Document

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, 2016
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 26, 2016 was 38,917,572. The number of shares of the registrant’s Class B common stock, par value $0.01 per share, outstanding as of October 26, 2016 was 24 (excluding 76 shares of Class B common stock held by a subsidiary of the registrant).



Table of Contents                                             



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

2

Table of Contents                                             



PART I. FINANCIAL INFORMATION

Item 1.
Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Financial Statements (Unaudited)
 
 
Page





3

Table of Contents                                             



EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(dollars in thousands, except share data)
 
September 30, 2016
 
December 31, 2015
Assets
 
 
 
Current Assets
 
 
 
Cash and Cash Equivalents
$
446,029

 
$
448,764

Marketable Securities
66,478

 
43,787

Financial Instruments Owned and Pledged as Collateral at Fair Value
17,848

 
41,742

Securities Purchased Under Agreements to Resell
12,881

 
2,191

Accounts Receivable (net of allowances of $1,703 and $1,313 at September 30, 2016 and December 31, 2015, respectively)
146,341

 
175,497

Receivable from Employees and Related Parties
19,325

 
21,189

Other Current Assets
18,910

 
16,294

Total Current Assets
727,812

 
749,464

Investments
122,160

 
126,651

Deferred Tax Assets
307,448

 
298,115

Furniture, Equipment and Leasehold Improvements (net of accumulated depreciation and amortization of $51,055 and $42,656 at September 30, 2016 and December 31, 2015, respectively)
46,036

 
47,980

Goodwill
163,835

 
166,461

Intangible Assets (net of accumulated amortization of $30,873 and $21,754 at September 30, 2016 and December 31, 2015, respectively)
31,903

 
41,010

Assets Segregated for Bank Regulatory Requirements
10,200

 
10,200

Other Assets
52,236

 
39,290

Total Assets
$
1,461,630

 
$
1,479,171

Liabilities and Equity
 
 
 
Current Liabilities
 
 
 
Accrued Compensation and Benefits
$
217,799

 
$
263,862

Accounts Payable and Accrued Expenses
33,017

 
43,878

Securities Sold Under Agreements to Repurchase
30,757

 
44,000

Payable to Employees and Related Parties
25,759

 
28,392

Taxes Payable
29,859

 
20,886

Other Current Liabilities
10,231

 
7,031

Total Current Liabilities
347,422

 
408,049

Notes Payable
168,035

 
119,250

Subordinated Borrowings
16,550

 
22,550

Amounts Due Pursuant to Tax Receivable Agreements
186,030

 
186,036

Other Long-term Liabilities
43,622

 
36,070

Total Liabilities
761,659

 
771,955

Commitments and Contingencies (Note 15)

 

Equity
 
 
 
Evercore Partners Inc. Stockholders' Equity
 
 
 
Common Stock
 
 
 
Class A, par value $0.01 per share (1,000,000,000 shares authorized, 57,913,271 and 55,249,559 issued at September 30, 2016 and December 31, 2015, respectively, and 38,900,114 and 39,623,271 outstanding at September 30, 2016 and December 31, 2015, respectively)
579

 
552

Class B, par value $0.01 per share (1,000,000 shares authorized, 24 and 25 issued and outstanding at September 30, 2016 and December 31, 2015, respectively)

 

Additional Paid-In-Capital
1,312,366

 
1,210,742

Accumulated Other Comprehensive Income (Loss)
(45,151
)
 
(34,539
)
Retained Earnings (Deficit)
(7,165
)
 
(27,791
)
Treasury Stock at Cost (19,013,157 and 15,626,288 shares at September 30, 2016 and December 31, 2015, respectively)
(806,190
)
 
(644,412
)
Total Evercore Partners Inc. Stockholders' Equity
454,439

 
504,552

Noncontrolling Interest
245,532

 
202,664

Total Equity
699,971

 
707,216

Total Liabilities and Equity
$
1,461,630

 
$
1,479,171

See Notes to Unaudited Condensed Consolidated Financial Statements.

4

Table of Contents                                             



EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(dollars and share amounts in thousands, except per share data)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
Investment Banking Revenue
$
368,434

 
$
285,561

 
$
936,234

 
$
749,749

Investment Management Revenue
17,158

 
23,812

 
57,842

 
70,398

Other Revenue, Including Interest
5,509

 
4,097

 
12,650

 
8,656

Total Revenues
391,101

 
313,470

 
1,006,726

 
828,803

Interest Expense
4,787

 
4,519

 
12,043

 
13,773

Net Revenues
386,314

 
308,951

 
994,683

 
815,030

Expenses
 
 
 
 
 
 
 
Employee Compensation and Benefits
231,710

 
197,375

 
632,959

 
533,645

Occupancy and Equipment Rental
12,627

 
11,717

 
33,983

 
35,631

Professional Fees
15,419

 
13,410

 
39,872

 
36,007

Travel and Related Expenses
12,440

 
12,567

 
42,258

 
39,137

Communications and Information Services
10,155

 
9,295

 
29,944

 
27,595

Depreciation and Amortization
5,907

 
8,398

 
18,915

 
21,112

Special Charges

 
28,000

 

 
33,499

Acquisition and Transition Costs
339

 
538

 
10

 
1,939

Other Operating Expenses
12,632

 
15,753

 
32,927

 
32,458

Total Expenses
301,229

 
297,053

 
830,868

 
761,023

Income Before Income from Equity Method Investments and Income Taxes
85,085

 
11,898

 
163,815

 
54,007

Income from Equity Method Investments
1,178

 
929

 
4,129

 
4,034

Income Before Income Taxes
86,263

 
12,827

 
167,944

 
58,041

Provision for Income Taxes
38,980

 
7,392

 
79,390

 
30,327

Net Income
47,283

 
5,435

 
88,554

 
27,714

Net Income (Loss) Attributable to Noncontrolling Interest
12,588

 
(1,762
)
 
24,454

 
5,453

Net Income Attributable to Evercore Partners Inc.
$
34,695

 
$
7,197

 
$
64,100

 
$
22,261

Net Income Attributable to Evercore Partners Inc. Common Shareholders
$
34,695

 
$
7,197

 
$
64,100

 
$
22,261

Weighted Average Shares of Class A Common Stock Outstanding
 
 
 
 
 
 
 
Basic
38,912

 
36,773

 
39,259

 
36,649

Diluted
43,734

 
44,334

 
44,085

 
43,100

Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders:
 
 
 
 
 
 
 
Basic
$
0.89

 
$
0.20

 
$
1.63

 
$
0.61

Diluted
$
0.79

 
$
0.16

 
$
1.45

 
$
0.52

 
 
 
 
 
 
 
 
Dividends Declared per Share of Class A Common Stock
$
0.31

 
$
0.28

 
$
0.93

 
$
0.84

See Notes to Unaudited Condensed Consolidated Financial Statements.

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Table of Contents                                             



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,
 
2016
 
2015
 
2016
 
2015
Net Income
$
47,283

 
$
5,435

 
$
88,554

 
$
27,714

Other Comprehensive Income (Loss), net of tax:
 
 
 
 
 
 
 
Unrealized Gain (Loss) on Marketable Securities and Investments, net
(632
)
 
(563
)
 
(1,448
)
 
(1,546
)
Foreign Currency Translation Adjustment Gain (Loss), net
(3,322
)
 
(6,592
)
 
(11,861
)
 
(8,504
)
Other Comprehensive Income (Loss)
(3,954
)
 
(7,155
)
 
(13,309
)
 
(10,050
)
Comprehensive Income (Loss)
43,329

 
(1,720
)
 
75,245

 
17,664

Comprehensive Income (Loss) Attributable to Noncontrolling Interest
11,739

 
(3,348
)
 
21,757

 
3,186

Comprehensive Income Attributable to Evercore Partners Inc.
$
31,590

 
$
1,628

 
$
53,488

 
$
14,478


See Notes to Unaudited Condensed Consolidated Financial Statements.


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Table of Contents                                             



EVERCORE PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
(dollars in thousands, except share data)
 
For the Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
Other
 
Retained
 
 
 
 
 
 
 
 
 
Class A Common Stock
 
Paid-In
 
Comprehensive
 
Earnings
 
Treasury Stock
 
Noncontrolling
 
Total
 
Shares
 
Dollars
 
Capital
 
Income (Loss)
 
(Deficit)
 
Shares
 
Dollars
 
Interest
 
Equity
Balance at December 31, 2015
55,249,559

 
$
552

 
$
1,210,742

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

 
$
707,216

Net Income

 

 

 

 
64,100

 

 

 
24,454

 
88,554

Other Comprehensive Income (Loss)

 

 

 
(10,612
)
 

 

 

 
(2,697
)
 
(13,309
)
Treasury Stock Purchases, net

 

 

 

 

 
(3,386,869
)
 
(161,778
)
 

 
(161,778
)
Evercore LP Units Converted into Class A Common Stock
326,280

 
3

 
9,161

 

 

 

 

 
(9,164
)
 

Equity-based Compensation Awards
2,337,432

 
24

 
87,939

 

 

 

 

 
66,357

 
154,320

Dividends and Equivalents

 

 
5,781

 

 
(43,474
)
 

 

 

 
(37,693
)
Noncontrolling Interest (Note 12)

 

 
(1,257
)
 

 

 

 

 
(36,082
)
 
(37,339
)
Balance at September 30, 2016
57,913,271

 
$
579

 
$
1,312,366

 
$
(45,151
)
 
$
(7,165
)
 
(19,013,157
)
 
$
(806,190
)
 
$
245,532

 
$
699,971

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, net

 

 

 

 

 
(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


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,
 
2016
 
2015
Cash Flows From Operating Activities
 
 
 
Net Income
$
88,554

 
$
27,714

Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:
 
 
 
Net (Gains) Losses on Investments, Marketable Securities and Contingent Consideration
3,565

 
3,411

Equity Method Investments
4,118

 
3,304

Equity-Based and Other Deferred Compensation
177,812

 
155,174

Impairment of Goodwill

 
28,000

Depreciation, Amortization and Accretion
19,033

 
22,821

Bad Debt Expense
1,966

 
1,214

Deferred Taxes
(2,509
)
 
(2,920
)
Decrease (Increase) in Operating Assets:
 
 
 
Marketable Securities
680

 
342

Financial Instruments Owned and Pledged as Collateral at Fair Value
20,621

 
36,728

Securities Purchased Under Agreements to Resell
(11,584
)
 
6,870

Accounts Receivable
23,414

 
(30,743
)
Receivable from Employees and Related Parties
1,700

 
(1,532
)
Other Assets
(12,991
)
 
(7,570
)
(Decrease) Increase in Operating Liabilities:
 
 
 
Accrued Compensation and Benefits
(49,915
)
 
(69,590
)
Accounts Payable and Accrued Expenses
(9,140
)
 
1,216

Securities Sold Under Agreements to Repurchase
(9,070
)
 
(43,713
)
Payables to Employees and Related Parties
(2,639
)
 
10,097

Taxes Payable
6,148

 
1,669

Other Liabilities
(3,855
)
 
350

Net Cash Provided by Operating Activities
245,908

 
142,842

Cash Flows From Investing Activities
 
 
 
Investments Purchased
(1,529
)
 
(235
)
Distributions of Private Equity Investments
107

 
6,752

Marketable Securities:
 
 
 
Proceeds from Sales and Maturities
29,482

 
25,295

Purchases
(52,851
)
 
(30,859
)
Cash Paid for Acquisitions and Deconsolidation of Cash, net of Cash Acquired
(2,877
)
 
(3,253
)
(Increase) Decrease in Restricted Cash
(5,385
)
 

Loans Receivable

 
(3,500
)
Purchase of Furniture, Equipment and Leasehold Improvements
(8,511
)
 
(12,855
)
Net Cash Provided by (Used in) Investing Activities
(41,564
)
 
(18,655
)
Cash Flows From Financing Activities
 
 
 
Issuance of Noncontrolling Interests
885

 
373

Purchase of Noncontrolling Interests
(6,482
)
 

Distributions to Noncontrolling Interests
(25,519
)
 
(15,059
)
Cash Paid for Deferred and Contingent Consideration
(5,050
)
 

Short-Term Borrowing
50,000

 
45,000

Repayment of Short-Term Borrowing
(50,000
)
 
(45,000
)
Repayment of Subordinated Borrowings
(6,000
)
 

Payment of Notes Payable - Mizuho
(120,000
)
 

Issuance of Notes Payable
170,000

 

Debt Issuance Costs
(2,084
)
 

Purchase of Treasury Stock and Noncontrolling Interests
(161,778
)
 
(152,788
)
Excess Tax Benefits Associated with Equity-Based Awards
4,493

 
9,905

Dividends - Class A Stockholders
(37,693
)
 
(33,794
)
Net Cash Provided by (Used in) Financing Activities
(189,228
)
 
(191,363
)
Effect of Exchange Rate Changes on Cash
(17,851
)
 
(6,839
)
Net Increase (Decrease) in Cash and Cash Equivalents
(2,735
)
 
(74,015
)
Cash and Cash Equivalents-Beginning of Period
448,764

 
352,160

Cash and Cash Equivalents-End of Period
$
446,029

 
$
278,145

 
 
 
 
 
 
 
 
SUPPLEMENTAL CASH FLOW DISCLOSURE
 
 
 
Payments for Interest
$
11,553

 
$
14,062

Payments for Income Taxes
$
75,213

 
$
29,237

Increase (Decrease) in Fair Value of Redeemable Noncontrolling Interest
$

 
$
(1,379
)
Dividend Equivalents Issued
$
5,781

 
$
4,814

Receipt of Securities in Settlement of Accounts Receivable
$

 
$
1,079


See Notes to Unaudited Condensed Consolidated Financial Statements.

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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)


Note 1 – Organization
Evercore Partners Inc. and subsidiaries (the "Company") is an investment banking and investment management firm, incorporated in Delaware on July 21, 2005 and headquartered in New York, New York. The Company is a holding company which owns a controlling interest in Evercore LP, a Delaware limited partnership ("Evercore LP"). Subsequent to the Company’s initial public offering, the Company became the sole general partner of Evercore LP. The Company operates from its offices and through its affiliates in North America, Europe, South America and Asia.
The Investment Banking business includes the advisory business through which the Company provides advice to clients on significant mergers, acquisitions, divestitures and other strategic corporate transactions, with a particular focus on advising prominent multinational corporations and substantial private equity firms on large, complex transactions. The Company also provides restructuring advice to companies in financial transition, as well as to creditors, shareholders and potential acquirers. In addition, the Company provides its clients with capital markets advice, underwrites securities offerings, raises funds for financial sponsors and provides advisory services focused on secondary transactions for private funds interests. The Investment Banking business also includes the Evercore ISI business through which the Company offers macroeconomic, policy and fundamental equity research and agency-based equity securities trading for institutional investors.
The Investment Management business includes the institutional asset management business through which the Company, directly and through affiliates, manages financial assets for sophisticated institutional investors and provides independent fiduciary services to corporate employee benefit plans and high net-worth individuals, the wealth management business through which the Company provides investment advisory and wealth management services for high net-worth individuals and associated entities, and the private equity business through which the Company, through affiliates, manages private equity funds.
Note 2 – Significant Accounting Policies
For a further discussion of the Company's accounting policies, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2015.
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, 2015. The December 31, 2015 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, 2016.
The accompanying unaudited condensed consolidated financial statements of the Company are comprised of the consolidation of Evercore LP and Evercore LP’s wholly-owned and majority-owned direct and indirect subsidiaries, including Evercore Group L.L.C. ("EGL"), a registered broker-dealer in the U.S. The Company’s policy is to consolidate all subsidiaries in which it has a controlling financial interest, as well as any variable interest entities ("VIEs") where the Company is deemed to be the primary beneficiary, when it has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb significant losses or the right to receive benefits that could potentially be significant to the VIE. The Company reviews factors, including the rights of the equity holders and obligations of equity holders to absorb losses or receive expected residual returns, to determine if the investment is a VIE. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly or indirectly by the Company. The consolidation analysis is generally performed qualitatively. This analysis, which requires judgment, is performed at each reporting date.


9

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


In February 2015, Accounting Standards Update ("ASU") No. 2015-02, "Amendments to the Consolidation Analysis," ("ASU 2015-02") was issued. This ASU eliminates the deferral of ASU No. 2010-10, "Amendments for Certain Investment Funds," which allows reporting entities with interests in certain investment funds to follow the consolidation guidance in Accounting Standards Codification ("ASC") No. 810, "Consolidation," ("ASC 810") and makes other changes to the variable interest model and the voting model. ASU 2015-02 modifies the evaluation performed by reporting entities on limited partnerships and similar entities and also impacts the evaluation performed by reporting entities on VIE determination, and determination of the primary beneficiary of a VIE.
The Company adopted ASU 2015-02 on January 1, 2016. Pursuant to the provisions of ASU 2015-02, Evercore LP is a VIE and the Company is the primary beneficiary. Prior to the adoption of ASU 2015-02, the Company consolidated Evercore LP as a voting interest entity. Specifically, the Company has the majority economic interest in Evercore LP and has decision making authority that significantly affects the economic performance of the entity while the limited partners have no kick-out or substantive participating rights. The assets and liabilities of Evercore LP represent substantially all of the consolidated assets and liabilities of the Company with the exception of U.S. corporate taxes and related items, which are presented on the Company's (Parent Company Only) statements of financial position in Note 23 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
International Strategy & Investment (UK) Limited ("ISI UK") is also a VIE pursuant to ASC 810 and the Company is the primary beneficiary of this VIE. Specifically, the Company provides financial support through a transfer pricing agreement with this entity, which exposes the Company to losses that are potentially significant to the entity, and has decision making authority that significantly affects the economic performance of the entity. The Company previously concluded that Evercore Asia Limited ("Evercore Asia") and Evercore Asia (Singapore) PTE. LTD. ("Evercore Singapore") were also VIEs; on July 1, 2016, the Company terminated the transfer pricing arrangements with Evercore Asia and Evercore Singapore. The Company viewed this modification as a reconsideration event under ASC 810-10 and concluded that Evercore Asia and Evercore Singapore are not VIEs and will continue to be consolidated as voting interest entities. Following the adoption of ASU 2015-02, the Company also concluded that Evercore Partners International LLP ("EPI LLP") is a VIE and that the Company is the primary beneficiary of this VIE. The Company has the majority economic interest in EPI LLP and has decision making authority that significantly affects the economic performance of this entity. The Company included in its Unaudited Condensed Consolidated Statements of Financial Condition ISI UK and EPI LLP assets of $111,905 and liabilities of $73,781 at September 30, 2016 and Evercore Asia, Evercore Singapore, ISI UK and EPI LLP assets of $151,583 and liabilities of $110,424 at December 31, 2015. See Note 8 for further information on the Company's VIEs.
All intercompany balances and transactions with the Company’s subsidiaries have been eliminated upon consolidation.
Note 3 – Recent Accounting Pronouncements
ASU 2014-09 – In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09"). ASU 2014-09 provides amendments to ASC No. 605, "Revenue Recognition" and creates ASC No. 606, "Revenue from Contracts with Customers," which changes the requirements for revenue recognition and amends the disclosure requirements. In August 2015, the FASB issued ASU No. 2015-14, "Deferral of the Effective Date," which provides amendments that defer the effective date of ASU 2014-09 by one year. In April 2016, the FASB issued ASU No. 2016-10, "Identifying Performance Obligations and Licensing," which provides clarification to identifying performance obligations and the licensing implementation guidance in ASU 2014-09. In May 2016, the FASB issued ASU No. 2016-12, "Narrow-Scope Improvements and Practical Expedients," which provides clarification on certain issues identified in the guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition in ASU 2014-09. The amendments in these updates are effective either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption, during interim and annual periods beginning after December 15, 2017, with early adoption permitted beginning after December 15, 2016. The Company 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 2014-12 – 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

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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)


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 adoption of ASU 2014-12 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 adoption of ASU 2015-01 did not have a material impact 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 810, which include the following:  1. Modify the evaluation of whether limited partnerships and similar legal entities are 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 adoption of ASU 2015-02 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto. See Note 2 for further information.
ASU 2015-03 - In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs" ("ASU 2015-03"). ASU 2015-03 provides amendments to Subtopic 835-30, "Interest - Imputation of Interest," which require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in this update are effective retrospectively during interim and annual periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU 2015-03 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2015-05 - In April 2015, the FASB issued ASU No. 2015-05, "Customer's Accounting for Fees Paid in a Cloud Computing Arrangement" ("ASU 2015-05"). ASU 2015-05 provides amendments to ASC No. 350, "Intangibles - Goodwill and Other," Subtopic 350-40, "Internal-Use Software" which help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement and determine whether an arrangement includes the sale or license of software. The amendments in this update are effective either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively during interim and annual periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU 2015-05 did not have a material impact 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 adoption permitted. The adoption of ASU 2015-16 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2016-01 - In January 2016, the FASB issued ASU No. 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"). ASU 2016-01 provides amendments to ASC No. 740, "Financial Instruments," which change the requirements for certain aspects of recognition, measurement and presentation of financial assets and liabilities and amend the disclosure requirements. The amendments in this update should be applied by means of a cumulative-

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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)


effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values are effective prospectively during interim and annual periods beginning after December 15, 2017, with early adoption not permitted. The Company is currently assessing the impact of the adoption of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2016-02 - In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). ASU 2016-02 supersedes ASC No. 840, "Leases," and includes requirements for the recognition of a right-of-use asset and lease liability on the balance sheet by lessees for those leases classified as operating leases under previous guidance. The amendments in this update are effective using a modified retrospective approach at the beginning of the earliest period presented, during interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the impact of the adoption of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2016-07 - In March 2016, the FASB issued ASU No. 2016-07, "Simplifying the Transition to the Equity Method of Accounting" ("ASU 2016-07"). ASU 2016-07 provides amendments to ASC No. 323, "Investments - Equity Method and Joint Ventures," which simplify the accounting for equity method investments by eliminating the requirement to adjust the investment, results of operations and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments in this update are effective prospectively to increases in the level of ownership interest or degree of influence that results in the adoption of the equity method, during interim and annual periods beginning after December 15, 2016, with early adoption permitted. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2016-09 - In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). ASU 2016-09 provides amendments to ASC No. 718, "Compensation - Stock Compensation," which simplify the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this update are effective during interim and annual periods beginning after December 15, 2016, with early adoption permitted. This update will result in excess tax benefits and deficiencies from the delivery of Class A common stock under share-based payment arrangements being recognized in the Company's Provision for Income Taxes, rather than in Additional Paid-In-Capital under the current standard, which will result in greater volatility in the effective tax rate and could be material to the results of operations and the classifications of cash flows in future periods depending upon the level of earnings and stock price of the Company, among other things.
ASU 2016-13 - In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). ASU 2016-13 provides amendments to ASC No. 326, "Financial Instruments - Credit Losses," which amend the guidance on the impairment of financial instruments and adds an impairment model (the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Entities will recognize an allowance for its estimate of expected credit losses as of the end of each reporting period. The amendments in this update are effective during interim and annual periods beginning after December 15, 2019, with early adoption permitted after December 15, 2018. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
ASU 2016-15 - In August 2016, the FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"). ASU 2016-15 provides amendments to ASC No. 230, "Statement of Cash Flows," which provide guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amendments in this update are effective retrospectively, or prospectively, if retrospective application is impracticable, during interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto.
Note 4 – Acquisition and Transition Costs, Special Charges and Intangible Asset Amortization
Acquisition and Transition Costs
The Company recognized $339 and $10 for the three and nine months ended September 30, 2016, respectively, and $538 and $1,939 for the three and nine months ended September 30, 2015, 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 addition, acquisition and transition costs for 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, 2016 included the reversal of $733 of a provision for certain settlements previously established in the fourth quarter of 2015.
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.
Intangible Asset Amortization
Expense associated with the amortization of intangible assets for Investment Banking was $2,582 and $8,659 for the three and nine months ended September 30, 2016, respectively, and $4,866 and $10,750 for the three and nine months ended September 30, 2015, 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 $117 and $460 for the three and nine months ended September 30, 2016, respectively, and $937 and $2,813 for the three and nine months ended September 30, 2015, 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 $1,433 and $10,182 for the three and nine months ended September 30, 2016, respectively, and $3,377 and $6,264 for the three and nine months ended September 30, 2015, respectively.
Investment Banking Revenue includes advisory fees earned from clients that have a Senior Managing Director as a member of their Board of Directors of $11,981 and $13,282 for the three and nine months ended September 30, 2016, respectively.
Other Assets on the Unaudited Condensed Consolidated Statements of Financial Condition includes the long-term portion of loans receivable from certain employees of $17,707 and $6,967 as of September 30, 2016 and December 31, 2015, respectively.
The Company had $16,550 and $22,550 in subordinated borrowings, principally with an executive officer of the Company, as of September 30, 2016 and December 31, 2015, respectively. See Note 10 for further information.
Note 6 – Marketable Securities
The amortized cost and estimated fair value of the Company’s Marketable Securities as of September 30, 2016 and December 31, 2015 were as follows:
 
September 30, 2016
 
December 31, 2015
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Securities Investments
$
6,483

 
$
14

 
$
3,727

 
$
2,770

 
$
6,463

 
$
10

 
$
2,523

 
$
3,950

Debt Securities Carried by EGL
37,559

 
90

 
4

 
37,645

 
37,404

 
94

 
8

 
37,490

Investment Funds
24,849

 
1,312

 
98

 
26,063

 
2,291

 
155

 
99

 
2,347

Total
$
68,891

 
$
1,416

 
$
3,829

 
$
66,478

 
$
46,158

 
$
259

 
$
2,630

 
$
43,787




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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)


Scheduled maturities of the Company’s available-for-sale debt securities within the Securities Investments portfolio as of September 30, 2016 and December 31, 2015 were as follows:
 
September 30, 2016
 
December 31, 2015
 
Amortized
Cost
 
Fair Value
 
Amortized
Cost
 
Fair Value
Due within one year
$

 
$

 
$
204

 
$
204

Due after one year through five years
1,761

 
1,773

 
1,537

 
1,545

Total
$
1,761

 
$
1,773

 
$
1,741

 
$
1,749

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, 2016.
Securities Investments
Securities Investments include equity and debt securities, which are classified as available-for-sale securities within Marketable Securities on the Unaudited Condensed Consolidated Statements of Financial Condition. These securities are stated at fair value with unrealized gains and losses included in Accumulated Other Comprehensive Income (Loss) and realized gains and losses included in earnings. The Company had net realized losses of ($12) and ($33) for the three and nine months ended September 30, 2016, respectively, and ($12) and ($35) for the three and nine months ended September 30, 2015, respectively.
Debt Securities Carried by EGL
EGL invests in a fixed income portfolio consisting primarily of municipal bonds. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest, on the Unaudited Condensed Consolidated Statements of Operations, as required for broker-dealers in securities. The Company had net realized and unrealized losses of ($341) and ($680) for the three and nine months ended September 30, 2016, respectively, and ($32) and ($342) for the three and nine months ended September 30, 2015, respectively.
Investment Funds
The Company invests in a portfolio of exchange traded funds and mutual funds as an economic hedge against the Company’s deferred compensation program. See Note 14 for further information. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest, on the Unaudited Condensed Consolidated Statements of Operations. The Company had net realized and unrealized gains (losses) of $707 and $1,232 for the three and nine months ended September 30, 2016, respectively, and ($222) and ($66) for the three and nine months ended September 30, 2015, 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 1.6

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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)


years, as of September 30, 2016, and are pledged as collateral against repurchase agreements. Generally, collateral is posted equal to the contract value at inception and is subject to market changes. These repurchase agreements are primarily with institutional customer accounts managed by ECB and permit the counterparty to pledge the securities.
ECB has procedures in place to monitor the daily risk limits for positions taken, as well as the credit risk based on the collateral pledged under these agreements against their contract value from inception to maturity date. The daily risk measure is Value at Risk ("VaR"), which is a statistical measure, at a 98% confidence level, of the potential daily losses from adverse market movements in an ordinary market environment based on a historical simulation using the prior year’s historical data. ECB’s Risk Management Committee (the "Committee") has established a policy to maintain VaR at levels below 0.1% of the value of the portfolio. If at any point in time the threshold is exceeded, ECB personnel are alerted by an automated interface with ECB’s trading systems and begin to make adjustments in the portfolio in order to mitigate the risk and bring the portfolio in compliance. Concurrently, ECB personnel must notify the Committee of the variance and the actions taken to reduce the exposure to loss.
In addition to monitoring VaR, ECB periodically performs discrete stress tests to assure that the level of potential losses that would arise from extreme market movements that may not be anticipated by VaR measures are within acceptable levels.
As of September 30, 2016 and December 31, 2015, a summary of the Company’s assets, liabilities and collateral received or pledged related to these transactions was as follows:
 
September 30, 2016
 
December 31, 2015
 
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
$
17,848

 
 
 
$
41,742

 
 
Securities Purchased Under Agreements to Resell
12,881

 
$
12,883

 
2,191

 
$
2,192

Total Assets
$
30,729

 
 
 
$
43,933

 
 
Liabilities
 
 
 
 
 
 
 
Securities Sold Under Agreements to Repurchase
$
(30,757
)
 
$
(30,782
)
 
$
(44,000
)
 
$
(44,063
)
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.
The Company also has investments in G5 Holdings S.A. ("G5 ǀ Evercore"), ABS Investment Management, LLC ("ABS") and Atalanta Sosnoff Capital, LLC ("Atalanta Sosnoff"), which are voting interest entities. The Company’s share of earnings (losses) on its investments in G5 ǀ Evercore, ABS and Atalanta Sosnoff (after its deconsolidation on December 31, 2015) 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"), Glisco Mexico Capital Partners II, L.P. ("GMCP II," formerly Evercore Mexico Capital Partners II, L.P., or EMCP II), Glisco Mexico Capital Partners III, L.P. ("GMCP III," formerly Evercore Mexico Capital Partners III, L.P., or EMCP III), Trilantic Capital Partners Associates IV, L.P. ("Trilantic IV") and Trilantic Capital Partners V, L.P. ("Trilantic V"). Portfolio holdings of the private equity funds are carried at fair value. Accordingly, the Company reflects its pro rata share of the unrealized gains and losses occurring from changes in fair

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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)


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, 2016 of $945 is comprised of its remaining interest in the general partner, including $863 in cash and $82 in securities. In addition, on September 12, 2016 the final distribution related to CSI Capital, L.P. ("CSI Capital") was made.
A summary of the Company’s investment in the private equity funds as of September 30, 2016 and December 31, 2015 was as follows:
 
September 30, 2016
 
December 31, 2015
ECP II
$
945

 
$
983

Discovery Fund
7,459

 
6,632

GMCP II
5,606

 
6,091

GMCP III
529

 
5,786

CSI Capital

 
35

Trilantic IV
227

 
2,829

Trilantic V
5,114

 
4,117

Total Private Equity Funds
$
19,880

 
$
26,473

Net realized and unrealized gains on private equity fund investments were $171 and $6,302 for the three and nine months ended September 30, 2016, respectively, and $1,933 and $3,259 for the three and nine months ended September 30, 2015, respectively. During the three and nine months ended September 30, 2016, Trilantic IV made distributions of $3,092 and $3,304, respectively. During the nine months ended September 30, 2015, ECP II, GMCP 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, 2016, the Company had $1,400 of previously distributed carried interest that may be subject to repayment.
General Partners of Private Equity Funds which are VIEs
The Company has concluded that Evercore Partners II, L.L.C. ("EP II L.L.C."), the general partner of ECP II, is a VIE pursuant to ASC 810. The Company owned 8%-9% of the carried interest earned by the general partner of ECP II. The Company's assessment of the design of EP II L.L.C. resulted in the determination that the Company is not acting as an agent for other members of the general partner and is a passive holder of interests in the fund, evidenced by the fact that the Company is a non-voting, non-managing member of the general partner and, therefore, has no authority in directing the management operations of the general partner. Furthermore, the Company does not have the obligation to absorb significant losses or the right to receive benefits that could potentially have a significant impact to EP II L.L.C. Accordingly, the Company has 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.
Glisco Transaction
On July 19, 2016, the Company and the principals of its Mexican Private Equity business entered into an agreement to transfer ownership of its Mexican Private Equity business and related entities to Glisco Partners Inc. ("Glisco"), which assumed all responsibility for the management of the existing funds GMCP II and GMCP III, and is controlled by the principals. These principals ceased to be employed by the Company following this transaction. An SMD of the Company will continue to serve on the Investment Committee for the funds. This transaction received consent from the Limited Partner Advisory Committee of the funds and regulatory approval in Mexico during the third quarter of 2016 and closed on September 30, 2016.
As consideration for this transaction, the Company will receive a fixed percentage of the management fees earned by Glisco for a period of up to ten years, as well as a portion of the carried interest in the next two successor funds. The Company committed to invest capital in those successor funds consistent with the level of carried interest it owns and will retain its carried interest and its capital interests in the existing funds. The Company is entitled to 20% of the carried interest in such successor funds. In conjunction with this transaction, the Company entered into a transition services agreement to provide operational support to Glisco for a period of up to 18 months.

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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)


Following this transaction, the Company ceased to have a general partner’s interest in and deconsolidated Glisco Mexico Partners II and III ("GMP II" and "GMP III," formerly Evercore Mexico Partners II and III, the General Partners of GMCP II and GMCP III) and related subsidiaries. Going forward the Company will maintain a limited partner’s interest in the general partners of the funds.
In addition, the Company maintains a limited partner’s interest in Glisco Manager Holdings LP, from which the Company will receive its portion of the management fees earned by Glisco. The Company’s investment in Glisco Manager Holdings LP will be accounted for as a cost method investment. 
As a result of this transaction, on September 30, 2016 the Company deconsolidated assets and liabilities of $8,302 and $2,343, respectively, and recorded an investment in Glisco Manager Holdings LP of $2,519, representing the fair value of the deferred consideration resulting from this transaction. Furthermore, this resulted in a decrease in Noncontrolling Interest of $5,808 at September 30, 2016 related to GMP III. In addition, the transaction resulted in a gain on deconsolidation of $406, included in Other Revenue on the Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016.
Following this transaction, the Company concluded that GMP II, GMP III and Glisco Manager Holdings LP are VIEs and that the Company is not the primary beneficiary of these VIEs. The Company's assessment of the primary beneficiary of these entities included assessing which parties have the power to significantly impact the economic performance of these entities and the obligation to absorb losses, which could be potentially significant to the entities, or the right to receive benefits from the entities that could be potentially significant. Neither the Company nor its related parties will have the ability to make decisions that significantly impact the economic performance of these entities. Further, as a limited partner in these entities, the Company does not possess substantive participating rights. The Company had assets of $8,654 included in its Unaudited Condensed Consolidated Statement of Financial Condition at September 30, 2016 related to these unconsolidated VIEs, representing the carrying value of the Company's investments in the entities. The Company’s exposure to the obligations of these VIEs is generally limited to its investments in these entities. The Company's maximum exposure to loss as of September 30, 2016 was $10,981, which represents the carrying value of the Company's investments in these VIEs, as well as any unfunded commitments to the current funds.
Investment in Trilantic Capital Partners and Others
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 30, 2016, $612 and $50 of this investment was allocated to Trilantic Fund V and IV, respectively. During 2015, $636 and $8 of this investment was allocated to Trilantic Fund V and IV, respectively. During 2014, $689 of this investment was allocated to Trilantic Fund V. From 2010 to 2013, $825 and $1,120 of this investment was allocated to Trilantic Fund V and IV, respectively. This investment had a balance of $12,150 and $12,812 as of September 30, 2016 and December 31, 2015, respectively. The Company has a $5,000 commitment to invest in Trilantic Fund V, of which $2,550 was unfunded at September 30, 2016. The Company and Trilantic anticipate that the Company will participate in the successor funds to Trilantic Fund V. The Company further anticipates that participation in the successor fund will be at approximately $12,000.
In the second quarter of 2015, the Company received an equity security in a private company with a fair value of $1,079 in exchange for advisory services. This investment is accounted for 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, 2016 and December 31, 2015 was as follows:

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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)


 
September 30, 2016
 
December 31, 2015
G5 ǀ Evercore
$
25,016

 
$
20,730

ABS
38,364

 
41,567

Atalanta Sosnoff
23,152

 
23,990

Total
$
86,532

 
$
86,287

G5 ǀ Evercore
In 2010, the Company made an investment accounted for under the equity method of accounting in G5 ǀ Evercore. At September 30, 2016, the Company’s economic ownership interest in G5 ǀ Evercore was 49%. This investment resulted in earnings (losses) of ($107) and ($78) for the three and nine months ended September 30, 2016, respectively, and ($388) and $263 for the three and nine months ended September 30, 2015, respectively, included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations. In addition, the investment is subject to currency translation from Brazilian Real to the U.S. Dollar.
ABS
In 2011, the Company made an investment accounted for under the equity method of accounting in ABS. At September 30, 2016, the Company’s economic ownership interest in ABS was 45%. This investment resulted in earnings of $1,113 and $3,687 for the three and nine months ended September 30, 2016, respectively, and $1,317 and $3,771 for the three and nine months ended September 30, 2015, respectively, included within Income from Equity Method Investments on the Unaudited Condensed Consolidated Statements of Operations.
Atalanta Sosnoff
On December 31, 2015, the Company amended the Operating Agreement with Atalanta Sosnoff and deconsolidated its assets and liabilities and accounted for its interest in Atalanta Sosnoff under the equity method of accounting from that date forward. The carrying amount of the investment of $23,990, at December 31, 2015, represented its fair value on that date. At September 30, 2016, the Company’s economic ownership interest in Atalanta Sosnoff was 49%. This investment resulted in earnings of $172 and $520 for the three and nine months ended September 30, 2016, 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 $884 and $2,648 for the three and nine months ended September 30, 2016, respectively, and $621 and $1,863 for the three and nine months ended September 30, 2015, respectively.
The Company assesses its equity method investments for impairment annually, or more frequently if circumstances indicate impairment may have occurred.
Note 9 – Fair Value Measurements
ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820") establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily-available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following categories:
Level I – Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed derivatives. As required by ASC 820, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

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


Level 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, 2016 and December 31, 2015 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, 2016 and December 31, 2015:
 
September 30, 2016
 
Level I
 
Level II
 
Level III
 
Total
Corporate Bonds, Municipal Bonds and Other Debt Securities (1)
$

 
$
44,313

 
$

 
$
44,313

Securities Investments (1)
3,996

 
1,773

 

 
5,769

Investment Funds
26,063

 

 

 
26,063

Financial Instruments Owned and Pledged as Collateral at Fair Value
17,848

 

 

 
17,848

Total Assets Measured At Fair Value
$
47,907

 
$
46,086

 
$

 
$
93,993

 
 
 
 
 
 
 
 
 
December 31, 2015
 
Level I
 
Level II
 
Level III
 
Total
Corporate Bonds, Municipal Bonds and Other Debt Securities (1)
$

 
$
44,144

 
$

 
$
44,144

Securities Investments (1)
5,200

 
1,749

 

 
6,949

Investment Funds
2,347

 

 

 
2,347

Financial Instruments Owned and Pledged as Collateral at Fair Value
41,742

 

 

 
41,742

Total Assets Measured At Fair Value
$
49,289

 
$
45,893

 
$

 
$
95,182

(1)
Includes $9,667 and $9,653 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, 2016 and December 31, 2015, 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, 2016 or the year ended December 31, 2015.
 
During the fourth quarter of 2015, the Company determined that the fair value of the goodwill in its Institutional Asset Management reporting unit was $66,200. 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.




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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, 2016
 
Carrying
 
Estimated Fair Value
 
Amount
 
Level I
 
Level II
 
Level III
 
Total
Financial Assets:
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
436,362

 
$
436,362

 
$

 
$

 
$
436,362

Securities Purchased Under Agreements to Resell
12,881

 

 
12,881

 

 
12,881

Accounts Receivable
146,341

 

 
146,341

 

 
146,341

Receivable from Employees and Related Parties
19,325

 

 
19,325

 

 
19,325

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

 

 
3,572

 

 
3,572

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Accounts Payable and Accrued Expenses
$
33,017

 
$

 
$
33,017

 
$

 
$
33,017

Securities Sold Under Agreements to Repurchase
30,757

 

 
30,757

 

 
30,757

Payable to Employees and Related Parties
25,759

 

 
25,759

 

 
25,759

Notes Payable
168,035

 

 
174,707

 

 
174,707

Subordinated Borrowings
16,550

 

 
17,142

 

 
17,142

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
Carrying
 
Estimated Fair Value
 
Amount
 
Level I
 
Level II
 
Level III
 
Total
Financial Assets:
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$
439,111

 
$
439,111

 
$

 
$

 
$
439,111

Securities Purchased Under Agreements to Resell
2,191

 

 
2,191

 

 
2,191

Accounts Receivable
175,497

 

 
175,497

 

 
175,497

Receivable from Employees and Related Parties
21,189

 

 
21,189

 

 
21,189

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

 

 
3,666

 

 
3,666

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Accounts Payable and Accrued Expenses
$
43,878

 
$

 
$
43,878

 
$

 
$
43,878

Securities Sold Under Agreements to Repurchase
44,000

 

 
44,000

 

 
44,000

Payable to Employees and Related Parties
28,392

 

 
28,392

 

 
28,392

Notes Payable
119,250

 

 
120,373

 

 
120,373

Subordinated Borrowings

22,550

 

 
23,076

 

 
23,076




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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 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.
The fair value of the Company’s Loans Receivable, Notes Payable and Subordinated Borrowings is estimated based on a present value analysis utilizing aggregate market yields obtained from independent pricing sources for similar financial instruments.
The carrying amounts reported on the Unaudited Condensed Consolidated Statements of Financial Condition for Cash and Cash Equivalents, Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase, Accounts Receivable, Receivable from Employees and Related Parties, Accounts Payable and Accrued Expenses, Payable to Employees and Related Parties, and Assets Segregated for Bank Regulatory Requirements approximate fair value due to the short-term nature of these items.
Note 10 – Notes Payable and Subordinated Borrowings
On March 30, 2016, the Company issued an aggregate of $170,000 of senior notes, including: $38,000 aggregate principal amount of its 4.88% Series A senior notes due 2021 (the "Series A Notes"), $67,000 aggregate principal amount of its 5.23% Series B senior notes due 2023 (the "Series B Notes"), $48,000 aggregate principal amount of its 5.48% Series C senior notes due 2026 (the "Series C Notes") and $17,000 aggregate principal amount of its 5.58% Series D senior notes due 2028 (the "Series D Notes" and together with the Series A Notes, the Series B Notes and the Series C Notes, the "Private Placement Notes"), pursuant to a note purchase agreement (the "Note Purchase Agreement") dated as of March 30, 2016, among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933.
Interest on the Private Placement Notes is payable semi-annually and the Private Placement Notes are guaranteed by certain of the Company's material domestic subsidiaries. The Company may, at its option, prepay all, or from time to time any part of, the Private Placement Notes (without regard to Series), in an amount not less than 5% of the aggregate principal amount of the Private Placement Notes then outstanding at 100% of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the Private Placement Notes will have the right to require the Company to prepay the entire unpaid principal amounts held by each holder of the Private Placement Notes plus accrued and unpaid interest to the prepayment date. The Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio, a minimum tangible net worth and a minimum interest coverage ratio, and customary events of default. As of September 30, 2016, the Company was in compliance with all of these covenants.
The Company used $120,000 of the net proceeds from the Private Placement Notes to repay outstanding borrowings under the senior credit facility with Mizuho Bank, Ltd. ("Mizuho") on March 30, 2016 and used the remaining net proceeds for general corporate purposes.
Notes Payable is comprised of the following as of September 30, 2016:
Note
 
Maturity Date
 
Effective Annual Interest Rate
 
Carrying Value as of September 30, 2016 (a)
Evercore Partners Inc. 4.88% Series A Senior Notes
 
3/30/2021
 
5.16
%
 
$
37,575

Evercore Partners Inc. 5.23% Series B Senior Notes
 
3/30/2023
 
5.44
%
 
66,228

Evercore Partners Inc. 5.48% Series C Senior Notes
 
3/30/2026
 
5.64
%
 
47,434

Evercore Partners Inc. 5.58% Series D Senior Notes
 
3/30/2028
 
5.72
%
 
16,798

Total
 
 
 
 
 
$
168,035

(a) Carrying value has been adjusted to reflect the presentation of debt issuance costs as a direct reduction from the related liability.
The Company has subordinated borrowings, principally with an executive officer of the Company, due on October 31, 2019. These borrowings have a coupon of 5.5%, payable semi-annually. In April 2016, the Company repaid $6,000 of the original borrowings pursuant to a separate agreement. The Company had $16,550 and $22,550 in subordinated borrowings pursuant to these agreements as of September 30, 2016 and December 31, 2015, respectively.

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


Note 11 – Evercore Partners Inc. Stockholders’ Equity
Dividends – The Company’s Board of Directors declared on October 24, 2016, a quarterly cash dividend of $0.34 per share, to the holders of record of Class A common stock ("Class A Shares") as of November 25, 2016, which will be paid on December 9, 2016. During the nine months ended September 30, 2016, the Company declared and paid dividends of $0.93 per share, totaling $37,693.
Treasury Stock – During the nine months ended September 30, 2016, the Company purchased 999 Class A Shares primarily from employees at values ranging from $44.30 to $54.68 per share (at an average cost per share of $46.04), primarily for the net settlement of stock-based compensation awards, and 2,388 net Class A Shares at market values ranging from $44.59 to $52.74 per share (at an average cost per share of $48.21) pursuant to the Company’s share repurchase program. The result of these purchases was an increase in Treasury Stock of $161,778 on the Company’s Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2016.
LP Units – During the nine months ended September 30, 2016, 326 LP Units were exchanged for Class A Shares, resulting in an increase to Common Stock and Additional Paid-In-Capital of $3 and $9,161, respectively, on the Company’s Unaudited Condensed Consolidated Statement of Financial Condition as of September 30, 2016.
Accumulated Other Comprehensive Income (Loss) – As of September 30, 2016, Accumulated Other Comprehensive Income (Loss) on the Company’s Unaudited Condensed Consolidated Statement of Financial Condition includes an accumulated Unrealized Gain (Loss) on Marketable Securities and Investments, net, and a Foreign Currency Translation Adjustment Gain (Loss), net, of ($5,568) and ($39,583), respectively.
Note 12 – Noncontrolling Interest
Noncontrolling Interest recorded in the unaudited condensed consolidated financial statements of the Company relates to a 14% interest in Evercore LP, a 38% interest in Evercore Wealth Management ("EWM"), a 39% interest in Evercore Private Capital Advisory L.P. ("PCA"), a 34% equity interest in Atalanta Sosnoff (through December 31, 2015, the date it was deconsolidated), a 28% interest in ECB (through January 29, 2016, the date all of the noncontrolling interest was repurchased by the Company) and other private equity partnerships (through September 30, 2016, the date the Company deconsolidated its Mexican Private Equity business). The Noncontrolling Interests for Evercore LP, EWM and PCA have rights, in certain circumstances, to convert into Class A Shares.















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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)


Changes in Noncontrolling Interest for the nine months ended September 30, 2016 and 2015 were as follows:
 
For the Nine Months Ended September 30,
 
2016
 
2015
Beginning balance
$
202,664

 
$
160,952

 
 
 
 
Comprehensive income (loss):
 
 
 
Net Income Attributable to Noncontrolling Interest
24,454

 
5,453

Other comprehensive income (loss)
(2,697
)
 
(2,267
)
Total comprehensive income
21,757

 
3,186

 
 
 
 
Evercore LP Units Purchased or Converted into Class A Shares
(9,164
)
 
(7,512
)
Amortization and Vesting of LP Units/Interests
66,357

 
65,272

 
 
 
 
Other Items:
 
 
 
Distributions to Noncontrolling Interests
(25,519
)
 
(15,059
)
Issuance of Noncontrolling Interest
885

 
373

Purchase of Noncontrolling Interest
(5,225
)
 

Deconsolidation of GMP III
(5,808
)
 

Other, net
(415
)
 
(191
)
Total other items
(36,082
)
 
(14,877
)
 
 
 
 
Ending balance
$
245,532

 
$
207,021

Other Comprehensive Income - Other comprehensive income (loss) attributed to Noncontrolling Interest includes Unrealized Gain (Loss) on Marketable Securities and Investments, net, of ($277) and ($644) for the three and nine months ended September 30, 2016, respectively, and ($453) and ($780) for the three and nine months ended September 30, 2015, respectively, and Foreign Currency Translation Adjustment Gain (Loss), net, of ($572) and ($2,053) for the three and nine months ended September 30, 2016, respectively, and ($1,133) and ($1,487) for the three and nine months ended September 30, 2015, respectively.
Atalanta Sosnoff - On December 31, 2015, the Company deconsolidated the assets and liabilities of Atalanta Sosnoff, as well as its related redeemable noncontrolling interests.
Interests Purchased - On January 29, 2016, the Company purchased, at fair value, all of the noncontrolling interest in ECB for $6,482.
GMP III - On July 19, 2016, the Company and the principals of its Mexican Private Equity business entered into an agreement to transfer ownership of its Mexican Private Equity business and related entities to Glisco. Upon the closing of this transaction, which occurred on September 30, 2016, the Company deconsolidated the noncontrolling interest in GMP III of $5,808. See Note 8 for further information.
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, 2016 and 2015 are described and presented below.

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


 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Basic Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Net income attributable to Evercore Partners Inc. common shareholders
$
34,695

 
$
7,197

 
$
64,100

 
$
22,261

Denominator:
 
 
 
 
 
 
 
Weighted average Class A Shares outstanding, including vested restricted stock units ("RSUs")
38,912

 
36,773

 
39,259

 
36,649

Basic net income per share attributable to Evercore Partners Inc. common shareholders
$
0.89

 
$
0.20

 
$
1.63

 
$
0.61

Diluted Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Net income attributable to Evercore Partners Inc. common shareholders
$
34,695

 
$
7,197

 
$
64,100

 
$
22,261

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
$
34,695

 
$
7,197

 
$
64,100

 
$
22,261

Denominator:
 
 
 
 
 
 
 
Weighted average Class A Shares outstanding, including vested RSUs
38,912

 
36,773

 
39,259

 
36,649

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
2,108

 
2,026

 
1,855

 
2,029

Shares that are contingently issuable (b)
2,714

 
2,271

 
2,971

 
1,269

Assumed conversion of Warrants issued (c)

 
3,264

 

 
3,153

Diluted weighted average Class A Shares outstanding
43,734

 
44,334

 
44,085

 
43,100

Diluted net income per share attributable to Evercore Partners Inc. common shareholders
$
0.79

 
$
0.16

 
$
1.45

 
$
0.52

(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, 2016 and 2015, the LP Units were antidilutive and consequently the effect of their exchange into Class A Shares has been excluded from the calculation of diluted net income per share attributable to Evercore Partners Inc. common shareholders. The units that would have been included in the denominator of the computation of diluted net income per share attributable to Evercore Partners Inc. common shareholders if the effect would have been dilutive were 6,410 and 6,440 for the three and nine months ended September 30, 2016, respectively, and 6,545 and 6,682 for the three and nine months ended September 30, 2015, 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 $5,972 and $11,235 for the three and nine months ended September 30, 2016, respectively, and $1,576 and $4,391 for the three and nine months ended September 30, 2015, 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

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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)


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, 2016 and 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. The interests that were assumed to be converted to an equal number of Class A Shares for purposes of computing diluted EPS were 2,714 and 2,971 for the three and nine months ended September 30, 2016, respectively, and 2,271 and 1,269 for the three and nine months ended September 30, 2015, respectively.
(c)
In November 2015, Mizuho exercised in full its outstanding Warrants to purchase 5,455 Class A Shares, of which the Company repurchased 2,355 shares.
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, 2016, the Company granted employees 3,087 RSUs that are Service-based Awards. Service-based Awards granted during the nine months ended September 30, 2016 had grant date fair values of $44.30 to $51.98 per share. During the nine months ended September 30, 2016, 2,269 Service-based Awards vested and 129 Service-based Awards were forfeited.
Compensation expense related to Service-based Awards was $29,505 and $86,783 for the three and nine months ended September 30, 2016, respectively, and $25,124 and $80,083 for the three and nine months ended September 30, 2015, respectively.
During the second quarter of 2016, the Company's stockholders approved the Amended and Restated 2016 Evercore Partners Inc. Stock Incentive Plan. The amended plan, among other things, authorizes an additional 10,000 shares of the Company's Class A Shares.
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. During the nine months ended September 30, 2016, the Company granted $41,147 of deferred cash awards pursuant to the deferred compensation program. Compensation expense related to this deferred compensation program was $4,281 and $11,399 for the three and nine months ended September 30, 2016, respectively, and $272 and $1,154 for the three and nine months ended September 30, 2015, 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 Evercore LP units and interests which have been treated as compensation, including 710 vested Class E LP Units and an allocation of the value, attributed to post-combination service, of 710 Class E LP Units that were unvested and vest ratably on October 31, 2015, 2016 and 2017 and become exchangeable once vested, subject to continued employment with the Company. The units will become exchangeable into Class A common shares of the Company subject to certain liquidated damages and continued employment provisions. Compensation expense related to Class E LP Units was $5,133 and $15,683 for the three and nine months ended September 30, 2016, respectively, and $6,193 and $16,155 for the three and nine months ended September 30, 2015, respectively.

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


In October 2016, 224 Class E LP Units vested.
The Company also issued 538 vested and 540 unvested Class G LP Interests, which vest ratably on February 15, 2016, 2017 and 2018, and 2,044 vested and 2,051 unvested Class H LP Interests, which will vest ratably on February 15, 2018, 2019 and 2020. The Company’s vested Class G and Class H LP Interests will become exchangeable into Class A common shares of the Company subject to the achievement of certain performance targets. The Company’s vested Class G LP Interests become exchangeable in February 2016, 2017 and 2018 if certain earnings before interest and taxes, excluding underwriting, ("Management Basis EBIT") margin thresholds within a range of 12% to 16%, are achieved for the calendar year preceding the date the interests become exchangeable. The Company’s vested Class H LP Interests will become exchangeable in February 2018, 2019 and 2020 if certain average Management Basis EBIT and Management Basis EBIT margin thresholds, within ranges of $8,000 to $48,000 and 7% to 17%, respectively, are achieved for the three calendar years preceding the date the interests become exchangeable. In the event of death, disability or termination of employment without cause, unvested Class G and H LP Interests will be canceled or may vest based on determination of expected performance, based on a decision by Management.
In February 2016, 371 Class G LP Interests achieved their performance targets and were converted to the same number of Class E LP Units.
Based on Evercore ISI’s results for 2015 and for the first nine months of 2016, the Company determined that the achievement of certain of the remaining performance thresholds for the remaining Class G and H LP Interests was probable at September 30, 2016. This determination assumes an average Management Basis EBIT margin of 15.9% and an average annual Management Basis EBIT of $37,960 being achieved over the remaining performance period for Evercore ISI which would result in 3,721 Class G and H LP Interests vesting and becoming exchangeable into Class E LP Units. For the nine months ended September 30, 2015, the Company had determined that the achievement of certain of the remaining performance thresholds for the Class G and H LP Interests was probable and assumed a Management Basis EBIT margin of 15.7% and annual Management Basis EBIT of $34,600 being achieved over the performance period for Evercore ISI. Accordingly, $8,629 and $50,379 of expense was recorded for the three and nine months ended September 30, 2016, respectively, and $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.
Assuming the maximum thresholds for the Class G and H LP Interests were considered probable of achievement at September 30, 2016, an additional $28,300 of expense would have been incurred in the third quarter ended September 30, 2016 and the remaining expense to be accrued over the future vesting period extending from October 1, 2016 to February 15, 2020 would be $126,325. In that circumstance, the total number of Class G and H LP Interests that would vest and become exchangeable to Class E LP Units would be 4,957. Conversely, the life to date actual accrued expense related to unvested Class G and H LP Interests as of September 30, 2016 was $91,899, which would be reversed if the actual performance falls below, or is deemed probable of falling below, the minimum thresholds prior to vesting.
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.
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 three equal installments on January 31, 2017, 2018 and 2019, 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. The compensation expense related to these awards was $6,117 and $13,595 for the three and nine months ended September 30, 2016, respectively, and $1,547 and $4,590 for the three and nine months ended September 30, 2015, respectively.
Employee Loans Receivable
Periodically, the Company provides new and existing employees with cash payments in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements ranging from one to five years. Generally, the terms of these awards include a requirement of either full or partial repayment of these awards based on the terms of their

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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)


employment agreements with the Company. In circumstances where the employee meets the Company's minimum credit standards, the Company amortizes these awards to compensation expense over the relevant service period which is generally the period they are subject to forfeiture. Compensation expense related to these awards was $4,246 and $14,777 for the three and nine months ended September 30, 2016, respectively, and $3,483 and $12,434 for the three and nine months ended September 30, 2015, respectively. The remaining unamortized amount of these awards was $34,568 as of September 30, 2016.
Separation Benefits
The Company granted separation benefits to certain employees, resulting in expense included in Employee Compensation and Benefits of approximately $845 and $4,068 for the three and nine months ended September 30, 2016, respectively, and $1,124 and $4,920 for the three and nine months ended September 30, 2015, respectively. In conjunction with these arrangements, the Company distributed cash payments of $617 and $2,379 for the three and nine months ended September 30, 2016, respectively, and $674 and $2,205 for the three and nine months ended September 30, 2015, respectively. The Company 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. In conjunction with these arrangements, the Company distributed cash payments of $487 for the nine months ended September 30, 2015. See Note 4 for further information.
Note 15 – Commitments and Contingencies
For a further discussion of the Company's commitments, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2015.
Operating Leases – The Company leases office space under non-cancelable lease agreements, which expire on various dates through 2025. The Company reflects lease expense over the lease terms on a straight-line basis. Occupancy lease agreements, in addition to base rentals, generally are subject to escalation provisions based on certain costs incurred by the landlord. Occupancy and Equipment Rental on the Unaudited Condensed Consolidated Statements of Operations includes occupancy rental expense relating to operating leases of $9,311 and $25,065 for the three and nine months ended September 30, 2016, respectively, and $8,345 and $25,704 for the three and nine months ended September 30, 2015, respectively.
Private Equity – As of September 30, 2016, the Company had unfunded commitments for capital contributions of $5,134 to private equity funds. These commitments will be funded as required through the end of each private equity fund’s investment period, subject to certain conditions. Such commitments are satisfied in cash and are generally required to be made as investment opportunities are consummated by the private equity funds.
Under the terms of the acquisition agreement for Protego Casa de Bolsa, S.A. de C.V., the Company 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. Beginning in 2014, the Company received distributions from Discovery Americas Associated L.P., the general partner of the Discovery Fund. Accordingly, as of September 30, 2016, the Company recorded Goodwill of $10,150 pursuant to this agreement. The carrying value of the Company's investment in the Discovery Fund is $7,459 at September 30, 2016. See Note 8 for further information.
Lines of Credit
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 was 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 bore interest at the prime rate. The facility was renewed on June 26, 2015 and the maturity date was extended to June 27, 2016. On January 15, 2016, the line of credit from First Republic Bank was decreased to an aggregate principal amount of up to $50,000. In addition, the agreement was modified to impose similar quarterly financial covenants as the Company agreed to in the senior credit facility with Mizuho executed in November 2015, including (i) a Minimum Consolidated Tangible Net Worth, (ii) a Minimum Unencumbered Liquid Asset Ratio and (iii) a Maximum Consolidated Leverage Ratio. On January 27, 2016, East drew down $50,000 on this facility. East repaid and terminated its line of credit with First Republic Bank on June 23, 2016.
On June 24, 2016, East entered into a loan agreement with PNC Bank, National Association ("PNC") for a revolving credit facility in an aggregate principal amount of up to $30,000, to be used for working capital and other corporate activities. This facility is secured by East's accounts receivable and the proceeds therefrom, as well as certain assets of EGLs, including certain of EGL's accounts receivable. In addition, the agreement contains certain reporting covenants as well as certain debt

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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)


covenants that prohibit East and the Company from incurring other indebtedness subject to specified exceptions. Drawings under this facility bear interest at the prime rate. The facility matures on June 23, 2017, subject to an extension agreed to between East and PNC. There have been no monies drawn on this facility as of September 30, 2016.
Other Commitments
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, 2016, with the remaining $2,000 due from the Company on demand. The Company may acquire a 20% interest in Luminis in 2017.
In addition, the Company enters into commitments to pay contingent consideration related to certain of its acquisitions. At September 30, 2016, 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.
Contingencies
In the normal course of business, from time to time the Company and its affiliates are involved in judicial or regulatory proceedings, arbitration or mediation concerning matters arising in connection with the conduct of its businesses, including contractual and employment matters. In addition, Mexican, United Kingdom, Hong Kong, Singapore, Canadian and United States government agencies and self-regulatory organizations, as well as state securities commissions in the United States, conduct periodic examinations and initiate administrative proceedings regarding the Company’s business, including, among other matters, accounting and operational matters, that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer, investment advisor, or its directors, officers or employees. In view of the inherent difficulty of determining whether any loss in connection with such matters is probable and whether the amount of such loss can be reasonably estimated, particularly in cases where claimants seek substantial or indeterminate damages or where 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 ("ETC") in the U.S. District Court for the District of Columbia, in which she purported 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 alleged 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 claimed that the Plan suffered losses of approximately $300 million due to declines in J.C. Penney stock. ETC believes that it has meritorious defenses against the plaintiff’s claims and intends to vigorously defend the action. 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 moved to dismiss the complaint for failure to state a claim upon which relief may be granted, and on February 17, 2016, the district court granted ETC’s motion to dismiss. On March 15, 2016, plaintiff noticed an appeal of the district court’s decision. The case was argued to the United States Court of Appeals for the D.C. Circuit on October 13, 2016, and the parties are awaiting a decision.
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, 2016 and December 31, 2015 was $157,790 and $79,019, respectively, which exceeded the minimum net capital requirement by $157,540 and $78,769, respectively.
On December 31, 2015, the operations of International Strategy & Investment Group L.L.C. were transferred to EGL.

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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)


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, 2016.
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, 2016.
Note 17 – Income Taxes
The Company's Provision for Income Taxes was $38,980 and $79,390 for the three and nine months ended September 30, 2016, respectively, and $7,392 and $30,327 for the three and nine months ended September 30, 2015, respectively. The effective tax rate was 45% and 47% for the three and nine months ended September 30, 2016, respectively, and 58% and 52% for the three and nine months ended September 30, 2015, respectively. The effective tax rate for 2016 and 2015 reflects the effect of certain nondeductible expenses, including expenses related to Class E LP Units and Class G and H LP Interests, as well as the noncontrolling interest associated with LP Units and other adjustments.
The Company reported an increase in deferred tax assets of $519 associated with changes in Unrealized Gain (Loss) on Marketable Securities and an increase of $6,306 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the nine months ended September 30, 2016. 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.
As of September 30, 2016, 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 September 30, 2016, the Company deconsolidated the assets and liabilities of its Mexican Private Equity business, which was in the Investment Management segment (see Note 8 for further information). On December 31, 2015, the Company deconsolidated the assets and liabilities of Atalanta Sosnoff, which was in the Investment Management segment, and accounted for its interest as an equity method investment from that date forward.
The Company’s segment information for the three and nine months ended September 30, 2016 and 2015 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.

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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)


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 in 2015 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.
Acquisition and Transition Costs - Includes costs incurred in connection with acquisitions and other ongoing business development initiatives, primarily comprised of professional fees for legal and other services, as well as the reversal of a provision for certain settlements in 2016 previously established in the fourth quarter of 2015.
Fair Value of Contingent Consideration - Includes expense associated with changes in the fair value of contingent consideration issued to the sellers of certain of the Company’s acquisitions.
Intangible Asset and Other Amortization - Includes amortization of intangible assets and other purchase accounting-related amortization associated with certain acquisitions.
The Company evaluates segment results based on net revenues and pre-tax income, both including and excluding the impact of the Other Expenses.
One client accounted for more than 10% (11%) of the Company's consolidated Net Revenues for the three months ended September 30, 2016.
The following information presents each segment’s contribution.

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


 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Investment Banking
 
 
 
 
 
 
 
Net Revenues (1)
$
368,634

 
$
285,918

 
$
936,504

 
$
746,875

Operating Expenses
268,666

 
220,565

 
707,846

 
586,200

Other Expenses (2)
17,422

 
30,131

 
75,854

 
85,168

Operating Income
82,546

 
35,222

 
152,804

 
75,507

Income (Loss) from Equity Method Investments
(112
)
 
(528
)
 
(94
)
 
238

Pre-Tax Income
$
82,434

 
$
34,694

 
$
152,710

 
$
75,745

Identifiable Segment Assets
$
1,114,565

 
$
919,000

 
$
1,114,565

 
$
919,000

Investment Management
 
 
 
 
 
 
 
Net Revenues (1)
$
17,680

 
$
23,033

 
$
58,179

 
$
68,155

Operating Expenses
14,843

 
18,275

 
46,357

 
58,050

Other Expenses (2)
298

 
28,082

 
811

 
31,605

Operating Income (Loss)
2,539

 
(23,324
)
 
11,011

 
(21,500
)
Income from Equity Method Investments
1,290

 
1,457

 
4,223

 
3,796

Pre-Tax Income (Loss)
$
3,829

 
$
(21,867
)
 
$
15,234

 
$
(17,704
)
Identifiable Segment Assets
$
347,065

 
$
411,389

 
$
347,065

 
$
411,389

Total
 
 
 
 
 
 
 
Net Revenues (1)
$
386,314

 
$
308,951

 
$
994,683

 
$
815,030

Operating Expenses
283,509

 
238,840

 
754,203

 
644,250

Other Expenses (2)
17,720

 
58,213

 
76,665

 
116,773

Operating Income
85,085

 
11,898

 
163,815

 
54,007

Income from Equity Method Investments
1,178

 
929

 
4,129

 
4,034

Pre-Tax Income
$
86,263

 
$
12,827

 
$
167,944

 
$
58,041

Identifiable Segment Assets
$
1,461,630

 
$
1,330,389

 
$
1,461,630

 
$
1,330,389

(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,
 
2016
 
2015
 
2016
 
2015
Investment Banking (A)
$
200

 
$
357

 
$
270

 
$
(2,874
)
Investment Management (B)
522

 
(779
)
 
337

 
(2,243
)
Total Other Revenue, net
$
722

 
$
(422
)
 
$
607

 
$
(5,117
)
(A)
Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and the line of credit of $2,592 and $6,946 for the three and nine months ended September 30, 2016, respectively, and $1,452 and $4,889 for the three and nine months ended September 30, 2015, respectively.
(B)
Investment Management Other Revenue, net, includes interest expense on the Notes Payable and the line of credit of $670 for the nine months ended September 30, 2016 and $962 and $2,874 for the three and nine months ended September 30, 2015, respectively.

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


(2)
Other Expenses are as follows:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Investment Banking
 
 
 
 
 
 
 
Amortization of LP Units / Interests and Certain Other Awards
$
13,859

 
$
21,980

 
$
66,356

 
$
66,123

Other Acquisition Related Compensation Charges

 

 

 
1,537

Special Charges

 

 

 
2,151

Acquisition and Transition Costs
41

 
538

 
(692
)
 
1,928

Fair Value of Contingent Consideration
984

 
2,797

 
1,671

 
2,797

Intangible Asset and Other Amortization
2,538

 
4,816

 
8,519

 
10,632

Total Investment Banking
17,422

 
30,131

 
75,854

 
85,168

Investment Management
 
 
 
 
 
 
 
Special Charges

 
28,000

 

 
31,348

Acquisition and Transition Costs
298

 

 
702

 
11

Intangible Asset and Other Amortization

 
82

 
109

 
246

Total Investment Management
298

 
28,082

 
811

 
31,605

Total Other Expenses
$
17,720

 
$
58,213

 
$
76,665

 
$
116,773

Geographic Information – The Company manages its business based on the profitability of the enterprise as a whole.
The Company’s revenues were derived from clients and private equity funds located and managed in the following geographical areas:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Net Revenues: (1)
 
 
 
 
 
 
 
United States
$
322,128

 
$
238,231

 
$
714,983

 
$
603,239

Europe and Other
54,690

 
61,838

 
247,371

 
189,976

Latin America
8,774

 
9,304

 
31,722

 
26,932

Total
$
385,592

 
$
309,373

 
$
994,076

 
$
820,147

(1) Excludes Other Revenue and Interest Expense.
The Company’s total assets are located in the following geographical areas:
 
September 30, 2016
 
December 31, 2015
Total Assets:
 
 
 
United States
$
1,196,511

 
$
1,135,570

Europe and Other
179,333

 
221,358

Latin America
85,786

 
122,243

Total
$
1,461,630

 
$
1,479,171


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Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with Evercore Partners Inc.’s unaudited condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q.
Forward-Looking Statements
This report contains or incorporates by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act, which reflect our current views with respect to, among other things, our operations and financial performance. In some cases, you can identify these forward-looking statements by the use of words such as "outlook", "believes", "expects", "potential", "probable", "continues", "may", "should", "seeks", "approximately", "predicts", "intends", "plans", "estimates", "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties.
Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these forward-looking statements. All statements other than statements of historical fact are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. We believe these factors include, but are not limited to, those described under “Risk Factors” discussed in the Annual Report on Form 10-K for the year ended December 31, 2015. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included or incorporated by reference in this report. We undertake no obligation to publicly update or review any forward-looking statement. We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Key Financial Measures
Revenue
Total revenues reflect revenues from our Investment Banking and Investment Management business segments that include fees for services, transaction-related client reimbursements plus other revenue. Net revenues reflect total revenues less interest expense.
Investment Banking. Our Investment Banking business earns fees from our clients for providing advice on mergers, acquisitions, divestitures, leveraged buyouts, restructurings and similar corporate finance matters, and from underwriting and private placement activities, as well as commissions from our sales and trading activities. The amount and timing of the fees paid vary by the type of engagement or services provided. In general, advisory fees are paid at the time we sign an engagement letter, during the course of the engagement or when an engagement is completed. The majority of our investment banking revenue consists of advisory fees that are dependent on the successful completion of a transaction. A transaction can fail to be completed for many reasons, including failure of parties to agree upon final terms with the counterparty, to secure necessary board or shareholder approvals, to secure necessary financing or to achieve necessary regulatory approvals. In the case of bankruptcy engagements, fees are subject to approval of the court. Underwriting fees are recognized when the offering has been deemed to be completed, placement fees are generally recognized at the time of the client’s acceptance of capital or capital commitments. Commissions and Related Fees includes commissions, which are recorded on a trade-date basis or, in the case of payments under commission sharing arrangements, on the date earned. Commissions and Related Fees also include subscription fees for the sales of research. Cash received before the subscription period ends is initially recorded as deferred revenue and recognized as revenue over the remaining subscription period.
Revenue trends in our advisory business generally are correlated to the volume of merger and acquisition ("M&A") activity and/or restructuring activity, which tends to be counter-cyclical to M&A. However, deviations from this trend can occur in any given year or quarter for a number of reasons. For example, changes in our market share or the ability of our clients to close certain large transactions can cause our revenue results to diverge from the level of overall M&A or restructuring activity. Revenue trends in our equities business are correlated to market volumes, which generally decrease in periods of unfavorable market or economic conditions.

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

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Non-Compensation Expenses. The balance of our operating expenses includes costs for occupancy and equipment rental, professional fees, travel and related expenses, communications and information technology services, depreciation and amortization, acquisition and transition costs and other operating expenses. We refer to all of these expenses as non-compensation expenses.
Other Expenses
Other Expenses include the following:
Amortization of LP Units/Interests and Certain Other Awards - Includes amortization costs 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 in 2015 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.
Acquisition and Transition Costs - Includes costs incurred in connection with acquisitions and other ongoing business development initiatives, primarily comprised of professional fees for legal and other services, as well as the reversal of a provision for certain settlements in 2016 previously established in the fourth quarter of 2015.
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.
Income from Equity Method Investments
Our share of the income (loss) from our equity interests in G5 ǀ Evercore, ABS and Atalanta Sosnoff (after its deconsolidation on December 31, 2015) are included within Income from Equity Method Investments, as a component of Income Before Income Taxes, on the Unaudited Condensed Consolidated Statements of Operations.
Provision for Income Taxes
We account for income taxes in accordance with ASC 740, "Income Taxes" ("ASC 740"), which requires the recognition of tax benefits or expenses on temporary differences between the financial reporting and tax basis of our assets and liabilities.
Noncontrolling Interest
We record noncontrolling interest relating to the ownership interests of our current and former Senior Managing Directors and other officers and their estate planning vehicles in Evercore LP, as well as the portions of our operating subsidiaries not owned by Evercore. As described in Note 12 to our unaudited condensed consolidated financial statements herein, Evercore Partners Inc. is the sole general partner of Evercore LP and has a majority economic interest in Evercore LP. As a result, Evercore Partners Inc. consolidates Evercore LP and records a noncontrolling interest for the economic interest in Evercore LP held by the limited partners.
We generally allocate net income or loss to noncontrolling interests held at Evercore LP and at the operating entity level, where required, by multiplying the relative ownership interest of the noncontrolling interest holders for the period by the net income or loss of the entity to which the noncontrolling interest relates. In circumstances where the governing documents of the entity to which the noncontrolling interest relates require special allocations of profits or losses to the controlling and noncontrolling interest holders, then the net income or loss of these entities will be allocated based on these special allocations.

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Results of Operations
The following is a discussion of our results of operations for the three and nine months ended September 30, 2016 and 2015. For a more detailed discussion of the factors that affected the revenue and operating expenses of our Investment Banking and Investment Management business segments in these periods, see the discussion in "Business Segments" below.
 
For the Three Months Ended September 30,
 
 
 
For the Nine Months Ended September 30,
 
 
 
2016
 
2015
 
Change
 
2016
 
2015
 
Change
 
(dollars in thousands, except per share data)
Revenues
 
 
 
 
 
 
 
 
 
 
 
Investment Banking Revenue
$
368,434

 
$
285,561

 
29
%
 
$
936,234

 
$
749,749

 
25
%
Investment Management Revenue
17,158

 
23,812

 
(28
%)
 
57,842

 
70,398

 
(18
%)
Other Revenue
5,509

 
4,097

 
34
%
 
12,650

 
8,656

 
46
%
Total Revenues
391,101

 
313,470

 
25
%
 
1,006,726

 
828,803

 
21
%
Interest Expense
4,787

 
4,519

 
6
%
 
12,043

 
13,773

 
(13
%)
Net Revenues
386,314

 
308,951

 
25
%
 
994,683

 
815,030

 
22
%
Expenses
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
283,509

 
238,840

 
19
%
 
754,203

 
644,250

 
17
%
Other Expenses
17,720

 
58,213

 
(70
%)
 
76,665

 
116,773

 
(34
%)
Total Expenses
301,229

 
297,053

 
1
%
 
830,868

 
761,023

 
9
%
Income Before Income from Equity Method Investments and Income Taxes
85,085

 
11,898

 
615
%
 
163,815

 
54,007

 
203
%
Income from Equity Method Investments
1,178

 
929

 
27
%
 
4,129

 
4,034

 
2
%
Income Before Income Taxes
86,263

 
12,827

 
573
%
 
167,944

 
58,041

 
189
%
Provision for Income Taxes
38,980

 
7,392

 
427
%
 
79,390

 
30,327

 
162
%
Net Income
47,283

 
5,435

 
770
%
 
88,554

 
27,714

 
220
%
Net Income (Loss) Attributable to Noncontrolling Interest
12,588

 
(1,762
)
 
NM

 
24,454

 
5,453

 
348
%
Net Income Attributable to Evercore Partners Inc.
$
34,695

 
$
7,197

 
382
%
 
$
64,100

 
$
22,261

 
188
%
Diluted Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders
$
0.79

 
$
0.16

 
394
%
 
$
1.45

 
$
0.52

 
179
%
As of September 30, 2016 and 2015 we employed approximately 1,500 and 1,400 people, respectively, worldwide.
Three Months Ended September 30, 2016 versus September 30, 2015
Net Revenues were $386.3 million for the three months ended September 30, 2016, an increase of $77.4 million, or 25%, versus Net Revenues of $309.0 million for the three months ended September 30, 2015. Investment Banking Revenue increased 29% and Investment Management Revenue decreased 28% compared to the three months ended September 30, 2015. On December 31, 2015, we deconsolidated the assets and liabilities of Atalanta Sosnoff and we accounted for our interest as an equity method investment from that date forward. For the three months ended September 30, 2015, the results of Atalanta Sosnoff were consolidated, which included Net Revenues of $5.4 million and Total Expenses of $5.1 million. Other Revenue for the three months ended September 30, 2016 increased 34% compared to the three months ended September 30, 2015, which was partially attributable to a gain resulting from the transfer of ownership of the Mexican Private Equity business on September 30, 2016.
Total Operating Expenses were $283.5 million for the three months ended September 30, 2016, as compared to $238.8 million for the three months ended September 30, 2015, an increase of $44.7 million or 19%. Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $217.8 million for the three months ended September 30, 2016, an increase of $42.4 million, or 24%, versus expense of $175.4 million for the three months ended September 30, 2015. The increase was primarily due to increased compensation costs resulting from the expansion of our businesses, including costs from share-based and other deferred and incentive compensation arrangements. Headcount increased 7% from September 30, 2015 to September 30, 2016. Non-compensation expenses as a component of Operating Expenses were $65.7 million for the three months ended September 30, 2016, an increase of $2.3 million, or 4%, over non-compensation operating expenses of

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$63.4 million for the three months ended September 30, 2015. Non-compensation operating expenses increased compared to the three months ended September 30, 2015 primarily driven by increased headcount and higher professional fees.
Total Other Expenses of $17.7 million for the three months ended September 30, 2016 included compensation costs associated with the vesting of LP Units and Interests and certain other awards of $13.9 million, primarily related to Evercore LP Units and Interests granted in conjunction with the acquisition of ISI, Acquisition and Transition Costs of $0.3 million, changes to the fair value of contingent consideration of $1.0 million and intangible asset and other amortization of $2.5 million. Total Other Expenses of $58.2 million for the three months ended September 30, 2015 included compensation costs associated with the vesting of LP Units and Interests and certain other awards of $22.0 million, primarily related to Evercore LP Units and Interests granted in conjunction with the acquisition of ISI, Special Charges $28.0 million, related to an impairment charge associated with the impairment of goodwill in the Company's Institutional Asset Management reporting unit, Acquisition and Transition Costs of $0.5 million, changes to the fair value of contingent consideration of $2.8 million and intangible asset and other amortization of $4.9 million.
Assuming the maximum thresholds for the Class G and H LP Interests were considered probable of achievement at September 30, 2016, an additional $28.3 million of expense would have been incurred in the third quarter ended September 30, 2016 and the remaining expense to be accrued over the future vesting period extending from October 1, 2016 to February 15, 2020 would be $126.3 million. In that circumstance, the total number of Class G and H LP Interests that would vest and become exchangeable to Class E LP Units would be 5.0 million. Conversely, the life to date actual accrued expense related to unvested Class G and H LP Interests as of September 30, 2016 was $91.9 million, which would be reversed if the actual performance falls below the minimum thresholds prior to vesting.
As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 60% for the three months ended September 30, 2016, compared to 64% for the three months ended September 30, 2015.
Income from Equity Method Investments was $1.2 million for the three months ended September 30, 2016, an increase of 27% as compared to $0.9 million for the three months ended September 30, 2015. The increase was primarily a result of the inclusion of Atalanta Sosnoff's earnings in the third quarter of 2016, partially offset by a decrease in earnings from ABS.
The provision for income taxes for the three months ended September 30, 2016 was $39.0 million, which reflected an effective tax rate of 45%. The provision for income taxes for the three months ended September 30, 2015 was $7.4 million, which reflected an effective tax rate of 58%. The provision for income taxes for 2016 and 2015 reflects the effect of certain nondeductible expenses, including expenses related to Class E LP Units and Class G and H LP Interests, as well as the noncontrolling interest associated with LP Units and other adjustments.
Net Income (Loss) Attributable to Noncontrolling Interest was $12.6 million for the three months ended September 30, 2016 compared to ($1.8) million for the three months ended September 30, 2015. The increase in Net Income (Loss) Attributable to Noncontrolling Interest reflects higher income allocated to Evercore LP during the three months ended September 30, 2016, as well as the impact of the impairment of goodwill in the Institutional Asset Management reporting unit incurred in the third quarter of 2015.
Nine Months Ended September 30, 2016 versus September 30, 2015
Net Revenues were $994.7 million for the nine months ended September 30, 2016, an increase of $179.7 million, or 22%, versus Net Revenues of $815.0 million for the nine months ended September 30, 2015. Investment Banking Revenue increased 25% and Investment Management Revenue decreased 18% compared to the nine months ended September 30, 2015. For the nine months ended September 30, 2015, the results of Atalanta Sosnoff were consolidated, which included Net Revenues of $16.7 million and Total Expenses of $15.6 million. Other Revenue for the nine months ended September 30, 2016 was 46% higher than for the nine months ended September 30, 2015, which was partially attributable to a gain resulting from the transfer of ownership of the Mexican Private Equity business on September 30, 2016, as well as foreign currency gains resulting from currency fluctuations following the Brexit vote in June 2016.
Total Operating Expenses were $754.2 million for the nine months ended September 30, 2016, as compared to $644.3 million for the nine months ended September 30, 2015, an increase of $110.0 million, or 17%. Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $566.6 million for the nine months ended September 30, 2016, an increase of $100.6 million, or 22%, versus expense of $466.0 million for the nine months ended September 30, 2015. The increase was primarily due to increased compensation costs resulting from the expansion of our businesses, including costs from share-based and other deferred and incentive compensation arrangements. Non-compensation expenses as a component of Operating Expenses were $187.6 million for the nine months ended September 30, 2016, an increase of $9.3 million, or 5%, over non-compensation operating expenses of $178.3 million for the nine months ended September 30, 2015. Non-compensation operating expenses increased compared to the nine months ended September 30, 2015 primarily driven by

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increased headcount, increased new business costs associated with higher levels of global transaction activity and higher professional fees.
Total Other Expenses of $76.7 million for the nine months ended September 30, 2016 included compensation costs associated with the vesting of LP Units and Interests and certain other awards of $66.4 million, primarily related to Evercore LP Units and Interests granted in conjunction with the acquisition of ISI, Acquisition and Transition Costs of $0.01 million, changes to the fair value of contingent consideration of $1.7 million and intangible asset and other amortization of $8.6 million. Total Other Expenses of $116.8 million for the nine months ended September 30, 2015 included compensation costs associated with the vesting of LP Units and Interests and certain other awards of $66.1 million, primarily related to Evercore LP Units and Interests granted in conjunction with the acquisition of ISI, other acquisition related compensation costs of $1.5 million, Special Charges of $33.5 million, primarily related to an impairment charge associated with the impairment of goodwill in the Company's Institutional Asset Management reporting unit, Acquisition and Transition Costs of $1.9 million, changes to the fair value of contingent consideration of $2.8 million and intangible asset and other amortization of $10.9 million.
As a result of the factors noted above, Employee Compensation and Benefits Expense as a percentage of Net Revenues was 64% for the nine months ended September 30, 2016, compared to 65% for the nine months ended September 30, 2015.
Income from Equity Method Investments was $4.1 million for the nine months ended September 30, 2016, as compared to $4.0 million for the nine months ended September 30, 2015. The increase was primarily a result of the inclusion of Atalanta Sosnoff's earnings for the nine months ended September 30, 2016, partially offset by a decrease in earnings from ABS and G5 | Evercore.
The provision for income taxes for the nine months ended September 30, 2016 was $79.4 million, which reflected an effective tax rate of 47%. The provision for income taxes for the nine months ended September 30, 2015 was $30.3 million, which reflected an effective tax rate of 52%.  The provision for income taxes for 2016 and 2015 reflects the effect of certain nondeductible expenses, including expenses related to Class E LP Units and Class G and H LP Interests in 2016, as well as the noncontrolling interest associated with LP Units and other adjustments.
Net Income (Loss) Attributable to Noncontrolling Interest was $24.5 million for the nine months ended September 30, 2016 compared to $5.5 million for the nine months ended September 30, 2015. The increase in Net Income (Loss) Attributable to Noncontrolling Interest reflects higher income allocated to Evercore LP during the nine months ended September 30, 2016, as well as the impact of the impairment of goodwill in the Institutional Asset Management reporting unit incurred during the nine months ended September 30, 2015.
















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Business Segments
The following data presents revenue, expenses and contributions from our equity method investments by business segment.
Investment Banking
The following table summarizes the operating results of the Investment Banking segment.
 
For the Three Months Ended September 30,
 
 
 
For the Nine Months Ended September 30,
 
 
 
2016
 
2015
 
Change
 
2016
 
2015
 
Change
 
(dollars in thousands)
Revenues
 
 
 
 
 
 
 
 
 
 
 
Investment Banking Revenue:
 
 
 
 
 
 
 
 
 
 
 
Advisory Fees
$
306,993

 
$
222,782

 
38
%
 
$
743,853

 
$
553,872

 
34
%
Commissions and Related Fees
53,512

 
58,264

 
(8
%)
 
167,908

 
164,363

 
2
%
Underwriting Fees
7,929

 
4,515

 
76
%
 
24,473

 
31,514

 
(22
%)
Total Investment Banking Revenue (1)
368,434

 
285,561

 
29
%
 
936,234

 
749,749

 
25
%
Other Revenue, net (2)
200

 
357

 
(44
%)
 
270

 
(2,874
)
 
NM

Net Revenues
368,634

 
285,918

 
29
%
 
936,504

 
746,875

 
25
%
Expenses
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
268,666

 
220,565

 
22
%
 
707,846

 
586,200

 
21
%
Other Expenses
17,422

 
30,131

 
(42
%)
 
75,854

 
85,168

 
(11
%)
Total Expenses
286,088

 
250,696

 
14
%
 
783,700

 
671,368

 
17
%
Operating Income (3)
82,546

 
35,222

 
134
%
 
152,804

 
75,507

 
102
%
Income (Loss) from Equity Method Investments
(112
)
 
(528
)
 
79
%
 
(94
)
 
238

 
NM

Pre-Tax Income
$
82,434

 
$
34,694

 
138
%
 
$
152,710

 
$
75,745

 
102
%
 
(1)
Includes client related expenses of $5.9 million and $16.4 million for the three and nine months ended September 30, 2016, respectively, and $6.6 million and $14.6 million for the three and nine months ended September 30, 2015, respectively.
(2)
Includes interest expense on the Notes Payable, subordinated borrowings and the line of credit of $2.6 million and $6.9 million for the three and nine months ended September 30, 2016, respectively, and $1.5 million and $4.9 million for the three and nine months ended September 30, 2015, respectively.
(3)
Includes Noncontrolling Interest of $0.2 million and $0.6 million for the three and nine months ended September 30, 2016, respectively, and $0.2 million and $0.3 million for the three and nine months ended September 30, 2015, respectively.

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For the three months ended September 30, 2016, the dollar value of North American announced and completed M&A activity decreased 40% and 20%, respectively, compared to three months ended September 30, 2015, while the dollar value of Global announced and completed M&A activity for the three months ended September 30, 2016 decreased 21% and 17%, respectively, compared to three months ended September 30, 2015. For the nine months ended September 30, 2016, the dollar value of North American announced and completed M&A activity decreased 29% and was flat, respectively, compared to the nine months ended September 30, 2015, while the dollar value of Global announced and completed M&A activity for the nine months ended September 30, 2016 decreased 21% and 6%, respectively, compared to the nine months ended September 30, 2015:
 
For the Three Months Ended September 30,
 
 
 
For the Nine Months Ended September 30,
 
 
 
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Industry Statistics ($ in billions) *
 
 
 
 
 
 
 
 
 
 
 
Value of North American M&A Deals Announced
$
352

 
$
586

 
(40
%)
 
$
1,073

 
$
1,507

 
(29
%)
Value of North American M&A Deals Completed
$
417

 
$
524

 
(20
%)
 
$
1,200

 
$
1,204

 
%
Value of Global M&A Deals Announced
$
802

 
$
1,012

 
(21
%)
 
$
2,390

 
$
3,013

 
(21
%)
Value of Global M&A Deals Completed
$
753

 
$
902

 
(17
%)
 
$
2,305

 
$
2,445

 
(6
%)
Evercore Statistics **
 
 
 
 
 
 
 
 
 
 
 
Total Number of Advisory Client Transactions
211

 
168

 
26
%
 
418

 
354

 
18
%
Investment Banking Fees of at Least $1 million from Advisory Client Transactions
65

 
35

 
86
%
 
164

 
112

 
46
%
 
*
Source: Thomson Reuters October 1, 2016
**
Includes revenue generating clients only
Investment Banking Results of Operations
Three Months Ended September 30, 2016 versus September 30, 2015
Net Investment Banking Revenues were $368.6 million for the three months ended September 30, 2016 compared to $285.9 million for the three months ended September 30, 2015, which represented an increase of 29%. We earned advisory fees from 211 client transactions for the three months ended September 30, 2016 compared to 168 for the three months ended September 30, 2015, representing a 26% increase. We had 65 fees in excess of $1.0 million for the three months ended September 30, 2016, compared to 35 for the three months ended September 30, 2015, representing a 86% increase. The increase in revenues from the three months ended September 30, 2015 primarily reflects an increase of $84.2 million, or 38%, in Advisory Fees, principally driven by higher volume and value of deals in our U.S. business reflecting increased market share, and an increase of $3.4 million, or 76%, in Underwriting Fees, principally driven by higher volume in our U.S. and Mexico businesses. These increases were partially offset by a decrease of $4.8 million, or 8%, in our Commissions and Related Fees, principally driven by lower trading volumes at Evercore ISI compared to the comparable period in the prior year which experienced high volatility in the U.S. equity markets and therefore, higher volumes.
Operating Expenses were $268.7 million for the three months ended September 30, 2016 compared to $220.6 million for the three months ended September 30, 2015, an increase of $48.1 million, or 22%. Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $207.6 million for the three months ended September 30, 2016, as compared to $162.4 million for the three months ended September 30, 2015, an increase of $45.2 million, or 28%. The increase was primarily due to compensation costs resulting from the expansion of our businesses, including costs from share-based and other deferred and incentive compensation arrangements, as well as increased incentive compensation related to the 29% increase in Net Revenues. Non-compensation expenses, as a component of Operating Expenses, were $61.1 million for the three months ended September 30, 2016, as compared to $58.2 million for the three months ended September 30, 2015, an increase of $2.9 million, or 5%. Non-compensation operating expenses increased from the prior year primarily driven by increased headcount within the business and higher professional fees.
Other Expenses of $17.4 million for the three months ended September 30, 2016 included compensation costs associated with the vesting of LP Units and Interests and certain other awards of $13.9 million, primarily related to Evercore LP Units and Interests granted in conjunction with the acquisition of ISI, Acquisition and Transition Costs of $0.04 million, changes to the

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fair value of contingent consideration of $1.0 million and intangible asset and other amortization of $2.5 million. Other Expenses of $30.1 million for the three months ended September 30, 2015 included compensation costs associated with the vesting of LP Units and Interests and certain other awards of $22.0 million, primarily related to Evercore LP Units and Interests granted in conjunction with the acquisition of ISI, Acquisition and Transition Costs of $0.5 million, changes to the fair value of contingent consideration of $2.8 million and intangible asset and other amortization of $4.8 million.
Nine Months Ended September 30, 2016 versus September 30, 2015
Net Investment Banking Revenues were $936.5 million for the nine months ended September 30, 2016 compared to $746.9 million for the nine months ended September 30, 2015, which represented an increase of 25%. We earned advisory fees from 418 clients for the nine months ended September 30, 2016 compared to 354 for the nine months ended September 30, 2015, representing a 18% increase. We had 164 fees in excess of $1.0 million for the nine months ended September 30, 2016, compared to 112 for the nine months ended September 30, 2015, representing a 46% increase. The increase in revenues from the nine months ended September 30, 2015 primarily reflects an increase of $190.0 million, or 34%, in Advisory fees, principally driven by higher volume and value of deals in our U.S. and U.K. businesses reflecting increased market share, and an increase of $3.5 million, or 2%, in our Commissions and Related Fees, principally driven by higher trading volumes at Evercore ISI. These increases were partially offset by a decrease of $7.0 million, or 22%, in Underwriting Fees, principally related to market conditions during 2016.
Operating Expenses were $707.8 million for the nine months ended September 30, 2016 compared to $586.2 million for the nine months ended September 30, 2015, an increase of $121.6 million, or 21%. Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $533.6 million for the nine months ended September 30, 2016, as compared to $425.0 million for the nine months ended September 30, 2015, an increase of $108.6 million, or 26%. The increase was primarily due to increased compensation costs resulting from the expansion of our businesses, including costs from share-based and other deferred and incentive compensation arrangements, as well as increased incentive compensation related to the 25% increase in Net Revenues. Non-compensation expenses, as a component of Operating Expenses, were $174.2 million for the nine months ended September 30, 2016, as compared to $161.2 million for the nine months ended September 30, 2015, an increase of $13.0 million, or 8%. Non-compensation operating expenses increased from the prior year primarily driven by increased headcount within the business, increased new business costs associated with higher levels of global transaction activity and higher professional fees.
Other Expenses of $75.9 million for the nine months ended September 30, 2016 included compensation costs associated with the vesting of LP Units and Interests and certain other awards of $66.4 million, primarily related to Evercore LP Units and Interests granted in conjunction with the acquisition of ISI, Acquisition and Transition Costs of ($0.7) million, primarily reflecting the reversal of a provision for certain settlements in 2016 previously established in the fourth quarter of 2015, changes to the fair value of contingent consideration of $1.7 million and intangible asset and other amortization of $8.5 million. Other Expenses of $85.2 million for the nine months ended September 30, 2015 included compensation costs associated with the vesting of LP Units and Interests and certain other awards of $66.1 million, primarily related to Evercore LP Units and Interests granted in conjunction with the acquisition of ISI, other acquisition related compensation costs of $1.5 million, Special Charges of $2.2 million, Acquisition and Transition Costs of $1.9 million, changes to the fair value of contingent consideration of $2.8 million and intangible asset and other amortization of $10.6 million.











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Investment Management
The following table summarizes the operating results of the Investment Management segment.
 
 
For the Three Months Ended September 30,
 
 
 
For the Nine Months Ended September 30,
 
 
 
2016
 
2015
 
Change
 
2016
 
2015
 
Change
 
(dollars in thousands)
Revenues
 
 
 
 
 
 
 
 
 
 
 
Investment Advisory and Management Fees:
 
 
 
 
 
 
 
 
 
 
 
Wealth Management
$
9,311

 
$
8,650

 
8
%
 
$
27,180

 
$
25,828

 
5
%
Institutional Asset Management
6,105

 
11,152

 
(45
%)
 
17,690

 
33,966

 
(48
%)
Private Equity
760

 
1,391

 
(45
%)
 
3,457

 
4,213

 
(18
%)
Total Investment Advisory and Management Fees
16,176

 
21,193

 
(24
%)
 
48,327

 
64,007

 
(24
%)
Realized and Unrealized Gains:
 
 
 
 
 
 
 
 
 
 
 
Institutional Asset Management
811

 
686

 
18
%
 
3,213

 
3,132

 
3
%
Private Equity
171

 
1,933

 
(91
%)
 
6,302

 
3,259

 
93
%
Total Realized and Unrealized Gains
982

 
2,619

 
(63
%)
 
9,515

 
6,391

 
49
%
Investment Management Revenue (1)
17,158

 
23,812

 
(28
%)
 
57,842

 
70,398

 
(18
%)
Other Revenue, net (2)
522

 
(779
)
 
NM

 
337

 
(2,243
)
 
NM

Net Investment Management Revenues
17,680

 
23,033

 
(23
%)
 
58,179

 
68,155

 
(15
%)
Expenses
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
14,843

 
18,275

 
(19
%)
 
46,357

 
58,050

 
(20
%)
Other Expenses (3)
298

 
28,082

 
(99
%)
 
811

 
31,605

 
(97
%)
Total Expenses
15,141

 
46,357

 
(67
%)
 
47,168

 
89,655

 
(47
%)
Operating Income (Loss) (4)
2,539

 
(23,324
)
 
NM

 
11,011

 
(21,500
)
 
NM

Income from Equity Method Investments (5)
1,290

 
1,457

 
(11
%)
 
4,223

 
3,796

 
11
%
Pre-Tax Income (Loss)
$
3,829

 
$
(21,867
)
 
NM

 
$
15,234

 
$
(17,704
)
 
NM

(1)
Includes client related expenses of $0.3 million and $0.7 million for the three and nine months ended September 30, 2016, respectively, and $0.1 million for the three and nine months ended September 30, 2015.
(2)
Includes interest expense on the Notes Payable and the line of credit of $0.7 million for the nine months ended September 30, 2016 and $1.0 million and $2.9 million for the three and nine months ended September 30, 2015, respectively.
(3)
Includes an impairment charge associated with the impairment of goodwill in the Company's Institutional Asset Management reporting unit of $28.0 million for the three and nine months ended September 30, 2015.
(4)
Includes Noncontrolling Interest of $0.8 million and $2.1 million for the three and nine months ended September 30, 2016, respectively, and $1.4 million and $2.8 million for the three and nine months ended September 30, 2015, respectively.
(5)
Equity in G5 ǀ Evercore, ABS and Atalanta Sosnoff (after its deconsolidation on December 31, 2015) is classified as Income from Equity Method Investments.
Investment Management Results of Operations
Our Wealth Management business includes the results of EWM. Our Institutional Asset Management business includes the results of ETC, ECB and Atalanta Sosnoff (prior to its deconsolidation on December 31, 2015). Fee-based revenues from EWM, Atalanta Sosnoff and ECB are primarily earned on a percentage of AUM, while ETC primarily earns fees from negotiated trust services and fiduciary consulting arrangements.
On July 19, 2016, the Company and the principals of its Mexican Private Equity business entered into an agreement to transfer ownership of its Mexican Private Equity business and related entities to Glisco. This transaction closed on September 30, 2016. See Note 8 to our unaudited condensed consolidated financial statements for further information.
Prior to the Glisco transaction, we earned management fees on GMCP II and GMCP III of 2.25% and 2.0%, respectively, per annum of committed capital during its investment period, and 2.25% and 2.0%, respectively, per annum on net

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funded capital thereafter. In addition, the general partner of the private equity funds earns carried interest of 20% based on the fund’s performance, provided it exceeds preferred return hurdles to its limited partners. We owned 8%-9% of the carried interest earned by the general partner of ECP II up until the fund's termination on December 31, 2014. A significant portion of any gains recognized related to ECP II, GMCP II and GMCP III, and any carried interest recognized by them, are distributed to certain of our private equity professionals.
In the event the private equity funds perform below certain thresholds we may be obligated to repay certain carried interest previously distributed. As of September 30, 2016, we had $1.4 million of previously distributed carried interest that may be subject to repayment.
We made investments accounted for under the equity method of accounting in G5 ǀ Evercore and ABS during the fourth quarters of 2010 and 2011, respectively, the results of which are included within Income from Equity Method Investments. On December 31, 2015, we amended the Operating Agreement of Atalanta Sosnoff, resulting in the deconsolidation of its assets and liabilities, and we accounted for its interest as an equity method investment from that date forward.
Assets Under Management
AUM for our Investment Management businesses of $8.4 billion at September 30, 2016 increased compared to $8.2 billion at December 31, 2015. The amounts of AUM presented in the table below reflect the assets for which we charge a management fee. These assets reflect the fair value of assets managed on behalf of Institutional Asset Management and Wealth Management clients, and the amount of either the invested or committed capital of the Private Equity funds. As defined in ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820"), valuations performed for Level I investments are based on quoted prices obtained from active markets generated by third parties and Level II investments are valued through the use of models based on either direct or indirect observable inputs in the use of models or other valuation methodologies performed by third parties to determine fair value. For both the Level I and Level II investments, we obtain both active quotes from nationally recognized exchanges and third-party pricing services to determine market or fair value quotes, respectively. For Level III investments, pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. Wealth Management maintained 63% of Level I investments, 34% of Level II investments and 3% of Level III investments as of September 30, 2016 and 66% of Level I investments and 34% of Level II investments as of December 31, 2015. Institutional Asset Management maintained 83% and 87% of Level I investments and 17% and 13% of Level II investments as of September 30, 2016 and December 31, 2015, respectively. As noted above, Private Equity AUM is not presented at fair value, but reported at either invested or committed capital in line with fee arrangements.
The fees that we receive for providing investment advisory and management services are primarily driven by the level and composition of AUM. Accordingly, client flows, market movements, foreign currency fluctuations and changes in our product mix will impact the level of management fees we receive from our investment management businesses. Fees vary with the type of assets managed and the channel in which they are managed, with higher fees earned on equity assets, alternative investment funds, such as hedge funds and private equity funds, and lower fees earned on fixed income and cash management products. Clients will increase or reduce the aggregate amount of AUM that we manage for a number of reasons, including changes in the level of assets that they have available for investment purposes, their overall asset allocation strategy, our relative performance versus competitors offering similar investment products and the quality of our service. The fees we earn are also impacted by our investment performance, as the appreciation or depreciation in the value of the assets that we manage directly impacts our fees.

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Wealth
Management
 
Institutional
Asset
Management
 
Private
Equity
 
Total
 
(dollars in millions)
Balance at December 31, 2015
$
6,209

 
$
1,655

 
$
304

 
$
8,168

Inflows
564

 
1,352

 

 
1,916

Outflows
(450
)
 
(876
)
 

 
(1,326
)
Market Appreciation (Depreciation)
184

 
(283
)
 

 
(99
)
Transfer of Ownership of Mexican Private Equity Business (September 30, 2016)

 

 
(304
)
 
(304
)
Balance at September 30, 2016
$
6,507

 
$
1,848

 
$

 
$
8,355

 
 
 
 
 
 
 
 
Unconsolidated Affiliates - Balance at September 30, 2016:
 
 
 
 
 
 
 
Atalanta Sosnoff
$

 
$
5,197

 
$

 
$
5,197

G5 ǀ Evercore
$
1,785

 
$

 
$

 
$
1,785

ABS
$

 
$
4,870

 
$

 
$
4,870


The following table represents the composition of our AUM for Wealth Management and Institutional Asset Management as of September 30, 2016:
 
Wealth Management
 
Institutional Asset Management
Equities
55
%
 
19
%
Fixed Income
34
%
 
81
%
Liquidity (1)
7
%
 
%
Alternatives
4
%
 
%
Total
100
%
 
100
%
(1) Includes cash, cash equivalents and U.S. Treasury securities.
Our Wealth Management business serves individuals, families and related institutions delivering customized investment management, financial planning, and trust and custody services. Investment portfolios are tailored to meet the investment objectives of individual clients and reflect a blend of equity, fixed income and other products. Fees charged to clients reflect the composition of the assets managed and the services provided. Investment performance in the Wealth Management businesses is measured against appropriate indices based on the AUM, most frequently the S&P 500 and a composite fixed income index principally reflecting BarCap and MSCI indices.
For the nine months ended September 30, 2016, AUM for Wealth Management increased 5%, reflecting a 2% increase due to flows and a 3% increase due to market appreciation. Wealth Management lagged the S&P 500 on a 1 and 3 year basis by 9% and 1%, respectively, during the period and outperformed the fixed income composite on a 1 and 3 year basis by 60 basis points and 10 basis points, respectively. For the period, the S&P 500 was up 8%, while the fixed income composite increased by 3%.
Our Institutional Asset Management business reflects assets managed by ECB. ECB primarily manages Mexican Government and corporate fixed income securities. ECB also manages equity products. ECB utilizes the IPC Index, which is a capitalization weighted index of leading equities traded on the Mexican Stock Exchange and the Cetes 28 Index, which is an index of Treasury Bills issued by the Mexican Government, as benchmarks in reviewing their performance and managing their investment decisions. For the nine months ended September 30, 2016, AUM for Institutional Asset Management increased 12%, reflecting a 29% increase due to flows, partially offset by a 17% decrease due to market depreciation. ECB's AUM increase primarily reflects net inflows, partially offset by the impact of the fluctuation of foreign currency.
Our Private Equity business included the assets of funds which our Private Equity professionals managed. These funds included ECP II (terminated on December 31, 2014), and the Discovery Fund, GMCP II and GMCP III prior to the closing of the Glisco transaction on September 30, 2016. See Note 8 to our unaudited condensed consolidated financial statements for further information.
AUM from our unconsolidated affiliates decreased 1% from December 31, 2015, primarily related to negative performance in Atalanta Sosnoff and ABS.

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Three Months Ended September 30, 2016 versus September 30, 2015
Net Investment Management Revenues were $17.7 million for the three months ended September 30, 2016, compared to $23.0 million for the three months ended September 30, 2015. Investment Advisory and Management Fees earned from the management of client portfolios and other investment advisory services decreased 24% from the three months ended September 30, 2015, primarily reflecting a decrease in Institutional Asset Management fees related to our deconsolidation of Atalanta Sosnoff (which reflected revenue of $5.4 million for the three months ended September 30, 2015), partially offset by higher fees in Wealth Management of $0.7 million related to growth in AUM. Fee-based revenues included $0.04 million of revenues from performance fees for the three months ended September 30, 2016, compared to $0.01 million of revenues from performance fees during the three months ended September 30, 2015. Realized and Unrealized Gains decreased 63% from the prior year primarily resulting from lower gains in our private equity funds, partially offset by higher gains in Institutional Asset Management. Income from Equity Method Investments decreased from the three months ended September 30, 2015 primarily as a result of a decrease in earnings from our investments in ABS and G5 | Evercore, partially offset by the inclusion of Atalanta Sosnoff’s earnings in the third quarter of 2016.
Operating Expenses were $14.8 million for the three months ended September 30, 2016, as compared to $18.3 million for the three months ended September 30, 2015, a decrease of $3.4 million, or 19%, primarily reflecting the deconsolidation of Atalanta Sosnoff (which reflected expenses of $5.1 million for the three months ended September 30, 2015). Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $10.3 million for the three months ended September 30, 2016, as compared to $13.0 million for the three months ended September 30, 2015, a decrease of $2.7 million, or 21%. Non-compensation expenses, as a component of Operating Expenses, were $4.5 million, as compared to $5.3 million for the three months ended September 30, 2015, a decrease of $0.8 million, or 15%.
Other Expenses of $0.3 million for the three months ended September 30, 2016 were related to Acquisition and Transition Costs. Other Expenses of $28.1 million for the three months ended September 30, 2015 primarily included Special Charges of $28.0 million related to an impairment charge associated with the impairment of goodwill in the Company's Institutional Asset Management reporting unit.
Nine Months Ended September 30, 2016 versus September 30, 2015
Net Investment Management Revenues were $58.2 million for the nine months ended September 30, 2016, compared to $68.2 million for the nine months ended September 30, 2015. Investment Advisory and Management Fees earned from the management of client portfolios and other investment advisory services decreased 24% from the nine months ended September 30, 2015, primarily reflecting a decrease in Institutional Asset Management fees related to our deconsolidation of Atalanta Sosnoff (which reflected Net Revenues of $16.7 million for the nine months ended September 30, 2015), partially offset by higher fees in Wealth Management of $1.4 million related to growth in AUM. Fee-based revenues included $0.2 million of revenues from performance fees during the nine months ended September 30, 2016 compared to $0.4 million during the nine months ended September 30, 2015. Realized and Unrealized Gains increased 49% from the prior year primarily resulting from higher gains and performance fees in our private equity funds. Income from Equity Method Investments increased from the nine months ended September 30, 2015 primarily as a result of the inclusion of Atalanta Sosnoff's earnings in 2016.
Operating Expenses were $46.4 million for the nine months ended September 30, 2016, as compared to $58.1 million for the nine months ended September 30, 2015, a decrease of $11.7 million, or 20%, primarily reflecting the deconsolidation of Atalanta Sosnoff (which reflected expenses of $15.6 million for the nine months ended September 30, 2015). Employee Compensation and Benefits Expense, as a component of Operating Expenses, was $33.0 million for the nine months ended September 30, 2016, as compared to $41.0 million for the nine months ended September 30, 2015, a decrease of $8.0 million, or 20%. Non-compensation expenses, as a component of Operating Expenses, were $13.4 million for the nine months ended September 30, 2016, as compared to $17.1 million for the nine months ended September 30, 2015, a decrease of $3.7 million, or 22%.
Other Expenses of $0.8 million for the nine months ended September 30, 2016 included Acquisition and Transition Costs of $0.7 million and intangible asset and other amortization of $0.1 million. Other Expenses of $31.6 million for the nine months ended September 30, 2015 primarily included Special Charges of $31.3 million, primarily related to an impairment charge associated with the impairment of goodwill in the Company's Institutional Asset Management reporting unit.
Cash Flows
Our operating cash flows are primarily influenced by the timing and receipt of investment banking and investment management fees, and the payment of operating expenses, including bonuses to our employees and interest expense on our repurchase agreements, Notes Payable, subordinated borrowings and the line of credit. Investment Banking advisory fees are generally collected within 90 days of billing. However, placement fees may be collected within 180 days of billing, with certain

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fees being collected in a period exceeding one year. Commissions earned from our agency trading activities are generally received from our clearing broker within 11 days. Fees from our Wealth Management and Institutional Asset Management businesses are generally billed and collected within 90 days. We traditionally pay a substantial portion of incentive compensation to personnel in the Investment Banking business and to executive officers during the first three months of each calendar year with respect to the prior year’s results. Our investing and financing cash flows are primarily influenced by activities to deploy capital to fund investments and acquisitions, raise capital through the issuance of stock or debt, repurchase of outstanding Class A Shares, and/or noncontrolling interest in Evercore LP, as well as our other subsidiaries, payment of dividends and other periodic distributions to our stakeholders. We generally make dividend payments and other distributions on a quarterly basis. We periodically draw down on our line of credit to balance the timing of our operating, investing and financing cash flow needs. A summary of our operating, investing and financing cash flows is as follows:
 
For the Nine Months Ended September 30,
 
2016
 
2015
 
(dollars in thousands)
Cash Provided By (Used In)
 
 
 
Operating activities:
 
 
 
Net income
$
88,554

 
$
27,714

Non-cash charges
203,985

 
211,004

Other operating activities
(46,631
)
 
(95,876
)
Operating activities
245,908

 
142,842

Investing activities
(41,564
)
 
(18,655
)
Financing activities
(189,228
)
 
(191,363
)
Effect of exchange rate changes
(17,851
)
 
(6,839
)
Net Increase (Decrease) in Cash and Cash Equivalents
(2,735
)
 
(74,015
)
Cash and Cash Equivalents
 
 
 
Beginning of Period
448,764

 
352,160

End of Period
$
446,029

 
$
278,145

Nine Months Ended September 30, 2016. Cash and Cash Equivalents were $446.0 million at September 30, 2016, a decrease of $2.7 million versus Cash and Cash Equivalents of $448.8 million at December 31, 2015. Operating activities resulted in a net inflow of $245.9 million, primarily related to earnings, partially offset by a decrease in accrued compensation and benefits. Cash of $41.6 million was used in investing activities primarily related to net purchases of our marketable securities, purchases of furniture, equipment and leasehold improvements and an increase in restricted cash. Financing activities during the period used cash of $189.2 million, primarily for the payment of dividends and distributions to noncontrolling interest holders, treasury stock purchases and the repayment of the outstanding borrowings under the senior credit facility with Mizuho, partially offset by the issuance of the Private Placement Notes.
Nine Months Ended September 30, 2015. Cash and Cash Equivalents were $278.1 million at September 30, 2015, a decrease of $74.0 million versus Cash and Cash Equivalents of $352.2 million at December 31, 2014. Operating activities resulted in a net inflow of $142.8 million, primarily related to earnings, partially offset by a decrease in accrued compensation and benefits. Cash of $18.7 million was used in investing activities primarily related to purchases of furniture, equipment and leasehold improvements and net purchases of marketable securities, partially offset by distributions from private equity investments. Financing activities during the period used cash of $191.4 million, primarily for the payment of dividends and distributions to noncontrolling interest holders, as well as treasury stock purchases.
Liquidity and Capital Resources
General
Our current assets include Cash and Cash Equivalents, Marketable Securities and Accounts Receivable relating to Investment Banking and Investment Management revenues. Our current liabilities include accrued expenses, accrued employee compensation and short-term borrowings. We traditionally have made payments for employee bonus awards and year-end distributions to partners in the first quarter of the year with respect to the prior year’s results. From time to time, advances may also be made in satisfaction of commitments to new employees, at or near the date they begin employment. Cash distributions related to partnership tax allocations are made to the partners of Evercore LP and EWM in accordance with our corporate estimated payment calendar; these payments are made prior to the end of each calendar quarter. In addition, dividends on

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Class A Shares, and related distributions to partners of Evercore LP, are paid when and if declared by the Board of Directors, which is generally quarterly.
We regularly monitor our liquidity position, including cash, other significant working capital, current assets and liabilities, long-term liabilities, lease commitments and related fixed assets, principal investment commitments related to our Investment Management business, dividends on Class A Shares, partnership distributions and other capital transactions, as well as other matters relating to liquidity and compliance with regulatory requirements. Our liquidity is highly dependent on our revenue stream from our operations, principally from our Investment Banking business, which is a function of closing transactions and earning success fees, the timing and realization of which is irregular and dependent upon factors that are not subject to our control. Our revenue stream funds the payment of our expenses, including annual bonus payments, a portion of which are guaranteed, interest expense on our repurchase agreements, Notes Payable, subordinated borrowings and the line of credit and other financing arrangements and income taxes. Payments made for income taxes may be reduced by deductions taken for the increase in tax basis of our investment in Evercore LP. These tax deductions, when realized, require payment under our long-term liability, Amounts Due Pursuant to Tax Receivable Agreements. We intend to fund these payments from cash and cash equivalents on hand, principally derived from cash flows from operations. These tax deductions, when realized, will result in cash otherwise required to satisfy tax obligations becoming available for other purposes. Our Management Committee meets regularly to monitor our liquidity and cash positions against our short and long-term obligations, as well as our capital requirements and commitments. The result of this review contributes to management’s recommendation to the Board of Directors as to the level of quarterly dividend payments, if any.
As a financial services firm, our businesses are materially affected by conditions in the global financial markets and economic conditions throughout the world. Revenue generated by our advisory activities is related to the number and value of the transactions in which we are involved. In addition, revenue related to our equities business is driven by market volumes. During periods of unfavorable market or economic conditions, the number and value of M&A transactions, as well as market volumes in equities, generally decrease, and they generally increase during periods of favorable market or economic conditions. Restructuring activity generally is counter-cyclical to M&A activity. In addition, during periods of unfavorable market conditions our Investment Management business may be impacted by reduced equity valuations and generate relatively lower revenue because fees we receive, either directly or through our affiliates, typically are in part based on the market value of underlying publicly-traded securities. Our profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs within a time frame and in an amount sufficient to match any decreases in revenue relating to changes in market and economic conditions. Reduced equity valuations resulting from future adverse economic events and/or market conditions may impact our performance and may result in future net redemptions of AUM from our clients, which would generally result in lower revenues and cash flows. These adverse conditions could also have an impact on our goodwill impairment assessment, which is done annually, as of November 30th, or more frequently if circumstances indicate impairment may have occurred.
The recent market turmoil and uncertainty caused by the Brexit vote in the U.K. may have a negative impact on our business operations in the U.K., and globally, over the intermediate term. We will continue to monitor and manage the potential implications of the Brexit vote, including assessing opportunities that may arise, as the potential impact on the U.K. and European economy becomes more evident.
The Company assesses its equity method investments for impairment annually, or more frequently if circumstances indicate impairment may have occurred. These circumstances could include unfavorable market conditions or the loss of key personnel of the investee.
For a further discussion of risks related to our business, refer to "Risk Factors" in Item 1A. and in our Form 10-K for the year ended December 31, 2015.
Stock Incentive Plan
During the second quarter of 2016, the Company's stockholders approved the Amended and Restated 2016 Evercore Partners Inc. Stock Incentive Plan. The amended plan, among other things, authorizes an additional 10.0 million shares of the Company's Class A Shares.
Treasury and Noncontrolling Interest Repurchases
We periodically repurchase Class A Shares and/or LP Units into Treasury in order to reduce the dilutive effect of equity awards granted. In addition, we may from time to time, purchase noncontrolling interests in subsidiaries.

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In October 2014, our Board of Directors authorized the repurchase of additional Class A Shares and/or LP Units so that going forward Evercore will be able to repurchase an aggregate of seven million Class A Shares and/or LP Units for up to $350.0 million. On April 25, 2016, our Board of Directors authorized the repurchase of additional Class A Shares and/or LP Units so that going forward Evercore will be able to repurchase an aggregate of 7.5 million Class A Shares and/or LP Units for up to $450.0 million. Under this share repurchase program, shares may be repurchased from time to time in open market transactions, in privately-negotiated transactions or otherwise. The timing and the actual amount of shares repurchased will depend on a variety of factors, including legal requirements, price, economic and market conditions and the objective to reduce the dilutive effect of equity awards granted. This program may be suspended or discontinued at any time and does not have a specified expiration date. During the nine months ended September 30, 2016, we repurchased 2,402,904 shares, at an average cost per share of $48.22, for $115.8 million pursuant to our repurchase program.
In addition, periodically, we buy shares into treasury from our employees in order to allow them to satisfy their minimum tax requirements for share deliveries under our share equity plan. During the nine months ended September 30, 2016, we repurchased 998,786 shares, at an average cost per share of $46.04 for $46.0 million primarily related to minimum tax withholding requirements of share deliveries.
On January 29, 2016, we purchased, at fair value, all of the noncontrolling interest in ECB for $6.5 million.
Private Placement
On March 30, 2016, the Company issued an aggregate $170.0 million of senior notes, including: $38.0 million aggregate principal amount of its 4.88% Series A Notes due 2021, $67.0 million aggregate principal amount of its 5.23% Series B Notes due 2023, $48.0 million aggregate principal amount of its 5.48% Series C Notes due 2026 and $17.0 million aggregate principal amount of its 5.58% Series D Notes due 2028, pursuant to the Note Purchase Agreement dated as of March 30, 2016, among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933.
Interest on the Private Placement Notes is payable semi-annually and the Private Placement Notes are guaranteed by certain of the Company's material domestic subsidiaries. The Company may, at its option, prepay all, or from time to time any part of, the Private Placement Notes (without regard to Series), in an amount not less than 5% of the aggregate principal amount of the Private Placement Notes then outstanding at 100% of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the Private Placement Notes will have the right to require the Company to prepay the entire unpaid principal amounts held by each holder of the Private Placement Notes plus accrued and unpaid interest to the prepayment date. The Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio, a minimum tangible net worth and a minimum interest coverage ratio, and customary events of default. As of September 30, 2016, the Company was in compliance with all of these covenants.
The Company used $120.0 million of the net proceeds from the Private Placement Notes to repay outstanding borrowings under the senior credit facility with Mizuho on March 30, 2016 and used the remaining net proceeds for general corporate purposes.
Lines of Credit
On June 26, 2015, 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 $75.0 million, 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. On January 15, 2016, the line of credit from First Republic Bank was decreased to an aggregate principal amount of up to $50.0 million. In addition, the agreement was modified to impose similar quarterly financial covenants as the Company agreed to in the senior credit facility with Mizuho executed in November 2015, including (i) a Minimum Consolidated Tangible Net Worth, (ii) a Minimum Unencumbered Liquid Asset Ratio and (iii) a Maximum Consolidated Leverage Ratio. On January 27, 2016, East drew down $50.0 million on this facility. East repaid and terminated its line of credit with First Republic Bank on June 23, 2016.
On June 24, 2016, East entered into a loan agreement with PNC Bank, National Association ("PNC") for a revolving credit facility in an aggregate principal amount of up to $30.0 million, to be used for working capital and other corporate activities. This facility is secured by East's accounts receivable and the proceeds therefrom, as well as certain assets of EGLs,

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including certain of EGL's accounts receivable. In addition, the agreement contains certain reporting covenants as well as certain debt covenants that prohibit East and the Company from incurring other indebtedness subject to specified exceptions. Drawings under this facility bear interest at the prime rate. The facility matures on June 23, 2017, subject to an extension agreed to between East and PNC. There have been no monies drawn on this facility as of September 30, 2016.

ECB maintains a line of credit with BBVA Bancomer to fund its trading activities on an intra-day and overnight basis. The facility has a maximum aggregate principal amount of approximately $10.3 million and is secured by trading securities. No interest is charged on the intra-day facility. The overnight facility is charged the Inter-Bank Balance Interest Rate plus 10 basis points. There have been no significant draw downs on ECB’s line of credit since August 10, 2006. The line of credit is renewable annually.
Other Commitments
The Company has subordinated borrowings, principally with an executive officer of the Company, due on October 31, 2019. These borrowings have a coupon of 5.5%, payable semi-annually. In April 2016, the Company repaid $6.0 million of the original borrowings pursuant to a separate agreement. As of September 30, 2016, the Company had $16.6 million in subordinated borrowings pursuant to these agreements.
We have made certain capital commitments with respect to our investment activities, as well as commitments related to contingent consideration from our acquisitions, which are included in the Contractual Obligations section below.
During the first quarter of 2015, in conjunction with the Company entering into a strategic alliance with Luminis, the Company committed to loan Luminis $5.5 million. The Company paid Luminis $3.5 million pursuant to the loan agreement during the nine months ended September 30, 2015, with the remaining $2.0 million due from the Company on demand. The Company may acquire a 20% interest in Luminis in 2017.
Pursuant to deferred compensation and deferred consideration arrangements, we are obligated to make cash payments in future periods. For further information see Note 14 to our unaudited condensed consolidated financial statements.
Certain of our subsidiaries are regulated entities and are subject to capital requirements. For further information see Note 16 to our unaudited condensed consolidated financial statements.
Collateralized Financing Activity at ECB
ECB enters into repurchase agreements with clients seeking overnight money market returns whereby ECB transfers to the clients Mexican government securities in exchange for cash and concurrently agrees to repurchase the securities at a future date for an amount equal to the cash exchanged plus a stipulated premium or interest factor. ECB deploys the cash received from, and acquires the securities deliverable to, clients under these repurchase arrangements by purchasing securities in the open market or by entering into reverse repurchase agreements with unrelated third parties. We account for these repurchase and reverse repurchase agreements as collateralized financing transactions. We record a liability on our Unaudited Condensed Consolidated Statements of Financial Condition in relation to repurchase transactions executed with clients as Securities Sold Under Agreements to Repurchase. We record as assets on our Unaudited Condensed Consolidated Statements of Financial Condition, Financial Instruments Owned and Pledged as Collateral at Fair Value (where we have acquired the securities deliverable to clients under these repurchase arrangements by purchasing securities in the open market) and Securities Purchased Under Agreements to Resell (where we have acquired the securities deliverable to clients under these repurchase agreements by entering into reverse repurchase agreements with unrelated third parties). These Mexican government securities included in Financial Instruments Owned and Pledged as Collateral at Fair Value on the Unaudited Condensed Consolidated Statements of Financial Condition have an estimated average time to maturity of approximately 1.6 years, as of September 30, 2016, and are pledged as collateral against repurchase agreements, which are collateralized financing agreements. Generally, collateral is posted equal to the contract value at inception and is subject to market changes. These repurchase agreements are primarily with institutional customer accounts managed by ECB, generally mature within one business day and permit the counterparty to pledge the securities. Increases and decreases in asset and liability levels related to these transactions are a function of growth in ECB’s AUM, as well as clients’ investment allocations requiring positioning in repurchase transactions.
ECB has procedures in place to monitor the daily risk limits for positions taken, as well as the credit risk based on the collateral pledged under these agreements against their contract value from inception to maturity date. The daily risk measure is 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

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Committee has established a policy to maintain VaR at levels below 0.1% of the value of the portfolio. If at any point in time the threshold is exceeded, ECB personnel are alerted by an automated interface with ECB’s trading systems and begin to make adjustments in the portfolio in order to mitigate the risk and bring the portfolio in compliance. Concurrently, ECB personnel must notify the Committee of the variance and the actions taken to reduce the exposure to loss.
In addition to monitoring VaR, ECB periodically performs discrete stress tests ("Stress Tests") to assure that the level of potential losses that would arise from extreme market movements that may not be anticipated by VaR measures are within acceptable levels. The table below includes a key stress test monitored by the Committee, noted as the sensitivity to a 100 basis point change in interest rates. This analysis assists ECB in understanding the impact of an extreme move in rates, assuring the Collateralized Financing portfolio is structured to maintain risk at an acceptable level, even in extreme circumstances.
The Committee meets monthly to analyze the overall market risk exposure based on positions taken, as well as the credit risk, based on the collateral pledged under these agreements against the contract value from inception to maturity date. In these meetings the Committee evaluates risk from an operating perspective, VaR, and an exceptional perspective, Stress Tests, to determine the appropriate level of risk limits in the current environment.
We periodically assess the collectability or credit quality related to securities purchased under agreements to resell.
As of September 30, 2016 and December 31, 2015, a summary of ECB’s assets, liabilities and risk measures related to its collateralized financing activities is as follows:
 
September 30, 2016
 
December 31, 2015
 
Amount
 
Market Value of Collateral Received or (Pledged)
 
Amount
 
Market Value of Collateral Received or (Pledged)
 
(dollars in thousands)
Assets
 
 
 
 
 
 
 
Financial Instruments Owned and Pledged as Collateral at Fair Value
$
17,848

 
 
 
$
41,742

 
 
Securities Purchased Under Agreements to Resell
12,881

 
$
12,883

 
2,191

 
$
2,192

Total Assets
30,729

 
 
 
43,933

 
 
Liabilities
 
 
 
 
 
 
 
Securities Sold Under Agreements to Repurchase
(30,757
)
 
$
(30,782
)
 
(44,000
)
 
$
(44,063
)
Net Liabilities
$
(28
)
 
 
 
$
(67
)
 
 
Risk Measures
 
 
 
 
 
 
 
VaR
$
1

 
 
 
$
4

 
 
Stress Test:
 
 
 
 
 
 
 
Portfolio sensitivity to a 100 basis point increase in the interest rate
$
(9
)
 
 
 
$
(20
)
 
 
Portfolio sensitivity to a 100 basis point decrease in the interest rate
$
9

 
 
 
$
20

 
 

Contractual Obligations
For a further discussion of our contractual obligations, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2015.
As of September 30, 2016, we were unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority per ASC 740; hence, unrecognized tax benefits have been excluded from this disclosure.
We had total commitments (not reflected on our Unaudited Condensed Consolidated Statements of Financial Condition) relating to future capital contributions to private equity funds of $5.1 million and $8.2 million as of September 30, 2016 and December 31, 2015, respectively. We expect to fund these commitments with cash flows from operations. We may be required to fund these commitments at any time through June 2023, depending on the timing and level of investments by our private equity funds.

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Off-Balance Sheet Arrangements
We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or engage in any leasing activities that expose us to any liability that is not reflected in our unaudited condensed consolidated financial statements.
Market Risk and Credit Risk
We, in general, are not a capital-intensive organization and as such, are not subject to significant market or credit risks. Nevertheless, we have established procedures to assess both the market and credit risk, as well as specific investment risk, exchange rate risk and credit risk related to receivables.
Market and Investment Risk
We hold equity securities and invest in exchange traded funds and mutual funds, principally as an economic hedge against our deferred compensation program. As of September 30, 2016, the fair value of our investments with these products, based on closing prices, was $27.1 million.
We estimate that a hypothetical 10% adverse change in the market value of the investments would have resulted in a decrease in pre-tax income of approximately $2.7 million for the three months ended September 30, 2016.
See "-Liquidity and Capital Resources" above for a discussion of collateralized financing transactions at ECB.
Private Equity Funds
Through our principal investments in our private equity funds and our ability to earn carried interest from these funds, we face exposure to changes in the estimated fair value of the companies in which these funds invest. Our professionals devote considerable time and resources to work closely with the portfolio company’s management to assist in designing a business strategy, allocating capital and other resources and evaluating expansion or acquisition opportunities. On a quarterly basis, we perform a comprehensive analysis and valuation of all of the portfolio companies. Our analysis includes reviewing the current market conditions and valuations of each portfolio company. Valuations and analysis regarding our investment in Trilantic are performed by their respective professionals, and thus we are not involved in determining the fair value for the portfolio companies of such funds.
We estimate that a hypothetical 10% adverse change in the value of the private equity funds would have resulted in a decrease in pre-tax income of approximately $1.1 million for the three months ended September 30, 2016.
Exchange Rate Risk
We have foreign operations, through our subsidiaries and affiliates, primarily in Mexico and the United Kingdom, as well as provide services to clients in other jurisdictions, which creates foreign exchange rate risk. We have not entered into any transactions to hedge our exposure to these foreign exchange fluctuations through the use of derivative instruments or otherwise. An appreciation or depreciation of any of these currencies relative to the U.S. dollar would result in an adverse or beneficial impact to our financial results. A significant portion of our Latin American revenues have been, and will continue to be, derived from contracts denominated in Mexican pesos and Brazilian real and Evercore Partners Limited's revenue and expenses are denominated primarily in British pounds sterling and euro. Historically, the value of these foreign currencies has fluctuated relative to the U.S. dollar. For the nine months ended September 30, 2016, the net impact of the fluctuation of foreign currencies recorded in Other Comprehensive Income within the Unaudited Condensed Consolidated Statement of Comprehensive Income was ($11.9) million. It is currently not our intention to hedge our foreign currency exposure, and we will reevaluate this policy from time to time.
Credit Risks
We maintain cash and cash equivalents with financial institutions with high credit ratings. At times, we may maintain deposits in federally insured financial institutions in excess of federally insured ("FDIC") limits or enter into sweep arrangements where banks will periodically transfer a portion of the Company's excess cash position to a money market fund. However, we believe that we are not exposed to significant credit risk due to the financial position of the depository institution or investment vehicles in which those deposits are held.

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Accounts Receivable consists primarily of advisory fees and expense reimbursements billed to our clients. Receivables are reported net of any allowance for doubtful accounts. We maintain an allowance for bad debts to provide coverage for probable losses from our customer receivables and derive the estimate through specific identification for the allowance for doubtful accounts and an assessment of the client’s creditworthiness. As of September 30, 2016 and December 31, 2015, total receivables amounted to $146.3 million and $175.5 million, respectively, net of an allowance. The Investment Banking and Investment Management receivables collection periods generally are within 90 days of invoice, with the exception of placement fees, which are generally collected within 180 days of invoice. The collection period for restructuring transactions and private equity fee receivables may exceed 90 days. We recorded minimal bad debt expense for each of the nine months ended September 30, 2016 and 2015.
With respect to our Marketable Securities portfolio, which is comprised primarily of highly-rated corporate and municipal bonds, mutual funds and securities investments, we manage our credit risk exposure by limiting concentration risk and maintaining investment grade credit quality. As of September 30, 2016, we had Marketable Securities of $66.5 million, of which 59% were corporate and municipal securities, primarily with S&P ratings ranging from AAA to BB+.
Critical Accounting Policies and Estimates
The unaudited condensed consolidated financial statements included in this report are prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions regarding future events that affect the amounts reported in our unaudited condensed consolidated financial statements and their notes, including reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We base these estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates. For a discussion of our critical accounting policies and estimates, refer to our Annual Report on Form 10-K for the year ended December 31, 2015.
Recently Issued Accounting Standards
For a discussion of recently issued accounting standards and their impact or potential impact on the Company's consolidated financial statements, see Note 3 to our unaudited condensed consolidated financial statements.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
See "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk and Credit Risk." We do not believe we face any material interest rate risk, foreign currency exchange risk, equity price risk or other market risk except as disclosed in Item 2 " – Market Risk and Credit Risk" above.
Item 4.
Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Controls over Financial Reporting
We have not made any changes during the three months ended September 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).

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PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
In the normal course of business, from time to time the Company and its affiliates are involved in judicial or regulatory proceedings, arbitration or mediation concerning matters arising in connection with the conduct of its businesses, including contractual and employment matters. In addition, Mexican, United Kingdom, Hong Kong, Singapore, Canadian and United States government agencies and self-regulatory organizations, as well as state securities commissions in the United States, conduct periodic examinations and initiate administrative proceedings regarding the Company’s business, including, among other matters, accounting and operational matters, that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer, investment advisor, or its directors, officers or employees. In view of the inherent difficulty of determining whether any loss in connection with such matters is probable and whether the amount of such loss can be reasonably estimated, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, the Company cannot estimate the amount of such loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, fine, penalty or other relief, if any, might be. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that it is not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company. Provisions for losses are established in accordance with ASC 450, "Contingencies" when warranted. Once established, such provisions are adjusted when there is more information available or when an event occurs requiring a change.
In January 2015, Donna Marie Coburn filed a proposed class action complaint against Evercore Trust Company ("ETC") in the U.S. District Court for the District of Columbia, in which she purported 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 alleged 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 claimed that the Plan suffered losses of approximately $300 million due to declines in J.C. Penney stock. ETC believes that it has meritorious defenses against the plaintiff’s claims and intends to vigorously defend the action. 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 moved to dismiss the complaint for failure to state a claim upon which relief may be granted, and on February 17, 2016, the district court granted ETC’s motion to dismiss. On March 15, 2016, plaintiff noticed an appeal of the district court’s decision. The case was argued to the United States Court of Appeals for the D.C. Circuit on October 13, 2016, and the parties are awaiting a decision.
Item 1A.
Risk Factors
A U.K. exit from the European Union could adversely impact our business and operations.
In June 2016, United Kingdom ("U.K.") voters voted in a non-binding referendum for the U.K. to exit the European Union ("E.U."). A U.K. exit from the E.U., together with what may be protracted negotiations around the terms of any exit, could adversely affect European and worldwide economic and market conditions, contribute to instability in global financial and foreign exchange markets, including volatility in the value of the British pound and European euro and introduce significant legal uncertainty and potentially divergent national laws and regulations. Our U.K. entities, Evercore Partners International LLP and International Strategy & Investment (UK) Limited, primarily service European-domiciled clients. Adverse conditions arising from a U.K. exit from the E.U. could adversely affect our U.K. business and operations, including by reducing the volume or size of mergers, acquisitions, divestitures and other strategic corporate transactions on which we seek to advise. A U.K. exit from the E.U. could also cause our U.K entities to lose their E.U. financial services passport licenses, which allow them to operate, on a cross-border and off-shore basis, into all E.U. countries without obtaining regulatory approval outside of the U.K., which would increase our legal, compliance and operational costs. 
For a discussion of other material risks, see "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015.

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Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities
2016
 
Total Number of
Shares (or Units)
Purchased(1)
 
Average Price
Paid Per Share
 
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(2)
 
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs(2)
January 1 to January 31
 
510,081

 
$
49.96

 
500,972

 
1,884,085

February 1 to February 29
 
1,813,583

 
45.65

 
882,028

 
1,002,057

March 1 to March 31
 
11,628

 
49.67

 

 
1,002,057

Total
 
2,335,292

 
$
46.61

 
1,383,000

 
1,002,057

 
 
 
 
 
 
 
 
 
April 1 to April 30
 
77,869

 
$
51.10

 
75,000

 
7,425,000

May 1 to May 31
 
835,720

 
49.70

 
831,300

 
6,593,700

June 1 to June 30
 
111,704

 
49.08

 
102,311

 
6,491,389

Total
 
1,025,293

 
$
49.74

 
1,008,611

 
6,491,389

 
 
 
 
 
 
 
 
 
July 1 to July 31
 
14,083

  
$
44.73

  

  
6,491,389

August 1 to August 31
 
26,808

  
50.65

  
11,293

  
6,480,096

September 1 to September 30
 
214

  
52.37

  

  
6,480,096

Total
 
41,105

 
$
48.63

 
11,293

 
6,480,096

(1)
These include the repurchase of 952,292, 16,682 and 29,812 shares in treasury transactions arising from net settlement of equity awards to satisfy minimum tax obligations during the three months ended March 31, 2016, June 30, 2016 and September 30, 2016, respectively.
(2)
In October 2014, our Board authorized the repurchase of shares of additional Class A Shares and/or LP Units so that we will be able to repurchase an aggregate of seven million Class A Shares and/or LP Units for up to $350.0 million. On April 25, 2016, our Board authorized the repurchase of additional Class A Shares and/or LP Units so that going forward we will be able to repurchase an aggregate of 7.5 million Class A Shares and/or LP Units for up to $450.0 million. Under this share repurchase program, shares may be repurchased from time to time in open market transactions, in privately-negotiated transactions or otherwise. The timing and the actual amount of shares repurchased will depend on a variety of factors, including legal requirements, price, economic and market conditions and the objective to reduce the dilutive effect of equity awards granted. This program may be suspended or discontinued at any time and does not have a specified expiration date.

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Item 6.
Exhibits and Financial Statement Schedules
 
 
 
Exhibit
Number
  
Description
 
 
31.1
  
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) (filed herewith)
 
 
31.2
  
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith)
 
 
32.1
  
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
 
 
32.2
  
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
 
 
101
  
The following materials from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, are formatted in XBRL (eXtensible Business Reporting Language); (i) Condensed Consolidated Statements of Financial Condition as of September 30, 2016 and December 31, 2015, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 and 2015, (iv) Condensed Consolidated Statements of Changes In Equity for the nine months ended September 30, 2016 and 2015, (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015, and (vi) Notes to Condensed Consolidated Financial Statements (filed herewith)



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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 2, 2016
 
Evercore Partners Inc.
 
 
 
 
By:
/s/    RALPH SCHLOSSTEIN
 
Name:
Ralph Schlosstein
 
Title:
Chief Executive Officer and Director
 
 
 
 
By:
/S/    ROBERT B. WALSH
 
Name:
Robert B. Walsh
 
Title:
Chief Financial Officer



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