Note 19 – 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. During 2010, the Investment Banking segment (formerly called the Advisory segment) expanded to include 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. During the second quarter of 2010, the Investment Management segment expanded to include the acquisitions of Atalanta Sosnoff and Morse Williams and Company, Inc. ("Morse Williams").

The Company's segment information for the three and six months ended June 30, 2011 and 2010 was 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 and other 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 amortization costs associated with the modification of unvested LP Units and certain other awards, charges associated with the vesting of Event-based Awards and amortization of intangibles associated with certain acquisitions.

The Company evaluates segment results based on net revenue and pre-tax income, both including and excluding the impact of the Other Expenses.

Two clients and one client accounted for more than 10% of the Company's consolidated Net Revenues for the three and six months ended June 30, 2011, respectively.

The following information provides a reasonable representation of each segment's contribution.


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2011			2010			2011			2010
Investment Banking
Net Revenues (1)	$	113,976		$	48,025		$	196,355		$	124,540
Operating Expenses		88,340			44,784			153,661			100,679
Other Expenses (2)		14,511			4,659			20,867			9,987

Operating Income (Loss)		11,125			(1,418	)		21,827			13,874
Income from Equity Method Investments		134			—			916			—

Pre-Tax Income (Loss)	$	11,259		$	(1,418	)	$	22,743		$	13,874

Identifiable Segment Assets	$	489,694		$	329,058		$	489,694		$	329,058


Investment Management
Net Revenues (1)	$	28,015		$	16,945		$	53,481		$	28,451
Operating Expenses		24,594			17,730			48,656			32,734
Other Expenses (2)		3,379			918			4,310			1,904

Operating Income (Loss)		42			(1,703	)		515			(6,187	)
Income (Loss) from Equity Method Investments		(65	)		(130	)		(447	)		(310	)

Pre-Tax Income (Loss)	$	(23	)	$	(1,833	)	$	68		$	(6,497	)

Identifiable Segment Assets	$	552,104		$	561,512		$	552,104		$	561,512


Total
Net Revenues (1)	$	141,991		$	64,970		$	249,836		$	152,991
Operating Expenses		112,934			62,514			202,317			133,413
Other Expenses (2)		17,890			5,577			25,177			11,891

Operating Income (Loss)		11,167			(3,121	)		22,342			7,687
Income (Loss) from Equity Method Investments		69			(130	)		469			(310	)

Pre-Tax Income (Loss)	$	11,236		$	(3,251	)	$	22,811		$	7,377

Identifiable Segment Assets	$	1,041,798		$	890,570		$	1,041,798		$	890,570

(1) Net revenues include Other Revenue, net, allocated to the segments as follows:


	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2011			2010		2011			2010
Investment Banking (A)	$	(720	)	$	520	$	(1,393	)	$	1,113
Investment Management (B)		(756	)		520		(1,479	)		795

Total Other Revenue, net	$	(1,476	)	$	1,040	$	(2,872	)	$	1,908

(A)

Investment Banking Other Revenue, net, includes interest expense on the Senior Notes of $1,059 and $2,112 for the three and six months ended June 30, 2011, respectively, and $1,042 and $2,077 for the three and six months ended June 30, 2010, respectively.

(B)

Investment Management Other Revenue, net, includes interest expense on the Senior Notes of $894 and $1,784 for the three and six months ended June 30, 2011, respectively, and $881 and $1,756 for the three and six months ended June 30, 2010, respectively.

(2) Other Expenses are as follows:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2011		2010		2011		2010
Investment Banking
Amortization of LP Units and Certain Other Awards	$	5,136	$	4,190	$	11,023	$	9,049
Vesting of Event-based Awards		8,906		—		8,906		—
Intangible Asset Amortization		469		469		938		938

Total Investment Banking		14,511		4,659		20,867		9,987

Investment Management
Amortization of LP Units and Certain Other Awards		781		803		1,597		1,674
Vesting of Event-based Awards		2,483		—		2,483		—
Intangible Asset Amortization		115		115		230		230

Total Investment Management		3,379		918		4,310		1,904

Total Other Expenses	$	17,890	$	5,577	$	25,177	$	11,891

Geographic Information – The Company manages its business based on the profitability of the enterprise as a whole.

The Company's revenues were derived from clients and private equity funds located in the following geographical areas:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2011		2010		2011		2010
Net Revenues: (1)
United States	$	118,644	$	54,014	$	191,144	$	129,090
Europe and Other		19,697		4,525		46,949		14,202
Latin America		5,126		5,391		14,615		7,791

Total	$	143,467	$	63,930	$	252,708	$	151,083

(1)

Excludes Other Revenue and Interest Expense.

Substantially all of the Company's long-lived assets reside in the United States.