10-Q
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 September 30, 2015
OR
¨ 
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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
ý
Accelerated filer
¨ 
Non-accelerated filer
¨   (Do not check if a smaller reporting company)
Smaller reporting company
¨ 
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 October 28, 2015 was 36,433,346. The number of shares of the registrant’s Class B common stock, par value $0.01 per share, outstanding as of October 28, 2015 was 25 (excluding 75 shares of Class B common stock held by a subsidiary of the registrant).



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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

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EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(dollars in thousands, except share data)
 
September 30, 2015
 
December 31, 2014
Assets
 
 
 
Current Assets
 
 
 
Cash and Cash Equivalents
$
278,145

 
$
352,160

Marketable Securities
42,403

 
37,985

Financial Instruments Owned and Pledged as Collateral at Fair Value
51,655

 
98,688

Securities Purchased Under Agreements to Resell
351

 
7,669

Accounts Receivable (net of allowances of $1,317 and $1,362 at September 30, 2015 and December 31, 2014, respectively)
162,691

 
136,280

Receivable from Employees and Related Parties
18,814

 
17,327

Deferred Tax Assets - Current
13,529

 
13,096

Other Current Assets
29,073

 
19,751

Total Current Assets
596,661

 
682,956

Investments
111,284

 
126,587

Deferred Tax Assets - Non-Current
281,296

 
265,901

Furniture, Equipment and Leasehold Improvements (net of accumulated depreciation and amortization of $40,532 and $33,980 at September 30, 2015 and December 31, 2014, respectively)
47,813

 
42,527

Goodwill
192,907

 
218,232

Intangible Assets (net of accumulated amortization of $47,298 and $33,735 at September 30, 2015 and December 31, 2014, respectively)
58,882

 
69,544

Assets Segregated for Bank Regulatory Requirements
10,200

 
10,200

Other Assets
31,346

 
30,609

Total Assets
$
1,330,389

 
$
1,446,556

Liabilities and Equity
 
 
 
Current Liabilities
 
 
 
Accrued Compensation and Benefits
$
143,696

 
$
212,334

Accounts Payable and Accrued Expenses
37,809

 
37,104

Securities Sold Under Agreements to Repurchase
52,025

 
106,499

Payable to Employees and Related Parties
29,041

 
18,875

Taxes Payable
4,761

 
2,515

Other Current Liabilities
11,334

 
7,753

Total Current Liabilities
278,666

 
385,080

Notes Payable
106,829

 
105,226

Subordinated Borrowings
22,550

 
22,550

Amounts Due Pursuant to Tax Receivable Agreements
197,449

 
191,253

Other Long-term Liabilities
35,507

 
26,200

Total Liabilities
641,001

 
730,309

Commitments and Contingencies (Note 15)

 

Redeemable Noncontrolling Interest
2,635

 
4,014

Equity
 
 
 
Evercore Partners Inc. Stockholders' Equity
 
 
 
Common Stock
 
 
 
Class A, par value $0.01 per share (1,000,000,000 shares authorized, 49,526,315 and 46,414,240 issued at September 30, 2015 and December 31, 2014, respectively, and 36,401,567 and 36,255,124 outstanding at September 30, 2015 and December 31, 2014, respectively)
495

 
464

Class B, par value $0.01 per share (1,000,000 shares authorized, 25 and 27 issued and outstanding at September 30, 2015 and December 31, 2014, respectively)

 

Additional Paid-In-Capital
1,054,555

 
950,147

Accumulated Other Comprehensive Income (Loss)
(28,170
)
 
(20,387
)
Retained Earnings (Deficit)
(34,354
)
 
(17,814
)
Treasury Stock at Cost (13,124,748 and 10,159,116 shares at September 30, 2015 and December 31, 2014, respectively)
(512,794
)
 
(361,129
)
Total Evercore Partners Inc. Stockholders' Equity
479,732

 
551,281

Noncontrolling Interest
207,021

 
160,952

Total Equity
686,753

 
712,233

Total Liabilities and Equity
$
1,330,389

 
$
1,446,556

See Notes to Unaudited Condensed Consolidated Financial Statements.

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EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(dollars and share amounts in thousands, except per share data)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 
 
Investment Banking Revenue
$
285,561

 
$
202,178

 
$
749,749

 
$
522,933

Investment Management Revenue
23,812

 
24,777

 
70,398

 
73,493

Other Revenue, Including Interest
4,097

 
4,170

 
8,656

 
8,861

Total Revenues
313,470

 
231,125

 
828,803

 
605,287

Interest Expense
4,519

 
3,964

 
13,773

 
11,317

Net Revenues
308,951

 
227,161

 
815,030

 
593,970

Expenses
 
 
 
 
 
 
 
Employee Compensation and Benefits
197,375

 
136,561

 
533,645

 
357,299

Occupancy and Equipment Rental
11,717

 
9,999

 
35,631

 
29,621

Professional Fees
13,410

 
10,862

 
36,007

 
31,361

Travel and Related Expenses
12,567

 
9,576

 
39,137

 
27,058

Communications and Information Services
9,295

 
3,974

 
27,595

 
11,269

Depreciation and Amortization
8,398

 
3,508

 
21,112

 
10,866

Special Charges
28,000

 
3,732

 
33,499

 
3,732

Acquisition and Transition Costs
538

 
4,122

 
1,939

 
5,238

Other Operating Expenses
15,753

 
5,481

 
32,458

 
14,431

Total Expenses
297,053

 
187,815

 
761,023

 
490,875

Income Before Income from Equity Method Investments and Income Taxes
11,898

 
39,346

 
54,007

 
103,095

Income from Equity Method Investments
929

 
1,102

 
4,034

 
3,381

Income Before Income Taxes
12,827

 
40,448

 
58,041

 
106,476

Provision for Income Taxes
7,392

 
15,264

 
30,327

 
38,214

Net Income
5,435

 
25,184

 
27,714

 
68,262

Net Income (Loss) Attributable to Noncontrolling Interest
(1,762
)
 
875

 
5,453

 
9,120

Net Income Attributable to Evercore Partners Inc.
$
7,197

 
$
24,309

 
$
22,261

 
$
59,142

Net Income Attributable to Evercore Partners Inc. Common Shareholders
$
7,197

 
$
24,309

 
$
22,261

 
$
59,142

Weighted Average Shares of Class A Common Stock Outstanding
 
 
 
 
 
 
 
Basic
36,773

 
36,527

 
36,649

 
35,655

Diluted
44,334

 
41,873

 
43,100

 
41,819

Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders:
 
 
 
 
 
 
 
Basic
$
0.20

 
$
0.67

 
$
0.61

 
$
1.66

Diluted
$
0.16

 
$
0.58

 
$
0.52

 
$
1.41

 
 
 
 
 
 
 
 
Dividends Declared per Share of Class A Common Stock
$
0.28

 
$
0.25

 
$
0.84

 
$
0.75


See Notes to Unaudited Condensed Consolidated Financial Statements.


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EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in thousands)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net Income
$
5,435

 
$
25,184

 
$
27,714

 
$
68,262

Other Comprehensive Income (Loss), net of tax:
 
 
 
 
 
 
 
Unrealized Gain (Loss) on Marketable Securities and Investments, net
(563
)
 
(1,255
)
 
(1,546
)
 
(253
)
Foreign Currency Translation Adjustment Gain (Loss), net
(6,592
)
 
(5,779
)
 
(8,504
)
 
(3,147
)
Other Comprehensive Income (Loss)
(7,155
)
 
(7,034
)
 
(10,050
)
 
(3,400
)
Comprehensive Income (Loss)
(1,720
)
 
18,150

 
17,664

 
64,862

Comprehensive Income (Loss) Attributable to Noncontrolling Interest
(3,348
)
 
(486
)
 
3,186

 
8,429

Comprehensive Income Attributable to Evercore Partners Inc.
$
1,628

 
$
18,636

 
$
14,478

 
$
56,433


See Notes to Unaudited Condensed Consolidated Financial Statements.


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EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
(dollars in thousands, except share data)
 
For the Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
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, 2014
46,414,240

 
$
464

 
$
950,147

 
$
(20,387
)
 
$
(17,814
)
 
(10,159,116
)
 
$
(361,129
)
 
$
160,952

 
$
712,233

Net Income

 

 

 

 
22,261

 

 

 
5,453

 
27,714

Other Comprehensive Income (Loss)

 

 

 
(7,783
)
 

 

 

 
(2,267
)
 
(10,050
)
Treasury Stock Purchases

 

 

 

 

 
(2,965,632
)
 
(151,665
)
 

 
(151,665
)
Evercore LP Units Purchased or Converted into Class A Common Stock
391,487

 
4

 
7,547

 

 

 

 

 
(7,512
)
 
39

Equity-based Compensation Awards
2,720,588

 
27

 
90,668

 

 

 

 

 
65,272

 
155,967

Dividends and Equivalents

 

 
4,814

 

 
(38,801
)
 

 

 

 
(33,987
)
Noncontrolling Interest (Note 12)

 

 
1,379

 

 

 

 

 
(14,877
)
 
(13,498
)
Balance at September 30, 2015
49,526,315

 
$
495

 
$
1,054,555

 
$
(28,170
)
 
$
(34,354
)
 
(13,124,748
)
 
$
(512,794
)
 
$
207,021

 
$
686,753

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended September 30, 2014
 
 
 
 
 
 
 
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, 2013
40,772,434

 
$
408

 
$
799,233

 
$
(10,784
)
 
$
(59,896
)
 
(7,702,900
)
 
$
(226,380
)
 
$
60,577

 
$
563,158

Net Income

 

 

 

 
59,142

 

 

 
9,120

 
68,262

Other Comprehensive Income (Loss)

 

 

 
(2,709
)
 

 

 

 
(691
)
 
(3,400
)
Treasury Stock Purchases

 

 

 

 

 
(2,550,357
)
 
(135,137
)
 

 
(135,137
)
Evercore LP Units Purchased or Converted into Class A Common Stock
1,101,851

 
11

 
12,067

 

 

 

 

 
(7,748
)
 
4,330

Equity-based Compensation Awards
4,107,627

 
41

 
109,780

 

 

 

 

 
205

 
110,026

Shares Issued as Consideration for Acquisitions and Investments

 

 
2,987

 

 

 
131,243

 
4,245

 
3,510

 
10,742

Dividends and Equivalents

 

 
4,481

 

 
(32,392
)
 

 

 

 
(27,911
)
Noncontrolling Interest (Note 12)

 

 
(15,748
)
 

 

 
119,207

 
3,856

 
25,242

 
13,350

Balance at September 30, 2014
45,981,912

 
$
460

 
$
912,800

 
$
(13,493
)
 
$
(33,146
)
 
(10,002,807
)
 
$
(353,416
)
 
$
90,215

 
$
603,420


See Notes to Unaudited Condensed Consolidated Financial Statements.


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Table of Contents



EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
 
For the Nine Months Ended September 30,
 
2015
 
2014
Cash Flows From Operating Activities
 
 
 
Net Income
$
27,714

 
$
68,262

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
 
 
 
Net (Gains) Losses on Investments, Marketable Securities and Contingent Consideration
3,411

 
(904
)
Equity Method Investments
3,304

 
5,620

Equity-Based and Other Deferred Compensation
155,174

 
82,857

Impairment of Goodwill
28,000

 

Depreciation, Amortization and Accretion
22,821

 
12,716

Bad Debt Expense
1,214

 
1,582

Deferred Taxes
(2,920
)
 
15,984

Decrease (Increase) in Operating Assets:
 
 
 
Marketable Securities
342

 
400

Financial Instruments Owned and Pledged as Collateral at Fair Value
36,728

 
(40,853
)
Securities Purchased Under Agreements to Resell
6,870

 
13,803

Accounts Receivable
(30,743
)
 
(24,583
)
Receivable from Employees and Related Parties
(1,532
)
 
(2,973
)
Other Assets
(7,570
)
 
(29,279
)
(Decrease) Increase in Operating Liabilities:
 
 
 
Accrued Compensation and Benefits
(69,590
)
 
(47,708
)
Accounts Payable and Accrued Expenses
1,216

 
11,638

Securities Sold Under Agreements to Repurchase
(43,713
)
 
27,050

Payables to Employees and Related Parties
10,097

 
(6,998
)
Taxes Payable
1,669

 
(4,145
)
Other Liabilities
350

 
6,782

Net Cash Provided by Operating Activities
142,842

 
89,251

Cash Flows From Investing Activities
 
 
 
Investments Purchased
(235
)
 
(10,783
)
Distributions of Private Equity Investments
6,752

 
216

Marketable Securities:
 
 
 
Proceeds from Sales and Maturities
25,295

 
31,999

Purchases
(30,859
)
 
(16,549
)
Cash Paid for Acquisitions, net of Cash Acquired
(3,253
)
 

Loans Receivable
(3,500
)
 

Purchase of Furniture, Equipment and Leasehold Improvements
(12,855
)
 
(10,223
)
Net Cash Provided by (Used in) Investing Activities
(18,655
)
 
(5,340
)
Cash Flows From Financing Activities
 
 
 
Issuance of Noncontrolling Interests
373

 
2,135

Distributions to Noncontrolling Interests
(15,059
)
 
(8,553
)
Cash Paid for Deferred and Contingent Consideration

 
(2,255
)
Short-Term Borrowing
45,000

 
75,000

Repayment of Short-Term Borrowing
(45,000
)
 
(75,000
)
Purchase of Treasury Stock and Noncontrolling Interests
(152,788
)
 
(137,443
)
Excess Tax Benefits Associated with Equity-Based Awards
9,905

 
33,045

Dividends - Class A Stockholders
(33,794
)
 
(27,911
)
Net Cash Provided by (Used in) Financing Activities
(191,363
)
 
(140,982
)
Effect of Exchange Rate Changes on Cash
(6,839
)
 
(2,313
)
Net Increase (Decrease) in Cash and Cash Equivalents
(74,015
)
 
(59,384
)
Cash and Cash Equivalents-Beginning of Period
352,160

 
298,453

Cash and Cash Equivalents-End of Period
$
278,145

 
$
239,069

 
 
 
 
SUPPLEMENTAL CASH FLOW DISCLOSURE
 
 
 
Payments for Interest
$
14,062

 
$
11,518

Payments for Income Taxes
$
29,327

 
$
14,640

Increase (Decrease) in Fair Value of Redeemable Noncontrolling Interest
$
(1,379
)
 
$
14,616

Dividend Equivalents Issued
$
4,814

 
$
4,481

Settlement of Contingent Consideration
$

 
$
7,232

Receipt of Securities in Settlement of Accounts Receivable
$
1,079

 
$
2,083

Purchase of Noncontrolling Interest
$

 
$
7,100

Contingent Consideration Accrued
$
10,787

 
$
2,162

Reclassification from Redeemable Noncontrolling Interest to Noncontrolling Interest
$

 
$
31,268


See Notes to Unaudited Condensed Consolidated Financial Statements.


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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 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 in the United States, the United Kingdom, Mexico, Hong Kong, Canada, Singapore and, through its affiliate G5 Holdings S.A. (“G5 ǀ Evercore”), in Brazil.
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 through which the Company, directly and through affiliates, manages private equity funds.
Note 2 – Significant Accounting Policies
For a complete discussion of the Company’s accounting policies, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
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, 2014. The December 31, 2014 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, 2015.
The 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”) and International Strategy & Investment Group L.L.C. ("ISI L.L.C."), registered broker-dealers 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, except for certain VIEs that qualify for accounting purposes as investment companies. 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.

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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)


Per the above, the Company has concluded that Evercore Asia Limited (“EAL”), Evercore Asia (Singapore) PTE. LTD (“ESL”) and Evercore ISI UK Limited (“Evercore ISI UK”) are VIEs pursuant to Accounting Standards Codification ("ASC") No. 810, "Consolidation" ("ASC 810") and that the Company is the primary beneficiary of these VIEs. Specifically, the Company provides financial support through cost plus transfer pricing agreements with these entities, which exposes the Company to losses that are potentially significant to the entities, and has decision making authority that significantly affects the economic performance of the entities. The Company included in its Unaudited Condensed Consolidated Statements of Financial Condition EAL, ESL and Evercore ISI UK assets of $31,853 and liabilities of $9,181 at September 30, 2015 and assets of $10,487 and liabilities of $7,487 at December 31, 2014.
In February 2010, Accounting Standards Update (“ASU”) No. 2010-10, “Amendments for Certain Investment Funds”, was issued. This ASU defers the application of the revised consolidation rules for a reporting entity’s interest in an entity if certain conditions are met, including if the entity has the attributes of an investment company and is not a securitization or asset-backed financing entity. An entity that qualifies for the deferral will continue to be assessed for consolidation under the overall guidance on VIEs, before its amendment, and other applicable consolidation guidance. Generally, the Company would consolidate those entities when it absorbs a majority of the expected losses or a majority of the expected residual returns, or both, of the entities.
For entities (principally funds) that the Company has concluded are not VIEs, the Company then evaluates whether the fund is a partnership or similar entity. If the fund is a partnership or similar entity, the Company evaluates the fund under the partnership consolidation guidance. Pursuant to that guidance, the Company consolidates funds in which it is the general partner and/or manages through a contract, unless presumption of control by the Company can be overcome. This presumption is overcome only when unrelated investors in the fund have the substantive ability to liquidate the fund or otherwise remove the Company as the general partner without cause, based on a simple majority vote of unaffiliated investors, or have other substantive participating rights. If the presumption of control can be overcome, the Company accounts for its interest in the fund pursuant to the equity method of accounting.
All intercompany balances and transactions with the Company’s subsidiaries have been eliminated upon consolidation.
Note 3 – Recent Accounting Pronouncements
ASU 2014-08 – In April 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). ASU 2014-08 provides amendments to ASC No. 205, “Presentation of Financial Statements,” and ASC 360, which change the requirements for reporting discontinued operations. The amendments in this update improve the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. The amendments also require expanded disclosures for discontinued operations and also require an entity to disclose the pretax profit or loss (or change in net assets for a not-for-profit entity) of an individually significant component of an entity that does not qualify for discontinued operations reporting. The amendments in this update are effective prospectively during interim and annual periods beginning after December 15, 2014, with early adoption permitted. The adoption of ASU 2014-08 did not have a material impact on the Company’s financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2014-09 – In May 2014, the 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" ("ASU 2015-14"), which provides amendments that defer the effective date of ASU 2014-09 by one year. The amendments in this update 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 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 2014-11 – In June 2014, the FASB issued ASU No. 2014-11, “Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures” (“ASU 2014-11”). ASU 2014-11 provides amendments to ASC No. 806, “Transfers and Servicing,” which expand secured borrowing accounting for certain repurchase agreements and require that in a repurchase financing arrangement the repurchase agreement be accounted for separately from the initial transfer of the financial asset. The amendments also require additional disclosures for certain transactions accounted for as sale and repurchase agreements, and for securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings. 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)


amendments in this update for the additional disclosures for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings are effective prospectively during annual periods beginning after December 15, 2014 and interim periods beginning after March 15, 2015, and all other amendments in this update are effective prospectively during interim and annual periods beginning after December 15, 2014, with early adoption not permitted. The adoption of ASU 2014-11 did not have a material impact on the Company’s financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2014-12 – In June 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”). ASU 2014-12 provides amendments to ASC No. 718, “Compensation - Stock Compensation,” which clarify the guidance for whether to treat a performance target that could be achieved after the requisite service period as a performance condition that affects vesting or as a nonvesting condition that affects the grant-date fair value of an award. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this update are effective either prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter, during interim and annual periods beginning after December 15, 2015, with early adoption 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 2014-17 – In November 2014, the FASB issued ASU No. 2014-17, “Pushdown Accounting” (“ASU 2014-17”). ASU 2014-17 provides amendments to ASC No. 805, “Business Combinations,” which provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The amendments in this update were effective on November 18, 2014. The adoption of ASU 2014-17 did not have a material impact on the Company’s financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2015-01 – In January 2015, the FASB issued ASU No. 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items” (“ASU 2015-01”). ASU 2015-01 provides amendments to ASC No. 225-20, “Income Statement - Extraordinary and Unusual Items,” which eliminate the concept of extraordinary items. The amendments in this update are effective either prospectively or retrospectively during interim and annual periods beginning after December 15, 2015, with early adoption 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 2015-02 - In February 2015, the FASB issued ASU No. 2015-02, “Amendments to the Consolidation Analysis” (“ASU 2015-02”). ASU 2015-02 provides amendments to ASC No. 810, “Consolidation,” which include the following:  1. Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, 2. Eliminate the presumption that a general partner should consolidate a limited partnership, 3. Affect the consolidation analysis of reporting entities that are involved with VIEs, and 4. Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The amendments in this update are effective during interim and annual periods beginning after December 15, 2015, with early adoption permitted, and may be applied retrospectively or using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. 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 2015-16 - In September 2015, the FASB issued ASU No. 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments” (“ASU 2015-16”). ASU 2015-16 provides amendments to ASC No. 805, “Business Combinations,” which simplify the accounting for adjustments made to provisional amounts recognized in a business combination by eliminating the requirement to retrospectively account for those adjustments and require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments also require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The amendments in this update are effective prospectively during interim and annual periods beginning after December 15, 2015, with early

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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)


adoption 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.
Note 4 – Acquisition and Transition Costs, Special Charges and Intangible Asset Amortization
Acquisition and Transition Costs
The Company recognized $538 and $1,939 for the three and nine months ended September 30, 2015, respectively, and $4,122 and $5,238 for the three and nine months ended September 30, 2014, respectively, as Acquisition and Transition Costs incurred in connection with acquisitions and other ongoing business development initiatives. These costs are primarily comprised of professional fees for legal and other services.
In May 2015, the Company entered into an agreement to acquire a 100% interest in Kuna & Co. KG, a Frankfurt-based investment banking advisory boutique, for $8,400. This transaction closed on July 2, 2015. The Company’s consideration for this transaction included the payment of €3,000, or $3,335, of cash at closing, as well as deferred cash consideration of €2,000, or $2,223, payable €500 on each of the four anniversary dates of the closing beginning in 2017, and contingent cash consideration which will be settled at various dates through 2020. The contingent consideration has a fair value of $2,195 as of September 30, 2015. Payment of the contingent consideration is dependent on the business meeting certain revenue performance targets. This transaction resulted in the Company recognizing goodwill of $5,476 and intangible assets relating to advisory backlog of $2,900, recognized in the Investment Banking Segment. The intangible assets are being amortized over an estimated useful life of one year. The Company recognized $1,932 of amortization expense related to these intangible assets for the three months ended September 30, 2015. The Company did not consider the acquisition of Kuna & Co. KG to be significant to its financial condition, results of operations or cash flows.
 Special Charges
The Company recognized $28,000 and $33,499 for the three and nine months ended September 30, 2015, respectively, as Special Charges incurred related to an impairment charge of $28,000 in the third quarter of 2015 associated with the impairment of goodwill in the Company's Institutional Asset Management reporting unit, separation benefits and costs associated with the termination of certain contracts within the Company’s Evercore ISI business and the finalization of a matter associated with the wind-down of the Company’s U.S. Private Equity business. See below for further information. The Company recognized $3,732 for the three and nine months ended September 30, 2014 as Special Charges incurred related to termination benefits, primarily consisting of cash severance and the acceleration of the vesting of restricted stock units, as well as the write-off of leasehold improvements in the Institutional Equities business.
Impairment Assessment
During the third quarter of 2015, the Institutional Asset Management reporting unit was impacted by adverse market and operating conditions, including a decline in AUM that was greater than anticipated at the time of the Company’s previous Step 1 impairment assessment, investment performance below benchmarks and lower market multiples for asset managers in response to market volatility during the third quarter. As a result, the Company determined that the Step 1 impairment assessment criteria were satisfied, as contemplated by ASC 350, “Goodwill and Other Intangible Assets,” for the goodwill in its Institutional Asset Management reporting unit as of August 31, 2015.
The amount of Goodwill allocated to the Institutional Asset Management reporting unit was $94,700 as of August 31, 2015, of which $27,271 was related to noncontrolling interest. In determining the fair value of this reporting unit, the Company utilized both a market multiple approach and a discounted cash flow methodology based on the adjusted cash flows from operations. The market multiple approach included applying the average earnings multiples of comparable public companies, multiplied by the forecasted earnings of the reporting unit, to yield an estimate of fair value. The discounted cash flow methodology began with the forecasted cash flows of the reporting unit and applied a discount rate of 15%, which reflected the weighted average cost of capital adjusted for the risks inherent in the future cash flows. The forecast inherent in the valuation assumes a stabilization of AUM flows by the end of 2015, with AUM from client flows beginning to increase in the first half of 2016 and, over the longer term, assumes a compound annual growth rate in revenues of 9% from the trailing twelve month period ended August 31, 2015.
As a result of the above analysis, the Company determined that the fair value of the Institutional Asset Management reporting unit was less than its carrying value as of August 31, 2015. As a result, the Company has begun a Step 2 impairment assessment, which it anticipates will be completed during the fourth quarter of 2015. The Company has concluded that a goodwill impairment is probable and has recorded an estimated goodwill impairment charge of $28,000 in the Investment

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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)


Management segment, which is included within Special Charges on the Unaudited Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2015. This charge resulted in an impact of $9,628 on Net Income Attributable to Evercore Partners Inc. (after adjustments for noncontrolling interest and income taxes). The Company will finalize this charge upon the completion of the Step 2 impairment assessment during the fourth quarter of 2015.
Intangible Asset Amortization
Expense associated with the amortization of intangible assets for Investment Banking was $4,866 and $10,750 for the three and nine months ended September 30, 2015, respectively, and $477 and $718 for the three and nine months ended September 30, 2014, respectively, included within Depreciation and Amortization expense on the Unaudited Condensed Consolidated Statements of Operations. Expense associated with the amortization of intangible assets for Investment Management was $937 and $2,813 for the three and nine months ended September 30, 2015, respectively, and $940 and $4,190 for the three and nine months ended September 30, 2014, respectively, included within Depreciation and Amortization expense on the Unaudited Condensed Consolidated Statements of Operations.
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 $3,377 and $6,264 for the three and nine months ended September 30, 2015, respectively, and $1,508 and $6,849 for the three and nine months ended September 30, 2014, respectively.
Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition includes the long-term portion of loans receivable from certain employees of $9,704 and $10,484 as of September 30, 2015 and December 31, 2014, respectively.
As of September 30, 2015, the Company had $22,550 in subordinated borrowings, principally with an executive officer of the Company. See Note 10 for further information.
Note 6Marketable Securities
The amortized cost and estimated fair value of the Company’s Marketable Securities as of September 30, 2015 and December 31, 2014 were as follows:
 
September 30, 2015
 
December 31, 2014
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Securities Investments
$
6,378

 
$
12

 
$
2,876

 
$
3,514

 
$
6,354

 
$
11

 
$
2,173

 
$
4,192

Debt Securities Carried by EGL
36,484

 
138

 
8

 
36,614

 
28,014

 
80

 
3

 
28,091

Mutual Funds
2,216

 
133

 
74

 
2,275

 
4,765

 
1,053

 
116

 
5,702

Total
$
45,078

 
$
283

 
$
2,958

 
$
42,403

 
$
39,133

 
$
1,144

 
$
2,292

 
$
37,985

Scheduled maturities of the Company’s available-for-sale debt securities within the Securities Investments portfolio as of September 30, 2015 and December 31, 2014 were as follows:
 
September 30, 2015
 
December 31, 2014
 
Amortized
Cost
 
Fair Value
 
Amortized
Cost
 
Fair Value
Due within one year
$
205

 
$
206

 
$
303

 
$
305

Due after one year through five years
1,340

 
1,347

 
1,229

 
1,236

Due after five years through 10 years
111

 
112

 
100

 
101

Total
$
1,656

 
$
1,665

 
$
1,632

 
$
1,642


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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)


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 September 30, 2015.
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 gains (losses) of ($12) and ($35) for the three and nine months ended September 30, 2015, respectively, and $569 and $863 for the three and nine months ended September 30, 2014, 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 gains (losses) of ($32) and ($342) for the three and nine months ended September 30, 2015, respectively, and ($197) and ($400) for the three and nine months ended September 30, 2014, respectively.
Mutual Funds
The Company invests in a portfolio of 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 ($222) and ($66) for the three and nine months ended September 30, 2015, respectively, and ($173) and $151 for the three and nine months ended September 30, 2014, respectively.
Note 7Financial 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 0.7 years, as of September 30, 2015, 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

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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)


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.
As of September 30, 2015 and December 31, 2014, a summary of the Company’s assets, liabilities and collateral received or pledged related to these transactions was as follows:
 
September 30, 2015
 
December 31, 2014
 
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
$
51,655

 
 
 
$
98,688

 
 
Securities Purchased Under Agreements to Resell
351

 
$
352

 
7,669

 
$
7,671

Total Assets
$
52,006

 
 
 
$
106,357

 
 
Liabilities
 
 
 
 
 
 
 
Securities Sold Under Agreements to Repurchase
$
(52,025
)
 
$
(52,041
)
 
$
(106,499
)
 
$
(106,632
)
Note 8 – Investments
The Company’s investments reported on the Unaudited Condensed Consolidated Statements of Financial Condition consist of investments in private equity partnerships, Trilantic Capital Partners ("Trilantic") and other investments in unconsolidated affiliated companies. 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, as the Company considers this activity integral to its Private Equity business.
The Company also has investments in G5 ǀ Evercore and ABS Investment Management, LLC ("ABS"), which are voting interest entities. The Company’s share of earnings (losses) on its investments in G5 ǀ Evercore and ABS 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”), Discovery Americas I, L.P. (the “Discovery Fund”), Evercore Mexico Capital Partners II, L.P. (“EMCP II”), Evercore Mexico Capital Partners III, L.P. (“EMCP III”), CSI Capital, L.P. (“CSI Capital”), 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 December 31, 2014, ECP II was terminated. The Company's investment at September 30, 2015 of $1,017 is comprised of remaining interest in the general partner, including $761 in cash, $78 in cash escrow balances, $66 in a seller note and $112 in securities.
In 2013, the Company held a fourth and final closing on EMCP III, a private equity fund focused on middle market investments in Mexico. The total subscribed capital commitments of $201,000 included a capital commitment of $10,750 by the general partner of EMCP III, Evercore Mexico Partners III ("EMP III"), of which $1,000 relates to the Company and $9,750 relates to noncontrolling interest holders. At September 30, 2015, unfunded commitments of EMP III were $4,581, including $384 due from the Company.


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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)


A summary of the Company’s investment in the private equity funds as of September 30, 2015 and December 31, 2014 was as follows:
 
September 30, 2015
 
December 31, 2014
ECP II
$
1,017

 
$
4,043

Discovery Fund
5,830

 
2,867

EMCP II
8,088

 
12,630

EMCP III
6,791

 
7,272

CSI Capital
11

 
3,030

Trilantic IV
3,362

 
3,798

Trilantic V
2,957

 
2,911

Total Private Equity Funds
$
28,056

 
$
36,551

Net realized and unrealized gains on private equity fund investments were $1,933 and $3,259 for the three and nine months ended September 30, 2015, respectively, and $1,671 and $5,633 for the three and nine months ended September 30, 2014, respectively. During the nine months ended September 30, 2015, ECP II, EMCP II, CSI Capital and Trilantic IV made distributions of $3,000, $3,194, $2,909 and $1,650, respectively. In the event the funds perform poorly, the Company may be obligated to repay certain carried interest previously distributed. As of September 30, 2015, there was no previously distributed carried interest 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 owns 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 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.
In 2013, EMP III amended and restated its Limited Partnership Agreement and admitted certain limited partners, which are related parties of the Company.  The Company viewed this modification as a reconsideration event under ASC 810-10, "Noncontrolling Interest in Consolidated Financial Statements - an amendment of ARB No. 51," and concluded that EMP III is a VIE and that the Company is the primary beneficiary of this VIE. Specifically, the Company's general partner interests in EMP III provide the Company the ability to make decisions that significantly impact the economic performance of EMP III, while the limited partners do not possess substantive participating rights over EMP III. The Company's assessment of the primary beneficiary of EMP III included assessing which parties have the power to significantly impact the economic performance of EMP III and the obligation to absorb losses, which could be potentially significant to EMP III, or the right to receive benefits from EMP III that could be potentially significant. The Company had previously consolidated EMP III as a voting interest entity; accordingly, consolidating as a VIE had no impact on the assets and liabilities of the Company. The Company consolidated EMP III assets of $7,024 and liabilities of $153 at September 30, 2015 and assets of $7,327 and liabilities of $75 at December 31, 2014, in the Company's Unaudited Condensed Consolidated Statements of Financial Condition. The assets retained by EMP III are for the benefit of the interest holders of EMP III and the liabilities are generally non-recourse to the Company.
Investment in Trilantic Capital Partners and Other
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 nine months ended September

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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)


30, 2015, $36 and $3 of this investment was allocated to Trilantic Fund V and IV, respectively. During 2014, $689 of this investment was allocated to Trilantic Fund V. During 2013, $825 and $29 of this investment was allocated to Trilantic Fund V and Trilantic Fund IV, respectively. From 2010 to 2012, $1,091 of this investment was allocated to Trilantic Fund IV. This investment had a balance of $13,416 and $13,455 as of September 30, 2015 and December 31, 2014, respectively. The Company has a $5,000 commitment to invest in Trilantic Fund V, of which $3,549 was unfunded at September 30, 2015. 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 successor funds will be at amounts comparable to those of Trilantic Fund V.
In the second quarter of 2015, the Company received an equity security in a private company of $1,079 in exchange for advisory services. This investment is accounted for on the cost basis.
Equity Method Investments
A summary of the Company’s other investments accounted for under the equity method of accounting as of September 30, 2015 and December 31, 2014 was as follows:
 
September 30, 2015
 
December 31, 2014
G5 ǀ Evercore
$
28,064

 
$
32,756

ABS
40,669

 
43,825

Total
$
68,733

 
$
76,581

G5 ǀ Evercore
In 2010, the Company made an investment accounted for under the equity method of accounting in G5 ǀ Evercore. During the second quarter of 2014, the Company settled its contingent consideration arrangement entered into in conjunction with its initial investment in G5 ǀ Evercore. Accordingly, in June 2014 the Company issued 131 shares of restricted Class A common stock, with a fair value of $7,232, and $7,916 of cash to the owners of G5 ǀ Evercore.
At September 30, 2015, the Company’s economic ownership interest in G5 ǀ Evercore was 49%. This investment resulted in earnings (losses) of ($388) and $263 for the three and nine months ended September 30, 2015, respectively, and ($25) and ($45) for the three and nine months ended September 30, 2014, respectively, included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations.
ABS
In 2011, the Company made an investment accounted for under the equity method of accounting in ABS. At September 30, 2015, the Company’s economic ownership interest in ABS was 45%. This investment resulted in earnings of $1,317 and $3,771 for the three and nine months ended September 30, 2015, respectively, and $1,127 and $3,426 for the three and nine months ended September 30, 2014, respectively, included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations.
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 $621 and $1,863 for the three and nine months ended September 30, 2015, respectively, and $647 and $1,941 for the three and nine months ended September 30, 2014, respectively.
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.

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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)


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 September 30, 2015 and December 31, 2014 are based on quoted market prices provided by external pricing services.
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 September 30, 2015 and December 31, 2014:
 
September 30, 2015
 
Level I
 
Level II
 
Level III
 
Total
Corporate Bonds, Municipal Bonds and Other Debt Securities (1)
$

 
$
43,917

 
$

 
$
43,917

Securities Investments (1)
4,849

 
1,665

 

 
6,514

Mutual Funds
2,275

 

 

 
2,275

Financial Instruments Owned and Pledged as Collateral at Fair Value
51,655

 

 

 
51,655

Total Assets Measured At Fair Value
$
58,779

 
$
45,582

 
$

 
$
104,361

 
 
 
 
 
 
 
 
 
December 31, 2014
 
Level I
 
Level II
 
Level III
 
Total
Corporate Bonds, Municipal Bonds and Other Debt Securities (1)
$

 
$
34,343

 
$

 
$
34,343

Securities Investments (1)
5,550

 
1,642

 

 
7,192

Mutual Funds
5,702

 

 

 
5,702

Financial Instruments Owned and Pledged as Collateral at Fair Value
98,688

 

 

 
98,688

Total Assets Measured At Fair Value
$
109,940

 
$
35,985

 
$

 
$
145,925

(1)
Includes $10,303 and $9,252 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 September 30, 2015 and December 31, 2014, 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 nine months ended September 30, 2015 or the year ended December 31, 2014.
 
During the third quarter of 2015, the Company determined that the fair value of the goodwill in its Institutional Asset Management reporting unit was $66,700. The fair value of the reporting unit was estimated by utilizing both a market multiple approach and a discounted cash flow methodology based on the adjusted cash flows from operations. Goodwill is measured at fair value on a non-recurring basis as a Level III asset. See Note 4 for further information.

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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 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.
 
 
 
September 30, 2015
 
Carrying
 
Estimated Fair Value
 
Amount
 
Level I
 
Level II
 
Level III
 
Total
Financial Assets:
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
267,842

 
$
267,842

 
$

 
$

 
$
267,842

Securities Purchased Under Agreements to Resell
351

 

 
351

 

 
351

Accounts Receivable
162,691

 

 
162,691

 

 
162,691

Receivable from Employees and Related Parties
18,814

 

 
18,814

 

 
18,814

Assets Segregated for Bank Regulatory Requirements
10,200

 
10,200

 

 

 
10,200

Closely-held Equity Security
1,079

 

 

 
1,079

 
1,079

Loans Receivable
3,500

 

 
3,653

 

 
3,653

 
 
 
 
 
 
 
 
 
 
Financial Liabilities:
 
 
 
 
 
 
 
 
 
Accounts Payable and Accrued Expenses
$
37,809

 
$

 
$
37,809

 
$

 
$
37,809

Securities Sold Under Agreements to Repurchase
52,025

 

 
52,025

 

 
52,025

Payable to Employees and Related Parties
29,041

 

 
29,041

 

 
29,041

Notes Payable
106,829

 

 
127,418

 

 
127,418

Subordinated Borrowings
22,550

 

 
23,421

 

 
23,421

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
Carrying
 
Estimated Fair Value
 
Amount
 
Level I
 
Level II
 
Level III
 
Total
Financial Assets:
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
342,908

 
$
342,908

 
$

 
$

 
$
342,908

Securities Purchased Under Agreements to Resell
7,669

 

 
7,669

 

 
7,669

Accounts Receivable
136,280

 

 
136,280

 

 
136,280

Receivable from Employees and Related Parties
17,327

 

 
17,327

 

 
17,327

Assets Segregated for Bank Regulatory Requirements
10,200

 
10,200

 

 

 
10,200

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Accounts Payable and Accrued Expenses
$
37,104

 
$

 
$
37,104

 
$

 
$
37,104

Securities Sold Under Agreements to Repurchase
106,499

 

 
106,499

 

 
106,499

Payable to Employees and Related Parties
18,875

 

 
18,875

 

 
18,875

Notes Payable
105,226

 

 
131,340

 

 
131,340

Subordinated Borrowings

22,550

 

 
22,550

 

 
22,550

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 market transactions executed by the issuer.

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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)


The fair value of the Company’s Loans Receivable is estimated based on a present value analysis utilizing aggregate market yields obtained from independent pricing sources for similar financial instruments.
The fair value of the Company’s Notes Payable is estimated based on a present value analysis utilizing aggregate market yields obtained from independent pricing sources for similar financial instruments.
The fair value of the Company’s Subordinated Borrowings as of September 30, 2015 is estimated based on a present value analysis utilizing aggregate market yields obtained from independent pricing sources for similar financial instruments. The carrying amount reported on the Unaudited Condensed Consolidated Statement of Financial Condition for Subordinated Borrowings approximated fair value as of December 31, 2014.
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, Warrants and Subordinated Borrowings
On August 21, 2008, the Company entered into a purchase agreement (the "Purchase Agreement") with Mizuho Corporate Bank, Ltd. (currently known as Mizuho Bank, Ltd.) (“Mizuho”) pursuant to which Mizuho purchased from the Company $120,000 principal amount of Senior Notes, due 2020 with a 5.20% coupon ("Senior Notes"), and warrants to purchase 5,455 shares of the Company's Class A common stock, par value $0.01 per share ("Class A Shares") at $22.00 per share (the “Warrant”) expiring in 2020. Based on their relative fair value at issuance, plus accretion, the Senior Notes and Warrants were reflected in Notes Payable and Additional Paid-In-Capital on the Unaudited Condensed Consolidated Statements of Financial Condition. The Senior Notes have an effective yield of 7.94%.
The holder of the Senior Notes may require the Company to purchase, for cash, all or any portion of the holder’s Senior Notes upon a change of control of the Company for a price equal to the aggregate accreted amount of such Senior Notes, (the “Accreted Amount”), plus accrued and unpaid interest. Senior Notes held by Mizuho will be redeemable at the Accreted Amount at the option of the Company at any time within 90 days following the date on which Mizuho notifies the Company that it is terminating their strategic alliance agreement (“Strategic Alliance Agreement”). Senior Notes held by any other holder than Mizuho will be redeemable at the Accreted Amount (plus accrued and unpaid interest) at the option of the Company at any time. In the event of a default under the indenture, the trustee or holders of 33 1/3% of the Senior Notes may declare that the Accreted Amount is immediately due and payable.
Pursuant to the agreement, Mizuho may transfer (A) the Senior Notes (i) with the Company’s consent, (ii) to a permitted transferee, or (iii) to the extent that such transfer does not result in any holder or group of affiliated holders directly or indirectly owning more than 15% of the aggregate principal amount of the Senior Notes, and (B) the Warrants (i) with the Company’s consent, (ii) to a permitted transferee, (iii) pursuant to a tender or exchange offer, or a merger or sale transaction involving the Company that has been recommended by the Company’s Board of Directors, or (iv) to the extent that such transfer is made pursuant to a widely distributed public offering or does not result in any holder or group of affiliated holders directly or indirectly owning more than 2% of the Company’s voting securities and the total shares of Class A common stock transferred, together with any shares of Class A common stock (on an as-converted basis) transferred during the preceding 12 months, is less than 25% of the Company’s outstanding Class A common stock. The Company has a right of first offer on any proposed transfer by Mizuho of the Warrants, Common Stock purchased in the open market or acquired by exercise of the Warrants and associated Common Stock issued as dividends.
The exercise price for the Warrants is payable, at the option of the holder of the Warrants, either in cash or by tender of Senior Notes at the Accreted Amount, at any point in time.

Mizuho has advised the Company it intends to exercise in full the outstanding Warrants in November 2015 and to pay the exercise price by surrender of the entire issue of the Senior Notes and payment of approximately $11,000 in cash.

The Company intends to conduct a public offering for the resale of the 5,455 shares of Class A common stock issuable upon exercise of the Warrants on behalf of Mizuho, in which 3,100 shares are to be offered to the public. The Company intends to purchase from the underwriters the remaining 2,355 shares of Class A common stock that are subject to the offering (the “Share Repurchase”), at a price per share equal to the price paid by the underwriters to the selling stockholder in the offering.

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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)


On November 2, 2015 the Company entered into a senior credit facility with the New York branch of Mizuho pursuant to which it will borrow, concurrently with the closing of the offering, $120,000 in a new term loan (the “New Loan”). The principal amount of the New Loan shall be subject to annual amortization of principal beginning in the second year, with the final payment of all amounts outstanding, plus accrued interest, being due five years after the closing date. The New Loan will bear interest at LIBOR or a base rate (at the Company’s election) plus an applicable margin (determined according to a leverage-based pricing grid), and will be guaranteed by certain of the Company’s material domestic subsidiaries. The New Loan will contain customary covenants, including financial covenants requiring compliance with a maximum leverage ratio, a minimum tangible net worth and a minimum ratio of liquid assets to debt, and customary events of default. The Company intends to use the proceeds of the New Loan, together with the cash portion of the exercise price of the Warrants, to fund the Share Repurchase.
Mizuho, Mizuho Securities Co. Ltd., and the Company are also revising the alliance between their advisory businesses to include geographies globally and extend for an additional three year term, with automatic one-year renewals thereafter.
As of September 30, 2015, the Company had $22,550 in subordinated borrowings, principally with an executive officer of the Company, due on October 31, 2019. These borrowings had a coupon of 5.5%, payable semi-annually.
Note 11 – Evercore Partners Inc. Stockholders’ Equity
Dividends – The Company’s Board of Directors declared on October 26, 2015, a quarterly cash dividend of $0.31 per share, to the holders of Class A Shares as of November 27, 2015, which will be paid on December 11, 2015. During the nine months ended September 30, 2015, the Company declared and paid dividends of $0.84 per share, totaling $33,987.
Treasury Stock – During the nine months ended September 30, 2015, the Company purchased 969 Class A Shares primarily from employees at values ranging from $47.56 to $59.02 per share (at an average cost per share of $50.95), primarily for the net settlement of stock-based compensation awards, and 1,997 Class A Shares at market values ranging from $47.10 to $57.03 per share (at an average cost per share of $50.84) pursuant to the Company’s share repurchase program. The result of these purchases was an increase in Treasury Stock of $151,665 on the Company’s Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2015.
LP Units – During the nine months ended September 30, 2015, 391 LP Units were exchanged for Class A Shares, resulting in an increase to Common Stock and Additional Paid-In-Capital of $4 and $8,317, respectively, on the Company’s Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2015.
During the nine months ended September 30, 2015, the Company purchased 26 LP Units and certain other rights from a noncontrolling interest holder, resulting in a decrease to Noncontrolling Interest of $353 and a decrease to Additional Paid-In Capital of $770, on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2015.
Accumulated Other Comprehensive Income (Loss) – As of September 30, 2015, 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 ($4,862) and ($23,308), respectively.
Note 12 – Noncontrolling Interest
Noncontrolling Interest recorded in the unaudited condensed consolidated financial statements of the Company relates to a 15% interest in Evercore LP, a 28% interest in ECB, a 38% interest in Evercore Wealth Management ("EWM"), a 34% equity interest in Atalanta Sosnoff Capital LLC ("Atalanta Sosnoff"), a 35% interest in Evercore Private Capital Advisory L.P. ("PCA"), a 38% interest in Institutional Equities ("IE") through October 31, 2014 and other private equity partnerships. The Atalanta Sosnoff interest excludes the Series C Profits Interest, which has been reflected in Employee Compensation and Benefits Expense on the Unaudited Condensed Consolidated Statements of Operations. The Noncontrolling Interests for Evercore LP, EWM, Atalanta Sosnoff and PCA have rights, in certain circumstances, to convert into Class A Shares.
Changes in Noncontrolling Interest for the nine months ended September 30, 2015 and 2014 were as follows:

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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)


 
For the Nine Months Ended September 30,
 
2015
 
2014
Beginning balance
$
160,952

 
$
60,577

 
 
 
 
Comprehensive income (loss):
 
 
 
Net Income Attributable to Noncontrolling Interest
5,453

 
9,120

Other comprehensive income (loss)
(2,267
)
 
(691
)
Total comprehensive income
3,186

 
8,429

 
 
 
 
Evercore LP Units Purchased or Converted into Class A Shares
(7,512
)
 
(7,748
)
Amortization and Vesting of LP Units/Interests
65,272

 
205

Issuance of Noncontrolling Interest for Acquisitions and Investments

 
3,510

 
 
 
 
Other Items:
 
 
 
Distributions to Noncontrolling Interests
(15,059
)
 
(8,553
)
Net Reclassification to/from Redeemable Noncontrolling Interest


 
27,477

Issuance of Noncontrolling Interest
373

 
2,439

Other, net
(191
)
 
3,879

Total other items
(14,877
)
 
25,242

 
 
 
 
Ending balance
$
207,021

 
$
90,215

Other comprehensive income (loss) attributed to Noncontrolling Interest includes Unrealized Gain (Loss) on Marketable Securities and Investments, net, of ($453) and ($780) for the three and nine months ended September 30, 2015, respectively, and ($348) and ($155) for the three and nine months ended September 30, 2014, respectively, and Foreign Currency Translation Adjustment Gain (Loss), net, of ($1,133) and ($1,487) for the three and nine months ended September 30, 2015, respectively, and ($1,013) and ($536) for the three and nine months ended September 30, 2014, respectively.
In conjunction with the Company’s purchase agreement with Atalanta Sosnoff, the Company issued a management member of Atalanta Sosnoff certain capital interests in Atalanta Sosnoff, which are redeemable for cash, at their fair value. Accordingly, these capital interests have been reflected at their fair value of $2,635 and $4,014 within Redeemable Noncontrolling Interest on the Unaudited Condensed Consolidated Statements of Financial Condition at September 30, 2015 and December 31, 2014, respectively.
During the nine months ended September 30, 2015, the Company purchased 26 LP Units and certain other rights from a noncontrolling interest holder, resulting in a decrease to Noncontrolling Interest of $353 and a decrease to Additional Paid-In Capital of $770, on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2015.

On May 22, 2014, the Company purchased 3 units, or 22%, of the aggregate amount of the outstanding EWM Class A units held by members of EWM for 119 Class A Shares and 11 LP Units of the Company, at a fair value of $7,100. This transaction resulted in an increase in the Company's ownership in EWM to 62%. In conjunction with this purchase, the Company amended the Amended and Restated Limited Liability Company Agreement of EWM. Per the amended agreement, the holders of certain EWM interests no longer have the option to redeem these capital interests for cash upon the event of the death or disability of the holder. Accordingly, the value of these interests had been reclassified from Redeemable Noncontrolling Interest to Noncontrolling Interest on the Unaudited Condensed Consolidated Statement of Financial Condition as of June 30, 2014. The above transactions had the effect of reducing Redeemable Noncontrolling Interest and Treasury Stock by $34,577 and $3,856, respectively, and increasing Noncontrolling Interest and Additional Paid-in Capital by $27,477 and $3,244, respectively, at June 30, 2014. These interests were reflected at their fair value of $34,577 within Redeemable Noncontrolling Interest on the Unaudited Condensed Consolidated Statement of Financial Condition at March 31, 2014. Changes in the fair value of these redeemable noncontrolling interests resulted in a decrease to Additional Paid-in Capital of $4,116 for the nine months ended September 30, 2014.

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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)


During the third quarter of 2014, the Company committed to purchase, for cash, noncontrolling interests from certain employees who were exiting the IE business. This resulted in an increase to Redeemable Noncontrolling Interest of $11,086 on the Unaudited Condensed Consolidated Statement of Financial Condition at September 30, 2014.
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 and nine months ended September 30, 2015 and 2014 are described and presented below.
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Basic Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Net income attributable to Evercore Partners Inc. common shareholders
$
7,197

 
$
24,309

 
$
22,261

 
$
59,142

Denominator:
 
 
 
 
 
 
 
Weighted average shares of Class A common stock outstanding, including vested restricted stock units ("RSUs")
36,773

 
36,527

 
36,649

 
35,655

Basic net income per share attributable to Evercore Partners Inc. common shareholders
$
0.20

 
$
0.67

 
$
0.61

 
$
1.66

Diluted Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Net income attributable to Evercore Partners Inc. common shareholders
$
7,197

 
$
24,309

 
$
22,261

 
$
59,142

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

 
(a)

 
(a)

 
(a)

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

 
(a)

 
(a)

 
(a)

Diluted net income attributable to Evercore Partners Inc. common shareholders
$
7,197

 
$
24,309

 
$
22,261

 
$
59,142

Denominator:
 
 
 
 
 
 
 
Weighted average shares of Class A common stock outstanding, including vested RSUs
36,773

 
36,527

 
36,649

 
35,655

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

 
(a)

 
(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
2,026

 
2,208

 
2,029

 
2,800

Shares that are contingently issuable (b)
2,271

 

 
1,269

 
110

Assumed conversion of Warrants issued (c)
3,264

 
3,138

 
3,153

 
3,254

Diluted weighted average shares of Class A common stock outstanding
44,334

 
41,873

 
43,100

 
41,819

Diluted net income per share attributable to Evercore Partners Inc. common shareholders
$
0.16

 
$
0.58

 
$
0.52

 
$
1.41

(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 and nine months ended September 30, 2015 and 2014, 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

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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)


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 6,545 and 6,682 for the three and nine months ended September 30, 2015, respectively, and 4,670 and 4,823 for the three and nine months ended September 30, 2014, respectively. The adjustment to the numerator, Diluted net income attributable to Class A common shareholders, if the effect would have been dilutive, would have been $1,576 and $4,391 for the three and nine months ended September 30, 2015, respectively, and $3,200 and $7,987 for the three and nine months ended September 30, 2014, 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 September 30, 2015, 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 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 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. For the three and nine months ended September 30, 2015, 2,271 and 1,269 of these interests, respectively, were assumed to be converted to an equal number of Class A Shares for purposes of computing diluted EPS.
(c)
In November 2015, Mizuho has advised the Company it intends to exercise in full its outstanding Warrants to purchase 5,455 shares of the Company’s Class A common stock, of which the Company intends to repurchase 2,355 shares. See Note 10 for further information.
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

Equity Grants
During the nine months ended September 30, 2015, the Company granted employees 2,559 RSUs that are Service-based Awards. Service-based Awards granted during the nine months ended September 30, 2015 had grant date fair values of $48.41 to $58.47 per share. During the nine months ended September 30, 2015, 2,202 Service-based Awards vested and 164 Service-based Awards were forfeited.
Compensation expense related to Service-based Awards was $25,124 and $80,083 for the three and nine months ended September 30, 2015, respectively, and $22,243 and $69,334 for the three and nine months ended September 30, 2014, respectively.

Deferred Cash Program
The Company's deferred compensation program provides 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. Compensation expense related to this deferred compensation program was $272 and $1,154 for the three and nine months ended September 30, 2015, respectively, and $878 and $2,718 for the three and nine months ended September 30, 2014, respectively.
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 Class E LP Units and Class G and H LP Interests which are treated as compensation. The Class E LP Units issued includes 710 vested Class E LP Units and an allocation of the value, attributed to post-combination

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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)


service, of 710 Class E LP Units that were unvested and will vest ratably on October 31, 2015, 2016 and 2017 and become exchangeable once vested, subject to continued employment with the Company. 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 $6,193 and $16,155 for the three and nine months ended September 30, 2015, respectively.
The Company also issued 538 vested and 540 unvested Class G LP Interests in 2014, which will vest ratably on February 15, 2016, 2017 and 2018, and 2,044 vested and 2,051 unvested Class H LP Interests in 2014, which will vest ratably on February 15, 2018, 2019 and 2020. The Company’s vested Class G LP Interests will 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. The amount of Class H LP Interests which become exchangeable are scaled to the threshold levels achieved.
Based on Evercore ISI’s results for the first nine months of 2015, the anticipated seasonality of results in the equities business and the anticipated impact of certain efficiency initiatives identified and executed during the period, the Company determined that the achievement of certain of the performance thresholds for the Class G and H LP Interests was probable at September 30, 2015. This determination was based on an assumed Management Basis EBIT margin of 15.7% and annual Management Basis EBIT over the performance period of $34,600 for Evercore ISI. Accordingly, $15,657 and $48,970 of expense was recorded for the three and nine months ended September 30, 2015, respectively, for the Class G and H LP Interests.

Other Acquisition Related
Lexicon - Compensation expense related to The Lexicon Partnership LLP ("Lexicon") Acquisition-related Awards and deferred cash consideration was $1,237 and $301, respectively, for the nine months ended September 30, 2015. Compensation expense related to the Lexicon Acquisition-related Awards and deferred cash consideration was $629 and ($36), respectively, for the three months ended September 30, 2014, and $4,626 and $1,663, respectively, for the nine months ended September 30, 2014.

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 a four-year performance period beginning January 1, 2013. These awards will be paid, in cash or Class A Shares, at the Company's discretion, in the two years following the performance period, to Senior Managing Directors employed by the Company 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. Compensation expense related to these awards was $1,547 and $4,590 for the three and nine months ended September 30, 2015, respectively, and $1,043 and $3,186 for the three and nine months ended September 30, 2014, respectively.
Other
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 $3,483 and $12,434 for the three and nine months ended September 30, 2015, respectively, and $4,043 and $9,693 for the three and nine months ended September 30, 2014, respectively. The remaining unamortized amount of these awards was $24,119 as of September 30, 2015.

The Company granted separation benefits to certain employees, resulting in expense included in Employee Compensation and Benefits of approximately $1,124 and $4,920 for the three and nine months ended September 30, 2015, respectively, and $186 and $4,775 for the three and nine months ended September 30, 2014, respectively. In conjunction with these arrangements, the Company distributed cash payments of $674 and $2,205 for the three and nine months ended September 30, 2015, respectively, and $280 and $3,281 for the three and nine months ended September 30, 2014, respectively. The Company

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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)


also granted separation benefits to certain employees, resulting in expense included in Special Charges of approximately $1,863 for the nine months ended September 30, 2015 and $3,336 for the three and nine months ended September 30, 2014. In conjunction with these arrangements, the Company distributed cash payments of $487 for the nine months ended September 30, 2015 and $110 for the three and nine months ended September 30, 2014. See Note 4 for further information.
Note 15 – Commitments and Contingencies
For a complete discussion of the Company’s commitments, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
Operating Leases – The Company leases office space under non-cancelable lease agreements, which expire on various dates through 2023. 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 $8,345 and $25,704 for the three and nine months ended September 30, 2015, respectively, and $6,619 and $19,898 for the three and nine months ended September 30, 2014, respectively.
Other Commitments – As of September 30, 2015, the Company had unfunded commitments for capital contributions of $8,458 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.
The Company also has additional commitments related to its redeemable noncontrolling interests. See Note 12 for further information.
In addition, the Company enters into commitments to pay contingent consideration related to certain of its acquisitions. At September 30, 2015, the Company had a remaining commitment for contingent consideration related to its acquisition of Protego in 2006, as well as commitments related to its acquisition of a boutique advisory business in 2014 and its acquisition of Kuna & Co. KG in July 2015.
Under the terms of the acquisition agreement for Protego, the Company is 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. During 2014, the Company received distributions from Discovery Americas Associated L.P., the general partner of the Discovery Fund. Accordingly, as of September 30, 2015, the Company recorded Goodwill of $1,708 pursuant to this agreement. The carrying value of the Company's investment in the Discovery Fund is $5,830 at September 30, 2015. See Note 8 for further information.
On June 26, 2015, Evercore Partners Services East L.L.C. ("East"), a wholly-owned subsidiary of the Company, increased its line of credit from First Republic Bank to an aggregate principal amount of up to $75,000, to be used for working capital and other corporate activities, including, but not limited to, the repurchase of the Company's stock from time to time.  This facility is secured by (i) cash and cash equivalents of East held in a designated account with First Republic Bank, (ii) certain of East's intercompany receivables and (iii) third party accounts receivable of EGL. Drawings under this facility bear interest at the prime rate. The facility was renewed on June 26, 2015 and the maturity date was extended to June 27, 2016. The Company drew down $45,000 on this facility on February 5, 2015, which was repaid as of June 30, 2015.
During the first quarter of 2015, in conjunction with the Company entering into a strategic alliance with Luminis Partners ("Luminis"), the Company committed to loan Luminis $5,500. The Company paid Luminis $3,500 pursuant to the loan agreement during the nine months ended September 30, 2015, which is included within Other Assets on the Company's Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2015, with the remaining $2,000 due from the Company on demand. The Company may acquire a 20% interest in Luminis in 2017.
Contingencies
In the normal course of business, from time to time the Company and its affiliates are involved in other 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

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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)


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.
In January 2015, Donna Marie Coburn filed a proposed class action complaint against Evercore Trust Company, N.A. ("ETC") in the U.S. District Court for the District of Columbia, in which she purports to represent a class of participants in the J.C. Penney Corporation Inc. Savings, Profit-Sharing and Stock Ownership Plan (the "Plan") whose participant accounts held J.C. Penney stock at any time between May 15, 2012 and the present.  The complaint alleges that ETC breached its fiduciary duties under the Employee Retirement Income Security Act by causing the Plan to invest in J.C. Penney stock during that period and claims the Plan suffered losses of approximately $300 million due to declines in J.C. Penney stock.  The plaintiff seeks the recovery of alleged Plan losses, attorneys’ fees, other costs, and other injunctive and equitable relief.  The Company believes that it has meritorious defenses against these claims and intends to vigorously defend against them. ETC is indemnified by J.C. Penney, and ultimately the Plan, for reasonable attorneys’ fees and other legal expenses, which would be refunded should ETC not prevail. On April 13, 2015, ETC filed an answer along with a motion to dismiss. On June 13, 2015 Plaintiffs filed an opposition to ETC’s motion to dismiss and on July 13, 2015, ETC filed its reply to Plaintiffs’ opposition. The case is now pending either scheduling of an oral argument, which has been requested, or a ruling on the motion.
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 September 30, 2015 and December 31, 2014 was $74,009 and $74,080, respectively, which exceeded the minimum net capital requirement by $73,759 and $73,830, respectively.
ISI L.L.C. is a U.S. registered broker-dealer and is subject to the net capital requirements of Rule 15c3-1 under the Exchange Act. Under the Alternative Net Capital Requirement, ISI L.L.C.'s minimum net capital requirement is $250. ISI L.L.C.’s regulatory net capital as of September 30, 2015 and December 31, 2014 was $23,977 and $7,548, respectively, which exceeded the minimum net capital requirement by $23,727 and $7,298, 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 September 30, 2015.
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 September 30, 2015.
Note 17 – Income Taxes
The Company’s Provision for Income Taxes was $7,392 and $30,327 for the three and nine months ended September 30, 2015, respectively, and $15,264 and $38,214 for the three and nine months ended September 30, 2014, respectively. The effective tax rate was 58% and 52% for the three and nine months ended September 30, 2015 and 38% and 36% for the three and nine months ended September 30, 2014, respectively. The effective tax rate for 2015 and 2014 reflects the effect of certain nondeductible expenses, including expenses related to Class E LP Units and Class G and H LP Interests in 2015, as well as the noncontrolling interest associated with LP Units and other adjustments.

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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 reported an increase in deferred tax assets of $530 associated with changes in Unrealized Gain (Loss) on Marketable Securities and an increase of $4,661 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the nine months ended September 30, 2015. The Company reported an increase in deferred tax assets of $60 associated with changes in Unrealized Gain (Loss) on Marketable Securities and an increase of $1,737 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the nine months ended September 30, 2014.
As of September 30, 2015, 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 fund 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 October 31, 2014, the Company acquired the operating businesses of ISI, which is included in the Investment Banking segment.
The Company’s segment information for the three and nine months ended September 30, 2015 and 2014 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 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.
Other Acquisition Related Compensation Charges - Includes compensation charges associated with deferred consideration, retention awards and related compensation for Lexicon employees.
Special Charges - Includes expenses in 2015 primarily related to an impairment charge associated with the impairment of goodwill in the Company's Institutional Asset Management reporting unit, separation benefits and costs associated with the termination of certain contracts within the Company’s Evercore ISI business and the finalization of a matter associated with the wind-down of the Company’s U.S. Private Equity business. Special Charges also includes expenses in 2014 related to termination benefits, primarily consisting of cash severance and the acceleration of the vesting of restricted stock units, as well as the write-off of leasehold improvements in the Institutional Equities business.
Professional Fees - Includes expense associated with share based awards resulting from increases in the share price, which is required upon change in employment status.

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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)


Acquisition and Transition Costs - Includes professional fees for legal and other services incurred related to the Company’s acquisition of all of the outstanding equity interests of the operating businesses of ISI, as well as costs related to transitioning ISI’s infrastructure.
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.

No client accounted for more than 10% of the Company’s consolidated Net Revenues for the three and nine months ended September 30, 2015.
The following information presents each segment’s contribution.
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Investment Banking
 
 
 
 
 
 
 
Net Revenues (1)
$
285,918

 
$
203,028

 
$
746,875

 
$
522,202

Operating Expenses
220,565

 
156,549

 
586,200

 
410,832

Other Expenses (2)
30,131

 
8,828

 
85,168

 
16,279

Operating Income
35,222

 
37,651

 
75,507

 
95,091

Income (Loss) from Equity Method Investments
(528
)
 
(48
)
 
238

 
455

Pre-Tax Income
$
34,694

 
$
37,603

 
$
75,745

 
$
95,546

Identifiable Segment Assets
$
919,000

 
$
719,351

 
$
919,000

 
$
719,351

Investment Management
 
 
 
 
 
 
 
Net Revenues (1)
$
23,033

 
$
24,133

 
$
68,155

 
$
71,768

Operating Expenses
18,275

 
22,356

 
58,050

 
63,518

Other Expenses (2)
28,082

 
82

 
31,605

 
246

Operating Income (Loss)
(23,324
)
 
1,695

 
(21,500
)
 
8,004

Income from Equity Method Investments
1,457

 
1,150

 
3,796

 
2,926

Pre-Tax Income (Loss)
$
(21,867
)
 
$
2,845

 
$
(17,704
)
 
$
10,930

Identifiable Segment Assets
$
411,389

 
$
504,400

 
$
411,389