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Segment Operating Results | 9 Months Ended
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Sep. 30, 2018
Segment Reporting [Abstract] |
Segment Operating Results | Segment Operating Results Business Segments – The Company's business results are categorized into the following two segments: Investment Banking and Investment Management. Investment Banking includes providing advice to clients on significant mergers, acquisitions, divestitures and other strategic corporate transactions, as well as services related to securities underwriting, private placement services and commissions for agency-based equity trading services and equity research. Investment Management includes advising third-party investors in Institutional Asset Management and Wealth Management and interests in private equity funds which are not managed by the Company. On October 18, 2017, the Company completed the sale of the Institutional Trust and Independent Fiduciary business of ETC, which was in the Investment Management segment. The Company's segment information for the three and nine months ended September 30, 2018 and 2017 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, execution, clearing and custody fees, equipment and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, legal, facilities management and senior management activities. Other Expenses include the following:
• | Amortization of LP Units/Interests and Certain Other Awards - Includes amortization costs or the reversal of expenses associated with the vesting of Class E LP Units, Class G and H LP Interests and Class J LP Units issued in conjunction with the acquisition of ISI and certain other related awards.
• | Special Charges - Includes expenses in 2018 related to separation benefits and costs for the termination of certain contracts associated with closing the Company's agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the previously announced expansion of the Company's headquarters in New York. Also includes expenses in 2017 related to the impairment of goodwill in the Company's Institutional Asset Management reporting unit and the impairment of the Company's investment in G5.
• | Acquisition and Transition Costs - Includes costs incurred in connection with acquisitions, divestitures and other ongoing business development initiatives, primarily comprised of professional fees for legal and other services.
• | 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, 2018. The following information presents each segment's contribution.
| For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
Investment Banking |  |  |  |  |  |  |
Net Revenues(1) | $ | 366,834 |  |  | $ | 388,299 |  |  | $ | 1,252,709 |  |  | $ | 1,115,478 |
Operating Expenses | 287,809 |  |  | 293,264 |  |  | 946,629 |  |  | 844,573 |
Other Expenses(2) | 7,888 |  |  | 11,748 |  |  | 21,805 |  |  | 26,663 |
Operating Income | 71,137 |  |  | 83,287 |  |  | 284,275 |  |  | 244,242 |
Income (Loss) from Equity Method Investments | — |  |  | (75 | ) |  | 297 |  |  | (111 | )
Pre-Tax Income | $ | 71,137 |  |  | $ | 83,212 |  |  | $ | 284,572 |  |  | $ | 244,131 |
Identifiable Segment Assets | $ | 1,294,106 |  |  | $ | 1,239,812 |  |  | $ | 1,294,106 |  |  | $ | 1,239,812 |
Investment Management |  |  |  |  |  |  |
Net Revenues(1) | $ | 14,425 |  |  | $ | 18,302 |  |  | $ | 40,590 |  |  | $ | 48,840 |
Operating Expenses | 11,022 |  |  | 14,027 |  |  | 32,973 |  |  | 40,441 |
Other Expenses(2) | — |  |  | 492 |  |  | 21 |  |  | 7,976 |
Operating Income | 3,403 |  |  | 3,783 |  |  | 7,596 |  |  | 423 |
Income from Equity Method Investments | 2,298 |  |  | 1,902 |  |  | 6,545 |  |  | 5,618 |
Pre-Tax Income | $ | 5,701 |  |  | $ | 5,685 |  |  | $ | 14,141 |  |  | $ | 6,041 |
Identifiable Segment Assets | $ | 411,501 |  |  | $ | 321,223 |  |  | $ | 411,501 |  |  | $ | 321,223 |
Total |  |  |  |  |  |  |
Net Revenues(1) | $ | 381,259 |  |  | $ | 406,601 |  |  | $ | 1,293,299 |  |  | $ | 1,164,318 |
Operating Expenses | 298,831 |  |  | 307,291 |  |  | 979,602 |  |  | 885,014 |
Other Expenses(2) | 7,888 |  |  | 12,240 |  |  | 21,826 |  |  | 34,639 |
Operating Income | 74,540 |  |  | 87,070 |  |  | 291,871 |  |  | 244,665 |
Income from Equity Method Investments | 2,298 |  |  | 1,827 |  |  | 6,842 |  |  | 5,507 |
Pre-Tax Income | $ | 76,838 |  |  | $ | 88,897 |  |  | $ | 298,713 |  |  | $ | 250,172 |
Identifiable Segment Assets | $ | 1,705,607 |  |  | $ | 1,561,035 |  |  | $ | 1,705,607 |  |  | $ | 1,561,035 |
(1) | Net revenues include Other Revenue, net, allocated to the segments as follows:
| For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
Investment Banking(A) | $ | 4,108 |  |  | $ | (878 | ) |  | $ | 3,219 |  |  | $ | (3,431 | )
Investment Management(B) | 1,747 |  |  | 2,018 |  |  | 3,987 |  |  | 1,803 |
Total Other Revenue, net | $ | 5,855 |  |  | $ | 1,140 |  |  | $ | 7,206 |  |  | $ | (1,628 | )
(A) | Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and the line of credit of $2,300 and $6,861 for the three and nine months ended September 30, 2018, respectively, and $2,488 and $7,494 for the three and nine months ended September 30, 2017, respectively. Also includes ($343) and ($606) of principal trading losses for the three and nine months ended September 30, 2017, respectively, to conform to the current presentation.
(B) | Includes $1,952 and $1,427 of net realized and unrealized gains on private equity investments for the three and nine months ended September 30, 2017, respectively, to conform to the current presentation.
(2) | Other Expenses are as follows:
| For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
Investment Banking |  |  |  |  |  |  |
Amortization of LP Units / Interests and Certain Other Awards | $ | 3,764 |  |  | $ | 9,249 |  |  | $ | 11,470 |  |  | $ | 4,980 |
Special Charges | 1,967 |  |  | — |  |  | 3,864 |  |  | 14,400 |
Acquisition and Transition Costs | — |  |  | 107 |  |  | — |  |  | 107 |
Intangible Asset and Other Amortization | 2,157 |  |  | 2,392 |  |  | 6,471 |  |  | 7,176 |
Total Investment Banking | 7,888 |  |  | 11,748 |  |  | 21,805 |  |  | 26,663 |
Investment Management |  |  |  |  |  |  |
Special Charges | — |  |  | — |  |  | — |  |  | 7,107 |
Acquisition and Transition Costs | — |  |  | 492 |  |  | 21 |  |  | 869 |
Total Investment Management | — |  |  | 492 |  |  | 21 |  |  | 7,976 |
Total Other Expenses | $ | 7,888 |  |  | $ | 12,240 |  |  | $ | 21,826 |  |  | $ | 34,639 |
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 located and managed in the following geographical areas:
| For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
Net Revenues:(1) |  |  |  |  |  |  |
United States | $ | 290,944 |  |  | $ | 305,062 |  |  | $ | 1,023,686 |  |  | $ | 842,814 |
Europe and Other | 82,063 |  |  | 94,654 |  |  | 239,226 |  |  | 314,154 |
Latin America | 2,397 |  |  | 5,745 |  |  | 23,181 |  |  | 8,978 |
Total | $ | 375,404 |  |  | $ | 405,461 |  |  | $ | 1,286,093 |  |  | $ | 1,165,946 |
(1) Excludes Other Revenue, Including Interest and Investments, and Interest Expense. The Company's total assets are located in the following geographical areas:
| September 30, 2018 |  | December 31, 2017
Total Assets: |  |  |
United States | $ | 1,438,902 |  |  | $ | 1,284,163 |
Europe and Other | 200,020 |  |  | 234,984 |
Latin America | 66,685 |  |  | 65,739 |
Total | $ | 1,705,607 |  |  | $ | 1,584,886 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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