
Pre-Tax Income
$
108,008

 
$
12,149

Identifiable Segment Assets
$
1,077,509

 
$
940,859

Investment Management
 
 
 
Net Revenues (1)
$
16,477

 
$
18,000

Operating Expenses
13,305

 
14,214

Other Expenses (2)
—

 
82

Operating Income
3,172

 
3,704

Income from Equity Method Investments
1,759

 
1,559

Pre-Tax Income
$
4,931

 
$
5,263

Identifiable Segment Assets
$
355,253

 
$
343,818

Total
 
 
 
Net Revenues (1)
$
387,247

 
$
257,713

Operating Expenses
294,897

 
206,478

Other Expenses (2)
(18,979
)
 
35,110

Operating Income
111,329

 
16,125

Income from Equity Method Investments
1,610

 
1,287

Pre-Tax Income
$
112,939

 
$
17,412

Identifiable Segment Assets
$
1,432,762

 
$
1,284,677

(1)
Net revenues include Other Revenue, net, allocated to the segments as follows:
 
For the Three Months Ended March 31,
 
2017
 
2016
Investment Banking (A)
$
(1,168
)
 
$
(913
)
Investment Management (B)
131

 
(429
)
Total Other Revenue, net
$
(1,037
)
 
$
(1,342
)
(A)
Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and the line of credit of $2,581 and $1,478 for the three months ended March 31, 2017 and 2016, respectively.
(B)
Investment Management Other Revenue, net, includes interest expense on the Notes Payable and the line of credit of $670 for the three months ended March 31, 2016.

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EVERCORE PARTNERS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and share / unit amounts in thousands, except per share amounts, unless otherwise noted)


(2)
Other Expenses are as follows:
 
For the Three Months Ended March 31,
 
2017
 
2016
Investment Banking
 
 
 
Amortization of LP Units / Interests and Certain Other Awards
$
(21,371
)
 
$
31,759

Fair Value of Contingent Consideration
—

 
106

Intangible Asset and Other Amortization
2,392

 
3,163

Total Investment Banking
(18,979
)
 
35,028

Investment Management
 
 
 
Intangible Asset and Other Amortization
—

 
82

Total Investment Management
—

 
82

Total Other Expenses
$
(18,979
)
 
$
35,110

Geographic Information – The Company manages its business based on the profitability of the enterprise as a whole.
The Company's revenues were derived from clients and private equity funds located and managed in the following geographical areas:
 
For the Three Months Ended March 31,
 
2017
 
2016
Net Revenues: (1)
 
 
 
United States
$
263,165

 
$
173,910

Europe and Other
122,911

 
72,211

Latin America
2,208

 
12,934

Total
$
388,284

 
$
259,055

(1) Excludes Other Revenue and Interest Expense.
The Company's total assets are located in the following geographical areas:
 
March 31, 2017
 
December 31, 2016
Total Assets:
 
 
 
United States
$
1,167,473

 
$
1,376,101

Europe and Other
174,833

 
190,380

Latin America
90,456

 
95,865

Total
$
1,432,762

 
$
1,662,346


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Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with Evercore Partners Inc.'s unaudited condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q.
Forward-Looking Statements
This report contains or incorporates by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act, which reflect our current views with respect to, among other things, our 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", "probable", "continues", "may", "should", "seeks", "approximately", "predicts", "intends", "plans", "estimates", "anticipates" or the negative version of these words or other comparable words. 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 forward-looking statements. All statements other than statements of historical fact 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 our business. We believe these factors include, but are not limited to, those described under "Risk Factors" discussed in the Annual Report on Form 10-K for the year ended December 31, 2016. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included or incorporated by reference in this report. We undertake no obligation to publicly update or review any forward-looking statement. We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management 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.
Key Financial Measures
Revenue
Total revenues reflect revenues from our Investment Banking and Investment Management business segments that include fees for services, transaction-related client reimbursements plus other revenue. Net revenues reflect total revenues less interest expense.
Investment Banking. Our Investment Banking business earns fees from our clients for providing advice on mergers, acquisitions, divestitures, leveraged buyouts, restructurings and similar corporate finance matters, and from underwriting and private placement activities, as well as commissions from our sales and trading activities. The amount and timing of the fees paid vary by the type of engagement or services provided. In general, advisory fees are paid at the time we sign an engagement letter, during the course of the engagement or when an engagement is completed. The majority of our investment banking revenue consists of advisory fees that are dependent on the successful completion of a transaction. A transaction can fail to be completed for many reasons, including failure of parties to agree upon final terms with the counterparty, to secure necessary board or shareholder approvals, to secure necessary financing or to achieve necessary regulatory approvals. In the case of bankruptcy engagements, fees are subject to approval of the court. Underwriting fees are recognized when the offering has been deemed to be completed, placement fees are generally recognized at the time of the client's acceptance of capital or capital commitments. Commissions and Related Fees includes commissions, which are recorded on a trade-date basis or, in the case of payments under commission sharing arrangements, on the date earned. Commissions and Related Fees also include subscription fees for the sales of research. Cash received before the subscription period ends is initially recorded as deferred revenue and recognized as revenue over the remaining subscription period.
Revenue trends in our advisory business generally are correlated to the volume of merger and acquisition ("M&A") activity and/or restructuring activity, which tends to be counter-cyclical to M&A. However, deviations from this trend can occur in any given year or quarter for a number of reasons. For example, changes in our market share or the ability of our clients to close certain large transactions can cause our revenue results to diverge from the level of overall M&A or restructuring activity. Revenue trends in our equities business are correlated to market volumes, which generally decrease in periods of unfavorable market or economic conditions.

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Investment Management. Our Investment Management business includes operations related to the management of the Institutional Asset Management, Wealth Management and Private Equity businesses. Revenue sources primarily include management fees, which include fees earned from portfolio companies, fiduciary and consulting fees, performance fees (including carried interest) and gains (or losses) on our investments.
Management fees for third party clients generally represent a percentage of assets under management ("AUM"). Fiduciary and consulting fees, which are generally a function of the size and complexity of each engagement, are individually negotiated. Management fees from private equity operations are generally a percentage of committed capital or invested capital at rates agreed with the investment funds we manage or with the individual client. The Company records performance fees upon the earlier of the termination of the investment fund or when the likelihood of clawback is mathematically improbable. Portfolio company fees include monitoring, director and transaction fees associated with services provided to the portfolio companies of the private equity funds we hold interests in. Gains and losses include both realized and unrealized gains and losses on principal investments, including those arising from our equity interest in investment partnerships.
Transaction-Related Client Reimbursements. In both our Investment Banking and Investment Management segments, we make various transaction-related expenditures, such as travel and professional fees, on behalf of our clients. Pursuant to the engagement letters with our advisory clients or the contracts with the limited partners in the private equity funds we manage, these expenditures may be reimbursable. We define these expenses as transaction-related expenses and record such expenditures as incurred and record revenue when it is determined that clients have an obligation to reimburse us for such transaction-related expenses. Client expense reimbursements are recorded as revenue on the Unaudited Condensed Consolidated Statements of Operations on the later of the date an engagement letter is executed or the date we pay or accrue the expense.
Other Revenue and Interest Expense. Other Revenue and Interest Expense is derived from investing customer funds in financing transactions. These transactions are principally repurchases and resales of Mexican government and government agency securities. Revenue and expenses associated with these transactions are recognized over the term of the repurchase or resale transaction.
Other Revenue also includes income earned on marketable securities, cash and cash equivalents and assets segregated for regulatory purposes, as well as adjustments to amounts due pursuant to our tax receivable agreements, subsequent to its initial establishment, related to changes in state and local tax rates and gains (losses) resulting from foreign currency fluctuations.
Interest Expense also includes interest expense associated with our Notes Payable, subordinated borrowings and the line of credit.
Operating Expenses
Employee Compensation and Benefits Expense. We include all payments for services rendered by our employees, as well as profits interests in our businesses that have been accounted for as compensation, in employee compensation and benefits expense.
We maintain compensation programs, including base salary, cash, deferred cash and equity bonus awards and benefits programs and manage compensation to estimates of competitive levels based on market conditions and performance. Our level of compensation reflects our plan to maintain competitive compensation levels to retain key personnel, and it reflects the impact of newly-hired senior professionals, including related grants of equity awards which are generally valued at their grant date.
Increasing the number of high-caliber, experienced senior level employees is critical to our growth efforts. In our advisory businesses, these hires generally do not begin to generate significant revenue in the year they are hired.
Our annual compensation program includes share-based compensation awards and deferred cash awards as a component of the annual bonus awards for certain employees. These awards are generally subject to annual vesting requirements over a four-year period beginning at the date of grant, which occurs in the first quarter of each year; accordingly, the expense is generally amortized over the stated vesting period, subject to retirement eligibility. With respect to annual awards, the Company's retirement eligibility criteria stipulates that if an employee has at least five years of continuous service, is at least 55 years of age and has a combined age and years of service of at least 65 years, the employee is eligible for retirement. Retirement eligibility allows for continued vesting of awards after employees depart from the Company, provided they give the minimum advance notice, which is generally one year.

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The Company estimates forfeitures in the aggregate compensation cost to be amortized over the requisite service period of its awards. The Company periodically monitors its estimated forfeiture rate and adjusts its assumptions to the actual occurrence of forfeited awards. A change in estimated forfeitures is recognized through a cumulative catch-up adjustment in the period of the change. 
Our Long-term Incentive Plan provides for incentive compensation awards to Advisory Senior Managing Directors, excluding executive officers, who exceed defined benchmark results over four-year performance periods beginning January 1, 2013 and January 1, 2017. These awards will be paid, in cash or Class A Shares, at our discretion, in three equal installments in the first quarter of 2017, 2018 and 2019 (for the performance period beginning on January 1, 2013) and in the first quarter of 2021, 2022 and 2023 (for the performance period beginning on January 1, 2017), subject to employment at the time of payment. These awards are subject to retirement eligibility requirements.
Non-Compensation Expenses. The balance of our operating expenses includes costs for occupancy and equipment rental, professional fees, travel and related expenses, communications and information technology services, depreciation and amortization and other operating expenses. We refer to all of these expenses as non-compensation expenses.
Other Expenses
Other Expenses include the following:
•
Amortization of LP Units/Interests and Certain Other Awards - Includes amortization costs or the reversal of expenses associated with the vesting of Class E LP Units and Class G and H LP Interests issued in conjunction with the acquisition of ISI and certain other related awards.
•
Fair Value of Contingent Consideration - Includes expense associated with changes in the fair value of contingent consideration issued to the sellers of certain of our acquisitions.
•
Intangible Asset and Other Amortization - Includes amortization of intangible assets and other purchase accounting-related amortization associated with certain acquisitions.
Income from Equity Method Investments
Our share of the income (loss) from our equity interests in G5 ǀ Evercore, ABS, Atalanta Sosnoff and Luminis are included within Income from Equity Method Investments, as a component of Income Before Income Taxes, on the Unaudited Condensed Consolidated Statements of Operations.
Provision for Income Taxes
We account for income taxes in accordance with ASC 740, "Income Taxes" ("ASC 740"), which requires the recognition of tax benefits or expenses on temporary differences between the financial reporting and tax basis of our assets and liabilities. We adopted ASU 2016-09 on January 1, 2017, which resulted in excess tax benefits and deficiencies from the delivery of Class A Shares under share-based payment arrangements being recognized in the Company's Provision for Income Taxes, rather than in Additional Paid-In-Capital under prior U.S. GAAP. See note 17 to our unaudited condensed consolidated financial statements for further information.
Noncontrolling Interest
We record noncontrolling interest relating to the ownership interests of our current and former Senior Managing Directors and other officers and their estate planning vehicles in Evercore LP, as well as the portions of our operating subsidiaries not owned by Evercore. As described in Note 12 to our unaudited condensed consolidated financial statements herein, Evercore Partners Inc. is the sole general partner of Evercore LP and has a majority economic interest in Evercore LP. As a result, Evercore Partners Inc. consolidates Evercore LP and records a noncontrolling interest for the economic interest in Evercore LP held by the limited partners.
We generally allocate net income or loss to noncontrolling interests held at Evercore LP and at the operating entity level, where required, by multiplying the relative ownership interest of the noncontrolling interest holders for the period by the net income or loss of the entity to which the noncontrolling interest relates. In circumstances where the governing documents of the entity to which the noncontrolling interest relates require special allocations of profits or losses to the controlling and noncontrolling interest holders, then the net income or loss of these entities is allocated based on these special allocations.

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Results of Operations
The following is a discussion of our results of operations for the three months ended March 31, 2017 and 2016. For a more detailed discussion of the factors that affected the revenue and operating expenses of our Investment Banking and Investment Management business segments in these periods, see the discussion in "Business Segments" below.
 
For the Three Months Ended March 31,
 
 
 
2017
 
2016
 
Change
 
(dollars in thousands, except per share data)
Revenues
 
 
 
 
 
Investment Banking Revenue
$
371,938

 
$
240,626

 
55
%
Investment Management Revenue
16,346

 
18,429

 
(11
%)
Other Revenue, Including Interest
3,739

 
1,377

 
172
%
Total Revenues
392,023

 
260,432

 
51
%
Interest Expense
4,776

 
2,719

 
76
%
Net Revenues
387,247

 
257,713

 
50
%
Expenses
 
 
 
 
 
Operating Expenses
294,897

 
206,478

 
43
%
Other Expenses
(18,979
)
 
35,110

 
NM

Total Expenses
275,918

 
241,588

 
14
%
Income Before Income from Equity Method Investments and Income Taxes
111,329

 
16,125

 
590
%
Income from Equity Method Investments
1,610

 
1,287

 
25
%
Income Before Income Taxes
112,939

 
17,412

 
549
%
Provision for Income Taxes
18,292

 
9,734

 
88
%
Net Income
94,647

 
7,678

 
NM

Net Income Attributable to Noncontrolling Interest
13,876

 
2,360

 
488
%
Net Income Attributable to Evercore Partners Inc.
$
80,771

 
$
5,318

 
NM

Diluted Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders
$
1.76

 
$
0.12

 
NM

As of March 31, 2017 and 2016 we employed approximately 1,500 and 1,400 people, respectively, worldwide.
Three Months Ended March 31, 2017 versus March 31, 2016
Net Revenues were $387.2 million for the three months ended March 31, 2017, an increase of $129.5 million, or 50%, versus Net Revenues of $257.7 million for the three months ended March 31, 2016. Investment Banking Revenue increased 55% and Investment Management Revenue decreased 11% compared to the three months ended March 31, 2016. On September 30, 2016, we transferred ownership of our Mexican Private Equity business and related entities to Glisco. The results of the Mexican Private Equity business were consolidated for the three months ended March 31, 2016, which included Net Revenues of $2.4 million and Total Expenses of $1.0 million. Other Revenue for the three months ended March 31, 2017 was 172% higher than for the three months ended March 31, 2016.
Total Operating Expenses were $294.9 million for the three months ended March 31, 2017, as compared to $206.5 million for the three months ended March 31, 2016, an increase of $88.4 million, or 43%. Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $226.9 million for the three months ended March 31, 2017, an increase of $78.7 million, or 53%, versus expense of $148.2 million for the three months ended March 31, 2016. The increase was primarily due to increased compensation costs resulting from the expansion of our businesses, including costs from share-based and other deferred and incentive compensation arrangements, as well as increased annual incentive compensation related to the 50% increase in Net Revenues. Headcount increased 7% from March 31, 2016 to March 31, 2017. The increase in Employee Compensation and Benefits Expense, as a component of Operating Expenses, was also due to increased costs related to awards issued in conjunction with the appointment of our Executive Chairman in November 2016. See Note 14 to our unaudited

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condensed consolidated financial statements for further information. Non-compensation expenses as a component of Operating Expenses were $68.0 million for the three months ended March 31, 2017, an increase of $9.7 million, or 17%, over non-compensation operating expenses of $58.3 million for the three months ended March 31, 2016. Non-compensation operating expenses increased compared to the three months ended March 31, 2016 primarily driven by increased headcount, increased new business costs associated with higher levels of global transaction activity and higher professional fees. Non-compensation operating expenses for the three months ended March 31, 2017 included execution and clearing costs of $3.7 million, compared to $4.8 million for the three months ended March 31, 2016.
Total Other Expenses of ($19.0) million for the three months ended March 31, 2017 primarily included the reversal of $26.2 million of expense associated with Evercore LP Interests granted in conjunction with the acquisition of ISI, as the achievement of certain of the remaining performance thresholds for the remaining Class G and H LP Interests was no longer probable at March 31, 2017. This assessment was based on management's revised outlook for the Evercore ISI business, including strategic decisions to increase the compensation ratio for this business. Other Expenses for the three months ended March 31, 2017 also included compensation costs associated with the vesting of LP Units and certain other awards of $4.8 million and intangible asset and other amortization of $2.4 million. Total Other Expenses of $35.1 million for the three months ended March 31, 2016 included compensation costs associated with the vesting of LP Units and Interests and certain other awards of $31.8 million, primarily related to Evercore LP Units and Interests granted in conjunction with the acquisition of ISI, changes to the fair value of contingent consideration of $0.1 million and intangible asset and other amortization of $3.2 million.
The life to date actual accrued expense related to unvested Class H LP Interests as of March 31, 2017 was $56.3 million, which would be reversed if the actual performance fell below, or is deemed probable of falling below, the minimum thresholds prior to vesting. Conversely, assuming the maximum thresholds for the Class G and H LP Interests were considered probable of achievement at March 31, 2017, an additional $76.1 million of expense would have been incurred for the three months ended March 31, 2017 and the remaining expense to be accrued over the future vesting period extending from April 1, 2017 to February 15, 2020 would be $103.4 million. In that circumstance, the total number of Class G and H LP Interests that would vest and become exchangeable to Class E LP Units would be 4.6 million.
As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 53% for the three months ended March 31, 2017, compared to 70% for the three months ended March 31, 2016.
Income from Equity Method Investments was $1.6 million for the three months ended March 31, 2017, as compared to $1.3 million for the three months ended March 31, 2016. The increase was primarily a result of an increase in earnings from ABS.
The provision for income taxes for the three months ended March 31, 2017 was $18.3 million, which reflected an effective tax rate of 16%. The provision for income taxes for the three months ended March 31, 2016 was $9.7 million, which reflected an effective tax rate of 56%. The effective tax rate for the three months ended March 31, 2017 reflects the application of ASU 2016-09, which was adopted effective January 1, 2017. ASU 2016-09 requires that the tax deduction associated with the appreciation in the Company's share price upon vesting of employee share-based awards above the original grant price be reflected in income tax expense. The application of ASU 2016-09 resulted in excess tax benefits from the delivery of Class A common stock under share-based payment arrangements of ($23.0) million being recognized in the Company's Provision for Income Taxes for the three months ended March 31, 2017, and resulted in a reduction in the effective tax rate of 20 percentage points for the period. The provision for income taxes for 2017 and 2016 also reflects the effect of certain nondeductible expenses, including expenses related to Class E LP Units and Class G and H LP Interests, as well as the noncontrolling interest associated with LP Units and other adjustments.
Net Income Attributable to Noncontrolling Interest was $13.9 million for the three months ended March 31, 2017 compared to $2.4 million for the three months ended March 31, 2016. The increase in Net Income Attributable to Noncontrolling Interest reflects higher income allocated to Evercore LP during the three months ended March 31, 2017.






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Business Segments
The following data presents revenue, expenses and contributions from our equity method investments by business segment.
Investment Banking
The following table summarizes the operating results of the Investment Banking segment.
 
For the Three Months Ended March 31,
 
 
 
2017
 
2016
 
Change
 
(dollars in thousands)
Revenues
 
 
 
 
 
Investment Banking Revenue:
 
 
 
 
 
Advisory Fees
$
312,284

 
$
180,102

 
73
%
Commissions and Related Fees
49,674

 
57,218

 
(13
%)
Underwriting Fees
9,980

 
3,306

 
202
%
Total Investment Banking Revenue (1)
371,938

 
240,626

 
55
%
Other Revenue, net (2)
(1,168
)
 
(913
)
 
(28
%)
Net Revenues
370,770

 
239,713

 
55
%
Expenses
 
 
 
 
 
Operating Expenses
281,592

 
192,264

 
46
%
Other Expenses
(18,979
)
 
35,028

 
NM

Total Expenses
262,613

 
227,292

 
16
%
Operating Income (3)
108,157

 
12,421

 
771
%
Income (Loss) from Equity Method Investments (4)
(149
)
 
(272
)
 
45
%
Pre-Tax Income
$
108,008

 
$
12,149

 
789
%
 
(1)
Includes client related expenses of $6.7 million and $3.9 million for the three months ended March 31, 2017 and 2016, respectively.
(2)
Includes interest expense on the Notes Payable, subordinated borrowings and the line of credit of $2.6 million and $1.5 million for the three months ended March 31, 2017 and 2016, respectively.
(3)
Includes Noncontrolling Interest of ($0.7) million and ($0.6) million for the three months ended March 31, 2017 and 2016, respectively.
(4)
Equity in G5 | Evercore - Advisory is classified as Income (Loss) from Equity Method Investments.

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For the three months ended March 31, 2017, the dollar value of North American announced and completed M&A activity increased 14% and decreased 8%, respectively, compared to the three months ended March 31, 2016, while the dollar value of Global announced and completed M&A activity for the three months ended March 31, 2017 increased 12% and decreased 17%, respectively, compared to the three months ended March 31, 2016:
 
For the Three Months Ended March 31,
 
 
 
2017
 
2016
 
Change
Industry Statistics ($ in billions) *
 
 
 
 
 
Value of North American M&A Deals Announced
$
312

 
$
274

 
14
%
Value of North American M&A Deals Completed
$
343

 
$
371

 
(8
%)
Value of Global M&A Deals Announced
$
771

 
$
689

 
12
%
Value of Global M&A Deals Completed
$
651

 
$
782

 
(17
%)
Evercore Statistics **
 
 
 
 
 
Total Number of Fees From Advisory Client Transactions
163

 
173

 
(6
%)
Investment Banking Fees of at Least $1 million from Advisory Client Transactions
53

 
41

 
29
%
 
*
Source: Thomson Reuters April 1, 2017
**
Includes revenue generating clients only
Investment Banking Results of Operations
Three Months Ended March 31, 2017 versus March 31, 2016
Net Investment Banking Revenues were $370.8 million for the three months ended March 31, 2017 compared to $239.7 million for the three months ended March 31, 2016, which represented an increase of 55%. We earned advisory fees from 163 clients for the three months ended March 31, 2017 compared to 173 for the three months ended March 31, 2016, representing a 6% decrease. We had 53 fees in excess of $1.0 million for the three months ended March 31, 2017, compared to 41 for the three months ended March 31, 2016, representing a 29% increase. The increase in revenues from the three months ended March 31, 2016 primarily reflects an increase of $132.2 million, or 73%, in Advisory fees, principally driven by higher value deals in our U.S. business, and an increase of $6.7 million, or 202%, in Underwriting Fees, principally driven by higher volume in our U.S. business. These increases were partially offset by a decrease of $7.5 million, or 13%, in our Commissions and Related Fees, principally driven by lower trading volumes in the market which negatively impacted volumes across all execution channels at Evercore ISI despite increased market share in the U.S.
Operating Expenses were $281.6 million for the three months ended March 31, 2017 compared to $192.3 million for the three months ended March 31, 2016, an increase of $89.3 million, or 46%. Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $217.5 million for the three months ended March 31, 2017, as compared to $138.0 million for the three months ended March 31, 2016, an increase of $79.5 million, or 58%. The increase was primarily due to increased compensation costs resulting from the expansion of our businesses, including costs from share-based and other deferred and incentive compensation arrangements, as well as increased annual incentive compensation related to the 55% increase in Net Revenues. The increase in Employee Compensation and Benefits Expense, as a component of Operating Expenses, was also due to increased costs related to awards issued in conjunction with the appointment of our Executive Chairman in November 2016. Non-compensation expenses, as a component of Operating Expenses, were $64.1 million for the three months ended March 31, 2017, as compared to $54.3 million for the three months ended March 31, 2016, an increase of $9.8 million, or 18%. Non-compensation operating expenses increased from the prior year primarily driven by increased headcount within the business, increased new business costs associated with higher levels of global transaction activity and higher professional fees.
Other Expenses of ($19.0) million for the three months ended March 31, 2017 primarily included the reversal of $26.2 million of expense associated with Evercore LP Interests granted in conjunction with the acquisition of ISI, as the achievement of certain of the remaining performance thresholds for the remaining Class G and H LP Interests was no longer probable at March 31, 2017. This assessment was based on management's revised outlook for the Evercore ISI business, including strategic decisions to increase the compensation ratio for this business. Other Expenses for the three months ended March 31, 2017 also included compensation costs associated with the vesting of LP Units and certain other awards of $4.8 million and intangible

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asset and other amortization of $2.4 million. Other Expenses of $35.0 million for the three months ended March 31, 2016 included compensation costs associated with the vesting of LP Units and Interests and certain other awards of $31.8 million, primarily related to Evercore LP Units and Interests granted in conjunction with the acquisition of ISI, changes to the fair value of contingent consideration of $0.1 million and intangible asset and other amortization of $3.2 million.
Investment Management
The following table summarizes the operating results of the Investment Management segment.
 
 
For the Three Months Ended March 31,
 
 
 
2017
 
2016
 
Change
 
(dollars in thousands)
Revenues
 
 
 
 
 
Investment Advisory and Management Fees:
 
 
 
 
 
Wealth Management
$
9,643

 
$
8,779

 
10
%
Institutional Asset Management
5,639

 
5,679

 
(1
%)
Private Equity
—

 
1,349

 
NM

Total Investment Advisory and Management Fees
15,282

 
15,807

 
(3
%)
Realized and Unrealized Gains:
 
 
 
 
 
Institutional Asset Management
725

 
1,255

 
(42
%)
Private Equity
339

 
1,367

 
(75
%)
Total Realized and Unrealized Gains
1,064

 
2,622

 
(59
%)
Investment Management Revenue (1)
16,346

 
18,429

 
(11
%)
Other Revenue, net (2)
131

 
(429
)
 
NM

Net Investment Management Revenues
16,477

 
18,000

 
(8
%)
Expenses
 
 
 
 
 
Operating Expenses
13,305

 
14,214

 
(6
%)
Other Expenses
—

 
82

 
NM

Total Expenses
13,305

 
14,296

 
(7
%)
Operating Income (3)
3,172

 
3,704

 
(14
%)
Income from Equity Method Investments (4)
1,759

 
1,559

 
13
%
Pre-Tax Income
$
4,931

 
$
5,263

 
(6
%)
(1)
Includes client related expenses of $0.02 million for the three months ended March 31, 2017 and 2016.
(2)
Includes interest expense on the Notes Payable and the line of credit of $0.7 million for the three months ended March 31, 2016.
(3)
Includes Noncontrolling Interest of $0.8 million and $0.6 million for the three months ended March 31, 2017 and 2016, respectively.
(4)
Equity in G5 ǀ Evercore - Wealth Management, ABS and Atalanta Sosnoff is classified as Income from Equity Method Investments.
Investment Management Results of Operations
Our Wealth Management business includes the results of EWM and Evercore Trust Company of Delaware ("ETCDE"). Our Institutional Asset Management business includes the results of ETC and ECB. Fee-based revenues from EWM and ECB are primarily earned on a percentage of AUM, while ETC and ETCDE primarily earn fees from negotiated trust services and fiduciary consulting arrangements.
In 2016, the Company and the principals of its Mexican Private Equity business entered into an agreement to transfer ownership of its Mexican Private Equity business and related entities to Glisco. This transaction closed on September 30, 2016. See Note 8 to our Unaudited Condensed Consolidated Financial Statements for further information.

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Prior to the Glisco transaction, we earned management fees on Glisco II and Glisco III of 2.25% and 2.0%, respectively, per annum of committed capital during its investment period, and 2.25% and 2.0%, respectively, per annum on net funded capital thereafter. In addition, the general partner of the private equity funds earned carried interest of 20% based on the fund's performance, provided it exceeds preferred return hurdles to its limited partners. We owned 8%-9% of the carried interest earned by the general partner of ECP II up until the fund's termination on December 31, 2014. A significant portion of any gains recognized related to ECP II, Glisco II and Glisco III, and any carried interest recognized by them, were distributed to certain of our private equity professionals.
The Company's investment in the Discovery Fund was fully distributed as of March 31, 2017.
In the event the private equity funds perform below certain thresholds we may be obligated to repay certain carried interest previously distributed. As of March 31, 2017, there was no previously distributed carried interest received from our managed funds that was subject to repayment.
We made investments accounted for under the equity method of accounting in G5 ǀ Evercore and ABS during the fourth quarters of 2010 and 2011, respectively, the results of which are included within Income from Equity Method Investments. On December 31, 2015, we amended the Operating Agreement of Atalanta Sosnoff, resulting in the deconsolidation of its assets and liabilities, and we accounted for its interest as an equity method investment from that date forward. On January 1, 2017, we made an investment accounted for under the equity method of accounting in Luminis.
Assets Under Management
AUM for our Investment Management businesses of $8.4 billion at March 31, 2017 increased compared to $8.0 billion at December 31, 2016. The amounts of AUM presented in the table below reflect the assets for which we charge a management fee. These assets reflect the fair value of assets managed on behalf of Institutional Asset Management and Wealth Management clients. As defined in ASC 820, valuations performed for Level I investments are based on quoted prices obtained from active markets generated by third parties and Level II investments are valued through the use of models based on either direct or indirect observable inputs in the use of models or other valuation methodologies performed by third parties to determine fair value. For both the Level I and Level II investments, we obtain both active quotes from nationally recognized exchanges and third-party pricing services to determine market or fair value quotes, respectively. For Level III investments, pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. Wealth Management maintained 65% and 64% of Level I investments, 31% and 32% of Level II investments and 4% of Level III investments as of March 31, 2017 and December 31, 2016, respectively. Institutional Asset Management maintained 84% and 82% of Level I investments and 16% and 18% of Level II investments as of March 31, 2017 and December 31, 2016, respectively.
The fees that we receive for providing investment advisory and management services are primarily driven by the level and composition of AUM. Accordingly, client flows, market movements, foreign currency fluctuations and changes in our product mix will impact the level of management fees we receive from our investment management businesses. Fees vary with the type of assets managed and the channel in which they are managed, with higher fees earned on equity assets, alternative investment funds, such as hedge funds and private equity funds, and lower fees earned on fixed income and cash management products. Clients will increase or reduce the aggregate amount of AUM that we manage for a number of reasons, including changes in the level of assets that they have available for investment purposes, their overall asset allocation strategy, our relative performance versus competitors offering similar investment products and the quality of our service. The fees we earn are also impacted by our investment performance, as the appreciation or depreciation in the value of the assets that we manage directly impacts our fees.
The following table summarizes AUM activity for the three months ended March 31, 2017:

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Wealth
Management
 
Institutional
Asset
Management
 
Total
 
(dollars in millions)
Balance at December 31, 2016
$
6,473

 
$
1,526

 
$
7,999

Inflows
227

 
453

 
680

Outflows
(196
)
 
(396
)
 
(592
)
Market Appreciation
259

 
103

 
362

Balance at March 31, 2017
$
6,763

 
$
1,686

 
$
8,449

 
 
 
 
 
 
Unconsolidated Affiliates - Balance at March 31, 2017:
 
 
 
 
 
Atalanta Sosnoff
$
—

 
$
5,299

 
$
5,299

G5 ǀ Evercore
$
1,858

 
$
—

 
$
1,858

ABS
$
—

 
$
4,942

 
$
4,942

The following table represents the composition of our AUM for Wealth Management and Institutional Asset Management as of March 31, 2017:
 
Wealth Management
 
Institutional Asset Management
Equities
57
%
 
16
%
Fixed Income
31
%
 
84
%
Liquidity (1)
7
%
 
—
%
Alternatives
5
%
 
—
%
Total
100
%
 
100
%
(1) Includes cash, cash equivalents and U.S. Treasury securities.
Our Wealth Management business serves individuals, families and related institutions delivering customized investment management, financial planning, and trust and custody services. Investment portfolios are tailored to meet the investment objectives of individual clients and reflect a blend of equity, fixed income and other products. Fees charged to clients reflect the composition of the assets managed and the services provided. Investment performance in the Wealth Management businesses is measured against appropriate indices based on the AUM, most frequently the S&P 500 and a composite fixed income index principally reflecting BarCap and MSCI indices.
For the three months ended March 31, 2017, AUM for Wealth Management increased 4%, primarily reflecting an increase due to market appreciation. Wealth Management lagged the S&P 500 on a 1 and 3 year basis by 3% and 2%, respectively, during the period and outperformed the fixed income composite on a 1 year basis by 10 basis points and tracked the fixed income composite on a 3 year basis. For the period, the S&P 500 was up 6%, while the fixed income composite increased by 2%.
Our Institutional Asset Management business reflects assets managed by ECB, which primarily manages Mexican Government and corporate fixed income securities, as well as equity products. ECB utilizes the IPC Index, which is a capitalization weighted index of leading equities traded on the Mexican Stock Exchange and the Cetes 28 Index, which is an index of Treasury Bills issued by the Mexican Government, as benchmarks in reviewing their performance and managing their investment decisions.
For the three months ended March 31, 2017, AUM for Institutional Asset Management increased 10%, reflecting a 6% increase due to market appreciation and a 4% increase due to flows. ECB's AUM increase from market appreciation primarily reflects the impact of the fluctuation of foreign currency.
AUM from our unconsolidated affiliates increased 4% from December 31, 2016, related to positive performance in Atalanta Sosnoff, G5 | Evercore and ABS.



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Three Months Ended March 31, 2017 versus March 31, 2016
Net Investment Management Revenues were $16.5 million for the three months ended March 31, 2017, compared to $18.0 million for the three months ended March 31, 2016. Investment Advisory and Management Fees earned from the management of client portfolios and other investment advisory services decreased 3% from the three months ended March 31, 2016, primarily reflecting lower fees in Private Equity, partially offset by higher fees in Wealth Management of $0.9 million related to growth in AUM. Fee-based revenues included $0.01 million of revenues from performance fees for the three months ended March 31, 2017, flat compared to the three months ended March 31, 2016. Realized and Unrealized Gains decreased 59% from the prior year primarily resulting from lower gains in Private Equity. Income from Equity Method Investments increased from the three months ended March 31, 2016 primarily as a result of an increase in earnings from ABS.
Operating Expenses were $13.3 million for the three months ended March 31, 2017, as compared to $14.2 million for the three months ended March 31, 2016, a decrease of $0.9 million, or 6%. Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $9.4 million for the three months ended March 31, 2017, as compared to $10.2 million for the three months ended March 31, 2016, a decrease of $0.8 million, or 8%. Non-compensation expenses, as a component of Operating Expenses, were $3.9 million for the three months ended March 31, 2017, as compared to $4.0 million for the three months ended March 31, 2016, a decrease of $0.1 million, or 3%.
Other Expenses of $0.1 million for the three months ended March 31, 2016 included intangible asset and other amortization.
Cash Flows
Our operating cash flows are primarily influenced by the timing and receipt of investment banking and investment management fees, and the payment of operating expenses, including bonuses to our employees and interest expense on our repurchase agreements, Notes Payable, subordinated borrowings and the line of credit. Investment Banking advisory fees are generally collected within 90 days of billing. However, placement fees may be collected within 180 days of billing, with certain fees being collected in a period exceeding one year. Commissions earned from our agency trading activities are generally received from our clearing broker within 11 days. Fees from our Wealth Management and Institutional Asset Management businesses are generally billed and collected within 90 days. We traditionally pay a substantial portion of incentive compensation to personnel in the Investment Banking business and to executive officers during the first three months of each calendar year with respect to the prior year's results. Our investing and financing cash flows are primarily influenced by activities to deploy capital to fund investments and acquisitions, raise capital through the issuance of stock or debt, repurchase of outstanding Class A Shares, and/or noncontrolling interest in Evercore LP, as well as our other subsidiaries, payment of dividends and other periodic distributions to our stakeholders. We generally make dividend payments and other distributions on a quarterly basis. We periodically draw down on our line of credit to balance the timing of our operating, investing and financing cash flow needs. A summary of our operating, investing and financing cash flows is as follows:
 
For the Three Months Ended March 31,
 
2017
 
2016
 
(dollars in thousands)
Cash Provided By (Used In)
 
 
 
Operating activities:
 
 
 
Net income
$
94,647

 
$
7,678

Non-cash charges
31,950

 
76,958

Other operating activities
(207,856
)
 
(197,161
)
Operating activities
(81,259
)
 
(112,525
)
Investing activities
(1,478
)
 
(5,680
)
Financing activities
(124,030
)
 
(36,269
)
Effect of exchange rate changes
(497
)
 
(2,767
)
Net Increase (Decrease) in Cash and Cash Equivalents
(207,264
)
 
(157,241
)
Cash and Cash Equivalents
 
 
 
Beginning of Period
558,524

 
448,764

End of Period
$
351,260

 
$
291,523


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Three Months Ended March 31, 2017. Cash and Cash Equivalents were $351.3 million at March 31, 2017, a decrease of $207.3 million versus Cash and Cash Equivalents of $558.5 million at December 31, 2016. Operating activities resulted in a net outflow of $81.3 million, primarily related to the payment of 2016 bonus awards. Cash of $1.5 million was used in investing activities primarily related to purchases of furniture, equipment and leasehold improvements, which were partially offset by net proceeds from sales and maturities of marketable securities. Financing activities during the period used cash of $124.0 million, primarily for purchases of treasury stock and noncontrolling interest, the payment of dividends, distributions to noncontrolling interest holders and the repayment of outstanding subordinated borrowings.
Three Months Ended March 31, 2016. Cash and Cash Equivalents were $291.5 million at March 31, 2016, a decrease of $157.2 million versus Cash and Cash Equivalents of $448.8 million at December 31, 2015. Operating activities resulted in a net outflow of $112.5 million, primarily related to the payment of 2015 bonus awards. Cash of $5.7 million was used in investing activities primarily related to net purchases of marketable securities and purchases of furniture, equipment and leasehold improvements. Financing activities during the period used cash of $36.3 million, primarily for the payment of dividends and distributions to noncontrolling interest holders, treasury stock purchases and the repayment of the outstanding borrowings under the senior credit facility with Mizuho, partially offset by the issuance of the Private Placement Notes and short-term borrowings.
Liquidity and Capital Resources
General
Our current assets include Cash and Cash Equivalents, Marketable Securities and Accounts Receivable relating to Investment Banking and Investment Management revenues. Our current liabilities include accrued expenses, accrued employee compensation and short-term borrowings. We traditionally have made payments for employee bonus awards and year-end distributions to partners in the first quarter of the year with respect to the prior year's results. In addition, payments in respect of deferred cash compensation arrangements are also made in the first quarter. From time to time, advances may also be made in satisfaction of commitments to new employees, at or near the date they begin employment. Cash distributions related to partnership tax allocations are made to the partners of Evercore LP and EWM in accordance with our corporate estimated payment calendar; these payments are made prior to the end of each calendar quarter. In addition, dividends on Class A Shares, and related distributions to partners of Evercore LP, are paid when and if declared by the Board of Directors, which is generally quarterly.
We regularly monitor our liquidity position, including cash, other significant working capital, current assets and liabilities, long-term liabilities, lease commitments and related fixed assets, principal investment commitments related to our Investment Management business, dividends on Class A Shares, partnership distributions and other capital transactions, as well as other matters relating to liquidity and compliance with regulatory requirements. Our liquidity is highly dependent on our revenue stream from our operations, principally from our Investment Banking business, which is a function of closing transactions and earning success fees, the timing and realization of which is irregular and dependent upon factors that are not subject to our control. Our revenue stream funds the payment of our expenses, including annual bonus payments, a portion of which are guaranteed, deferred compensation arrangements, interest expense on our repurchase agreements, Notes Payable, subordinated borrowings, the line of credit and other financing arrangements and income taxes. Payments made for income taxes may be reduced by deductions taken for the increase in tax basis of our investment in Evercore LP. These tax deductions, when realized, require payment under our long-term liability, Amounts Due Pursuant to Tax Receivable Agreements. We intend to fund these payments from cash and cash equivalents on hand, principally derived from cash flows from operations. These tax deductions, when realized, will result in cash otherwise required to satisfy tax obligations becoming available for other purposes. Our Management Committee meets regularly to monitor our liquidity and cash positions against our short and long-term obligations, as well as our capital requirements and commitments. The result of this review contributes to management's recommendation to the Board of Directors as to the level of quarterly dividend payments, if any.
As a financial services firm, our businesses are materially affected by conditions in the global financial markets and economic conditions throughout the world. Revenue generated by our advisory activities is related to the number and value of the transactions in which we are involved. In addition, revenue related to our equities business is driven by market volumes. During periods of unfavorable market or economic conditions, the number and value of M&A transactions, as well as market volumes in equities, generally decrease, and they generally increase during periods of favorable market or economic conditions. Restructuring activity generally is counter-cyclical to M&A activity. In addition, during periods of unfavorable market conditions our Investment Management business may be impacted by reduced equity valuations and generate relatively lower revenue because fees we receive, either directly or through our affiliates, typically are in part based on the market value of underlying publicly-traded securities. Our profitability may also be adversely affected by our fixed costs and the possibility that

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we would be unable to scale back other costs within a time frame and in an amount sufficient to match any decreases in revenue relating to changes in market and economic conditions. Reduced equity valuations resulting from future adverse economic events and/or market conditions may impact our performance and may result in future net redemptions of AUM from our clients, which would generally result in lower revenues and cash flows. These adverse conditions could also have an impact on our goodwill impairment assessment, which is done annually, as of November 30th, or more frequently if circumstances indicate impairment may have occurred.
Changes in regulation, market structure or business activity arising from the ongoing discussions over the U.K.'s implementation of its separation from the EU may have a negative impact on our business operations in the U.K., and globally, over the intermediate term. We will continue to monitor and manage the potential implications of the separation, including assessing opportunities that may arise, as the potential impact on the U.K. and European economy becomes more evident.
We assess our equity method investments for impairment annually, or more frequently if circumstances indicate impairment may have occurred. These circumstances could include unfavorable market conditions or the loss of key personnel of the investee.
For a further discussion of risks to our business, refer to "Risk Factors" in our Form 10-K for the year ended December 31, 2016.
Treasury and Noncontrolling Interest Repurchases
We periodically repurchase Class A Shares and/or LP Units into Treasury in order to reduce the dilutive effect of equity awards granted. In addition, we may from time to time, purchase noncontrolling interests in subsidiaries.
On April 25, 2016, our Board of Directors authorized the repurchase of additional Class A Shares and/or LP Units so that going forward Evercore will be able to repurchase an aggregate of 7.5 million Class A Shares and/or LP Units for up to $450.0 million. Under this share repurchase program, shares may be repurchased from time to time in open market transactions, in privately-negotiated transactions or otherwise. The timing and the actual amount of shares repurchased will depend on a variety of factors, including legal requirements, price, economic and market conditions and the objective to reduce the dilutive effect of equity awards granted. This program may be suspended or discontinued at any time and does not have a specified expiration date. During the three months ended March 31, 2017, we repurchased 13,881 shares, at a cost per share of $74.51, for $1.0 million pursuant to our repurchase program.
In addition, periodically, we buy shares into treasury from our employees in order to allow them to satisfy their minimum tax requirements for share deliveries under our share equity plan. During the three months ended March 31, 2017, we repurchased 1,093,814 shares, at an average cost per share of $78.03 for $85.4 million primarily related to minimum tax withholding requirements of share deliveries.
On March 3, 2017, the Company purchased, at fair value, an additional 13% of PCA for $7.1 million.
Private Placement
On March 30, 2016, we issued an aggregate $170.0 million of senior notes, including: $38.0 million aggregate principal amount of its 4.88% Series A Notes, $67.0 million aggregate principal amount of its 5.23% Series B Notes, $48.0 million aggregate principal amount of its 5.48% Series C Notes and $17.0 million aggregate principal amount of its 5.58% Series D Notes, pursuant to the Note Purchase Agreement dated as of March 30, 2016, among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933.
Interest on the Private Placement Notes is payable semi-annually and the Private Placement Notes are guaranteed by certain of our domestic subsidiaries. The Company may, at its option, prepay all, or from time to time any part of, the Private Placement Notes (without regard to Series), in an amount not less than 5% of the aggregate principal amount of the Private Placement Notes then outstanding at 100% of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the Private Placement Notes will have the right to require the Company to prepay the entire unpaid principal amounts held by each holder of the Private Placement Notes plus accrued and unpaid interest to the prepayment date. The Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio, a minimum tangible net worth and a minimum interest coverage ratio, and customary events of default. As of March 31, 2017, we were in compliance with all of these covenants.

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We used $120.0 million of the net proceeds from the Private Placement Notes to repay outstanding borrowings under the senior credit facility with Mizuho on March 30, 2016 and used the remaining net proceeds for general corporate purposes.
Lines of Credit
On June 24, 2016, East entered into a loan agreement with PNC for a revolving credit facility in an aggregate principal amount of up to $30.0 million, to be used for working capital and other corporate activities. This facility is secured by East's accounts receivable and the proceeds therefrom, as well as certain assets of EGL, including certain of EGL's accounts receivable. In addition, the agreement contains certain reporting covenants as well as certain debt covenants that prohibit East and the Company from incurring other indebtedness subject to specified exceptions. Drawings under this facility bear interest at the prime rate. The facility matures on June 23, 2017, subject to an extension agreed to between East and PNC. On February 2, 2017, East drew down $30.0 million on this facility, which was repaid on March 10, 2017.

ECB maintains a line of credit with BBVA Bancomer to fund its trading activities on an intra-day and overnight basis. The facility has a maximum aggregate principal amount of approximately $10.7 million and is secured by trading securities. No interest is charged on the intra-day facility. The overnight facility is charged the Inter-Bank Balance Interest Rate plus 10 basis points. There have been no significant draw downs on ECB's line of credit since August 10, 2006. The line of credit is renewable annually.
Other Commitments
We have subordinated borrowings, principally with an executive officer of the Company, due on October 31, 2019. These borrowings have a coupon of 5.5%, payable semi-annually. In February 2017, we repaid $6.0 million of the original borrowings. As of March 31, 2017, we had $10.6 million in subordinated borrowings pursuant to these agreements. In April 2017, we repaid $3.8 million of the original borrowings.
We have made certain capital commitments with respect to our investment activities, as well as commitments related to contingent consideration from our acquisitions, which are included in the Contractual Obligations section below.
Pursuant to deferred compensation and deferred consideration arrangements, we are obligated to make cash payments in future periods. For further information see Note 14 to our unaudited condensed consolidated financial statements.
Certain of our subsidiaries are regulated entities and are subject to capital requirements. For further information see Note 16 to our unaudited condensed consolidated financial statements.
Collateralized Financing Activity at ECB
ECB enters into repurchase agreements with clients seeking overnight money market returns whereby ECB transfers to the clients Mexican government securities in exchange for cash and concurrently agrees to repurchase the securities at a future date for an amount equal to the cash exchanged plus a stipulated premium or interest factor. ECB deploys the cash received from, and acquires the securities deliverable to, clients under these repurchase arrangements by purchasing securities in the open market or by entering into reverse repurchase agreements with unrelated third parties. We account for these repurchase and reverse repurchase agreements as collateralized financing transactions. We record a liability on our Unaudited Condensed Consolidated Statements of Financial Condition in relation to repurchase transactions executed with clients as Securities Sold Under Agreements to Repurchase. We record as assets on our Unaudited Condensed Consolidated Statements of Financial Condition, Financial Instruments Owned and Pledged as Collateral at Fair Value (where we have acquired the securities deliverable to clients under these repurchase arrangements by purchasing securities in the open market) and Securities Purchased Under Agreements to Resell (where we have acquired the securities deliverable to clients under these repurchase agreements by entering into reverse repurchase agreements with unrelated third parties). These Mexican government securities included in Financial Instruments Owned and Pledged as Collateral at Fair Value on the Unaudited Condensed Consolidated Statements of Financial Condition have an estimated average time to maturity of approximately 1.0 year, as of March 31, 2017, and are pledged as collateral against repurchase agreements, which are collateralized financing agreements. Generally, collateral is posted equal to the contract value at inception and is subject to market changes. These repurchase agreements are primarily with institutional customer accounts managed by ECB, generally mature within one business day and permit the counterparty to pledge the securities. Increases and decreases in asset and liability levels related to these transactions are a function of growth in ECB's AUM, as well as clients' investment allocations requiring positioning in repurchase transactions.
ECB has procedures in place to monitor the daily risk limits for positions taken, as well as the credit risk based on the collateral pledged under these agreements against their contract value from inception to maturity date. The daily risk measure is

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VaR, which is a statistical measure, at a 98% confidence level, of the potential daily losses from adverse market movements in an ordinary market environment based on a historical simulation using the prior year's historical data. The Committee has established a policy to maintain VaR at levels below 0.1% of the value of the portfolio. If at any point in time the threshold is exceeded, ECB personnel are alerted by an automated interface with ECB's trading systems and begin to make adjustments in the portfolio in order to mitigate the risk and bring the portfolio in compliance. Concurrently, ECB personnel must notify the Committee of the variance and the actions taken to reduce the exposure to loss.
In addition to monitoring VaR, ECB periodically performs discrete Stress Tests to assure that the level of potential losses that would arise from extreme market movements that may not be anticipated by VaR measures are within acceptable levels. The table below includes a key stress test monitored by the Committee, noted as the sensitivity to a 100 basis point change in interest rates. This analysis assists ECB in understanding the impact of an extreme move in rates, assuring the Collateralized Financing portfolio is structured to maintain risk at an acceptable level, even in extreme circumstances.
The Committee meets monthly to analyze the overall market risk exposure based on positions taken, as well as the credit risk, based on the collateral pledged under these agreements against the contract value from inception to maturity date. In these meetings the Committee evaluates risk from an operating perspective, VaR, and an exceptional perspective, Stress Tests, to determine the appropriate level of risk limits in the current environment.
We periodically assess the collectability or credit quality related to securities purchased under agreements to resell.
As of March 31, 2017 and December 31, 2016, a summary of ECB's assets, liabilities and risk measures related to its collateralized financing activities is as follows:
 
March 31, 2017
 
December 31, 2016
 
Amount
 
Market Value of Collateral Received or (Pledged)
 
Amount
 
Market Value of Collateral Received or (Pledged)
 
(dollars in thousands)
Assets
 
 
 
 
 
 
 
Financial Instruments Owned and Pledged as Collateral at Fair Value
$
34,808

 
 
 
$
18,535

 
 
Securities Purchased Under Agreements to Resell
535

 
$
536

 
12,585

 
$
12,601

Total Assets
35,343

 
 
 
31,120

 
 
Liabilities
 
 
 
 
 
 
 
Securities Sold Under Agreements to Repurchase
(35,368
)
 
$
(35,388
)
 
(31,150
)
 
$
(31,155
)
Net Liabilities
$
(25
)
 
 
 
$
(30
)
 
 
Risk Measures
 
 
 
 
 
 
 
VaR
$
11

 
 
 
$
5

 
 
Stress Test:
 
 
 
 
 
 
 
Portfolio sensitivity to a 100 basis point increase in the interest rate
$
(24
)
 
 
 
$
(9
)
 
 
Portfolio sensitivity to a 100 basis point decrease in the interest rate
$
24

 
 
 
$
9

 
 
Contractual Obligations
For a further discussion of our contractual obligations, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2016.
As of March 31, 2017, we were unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority per ASC 740; hence, unrecognized tax benefits have been excluded from this disclosure.
We had total commitments (not reflected on our Unaudited Condensed Consolidated Statements of Financial Condition) relating to future capital contributions to private equity funds of $4.4 million and $4.6 million as of March 31, 2017 and December 31, 2016, respectively. We expect to fund these commitments with cash flows from operations. We may be required

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to fund these commitments at any time through June 2023, depending on the timing and level of investments by our private equity funds.
Off-Balance Sheet Arrangements
We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or engage in any leasing activities that expose us to any liability that is not reflected in our unaudited condensed consolidated financial statements.
Market Risk and Credit Risk
We, in general, are not a capital-intensive organization and as such, are not subject to significant market or credit risks. Nevertheless, we have established procedures to assess both the market and credit risk, as well as specific investment risk, exchange rate risk and credit risk related to receivables.
Market and Investment Risk
We hold equity securities and invest in exchange traded funds and mutual funds, principally as an economic hedge against our deferred compensation program. As of March 31, 2017, the fair value of our investments with these products, based on closing prices, was $25.9 million.
We estimate that a hypothetical 10% adverse change in the market value of the investments would have resulted in a decrease in pre-tax income of approximately $2.6 million for the three months ended March 31, 2017.
See "-Liquidity and Capital Resources" above for a discussion of collateralized financing transactions at ECB.
Private Equity Funds
Through our principal investments in private equity funds and our ability to earn carried interest from these funds, we face exposure to changes in the estimated fair value of the companies in which these funds invest. Valuations and analysis regarding our investments in Trilantic and Glisco are performed by their respective professionals, and thus we are not involved in determining the fair value for the portfolio companies of such funds.
We estimate that a hypothetical 10% adverse change in the value of the private equity funds would have resulted in a decrease in pre-tax income of approximately $1.2 million for the three months ended March 31, 2017.
Exchange Rate Risk
We have foreign operations, through our subsidiaries and affiliates, primarily in Mexico and the United Kingdom, as well as provide services to clients in other jurisdictions, which creates foreign exchange rate risk. We have not entered into any transactions to hedge our exposure to these foreign exchange fluctuations through the use of derivative instruments or otherwise. An appreciation or depreciation of any of these currencies relative to the U.S. dollar would result in an adverse or beneficial impact to our financial results. A significant portion of our Latin American revenues have been, and will continue to be, derived from contracts denominated in Mexican pesos and Brazilian real and Evercore Partners Limited's revenue and expenses are denominated primarily in British pounds sterling and euro. Historically, the value of these foreign currencies has fluctuated relative to the U.S. dollar. For the three months ended March 31, 2017, the net impact of the fluctuation of foreign currencies recorded in Other Comprehensive Income within the Unaudited Condensed Consolidated Statement of Comprehensive Income was $0.3 million. It is currently not our intention to hedge our foreign currency exposure, and we will reevaluate this policy from time to time.
Credit Risks
We maintain cash and cash equivalents with financial institutions with high credit ratings. At times, we may maintain deposits in federally insured financial institutions in excess of federally insured ("FDIC") limits or enter into sweep arrangements where banks will periodically transfer a portion of the Company's excess cash position to a money market fund. However, we believe that we are not exposed to significant credit risk due to the financial position of the depository institution or investment vehicles in which those deposits are held.
Accounts Receivable consists primarily of advisory fees and expense reimbursements billed to our clients. Receivables are reported net of any allowance for doubtful accounts. We maintain an allowance for doubtful accounts to provide coverage

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for probable losses from our customer receivables and derive the estimate through specific identification for the allowance for doubtful accounts and an assessment of the client's creditworthiness. As of March 31, 2017 and December 31, 2016, total receivables amounted to $201.0 million and $230.5 million, respectively, net of an allowance. The Investment Banking and Investment Management receivables collection periods generally are within 90 days of invoice, with the exception of placement fees, which are generally collected within 180 days of invoice. The collection period for restructuring transactions and private equity fee receivables may exceed 90 days. We recorded minimal bad debt expense for each of the three months ended March 31, 2017 and 2016.
With respect to our Marketable Securities portfolio, which is comprised primarily of highly-rated corporate and municipal bonds, exchange traded funds, mutual funds and securities investments, we manage our credit risk exposure by limiting concentration risk and maintaining investment grade credit quality. As of March 31, 2017, we had Marketable Securities of $62.8 million, of which 58% were corporate and municipal securities, primarily with S&P ratings ranging from AAA to BB+.
Critical Accounting Policies and Estimates
The unaudited condensed consolidated financial statements included in this report are prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions regarding future events that affect the amounts reported in our unaudited condensed consolidated financial statements and their notes, including reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We base these estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates. For a discussion of our critical accounting policies and estimates, refer to our Annual Report on Form 10-K for the year ended December 31, 2016.
The Company adopted ASU 2016-09 effective January 1, 2017. ASU 2016-09 requires that the tax deduction associated with the appreciation in the Company's share price upon vesting of employee share-based awards above the original grant price be reflected in income tax expense. See Note 3 to our unaudited condensed consolidated financial statements for further information.
Recently Issued Accounting Standards
For a discussion of recently issued accounting standards and their impact or potential impact on the Company's consolidated financial statements, see Note 3 to our unaudited condensed consolidated financial statements.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
See "Management's Discussion and Analysis of Financial Condition and Results of Operations – Market Risk and Credit Risk." We do not believe we face any material interest rate risk, foreign currency exchange risk, equity price risk or other market risk except as disclosed in Item 2" – Market Risk and Credit Risk" above.
Item 4.
Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Controls over Financial Reporting

We have not made any changes during the three months ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).



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PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
In the normal course of business, from time to time the Company and its affiliates are involved in judicial or regulatory proceedings, arbitration or mediation concerning matters arising in connection with the conduct of its businesses, including contractual and employment matters. In addition, Mexican, United Kingdom, Hong Kong, Singapore, Canadian and United States government agencies and self-regulatory organizations, as well as state securities commissions in the United States, conduct periodic examinations and initiate administrative proceedings regarding the Company's business, including, among other matters, accounting and operational matters, that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer, investment advisor, or its directors, officers or employees. In view of the inherent difficulty of determining whether any loss in connection with such matters is probable and whether the amount of such loss can be reasonably estimated, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, the Company cannot estimate the amount of such loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, fine, penalty or other relief, if any, might be. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that it is not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company. Provisions for losses are established in accordance with ASC 450, "Contingencies" when warranted. Once established, such provisions are adjusted when there is more information available or when an event occurs requiring a change.
On September 19, 2016, EGL was named as a defendant in the First Amended and Supplemented Verified Class Action Complaint (the "Complaint"), filed in the Chancery Court of the State of Delaware in a case entitled City of Daytona Beach Police and Fire Pension Fund v. ExamWorks Group, Inc., et al. (C.A. No. 12481-VCL). The Complaint was brought on behalf of a purported class consisting of all ExamWorks common stockholders and purports to assert a claim against EGL for aiding and abetting breaches of fiduciary duties by ExamWorks officers and directors in connection with a merger transaction between ExamWorks and affiliates of Leonard Green & Partners, L.P. that was agreed to on April 26, 2016 and consummated on July 27, 2016. The Complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys' fees. The parties reached an agreement in principle to settle the case prior to trial which would result in no liability to EGL.  The settlement is subject to appropriate documentation and court approval.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

2017
 
Total Number of
Shares (or Units)
Purchased(1)
 
Average Price
Paid Per Share
 
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(2)
 
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs(2)
January 1 to January 31
 
118,716

 
$
70.67

 
—

 
6,475,103

February 1 to February 28
 
958,748

 
78.91

 
—

 
6,475,103

March 1 to March 31
 
30,231

 
77.25

 
13,881

 
6,461,222

Total
 
1,107,695

 
$
77.99

 
13,881

 
6,461,222


(1)
Includes the repurchase of 1,093,814 shares in treasury transactions arising from net settlement of equity awards to satisfy minimum tax obligations during the three months ended March 31, 2017.
(2)
On April 25, 2016, our Board authorized the repurchase of additional Class A Shares and/or LP Units so that going forward we will be able to repurchase an aggregate of 7.5 million Class A Shares and/or LP Units for up to $450.0 million. Under this share repurchase program, shares may be repurchased from time to time in open market transactions, in privately-negotiated transactions or otherwise. The timing and the actual amount of shares repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. This program may be suspended or discontinued at any time and does not have a specified expiration date.

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Item 6.
Exhibits and Financial Statement Schedules
 
 
 
Exhibit
Number
  
Description
 
 
31.1
  
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) (filed herewith)
 
 
31.2
  
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith)
 
 
32.1
  
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
 
 
32.2
  
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
 
 
101
  
The following materials from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, are formatted in XBRL (eXtensible Business Reporting Language); (i) Condensed Consolidated Statements of Financial Condition as of March 31, 2017 and December 31, 2016, (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016, (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016, (iv) Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2017 and 2016, (v) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016, and (vi) Notes to Condensed Consolidated Financial Statements (filed herewith)



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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 thereunto duly authorized.
Date: May 9, 2017
 
Evercore Partners Inc.
 
 
 
 
By:
/s/    RALPH SCHLOSSTEIN
 
Name:
Ralph Schlosstein
 
Title:
Chief Executive Officer and Director
 
 
 
 
By:
/S/    ROBERT B. WALSH
 
Name:
Robert B. Walsh
 
Title:
Chief Financial Officer



50

Exhibit


Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Ralph Schlosstein, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Evercore Partners Inc. (the “Registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Dated: May 9, 2017
 
 
/ s /    RALPH SCHLOSSTEIN
 
Ralph Schlosstein
Chief Executive Officer and Director



Exhibit


Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Robert B. Walsh, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Evercore Partners Inc. (the “Registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Dated: May 9, 2017
 
 
/ s /    ROBERT B. WALSH
 
Robert B. Walsh
Chief Financial Officer
(Principal Financial Officer)



Exhibit


Exhibit 32.1
Certification of the Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Evercore Partners Inc. (the “Company”) on Form 10-Q as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ralph Schlosstein, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: May 9, 2017
 
 
/ s /    RALPH SCHLOSSTEIN
 
Ralph Schlosstein
Chief Executive Officer and Director
 
*
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.



Exhibit


Exhibit 32.2
Certification of the Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Evercore Partners Inc. (the “Company”) on Form 10-Q as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert B. Walsh, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: May 9, 2017
 
 
/ s /    ROBERT B. WALSH
 
Robert B. Walsh
Chief Financial Officer
 
*
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.