NEW YORK--(BUSINESS WIRE)--Evercore Partners Inc. (NYSE: EVR) today announced that its Adjusted Pro Forma Net Revenues were $149.2 million for the quarter ended September 30, 2012, compared with $163.1 million and $172.1 million for the quarters ended September 30, 2011 and June 30, 2012, respectively. Adjusted Pro Forma Net Revenues were $426.9 million for the first nine months of the year compared to $408.7 million for the nine months ended September 30, 2011. Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $17.3 million, or $0.40 per share, for the third quarter, compared to $19.8 million, or $0.46 per share, a year ago and $21.2 million, or $0.49 per share, last quarter. Year-to-date Adjusted Pro Forma Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $42.8 million, or $0.98 per share, compared to $49.1 million, or $1.17 per share, for the same period last year.
U.S. GAAP Net Revenues were $153.0 million for the quarter ended September 30, 2012, compared to $163.2 million and $172.5 million for the quarters ended September 30, 2011 and June 30, 2012, respectively. U.S. GAAP Net Revenues were $428.3 million for the first nine months of the year, compared to $411.5 million for the first nine months of 2011. U.S. GAAP Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $5.3 million, or $0.17 per share, for the third quarter, compared to $2.0 million, or $0.06 per share, a year ago and $7.9 million, or $0.25 per share, last quarter. U.S. GAAP Net Income from Continuing Operations Attributable to Evercore Partners Inc. was $9.9 million, or $0.31 per share, for the first nine months of the year, compared to $7.9 million, or $0.27 per share, for the same period last year.
The Adjusted Pro Forma compensation ratio for the current quarter was 60%, compared to 62% and 60% for the quarters ended September 30, 2011 and June 30, 2012, respectively. The Adjusted Pro Forma compensation ratio for the trailing twelve months was 60%, compared to 60% for the twelve months ended September 30, 2011 and June 30, 2012. The U.S. GAAP compensation ratio for the three months ended September 30, 2012, September 30, 2011 and June 30, 2012 was 66%, 70% and 66%, respectively. The U.S. GAAP trailing twelve-month compensation ratio of 69% compares to 68% for the twelve months ended September 30, 2011 and 70% for the twelve months ended June 30, 2012.
Evercore’s quarterly results may fluctuate significantly due to the timing and amount of transaction fees earned, as well as other factors. Accordingly, financial results in any particular quarter may not be representative of future results over a longer period of time.
“We are pleased with our third quarter results, reporting our third best quarter for revenue on sustained strong performance in our Advisory business. Our Wealth Management and Institutional Equities businesses continue to take market share and investment performance is improving in the Institutional Asset Management business. While market conditions remain challenging, we are working hard to sustain this momentum through the end of the year and into 2013, continuing to build market share in each of our core businesses,” said Ralph Schlosstein, President and Chief Executive Officer. “Our results further demonstrate our commitment to delivering strong returns to our shareholders. During the quarter we repurchased more than 1 million shares of stock (2.6 million shares year to date) and increased our dividend by 10% to $0.22 per share. The increased dividend and our Board’s authorization of a new stock repurchase program for 5 million shares, more than double the size of the prior program, demonstrate our ongoing commitment to delivering returns to our shareholders as we continue to grow.”
“Evercore continues to grow and gain market share. Compared to this time last year, our year-to-date Investment Banking revenues have grown by 10%, despite a 15% decrease in global announced M&A volume and a 27% decrease in global completed M&A volume. We were again strong competitively, ranking eighth among all firms in year-to-date U.S. announced deals. We continued our long standing practice of adding talented Senior Managing Directors, hiring four new SMDs who will strengthen our Consumer, Restructuring and Canada businesses,” said Roger Altman, Executive Chairman.
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Consolidated U.S. GAAP and Adjusted Pro Forma Selected Financial Data (Unaudited) |
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| U.S. GAAP | |||||||||||||||||||||||||||||
| Three Months Ended | % Change vs. | Nine Months Ended | |||||||||||||||||||||||||||
| September 30, | June 30, | September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||
| 2012 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 |
% Change |
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| (dollars in thousands) | |||||||||||||||||||||||||||||
| Net Revenues | $ | 153,029 | $ | 172,497 | $ | 163,181 | (11 | %) | (6 | %) | $ | 428,324 | $ | 411,483 | 4 | % | |||||||||||||
| Operating Income | $ | 14,245 | $ | 21,195 | $ | 13,442 | (33 | %) | 6 | % | $ | 23,297 | $ | 36,821 | (37 | %) | |||||||||||||
| Net Income from Continuing Operations Attributable to Evercore Partners Inc. | $ | 5,301 | $ | 7,934 | $ | 1,957 | (33 | %) | 171 | % | $ | 9,867 | $ | 7,921 | 25 | % | |||||||||||||
| Diluted Earnings Per Share from Continuing Operations | $ | 0.17 | $ | 0.25 | $ | 0.06 | (32 | %) | 183 | % | $ | 0.31 | $ | 0.27 | 15 | % | |||||||||||||
| Compensation Ratio | 66 | % | 66 | % | 70 | % | 69 | % | 69 | % | |||||||||||||||||||
| Operating Margin | 9 | % | 12 | % | 8 | % | 5 | % | 9 | % | |||||||||||||||||||
| Adjusted Pro Forma | |||||||||||||||||||||||||||||
| Three Months Ended | % Change vs. | Nine Months Ended | |||||||||||||||||||||||||||
| September 30, | June 30, | September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||
| 2012 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | % Change | ||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||
| Net Revenues | $ | 149,247 | $ | 172,115 | $ | 163,094 | (13 | %) | (8 | %) | $ | 426,883 | $ | 408,728 | 4 | % | |||||||||||||
| Operating Income | $ | 29,391 | $ | 36,452 | $ | 33,383 | (19 | %) | (12 | %) | $ | 74,774 | $ | 86,240 | (13 | %) | |||||||||||||
| Net Income from Continuing Operations Attributable to Evercore Partners Inc. | $ | 17,275 | $ | 21,185 | $ | 19,792 | (18 | %) | (13 | %) | $ | 42,777 | $ | 49,062 | (13 | %) | |||||||||||||
| Diluted Earnings Per Share from Continuing Operations | $ | 0.40 | $ | 0.49 | $ | 0.46 | (18 | %) | (13 | %) | $ | 0.98 | $ | 1.17 | (16 | %) | |||||||||||||
| Compensation Ratio | 60 | % | 60 | % | 62 | % | 61 | % | 60 | % | |||||||||||||||||||
| Operating Margin | 20 | % | 21 | % | 20 | % | 18 | % | 21 | % | |||||||||||||||||||
The U.S. GAAP and Adjusted Pro Forma results for September 30, 2011 present the continuing operations of the Company, which exclude amounts related to Evercore Asset Management (“EAM”), whose operations were discontinued during the fourth quarter of 2011. See page A-1 for the full financial results of the Company including its discontinued operations.
Throughout the discussion of Evercore’s business segments, information is presented on an Adjusted Pro Forma basis, which is an unaudited non-generally accepted accounting principles (“non-GAAP”) measure. Adjusted Pro Forma results begin with information prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and then those results are adjusted to exclude certain items and reflect the conversion of vested and unvested Evercore LP Units into Class A shares. Evercore believes that the disclosed Adjusted Pro Forma measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore’s results across several periods and facilitate an understanding of Evercore’s operating results. Evercore uses these measures to evaluate its operating performance, as well as the performance of individual employees. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. For more information about the Adjusted Pro Forma basis of reporting used by management to evaluate the performance of Evercore and each line of business, including reconciliations of U.S. GAAP results to an Adjusted Pro Forma basis, see pages A-2 through A-11 included in Annex I. These Adjusted Pro Forma amounts are allocated to the Company’s two business segments: Investment Banking and Investment Management.
Business Line Reporting
A discussion of Adjusted Pro Forma revenues and expenses from continuing operations is presented below for the Investment Banking and Investment Management segments. Unless otherwise stated, all of the financial measures presented in this discussion are Adjusted Pro Forma measures. For a reconciliation of the Adjusted Pro Forma segment data to U.S. GAAP results, see pages A-2 to A-11 in Annex I.
Investment Banking
For the third quarter, Evercore’s Investment Banking segment reported net revenues of $128.2 million, which represents a decrease of 7% year-over-year and 15% sequentially. Operating income of $27.4 million decreased by 12% from the third quarter of last year and 23% sequentially. Operating margins were 21% in comparison to 22% this time last year. For the nine months ended September 30, 2012, Investment Banking reported net revenues of $364.4 million, an increase of 10% from last year. Year-to-date operating income was $70.4 million compared to $76.8 million last year. Year-to-date operating margins were 19%, compared to 23% last year. The Company had 61 Investment Banking Senior Managing Directors as of September 30, 2012.
| Adjusted Pro Forma | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | June 30, |
September 30, |
September 30, | September 30, | |||||||||||||||
| 2012 | 2012 |
2011 |
2012 | 2011 | |||||||||||||||
| (dollars in thousands) | |||||||||||||||||||
| Net Revenues: | |||||||||||||||||||
| Investment Banking | $ | 127,588 | $ | 151,397 | $ | 138,121 | $ | 363,605 | $ | 330,169 | |||||||||
| Other Revenue, net | 647 | (187 | ) | 230 | 820 | 949 | |||||||||||||
| Net Revenues | 128,235 | 151,210 | 138,351 | 364,425 | 331,118 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Employee Compensation and Benefits | 77,331 | 89,829 | 85,945 | 221,622 | 200,723 | ||||||||||||||
| Non-compensation Costs | 23,504 | 25,858 | 21,301 | 72,373 | 53,568 | ||||||||||||||
| Total Expenses | 100,835 | 115,687 | 107,246 | 293,995 | 254,291 | ||||||||||||||
| Operating Income | $ | 27,400 | $ | 35,523 | $ | 31,105 | $ | 70,430 | $ | 76,827 | |||||||||
| Compensation Ratio | 60 | % | 59 | % | 62 | % | 61 | % | 61 | % | |||||||||
| Operating Margin | 21 | % | 23 | % | 22 | % | 19 | % | 23 | % | |||||||||
| U.S. GAAP | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| 2012 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||
| (dollars in thousands) | |||||||||||||||||||
| Net Revenues: | |||||||||||||||||||
| Investment Banking | $ | 133,850 | $ | 154,426 | $ | 139,995 | $ | 372,771 | $ | 337,743 | |||||||||
| Other Revenue, net | (435 | ) | (1,262 | ) | (829 | ) | (2,407 | ) | (2,222 | ) | |||||||||
| Net Revenues | 133,415 | 153,164 | 139,166 | 370,364 | 335,521 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Employee Compensation and Benefits | 88,774 | 100,754 | 98,059 | 257,757 | 232,766 | ||||||||||||||
| Non-compensation Costs | 30,180 | 29,165 | 25,660 | 86,199 | 65,481 | ||||||||||||||
| Special Charges | - | 662 | 2,626 | 662 | 2,626 | ||||||||||||||
| Total Expenses | 118,954 | 130,581 | 126,345 | 344,618 | 300,873 | ||||||||||||||
| Operating Income | $ | 14,461 | $ | 22,583 | $ | 12,821 | $ | 25,746 | $ | 34,648 | |||||||||
| Compensation Ratio | 67 | % | 66 | % | 70 | % | 70 | % | 69 | % | |||||||||
| Operating Margin | 11 | % | 15 | % | 9 | % | 7 | % | 10 | % | |||||||||
Revenues
During the quarter, Investment Banking earned advisory fees from 147 clients (vs. 112 in Q3 2011 and 137 in Q2 2012) and fees in excess of $1 million from 30 transactions (vs. 26 in Q3 2011 and 30 in Q2 2012). For the first nine months of the year, Investment Banking earned advisory fees from 247 clients (vs. 188 last year) and fees in excess of $1 million from 77 transactions (vs. 65 last year).
The Institutional Equities business contributed revenues of $5.2 million and the Private Funds Group closed one capital raise during the quarter.
Expenses
Compensation costs were $77.3 million for the third quarter, a decrease of 10% year-over-year and 14% sequentially. The trailing twelve-month compensation ratio was 60%, down from 61% a year ago and flat when compared to the previous quarter. Evercore’s Investment Banking compensation ratio was 60% for the third quarter, versus the compensation ratio reported for the three months ended September 30, 2011 and June 30, 2012 of 62% and 59%, respectively. Year-to-date compensation costs were $221.6 million, an increase of 10% from the prior year.
Non-compensation costs for the current quarter were $23.5 million, up 10% from the same period last year but down 9% sequentially. The year-over-year increase in costs reflects the Lexicon acquisition and continued growth of the Investment Banking business. The sequential quarter-over-quarter decrease was driven by completion of real estate consolidation and cost control initiatives implemented in the quarter. The ratio of non-compensation costs to revenue for the current quarter was 18%, compared to 15% in the same quarter last year and 17% in the previous quarter. Year-to-date non-compensation costs were $72.4 million, up 35% from the prior year. The ratio of non-compensation costs to revenue for the first nine months was 20%, compared to 16% last year.
Expenses in the Institutional Equities business were $6.9 million for the third quarter, an increase of 5% from the previous quarter, reflecting the addition of a team to cover the REIT sector.
Investment Management
For the third quarter, Investment Management reported net revenues and operating income of $21.0 million and $2.0 million, respectively. Investment Management reported third quarter operating margin of 9%. For the nine months ended September 30, 2012, Investment Management reported net revenue and operating income of $62.5 million and $4.3 million, respectively. The year-to-date operating margin was 7%, compared to 12% last year. As of September 30, 2012, Investment Management reported $11.6 billion of AUM, down 2% from the second quarter as net outflows of $0.7 billion offset market appreciation of $0.5 billion.
| Adjusted Pro Forma | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| 2012 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||
| Net Revenues: | (dollars in thousands) | ||||||||||||||||||
| Investment Management Revenues | $ | 20,918 | $ | 20,699 | $ | 24,557 | $ | 62,005 | $ | 77,124 | |||||||||
| Other Revenue, net | 94 | 206 | 186 | 453 | 486 | ||||||||||||||
| Net Revenues | 21,012 | 20,905 | 24,743 | 62,458 | 77,610 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Employee Compensation and Benefits | 11,994 | 12,962 | 14,834 | 36,928 | 45,213 | ||||||||||||||
| Non-compensation Costs | 7,027 | 7,014 | 7,631 | 21,186 | 22,984 | ||||||||||||||
| Total Expenses | 19,021 | 19,976 | 22,465 | 58,114 | 68,197 | ||||||||||||||
| Operating Income | $ | 1,991 | $ | 929 | $ | 2,278 | $ | 4,344 | $ | 9,413 | |||||||||
| Compensation Ratio | 57 | % | 62 | % | 60 | % | 59 | % | 58 | % | |||||||||
| Operating Margin | 9 | % | 4 | % | 9 | % | 7 | % | 12 | % | |||||||||
| U.S. GAAP | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| 2012 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||
| Net Revenues: | (dollars in thousands) | ||||||||||||||||||
| Investment Management Revenues | $ | 20,434 | $ | 20,036 | $ | 24,723 | $ | 60,234 | $ | 78,154 | |||||||||
| Other Revenue, net | (820 | ) | (703 | ) | (708 | ) | (2,274 | ) | (2,192 | ) | |||||||||
| Net Revenues | 19,614 | 19,333 | 24,015 | 57,960 | 75,962 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Employee Compensation and Benefits | 12,590 | 13,536 | 15,575 | 38,624 | 50,034 | ||||||||||||||
| Non-compensation Costs | 7,240 | 7,185 | 7,819 | 21,785 | 23,755 | ||||||||||||||
| Total Expenses | 19,830 | 20,721 | 23,394 | 60,409 | 73,789 | ||||||||||||||
| Operating Income (Loss) | $ | (216 | ) | $ | (1,388 | ) | $ | 621 | $ | (2,449 | ) | $ | 2,173 | ||||||
| Compensation Ratio | 64 | % | 70 | % | 65 | % | 67 | % | 66 | % | |||||||||
| Operating Margin | (1 | %) | (7 | %) | 3 | % | (4 | %) | 3 | % | |||||||||
|
Revenues |
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| Investment Management Revenue Components | |||||||||||||||||||
| Adjusted Pro Forma | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| 2012 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||
| Investment Advisory and Management Fees | (dollars in thousands) | ||||||||||||||||||
| Wealth Management | $ | 5,269 | $ | 4,906 | $ | 3,927 | $ | 14,700 | $ | 11,159 | |||||||||
| Institutional Asset Management (1) | 11,459 | 12,415 | 16,016 | 36,340 | 51,392 | ||||||||||||||
| Private Equity | 1,856 | 1,810 | 1,678 | 5,401 | 5,107 | ||||||||||||||
| Total Investment Advisory and Management Fees | 18,584 | 19,131 | 21,621 | 56,441 | 67,658 | ||||||||||||||
| Realized and Unrealized Gains (Losses) | |||||||||||||||||||
| Institutional Asset Management | 1,296 | 1,117 | 1,269 | 3,625 | 3,426 | ||||||||||||||
| Private Equity | 423 | (301 | ) | 1,728 | (185 | ) | 6,548 | ||||||||||||
| Total Realized and Unrealized Gains | 1,719 | 816 | 2,997 | 3,440 | 9,974 | ||||||||||||||
| Equity in Earnings (Loss) of Affiliates (2) | 615 | 752 | (61 | ) | 2,124 | (508 | ) | ||||||||||||
| Investment Management Revenues | $ | 20,918 | $ | 20,699 | $ | 24,557 | $ | 62,005 | $ | 77,124 | |||||||||
| (1) Management fees from Institutional Asset Management were $11.6 million, $12.5 million and $36.7 million for the three months ended September 30, 2012, June 30, 2012 and nine months ended September 30, 2012, respectively, on a U.S. GAAP basis, excluding the reduction of revenues for client-related expenses. |
| (2) Equity in Pan, G5 and ABS on a U.S. GAAP basis are reclassified from Investment Management Revenue to Income from Equity Method Investments. |
Investment Advisory and Management Fees of $18.6 million for the quarter ended September 30, 2012 declined compared to the same period a year ago, as higher fees in Wealth Management and Private Equity were offset by declines in Institutional Asset Management. Fees earned in the current quarter decreased in comparison to the previous quarter due to a lower contribution from Institutional Asset Management.
Realized and Unrealized Gains of $1.7 million in the quarter declined by $1.3 million relative to the prior year but increased by $0.9 million relative to the previous quarter; the change relative to the prior periods was primarily driven by valuation adjustments in Private Equity.
Equity in Earnings of Affiliates of $0.6 million in the quarter increased relative to the prior year, reflecting an increased contribution from ABS Investment Management, and was in line with the prior quarter.
Expenses
Investment Management’s third quarter expenses were $19.0 million, a decrease of 15% compared to the third quarter of 2011 and 5% compared to previous quarter. Year-to-date Investment Management expenses were $58.1 million, down 15% from a year ago. The decreases from the prior periods primarily reflect lower performance-based compensation costs.
Other U.S. GAAP Expenses
Evercore’s Adjusted Pro Forma Net Income Attributable to Evercore Partners Inc. for the three and nine months ended September 30, 2012 was higher than U.S. GAAP as a result of the exclusion of expenses associated with the vesting of IPO equity awards and awards granted in conjunction with the Lexicon acquisition and certain business acquisition-related costs, including Special Charges. In addition, for Adjusted Pro Forma purposes, client related expenses and expenses associated with revenue-sharing engagements with third parties have been presented as a reduction from Revenues and Non-compensation costs. Further details of these expenses, as well as an explanation of similar expenses for the three and nine months ended September 30, 2011 and the three months ended June 30, 2012, are included in Annex I, pages A-2 to A-11.
Non-controlling Interests
Non-controlling Interests in certain subsidiaries are owned by the principals and strategic investors in these businesses. Evercore’s equity ownership percentages in these businesses range from 51% to 86%. For the periods ended September 30, 2012, June 30, 2012, and September 30, 2011 the gain (loss) allocated to non-controlling interests was as follows:
| Net Gain (Loss) Allocated to Noncontrolling Interests | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||
| 2012 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||
|
Segment |
(dollars in thousands) | |||||||||||||||||
| Investment Banking (1) | $ | (742 | ) | $ | 15 | $ | (1,754 | ) | $ | (1,005 | ) | $ | (3,441 | ) | ||||
| Investment Management (1) | 452 | 170 | 822 | 896 | 2,617 | |||||||||||||
| Total | $ | (290 | ) | $ | 185 | $ | (932 | ) | $ | (109 | ) | $ | (824 | ) | ||||
| (1) The difference between Adjusted Pro Forma and U.S. GAAP Noncontrolling Interests relates primarily to intangible amortization expense for certain acquisitions which we excluded from the Adjusted Pro Forma results. |
Income Taxes
For the three and nine months ended September 30, 2012, Evercore’s Adjusted Pro Forma effective tax rate was 38%, compared to 40% for the three and nine months ended September 30, 2011.
For the three and nine months ended September 30, 2012, Evercore’s U.S. GAAP effective tax rate was approximately 49% and 46%, respectively, compared to 82% and 58%, respectively, for the three and nine months ended September 30, 2011. The effective tax rate for U.S. GAAP purposes reflects significant adjustments relating to the tax treatment of certain compensation transactions, valuation allowances on deferred tax assets of non-U.S. subsidiaries as well as the non-controlling interest associated with Evercore LP Units. The effective tax rate for the three and nine month periods ended September 30, 2012, was lower than the three and nine month periods ended September 30, 2011 primarily due to a higher level of expected foreign sourced income in 2012.
Balance Sheet
The Company continues to maintain a strong balance sheet, holding cash, cash equivalents and marketable securities of $205.2 million at September 30, 2012. Current assets exceed current liabilities by $184.3 million at September 30, 2012. Amounts due related to the Long-Term Notes Payable were $100.9 million at September 30, 2012.
During the quarter the Company repurchased approximately 1,015,000 shares at an average cost of $24.23 per share.
Evercore also announced that its Board of Directors has authorized the repurchase of up to 5 million shares of Evercore Class A Common Stock and/or Evercore LP partnership units. 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 number 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.
Dividend
On October 22, 2012, the Board of Directors of Evercore declared a quarterly dividend of $0.22 per share to be paid on December 14, 2012 to common stockholders of record on November 30, 2012.
Conference Call
Investors and analysts may participate in the live conference call by dialing (800) 706-7745 (toll-free domestic) or (617) 614-3472 (international); passcode: 93290025. Please register at least 10 minutes before the conference call begins. A replay of the call will be available for one week via telephone starting approximately one hour after the call ends. The replay can be accessed at (888) 286-8010 (toll-free domestic) or (617) 801-6888 (international); passcode: 49057013. A live webcast of the conference call will be available on the Investor Relations section of Evercore’s website at www.evercore.com. The webcast will be archived on Evercore’s website for 30 days after the call.
About Evercore Partners
Evercore Partners is a leading independent investment banking advisory firm. Evercore’s Investment Banking business advises its clients on mergers, acquisitions, divestitures, restructurings, financings, public offerings, private placements and other strategic transactions and also provides institutional investors with high quality research, sales and trading execution that is free of the conflicts created by proprietary activities; Evercore’s Investment Management business comprises wealth management, institutional asset management and private equity investing. Evercore serves a diverse set of clients around the world from its offices in New York, Boston, Chicago, Minneapolis, Houston, Los Angeles, San Francisco, Washington D.C., Toronto, London, Aberdeen, Scotland, Mexico City and Monterrey, Mexico, Hong Kong and Rio de Janeiro and São Paulo, Brazil. More information about Evercore can be found on the Company’s website at www.evercore.com.
Basis of Alternative Financial Statement Presentation
Adjusted Pro Forma results are a non-GAAP measure. Evercore believes that the disclosed Adjusted Pro Forma measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore’s results across several periods and better reflect management’s view of operating results. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. A reconciliation of U.S. GAAP results to Adjusted Pro Forma results is presented in the tables included in Annex I.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which reflect our current views with respect to, among other things, Evercore’s operations and financial performance. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. All statements other than statements of historical fact included in this presentation are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in Evercore’s business. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Evercore believes these factors include, but are not limited to, those described under “Risk Factors” discussed in Evercore’s Annual Report on Form 10-K for the year ended December 31, 2011, subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and Registration Statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Evercore to predict all risks and uncertainties, nor can Evercore assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and Evercore does not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. Evercore undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
With respect to any securities offered by any private equity fund referenced herein, such securities have not been and will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
|
ANNEX I |
|
| Schedule | Page Number |
| Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011 | A-1 |
| Adjusted Pro Forma: | |
| Adjusted Pro Forma Results | A-2 |
| U.S. GAAP Reconciliation to Adjusted Pro Forma (Unaudited) | A-4 |
| Adjusted Pro Forma Segment Reconciliation to U.S. GAAP for the Three and Nine Months ended September 30, 2012 (Unaudited) | A-6 |
| Adjusted Pro Forma Segment Reconciliation to U.S. GAAP for the Three Months ended June 30, 2012 (Unaudited) | A-7 |
| Adjusted Pro Forma Segment Reconciliation to U.S. GAAP for the Three and Nine Months ended September 30, 2011 (Unaudited) | A-8 |
| Notes to Unaudited Condensed Consolidated Adjusted Pro Forma Financial Data | A-9 |
| EVERCORE PARTNERS INC. | ||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
| THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 | ||||||||||||||
| (dollars in thousands, except per share data) | ||||||||||||||
| (UNAUDITED) | ||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||
| Revenues | ||||||||||||||
| Investment Banking Revenue | $ | 133,850 | $ | 139,995 | $ | 372,771 | $ | 337,743 | ||||||
| Investment Management Revenue | 20,434 | 24,723 | 60,234 | 78,154 | ||||||||||
| Other Revenue | 2,760 | 3,036 | 6,649 | 11,002 | ||||||||||
| Total Revenues | 157,044 | 167,754 | 439,654 | 426,899 | ||||||||||
| Interest Expense (1) | 4,015 | 4,573 | 11,330 | 15,416 | ||||||||||
| Net Revenues | 153,029 | 163,181 | 428,324 | 411,483 | ||||||||||
| Expenses | ||||||||||||||
| Employee Compensation and Benefits | 101,364 | 113,634 | 296,381 | 282,800 | ||||||||||
| Occupancy and Equipment Rental | 8,882 | 5,976 | 26,273 | 16,767 | ||||||||||
| Professional Fees | 10,752 | 9,395 | 26,080 | 25,404 | ||||||||||
| Travel and Related Expenses | 6,802 | 5,856 | 21,183 | 15,785 | ||||||||||
| Communications and Information Services | 2,915 | 1,574 | 8,731 | 5,548 | ||||||||||
| Depreciation and Amortization | 3,828 | 4,886 | 12,870 | 10,882 | ||||||||||
| Special Charges | - | 2,626 | 662 | 2,626 | ||||||||||
| Acquisition and Transition Costs | - | 1,178 | 148 | 2,312 | ||||||||||
| Other Operating Expenses | 4,241 | 4,614 | 12,699 | 12,538 | ||||||||||
| Total Expenses | 138,784 | 149,739 | 405,027 | 374,662 | ||||||||||
| Income Before Income from Equity Method Investments and Income Taxes | 14,245 | 13,442 | 23,297 | 36,821 | ||||||||||
| Income from Equity Method Investments | 415 | 195 | 3,519 | 664 | ||||||||||
| Income Before Income Taxes | 14,660 | 13,637 | 26,816 | 37,485 | ||||||||||
| Provision for Income Taxes | 7,187 | 11,144 | 12,322 | 21,644 | ||||||||||
| Net Income from Continuing Operations | 7,473 | 2,493 | 14,494 | 15,841 | ||||||||||
| Discontinued Operations | ||||||||||||||
| Income (Loss) from Discontinued Operations | - | (1,718 | ) | - | (2,755 | ) | ||||||||
| Provision (Benefit) for Income Taxes | - | (518 | ) | - | (783 | ) | ||||||||
| Net Income (Loss) from Discontinued Operations | - | (1,200 | ) | - | (1,972 | ) | ||||||||
| Net Income | 7,473 | 1,293 | 14,494 | 13,869 | ||||||||||
| Net Income (Loss) Attributable to Noncontrolling Interest | 2,172 | (466 | ) | 4,627 | 6,261 | |||||||||
| Net Income Attributable to Evercore Partners Inc. | $ | 5,301 | $ | 1,759 | $ | 9,867 | $ | 7,608 | ||||||
| Net Income (Loss) Attributable to Evercore Partners Inc. Common Shareholders: | ||||||||||||||
| From Continuing Operations | $ | 5,280 | $ | 1,936 | $ | 9,804 | $ | 7,858 | ||||||
| From Discontinued Operations | - | (198 | ) | - | (313 | ) | ||||||||
| Net Income Attributable to Evercore Partners Inc. | $ | 5,280 | $ | 1,738 | $ | 9,804 | $ | 7,545 | ||||||
| Weighted Average Shares of Class A Common Stock Outstanding: | ||||||||||||||
| Basic | 28,841 | 28,967 | 29,063 | 25,146 | ||||||||||
| Diluted | 31,440 | 31,235 | 31,973 | 28,534 | ||||||||||
| Basic Net Income (Loss) Per Share Attributable to Evercore Partners Inc. Common Shareholders: | ||||||||||||||
| From Continuing Operations | $ | 0.18 | $ | 0.06 | $ | 0.34 | $ | 0.31 | ||||||
| From Discontinued Operations | - | - | - | (0.01 | ) | |||||||||
| Net Income Attributable to Evercore Partners Inc. | $ | 0.18 | $ | 0.06 | $ | 0.34 | $ | 0.30 | ||||||
| Diluted Net Income (Loss) Per Share Attributable to Evercore Partners Inc. Common Shareholders: | ||||||||||||||
| From Continuing Operations | $ | 0.17 | $ | 0.06 | $ | 0.31 | $ | 0.27 | ||||||
| From Discontinued Operations | - | - | - | (0.01 | ) | |||||||||
| Net Income Attributable to Evercore Partners Inc. | $ | 0.17 | $ | 0.06 | $ | 0.31 | $ | 0.26 | ||||||
| (1) Includes interest expense on long-term debt and interest expense on short-term repurchase agreements. |
|
A-1 |
|
Adjusted Pro Forma Results |
| Throughout the discussion of Evercore’s business segments, information is presented on an Adjusted Pro Forma basis, which is a non-generally accepted accounting principles (“non-GAAP”) measure. Adjusted Pro Forma results begin with information prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), adjusted to exclude certain items and reflect the conversion of vested and unvested Evercore LP Units, other IPO related restricted stock unit awards, as well as Acquisition Related Share Issuances and Unvested Restricted Stock Units granted to Lexicon employees, into Class A shares. Evercore believes that the disclosed Adjusted Pro Forma measures and any adjustments thereto, when presented in conjunction with comparable U.S. GAAP measures, are useful to investors to compare Evercore’s results across several periods and facilitate an understanding of Evercore’s operating results. The Company uses these measures to evaluate its operating performance, as well as the performance of individual employees. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. These Adjusted Pro Forma amounts are allocated to the Company’s two business segments: Investment Banking and Investment Management. The differences between Adjusted Pro Forma and U.S. GAAP results are as follows: |
| 1. |
Assumed Vesting of Evercore LP Units and Exchange into Class A Shares. The Company incurred expenses, primarily, in Employee Compensation and Benefits, resulting from the modification of Evercore LP Units, which will vest generally over a five-year period. The Adjusted Pro Forma results assume these LP Units have vested and have been exchanged for Class A shares. Accordingly, any expense associated with these units and related awards is excluded from Adjusted Pro Forma results and the noncontrolling interest related to these units is converted to controlling interest. The Company’s Management believes that it is useful to provide the per-share effect associated with the assumed conversion of this previously granted but unvested equity, and thus the Adjusted Pro Forma results reflect the vesting of all unvested Evercore LP partnership units and IPO related restricted stock unit awards. |
|
| 2. |
Vesting of Contingently Vested Equity Awards. The Company incurred expenses in Employee Compensation and Benefits, resulting from the vesting of awards issued at the time of the IPO. These awards vest upon the occurrence of specified vesting events rather than merely the passage of time and continued service. In periods prior to the completion of the June 2011 offering, we concluded that it was not probable that the vesting conditions would be achieved. Accordingly, we had not been accruing compensation expense relating to these unvested stock-based awards. The completion of the June 2011 offering resulted in Messrs. Altman, Beutner and Aspe, and trusts benefiting their families and permitted transferees, collectively, ceasing to beneficially own at least 50% of the aggregate Evercore LP partnership units owned by them on the date of the internal reorganization, resulting in the vesting of these awards. The related expense has been excluded from the Adjusted Pro Forma results. |
|
| 3. |
Expenses Associated with Business Combinations. The following expenses resulting from business combinations have been excluded from Adjusted Pro Forma results because the Company’s Management believes that operating performance is more comparable across periods excluding the effects of these acquisition-related charges; |
| a. |
Amortization of Intangible Assets. Amortization of intangible assets related to the Protego acquisition, the Braveheart acquisition and the acquisitions of SFS and Lexicon. |
||||
| b. |
Compensation Charges. Expenses for deferred share-based and cash consideration and retention awards associated with the acquisition of Lexicon, as well as base salary adjustments for Lexicon employees for the period preceding the acquisition. |
||||
| c. |
Special Charges. Expenses primarily related to exiting the legacy office space in the UK and expenses related to the charge associated with lease commitments for exited office space in conjunction with the acquisition of Lexicon as well as for an introducing fee in connection with the Lexicon acquisition. |
||||
|
A-2 |
|||||
| 4. |
Client Related Expenses. Client related expenses, expenses associated with revenue sharing engagements with third parties and provisions for uncollected receivables, have been classified as a reduction of revenue in the Adjusted Pro Forma presentation. The Company’s Management believes that this adjustment results in more meaningful key operating ratios, such as compensation to net revenues and operating margin. |
|
| 5. |
Income Taxes. Evercore is organized as a series of Limited Liability Companies, Partnerships, a C-Corporation and a Public Corporation and therefore, not all of the Company’s income is subject to corporate-level taxes. As a result, adjustments have been made to the Adjusted Pro Forma earnings to assume that the Company has adopted a conventional corporate tax structure and is taxed as a C-Corporation in the U.S. at the prevailing corporate rates, that all deferred tax assets relating to foreign operations are fully realizable within the structure on a consolidated basis and that adjustments for deferred tax assets related to the ultimate tax deductions for equity-based compensation awards are made directly to stockholders’ equity. This assumption is consistent with the assumption that all Evercore LP Units are vested and exchanged into Class A shares, as discussed in Item 1 above, as the assumed exchange would change the tax structure of the Company. |
|
| 6. |
Presentation of Interest Expense. The Adjusted Pro Forma results present interest expense on short-term repurchase agreements, within the Investment Management segment, in Other Revenues, net, as the Company’s Management believes it is more meaningful to present the spread on net interest resulting from the matched financial assets and liabilities. In addition, Adjusted Pro Forma Investment Banking and Investment Management Operating Income is presented before interest expense on long-term debt, which is included in interest expense on a U.S. GAAP basis. |
|
| 7. |
Presentation of Income from Equity Method Investments. The Adjusted Pro Forma results present Income from Equity Method Investments within Revenue as the Company’s Management believes it is a more meaningful presentation. |
|
|
A-3 |
||
| EVERCORE PARTNERS INC. | |||||||||||||||||||
| U.S. GAAP RECONCILIATION TO ADJUSTED PRO FORMA | |||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| 2012 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||
| Net Revenues - U.S. GAAP (a) | $ | 153,029 | $ | 172,497 | $ | 163,181 | $ | 428,324 | $ | 411,483 | |||||||||
| Client Related Expenses (1) | (6,193 | ) | (3,085 | ) | (2,235 | ) | (10,914 | ) | (9,268 | ) | |||||||||
| Income from Equity Method Investments (2) | 415 | 719 | 195 | 3,519 | 664 | ||||||||||||||
| Interest Expense on Long-term Debt (3) | 1,996 | 1,984 | 1,953 | 5,954 | 5,849 | ||||||||||||||
| Net Revenues - Adjusted Pro Forma (a) | $ | 149,247 | $ | 172,115 | $ | 163,094 | $ | 426,883 | $ | 408,728 | |||||||||
| Compensation Expense - U.S. GAAP (a) | $ | 101,364 | $ | 114,290 | $ | 113,634 | $ | 296,381 | $ | 282,800 | |||||||||
| Amortization of LP Units and Certain Other Awards (4) | (5,237 | ) | (5,147 | ) | (5,126 | ) | (15,032 | ) | (17,746 | ) | |||||||||
| IPO Related Restricted Stock Unit Awards (5) | - | - | - | - | (11,389 | ) | |||||||||||||
| Acquisition Related Compensation Charges (6) | (6,802 | ) | (6,352 | ) | (7,729 | ) | (22,799 | ) | (7,729 | ) | |||||||||
| Compensation Expense - Adjusted Pro Forma (a) | $ | 89,325 | $ | 102,791 | $ | 100,779 | $ | 258,550 | $ | 245,936 | |||||||||
| Operating Income - U.S. GAAP (a) | $ | 14,245 | $ | 21,195 | $ | 13,442 | $ | 23,297 | $ | 36,821 | |||||||||
| Income from Equity Method Investments (2) | 415 | 719 | 195 | 3,519 | 664 | ||||||||||||||
| Pre-Tax Income - U.S. GAAP (a) | 14,660 | 21,914 | 13,637 | 26,816 | 37,485 | ||||||||||||||
| Amortization of LP Units and Certain Other Awards (4) | 5,462 | 5,069 | 5,321 | 15,273 | 17,941 | ||||||||||||||
| IPO Related Restricted Stock Unit Awards (5) | - | - | - | - | 11,389 | ||||||||||||||
| Acquisition Related Compensation Charges (6) | 6,802 | 6,352 | 7,729 | 22,799 | 7,729 | ||||||||||||||
| Special Charges (7) | - | 662 | 2,626 | 662 | 2,626 | ||||||||||||||
| Intangible Asset Amortization (8a) | 471 | 471 | 2,117 | 3,270 | 3,221 | ||||||||||||||
| Pre-Tax Income - Adjusted Pro Forma (a) | 27,395 | 34,468 | 31,430 | 68,820 | 80,391 | ||||||||||||||
| Interest Expense on Long-term Debt (3) | 1,996 | 1,984 | 1,953 | 5,954 | 5,849 | ||||||||||||||
| Operating Income - Adjusted Pro Forma (a) | $ | 29,391 | $ | 36,452 | $ | 33,383 | $ | 74,774 | $ | 86,240 | |||||||||
| Provision for Income Taxes - U.S. GAAP (a) | $ | 7,187 | $ | 9,773 | $ | 11,144 | $ | 12,322 | $ | 21,644 | |||||||||
| Income Taxes (9) | 3,223 | 3,325 | 1,426 | 13,830 | 10,509 | ||||||||||||||
| Provision for Income Taxes - Adjusted Pro Forma (a) | $ | 10,410 | $ | 13,098 | $ | 12,570 | $ | 26,152 | $ | 32,153 | |||||||||
| Net Income from Continuing Operations (a) | $ | 7,473 | $ | 12,141 | $ | 2,493 | $ | 14,494 | $ | 15,841 | |||||||||
| Net Income (Loss) Attributable to Noncontrolling Interest (a) | 2,172 | 4,207 | 536 | 4,627 | 7,920 | ||||||||||||||
| Net Income from Continuing Operations Attributable to Evercore Partners Inc. - U.S. GAAP (a) | 5,301 | 7,934 | 1,957 | 9,867 | 7,921 | ||||||||||||||
| Amortization of LP Units and Certain Other Awards (4) | 5,462 | 5,069 | 5,321 | 15,273 | 17,941 | ||||||||||||||
| IPO Related Restricted Stock Unit Awards (5) | - | - | - | - | 11,389 | ||||||||||||||
| Acquisition Related Compensation Charges (6) | 6,802 | 6,352 | 7,729 | 22,799 | 7,729 | ||||||||||||||
| Special Charges (7) | - | 662 | 2,626 | 662 | 2,626 | ||||||||||||||
| Intangible Asset Amortization (8a) | 471 | 471 | 2,117 | 3,270 | 3,221 | ||||||||||||||
| Income Taxes (9) | (3,223 | ) | (3,325 | ) | (1,426 | ) | (13,830 | ) | (10,509 | ) | |||||||||
| Noncontrolling Interest (10) | 2,462 | 4,022 | 1,468 | 4,736 | 8,744 | ||||||||||||||
| Net Income from Continuing Operations Attributable to Evercore Partners Inc. - Adjusted Pro Forma (a) | $ | 17,275 | $ | 21,185 | $ | 19,792 | $ | 42,777 | $ | 49,062 | |||||||||
| Diluted Shares Outstanding - U.S. GAAP | 31,440 | 31,664 | 31,235 | 31,973 | 28,534 | ||||||||||||||
| Vested Partnership Units (11a) | 7,280 | 7,559 | 6,444 | 7,500 | 8,404 | ||||||||||||||
| Unvested Partnership Units (11a) | 2,918 | 2,926 | 4,447 | 2,942 | 4,489 | ||||||||||||||
| Unvested Restricted Stock Units - Event Based (11a) | 12 | 12 | 12 | 12 | 365 | ||||||||||||||
| Acquisition Related Share Issuance (11b) | 1,106 | 1,208 | 815 | 1,272 | 243 | ||||||||||||||
| Unvested Restricted Stock Units - Service Based (11b) | - | 78 | - | - | - | ||||||||||||||
| Diluted Shares Outstanding - Adjusted Pro Forma | 42,756 | 43,447 | 42,953 | 43,699 | 42,035 | ||||||||||||||
|
Key Metrics: (b) |
|||||||||||||||||||
| Diluted Earnings Per Share from Continuing Operations - U.S. GAAP (c) | $ | 0.17 | $ | 0.25 | $ | 0.06 | $ | 0.31 | $ | 0.27 | |||||||||
| Diluted Earnings Per Share from Continuing Operations - Adjusted Pro Forma (c) | $ | 0.40 | $ | 0.49 | $ | 0.46 | $ | 0.98 | $ | 1.17 | |||||||||
| Compensation Ratio - U.S. GAAP | 66 | % | 66 | % | 70 | % | 69 | % | 69 | % | |||||||||
| Compensation Ratio - Adjusted Pro Forma | 60 | % | 60 | % | 62 | % | 61 | % | 60 | % | |||||||||
| Operating Margin - U.S. GAAP | 9 | % | 12 | % | 8 | % | 5 | % | 9 | % | |||||||||
| Operating Margin - Adjusted Pro Forma | 20 | % | 21 | % | 20 | % | 18 | % | 21 | % | |||||||||
| Effective Tax Rate - U.S. GAAP | 49 | % | 45 | % | 82 | % | 46 | % | 58 | % | |||||||||
| Effective Tax Rate - Adjusted Pro Forma | 38 | % | 38 | % | 40 | % | 38 | % | 40 | % | |||||||||
| (a) Represents the Company's results from Continuing Operations. | |
| (b) Reconciliations of the key metrics from U.S. GAAP to Adjusted Pro Forma are a derivative of the reconciliations of their components above. | |
| (c) For Earnings Per Share purposes, Net Income Attributable to Evercore Partners Inc. is reduced by $21 of accretion for the three months ended September 30, 2012, June 30, 2012 and September 30, 2011, and $63 of accretion for the nine months ended September 30, 2012 and 2011, related to the Company's noncontrolling interest in Trilantic Capital Partners. | |
|
A-4 |
|
| EVERCORE PARTNERS INC. | |||||||||||
| U.S. GAAP RECONCILIATION TO ADJUSTED PRO FORMA | |||||||||||
| TRAILING TWELVE MONTHS | |||||||||||
| (dollars in thousands) | |||||||||||
| (UNAUDITED) | |||||||||||
| Consolidated | |||||||||||
| Twelve Months Ended | |||||||||||
| September 30, | June 30, | September 30, | |||||||||
| 2012 | 2012 | 2011 | |||||||||
| Net Revenues - U.S. GAAP | $ | 541,105 | $ | 551,257 | $ | 512,935 | |||||
| Client Related Expenses (1) | (14,294 | ) | (10,336 | ) | (10,920 | ) | |||||
| Income from Equity Method Investments (2) | 3,774 | 3,554 | 548 | ||||||||
| Interest Expense on Long-term Debt (3) | 7,922 | 7,879 | 7,787 | ||||||||
| Net Revenues - Adjusted Pro Forma | $ | 538,507 | $ | 552,354 | $ | 510,350 | |||||
| Compensation Expense - U.S. GAAP | $ | 371,261 | $ | 383,531 | $ | 349,812 | |||||
| Amortization of LP Units and Certain Other Awards (4) | (20,993 | ) | (20,882 | ) | (22,880 | ) | |||||
| IPO Related Restricted Stock Unit Awards (5) | - | - | (11,389 | ) | |||||||
| Acquisition Related Compensation Charges (6) | (29,688 | ) | (30,615 | ) | (7,729 | ) | |||||
| Compensation Expense - Adjusted Pro Forma | $ | 320,580 | $ | 332,034 | $ | 307,814 | |||||
| Compensation Ratio - U.S. GAAP (a) | 69 | % | 70 | % | 68 | % | |||||
| Compensation Ratio - Adjusted Pro Forma (a) | 60 | % | 60 | % | 60 | % | |||||
| Investment Banking | |||||||||||
| Twelve Months Ended | |||||||||||
| September 30, | June 30, | September 30, | |||||||||
| 2012 | 2012 | 2011 | |||||||||
| Net Revenues - U.S. GAAP | $ | 462,967 | $ | 468,718 | $ | 412,068 | |||||
| Client Related Expenses (1) | (13,859 | ) | (9,927 | ) | (10,246 | ) | |||||
| Income from Equity Method Investments (2) | 1,324 | 1,780 | 1,188 | ||||||||
| Interest Expense on Long-term Debt (3) | 4,294 | 4,271 | 4,221 | ||||||||
| Net Revenues - Adjusted Pro Forma | $ | 454,726 | $ | 464,842 | $ | 407,231 | |||||
| Compensation Expense - U.S. GAAP | $ | 319,061 | $ | 328,346 | $ | 284,752 | |||||
| Amortization of LP Units and Certain Other Awards (4) | (18,743 | ) | (18,487 | ) | (19,790 | ) | |||||
| IPO Related Restricted Stock Unit Awards (5) | - | - | (8,906 | ) | |||||||
| Acquisition Related Compensation Charges (6) | (29,688 | ) | (30,615 | ) | (7,729 | ) | |||||
| Compensation Expense - Adjusted Pro Forma | $ | 270,630 | $ | 279,244 | $ | 248,327 | |||||
| Compensation Ratio - U.S. GAAP (a) | 69 | % | 70 | % | 69 | % | |||||
| Compensation Ratio - Adjusted Pro Forma (a) | 60 | % | 60 | % | 61 | % | |||||
| (a) Reconciliations of the key metrics from U.S. GAAP to Adjusted Pro Forma are a derivative of the reconciliations of their components above. |
|
A-5 |
| EVERCORE PARTNERS INC. | |||||||||||||||||||||||
| ADJUSTED PRO FORMA SEGMENT RECONCILIATION TO U.S. GAAP | |||||||||||||||||||||||
| FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 | |||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||
| Investment Banking Segment | |||||||||||||||||||||||
| Three Months Ended September 30, 2012 | Nine Months Ended September 30, 2012 | ||||||||||||||||||||||
| Non-GAAP | Non-GAAP | ||||||||||||||||||||||
| Adjusted Pro | U.S. GAAP | Adjusted Pro | U.S. GAAP | ||||||||||||||||||||
| Forma Basis | Adjustments | Basis | Forma Basis | Adjustments | Basis | ||||||||||||||||||
| Net Revenues: | |||||||||||||||||||||||
| Investment Banking Revenue | $ | 127,588 | $ | 6,262 | (1)(2) | $ | 133,850 | $ | 363,605 | $ | 9,166 | (1)(2) | $ | 372,771 | |||||||||
| Other Revenue, net | 647 | (1,082 | ) | (3) | (435 | ) | 820 | (3,227 | ) | (3) | (2,407 | ) | |||||||||||
| Net Revenues | 128,235 | 5,180 | 133,415 | 364,425 | 5,939 | 370,364 | |||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Employee Compensation and Benefits | 77,331 | 11,443 | (4)(6) | 88,774 | 221,622 | 36,135 | (4)(6) | 257,757 | |||||||||||||||
| Non-compensation Costs | 23,504 | 6,676 | (4)(8) | 30,180 | 72,373 | 13,826 | (4)(8) | 86,199 | |||||||||||||||
| Special Charges | - | - | - | - | 662 | (7) | 662 | ||||||||||||||||
| Total Expenses | 100,835 | 18,119 | 118,954 | 293,995 | 50,623 | 344,618 | |||||||||||||||||
| Operating Income from Continuing Operations (a) | $ | 27,400 | $ | (12,939 | ) | $ | 14,461 | $ | 70,430 | $ | (44,684 | ) | $ | 25,746 | |||||||||
| Compensation Ratio (b) | 60 | % | 67 | % | 61 | % | 70 | % | |||||||||||||||
| Operating Margin (b) | 21 | % | 11 | % | 19 | % | 7 | % | |||||||||||||||
| Investment Management Segment | |||||||||||||||||||||||
| Three Months Ended September 30, 2012 | Nine Months Ended September 30, 2012 | ||||||||||||||||||||||
| Non-GAAP | Non-GAAP | ||||||||||||||||||||||
| Adjusted Pro | U.S. GAAP | Adjusted Pro | U.S. GAAP | ||||||||||||||||||||
| Forma Basis | Adjustments | Basis | Forma Basis | Adjustments | Basis | ||||||||||||||||||
| Net Revenues: | |||||||||||||||||||||||
| Investment Management Revenue | $ | 20,918 | $ | (484 | ) | (1)(2) | $ | 20,434 | $ | 62,005 | $ | (1,771 | ) | (1)(2) | $ | 60,234 | |||||||
| Other Revenue, net | 94 | (914 | ) | (3) | (820 | ) | 453 | (2,727 | ) | (3) | (2,274 | ) | |||||||||||
| Net Revenues | 21,012 | (1,398 | ) | 19,614 | 62,458 | (4,498 | ) | 57,960 | |||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Employee Compensation and Benefits | 11,994 | 596 | (4) | 12,590 | 36,928 | 1,696 | (4) | 38,624 | |||||||||||||||
| Non-compensation Costs | 7,027 | 213 | (8) | 7,240 | 21,186 | 599 | (8) | 21,785 | |||||||||||||||
| Total Expenses | 19,021 | 809 | 19,830 | 58,114 | 2,295 | 60,409 | |||||||||||||||||
| Operating Income (Loss) from Continuing Operations (a) | $ | 1,991 | $ | (2,207 | ) | $ | (216 | ) | $ | 4,344 | $ | (6,793 | ) | $ | (2,449 | ) | |||||||
| Compensation Ratio (b) | 57 | % | 64 | % | 59 | % | 67 | % | |||||||||||||||
| Operating Margin (b) | 9 | % | (1 | %) | 7 | % | (4 | %) | |||||||||||||||
| (a) Operating Income (Loss) for U.S. GAAP excludes Income (Loss) from Equity Method Investments. |
| (b) Reconciliations of the key metrics from U.S. GAAP to Adjusted Pro Forma are a derivative of the reconciliations of their components above. |
|
A-6 |
| EVERCORE PARTNERS INC. | |||||||||||
| ADJUSTED PRO FORMA SEGMENT RECONCILIATION TO U.S. GAAP | |||||||||||
| FOR THE THREE MONTHS ENDED JUNE 30, 2012 | |||||||||||
| (dollars in thousands) | |||||||||||
| (UNAUDITED) | |||||||||||
| Investment Banking Segment | |||||||||||
| Three Months Ended June 30, 2012 | |||||||||||
| Non-GAAP | |||||||||||
| Adjusted Pro | U.S. GAAP | ||||||||||
| Forma Basis | Adjustments | Basis | |||||||||
| Net Revenues: | |||||||||||
| Investment Banking Revenue | $ | 151,397 | $ | 3,029 | (1)(2) | $ | 154,426 | ||||
| Other Revenue, net | (187 | ) | (1,075 | ) | (3) | (1,262 | ) | ||||
| Net Revenues | 151,210 | 1,954 | 153,164 | ||||||||
| Expenses: | |||||||||||
| Employee Compensation and Benefits | 89,829 | 10,925 | (4)(6) | 100,754 | |||||||
| Non-compensation Costs | 25,858 | 3,307 | (4)(8) | 29,165 | |||||||
| Special Charges | - | 662 | (7) | 662 | |||||||
| Total Expenses | 115,687 | 14,894 | 130,581 | ||||||||
| Operating Income from Continuing Operations (a) | $ | 35,523 | $ | (12,940 | ) | $ | 22,583 | ||||
| Compensation Ratio (b) | 59 | % | 66 | % | |||||||
| Operating Margin (b) | 23 | % | 15 | % | |||||||
| Investment Management Segment | |||||||||||
| Three Months Ended June 30, 2012 | |||||||||||
| Non-GAAP | |||||||||||
| Adjusted Pro | U.S. GAAP | ||||||||||
| Forma Basis | Adjustments | Basis | |||||||||
| Net Revenues: | |||||||||||
| Investment Management Revenue | $ | 20,699 | $ | (663 | ) | (1)(2) | $ | 20,036 | |||
| Other Revenue, net | 206 | (909 | ) | (3) | (703 | ) | |||||
| Net Revenues | 20,905 | (1,572 | ) | 19,333 | |||||||
| Expenses: | |||||||||||
| Employee Compensation and Benefits | 12,962 | 574 | (4) | 13,536 | |||||||
| Non-compensation Costs | 7,014 | 171 | (8) | 7,185 | |||||||
| Total Expenses | 19,976 | 745 | 20,721 | ||||||||
| Operating Income (Loss) from Continuing Operations (a) | $ | 929 | $ | (2,317 | ) | $ | (1,388 | ) | |||
| Compensation Ratio (b) | 62 | % | 70 | % | |||||||
| Operating Margin (b) | 4 | % | (7 | %) | |||||||
| (a) Operating Income (Loss) for U.S. GAAP excludes Income (Loss) from Equity Method Investments. |
| (b) Reconciliations of the key metrics from U.S. GAAP to Adjusted Pro Forma are a derivative of the reconciliations of their components above. |
|
A-7 |
| EVERCORE PARTNERS INC. | |||||||||||||||||||||||
| ADJUSTED PRO FORMA SEGMENT RECONCILIATION TO U.S. GAAP | |||||||||||||||||||||||
| FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 | |||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||
| Investment Banking Segment | |||||||||||||||||||||||
| Three Months Ended September 30, 2011 | Nine Months Ended September 30, 2011 | ||||||||||||||||||||||
| Non-GAAP | Non-GAAP | ||||||||||||||||||||||
| Adjusted Pro | U.S. GAAP | Adjusted Pro | U.S. GAAP | ||||||||||||||||||||
| Forma Basis | Adjustments | Basis | Forma Basis | Adjustments | Basis | ||||||||||||||||||
| Net Revenues: | |||||||||||||||||||||||
| Investment Banking Revenue | $ | 138,121 | $ | 1,874 | (1)(2) | $ | 139,995 | $ | 330,169 | $ | 7,574 | (1)(2) | $ | 337,743 | |||||||||
| Other Revenue, net | 230 | (1,059 | ) | (3) | (829 | ) | 949 | (3,171 | ) | (3) | (2,222 | ) | |||||||||||
| Net Revenues | 138,351 | 815 | 139,166 | 331,118 | 4,403 | 335,521 | |||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Employee Compensation and Benefits | 85,945 | 12,114 | (4)(5)(6) | 98,059 | 200,723 | 32,043 | (4)(5)(6) | 232,766 | |||||||||||||||
| Non-compensation Costs | 21,301 | 4,359 | (4)(8) | 25,660 | 53,568 | 11,913 | (4)(8) | 65,481 | |||||||||||||||
| Special Charges | - | 2,626 | (7) | 2,626 | - | 2,626 | (7) | 2,626 | |||||||||||||||
| Total Expenses | 107,246 | 19,099 | 126,345 | 254,291 | 46,582 | 300,873 | |||||||||||||||||
| Operating Income from Continuing Operations (a) | $ | 31,105 | $ | (18,284 | ) | $ | 12,821 | $ | 76,827 | $ | (42,179 | ) | $ | 34,648 | |||||||||
| Compensation Ratio (b) | 62 | % | 70 | % | 61 | % | 69 | % | |||||||||||||||
| Operating Margin (b) | 22 | % | 9 | % | 23 | % | 10 | % | |||||||||||||||
| Investment Management Segment | |||||||||||||||||||||||
| Three Months Ended September 30, 2011 | Nine Months Ended September 30, 2011 | ||||||||||||||||||||||
| Non-GAAP | Non-GAAP | ||||||||||||||||||||||
| Adjusted Pro | U.S. GAAP | Adjusted Pro | U.S. GAAP | ||||||||||||||||||||
| Forma Basis | Adjustments | Basis | Forma Basis | Adjustments | Basis | ||||||||||||||||||
| Net Revenues: | |||||||||||||||||||||||
| Investment Management Revenue | $ | 24,557 | $ | 166 | (1)(2) | $ | 24,723 | $ | 77,124 | $ | 1,030 | (1)(2) | $ | 78,154 | |||||||||
| Other Revenue, net | 186 | (894 | ) | (3) | (708 | ) | 486 | (2,678 | ) | (3) | (2,192 | ) | |||||||||||
| Net Revenues | 24,743 | (728 | ) | 24,015 | 77,610 | (1,648 | ) | 75,962 | |||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Employee Compensation and Benefits | 14,834 | 741 | (4)(5) | 15,575 | 45,213 | 4,821 | (4)(5) | 50,034 | |||||||||||||||
| Non-compensation Costs | 7,631 | 188 | (8) | 7,819 | 22,984 | 771 | (8) | 23,755 | |||||||||||||||
| Total Expenses | 22,465 | 929 | 23,394 | 68,197 | 5,592 | 73,789 | |||||||||||||||||
| Operating Income from Continuing Operations (a) | $ | 2,278 | $ | (1,657 | ) | $ | 621 | $ | 9,413 | $ | (7,240 | ) | $ | 2,173 | |||||||||
| Compensation Ratio (b) | 60 | % | 65 | % | 58 | % | 66 | % | |||||||||||||||
| Operating Margin (b) | 9 | % | 3 | % | 12 | % | 3 | % | |||||||||||||||
|
(a) Operating Income for U.S. GAAP excludes Income (Loss) from Equity Method Investments. |
|
|
(b) Reconciliations of the key metrics from U.S. GAAP to Adjusted Pro Forma are a derivative of the reconciliations of their components above. |
|
|
A-8 |
|
|
Notes to Unaudited Condensed Consolidated Adjusted Pro Forma Financial Data |
||
| For further information on these Adjusted Pro Forma adjustments, see page A-2. | ||
| (1) | Client related expenses, expenses associated with revenue sharing engagements with third parties and provisions for uncollected receivables, have been reclassified as a reduction of revenue in the Adjusted Pro Forma presentation. | |
| (2) | Income from Equity Method Investments has been reclassified to Revenue in the Adjusted Pro Forma presentation. | |
| (3) | Interest Expense on Long-term Debt is excluded from the Adjusted Pro Forma Investment Banking and Investment Management segment results and is included in Interest Expense in the segment results on a U.S. GAAP Basis. | |
| (4) | Expenses incurred from the modification of Evercore LP Units and related awards, which primarily vest over a five-year period, are excluded from the Adjusted Pro Forma presentation. | |
| (5) | Expenses incurred from the vesting of IPO related restricted stock unit awards relating to the June 2011 offering are excluded from the Adjusted Pro Forma presentation. | |
| (6) | Expenses for deferred share-based and cash consideration and retention awards associated with the acquisition of Lexicon, as well as base salary adjustments for Lexicon employees for the period preceding the acquisition, are excluded from the Adjusted Pro Forma presentation. | |
| (7) | Expenses related to exiting the legacy office space in the UK and expenses related to the charge associated with lease commitments for exited office space in conjunction with the acquisition of Lexicon, as well as for an introducing fee in connection with the Lexicon acquisition, are excluded from the Adjusted Pro Forma presentation. | |
| (8) | Non-compensation Costs on an Adjusted Pro Forma basis reflect the following adjustments: | |
|
A-9 |
||
| Three Months Ended September 30, 2012 | ||||||||||||||
| Investment | Investment | Total | ||||||||||||
| Banking | Management | Segments | Adjustments | U.S. GAAP | ||||||||||
| Occupancy and Equipment Rental | $ | 7,271 | $ | 1,611 | $ | 8,882 | $ | - | $ | 8,882 | ||||
| Professional Fees | 5,422 | 2,133 | 7,555 | 3,197 | (1) | 10,752 | ||||||||
| Travel and Related Expenses | 3,331 | 499 | 3,830 | 2,972 | (1) | 6,802 | ||||||||
| Communications and Information Services | 2,427 | 407 | 2,834 | 81 | (1) | 2,915 | ||||||||
| Depreciation and Amortization | 1,706 | 1,651 | 3,357 | 471 | (8a) | 3,828 | ||||||||
| Other Operating Expenses | 3,347 | 726 | 4,073 | 168 | (1) | 4,241 | ||||||||
| Total Non-compensation Costs from Continuing Operations | $ | 23,504 | $ | 7,027 | $ | 30,531 | $ | 6,889 | $ | 37,420 | ||||
| Three Months Ended June 30, 2012 | ||||||||||||||
| Investment | Investment | Total | ||||||||||||
| Banking | Management | Segments | Adjustments | U.S. GAAP | ||||||||||
| Occupancy and Equipment Rental | $ | 7,604 | $ | 1,542 | $ | 9,146 | $ | - | $ | 9,146 | ||||
| Professional Fees | 4,943 | 1,961 | 6,904 | 1,368 | (1) | 8,272 | ||||||||
| Travel and Related Expenses | 5,870 | 564 | 6,434 | 1,214 | (1) | 7,648 | ||||||||
| Communications and Information Services | 2,431 | 563 | 2,994 | 34 | (1) | 3,028 | ||||||||
| Depreciation and Amortization | 1,559 | 1,650 | 3,209 | 471 | (8a) | 3,680 | ||||||||
| Acquisition and Transition Costs | 23 | 52 | 75 | - | 75 | |||||||||
| Other Operating Expenses | 3,428 | 682 | 4,110 | 391 | (1) | 4,501 | ||||||||
| Total Non-compensation Costs from Continuing Operations | $ | 25,858 | $ | 7,014 | $ | 32,872 | $ | 3,478 | $ | 36,350 | ||||
| Three Months Ended September 30, 2011 | ||||||||||||||
| Investment | Investment | Total | ||||||||||||
| Banking | Management | Segments | Adjustments | U.S. GAAP | ||||||||||
| Occupancy and Equipment Rental | $ | 4,331 | $ | 1,645 | $ | 5,976 | $ | - | $ | 5,976 | ||||
| Professional Fees | 6,143 | 2,445 | 8,588 | 807 | (1) | 9,395 | ||||||||
| Travel and Related Expenses | 4,309 | 525 | 4,834 | 1,022 | (1) | 5,856 | ||||||||
| Communications and Information Services | 1,185 | 360 | 1,545 | 29 | (1) | 1,574 | ||||||||
| Depreciation and Amortization | 1,120 | 1,649 | 2,769 | 2,117 | (8a) | 4,886 | ||||||||
| Acquisition and Transition Costs | 1,053 | 125 | 1,178 | - | 1,178 | |||||||||
| Other Operating Expenses | 3,160 | 882 | 4,042 | 572 | (1) | 4,614 | ||||||||
| Total Non-compensation Costs from Continuing Operations | $ | 21,301 | $ | 7,631 | $ | 28,932 | $ | 4,547 | $ | 33,479 | ||||
| Nine Months Ended September 30, 2012 | ||||||||||||||
| Investment | Investment | Total | ||||||||||||
| Banking | Management | Segments | Adjustments | U.S. GAAP | ||||||||||
| Occupancy and Equipment Rental | $ | 21,469 | $ | 4,804 | $ | 26,273 | $ | - | $ | 26,273 | ||||
| Professional Fees | 15,063 | 5,965 | 21,028 | 5,052 | (1) | 26,080 | ||||||||
| Travel and Related Expenses | 14,237 | 1,636 | 15,873 | 5,310 | (1) | 21,183 | ||||||||
| Communications and Information Services | 7,078 | 1,471 | 8,549 | 182 | (1) | 8,731 | ||||||||
| Depreciation and Amortization | 4,615 | 4,985 | 9,600 | 3,270 | (8a) | 12,870 | ||||||||
| Acquisition and Transition Costs | 42 | 106 | 148 | - | 148 | |||||||||
| Other Operating Expenses | 9,869 | 2,219 | 12,088 | 611 | (1) | 12,699 | ||||||||
| Total Non-compensation Costs from Continuing Operations | $ | 72,373 | $ | 21,186 | $ | 93,559 | $ | 14,425 | $ | 107,984 | ||||
| Nine Months Ended September 30, 2011 | ||||||||||||||
| Investment | Investment | Total | ||||||||||||
| Banking | Management | Segments | Adjustments | U.S. GAAP | ||||||||||
| Occupancy and Equipment Rental | $ | 11,746 | $ | 5,021 | $ | 16,767 | $ | - | $ | 16,767 | ||||
| Professional Fees | 14,483 | 6,471 | 20,954 | 4,450 | (1) | 25,404 | ||||||||
| Travel and Related Expenses | 10,539 | 1,632 | 12,171 | 3,614 | (1) | 15,785 | ||||||||
| Communications and Information Services | 4,069 | 1,365 | 5,434 | 114 | (1) | 5,548 | ||||||||
| Depreciation and Amortization | 2,656 | 5,005 | 7,661 | 3,221 | (8a) | 10,882 | ||||||||
| Acquisition and Transition Costs | 1,967 | 345 | 2,312 | - | 2,312 | |||||||||
| Other Operating Expenses | 8,108 | 3,145 | 11,253 | 1,285 | (1) | 12,538 | ||||||||
| Total Non-compensation Costs from Continuing Operations | $ | 53,568 | $ | 22,984 | $ | 76,552 | $ | 12,684 | $ | 89,236 | ||||
|
A-10 |
||||||||||||||
| (8a) | The exclusion from the Adjusted Pro Forma presentation of expenses associated with amortization of intangible assets acquired in the Protego, Braveheart, SFS and Lexicon acquisitions. | |
| (9) | Evercore is organized as a series of Limited Liability Companies, Partnerships, a C-Corporation and a Public Corporation and therefore, not all of the Company’s income is subject to corporate level taxes. As a result, adjustments have been made to decrease Evercore’s effective tax rate to approximately 38% for the three and nine months ended September 30, 2012. These adjustments assume that the Company has adopted a conventional corporate tax structure and is taxed as a C-Corporation in the U.S. at the prevailing corporate rates, that all deferred tax assets relating to foreign operations are fully realizable within the structure on a consolidated basis and that, historically, adjustments for deferred tax assets related to the ultimate tax deductions for equity-based compensation awards are made directly to stockholders’ equity. | |
| (10) | Reflects adjustment to eliminate noncontrolling interest related to all Evercore LP partnership units which are assumed to be converted to Class A common stock in the Adjusted Pro Forma presentation. | |
| (11a) | Assumes the vesting of all Evercore LP partnership units and IPO related restricted stock unit awards in the Adjusted Pro Forma presentation. In the computation of outstanding common stock equivalents for U.S. GAAP net income per share, the unvested Evercore LP partnership units are anti-dilutive and the IPO related restricted stock unit awards are excluded from the calculation prior to the June 2011 offering. | |
| (11b) | Assumes the vesting of all Acquisition Related Share Issuance and Unvested Restricted Stock Units granted to Lexicon employees in the Adjusted Pro Forma presentation. In the computation of outstanding common stock equivalents for U.S. GAAP, these Shares and Restricted Stock Units are reflected using the Treasury Stock Method. | |
|
A-11 |
||