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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

Commission file number 001-32147

Greenhill & Co., Inc.
(Exact name of registrant as specified in its charter)

Registrant’s telephone number (212) 389-1500

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   No  X  

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes         No  X  

As of June 4, 2004, there were 30,750,000 shares of the registrant’s common stock outstanding.

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AVAILABLE INFORMATION

     Greenhill & Co., Inc. (“Company”) files current, annual and quarterly reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission (“SEC”). You may read and copy any document the Company files at the SEC’s public reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549, U.S.A. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The Company’s SEC filings are also available to the public from the SEC’s internet site at http://www.sec.gov. Copies of these reports, proxy statements and other information can also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, U.S.A.

     The Company’s public internet site is http://www.greenhill-co.com. The Company will make available free of charge through its internet site, via a link to the SEC’s internet site at http://www.sec.gov, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed on behalf of directors and executive officers and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.

     In addition, the Company will make available on http://www.greenhill-co.com its most recent annual report on Form 10-K, its quarterly reports on Form 10-Q for the current fiscal year and its most recent proxy statement, although in some cases these documents are not available on that site as soon as they are available on the SEC’s internet site. Also posted on the Company’s website, and available in print upon request of any stockholder to the Investor Relations Department, are charters for the Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Copies of the Corporate Governance Guidelines and the Code of Business Conduct and Ethics governing our directors, officers and employees are also posted on the Company’s website within the “Corporate Governance” section. You will need to have Adobe Acrobat Reader software installed on your computer to view these documents, which are in the PDF format.

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Part I. Financial Information

Item 1. Financial Statements

Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Condensed Consolidated Statements of Financial Condition

See accompanying notes to condensed consolidated financial statements.

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Condensed Consolidated Statements of Income (Unaudited)

See accompanying notes to condensed consolidated financial statements.

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Condensed Consolidated Statements of Changes in Members’ Equity (Unaudited)

See accompanying notes to condensed consolidated financial statements.

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Condensed Consolidated Statements Cash Flows (Unaudited)

See accompanying notes to condensed consolidated financial statements.

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 - Organization

     Effective May 11, 2004 (the “Reorganization Date”), Greenhill & Co. Holdings, LLC (“Holdings”), a New York limited liability company, merged with Greenhill & Co., Inc., a Delaware corporation (the merger and the other related transactions effected by Holdings and its affiliates in anticipation of the initial public offering are referred to collectively as the “Reorganization”). The surviving corporation in the merger, Greenhill & Co., Inc., completed its initial public offering on the same day. In the offering, Greenhill & Co., Inc, issued 5,750,000 shares of common stock and received net proceeds of approximately $89.1 million. The Reorganization is described in greater detail in the Company’s Registration Statement in Form S-1 (Commission file number 333-113526) filed with the Securities and Exchange Commission. Greenhill & Co., Inc. (formerly Holdings), together with its subsidiaries (collectively, the “Company”), is an independent investment banking firm. The Company has clients located throughout the world, with offices located in New York, London and Frankfurt.

     The Company’s activities as an investment banking firm constitute a single business segment, with two principal sources of revenue:

• Financial advisory, which includes advice on mergers, acquisitions, restructurings and similar corporate finance matters; and
  
  
• Merchant banking, which includes the management of outside capital invested in the Company’s merchant banking fund, Greenhill Capital Partners (“GCP”), and the Company’s principal investments in such fund.

     The Company’s U.S. and international wholly-owned subsidiaries include Greenhill & Co., LLC (“G&Co”), Greenhill Capital Partners, LLC (“GCP, LLC”) (formerly Greenhill Fund Management Co., LLC), Greenhill Aviation Co., LLC (“GAC”) and Greenhill & Co. Europe Limited (“GCE”).

     G&Co is a registered broker-dealer under the Securities Exchange Act of 1934, as amended, and is registered with the National Association of Securities Dealers, Inc. G&Co is engaged in the investment banking business principally in North America.

     GCE is a U.K. based holding company. GCE controls Greenhill & Co. International LLP (“GCI”), through its controlling membership interest. GCI is engaged in investment banking activities, principally in Europe, and is subject to regulation by the U.K. Financial Services Authority (“FSA”). In addition, GCE has a wholly-owned subsidiary, Greenhill & Co. GmbH (“GmbH”), which operates in Germany and provides corporate advisory services to both G&Co and GCI.

     GCP is a private equity fund that invests in a diversified portfolio of private equity and equity related investments. The firms in which GCP has invested engage in business activities in North America and Europe. The majority of the investors in GCP are third parties. However, Managing Directors and employees of the Company have also made investments in GCP.

     GCP, LLC is a registered investment adviser under the Investment Advisers Act of 1940. GCP, LLC provides investment advisory services to GCP.

     GAC owns and operates an aircraft, which is used for the exclusive benefit of the Company’s employees and their immediate family members.

Note 2 - Summary of Significant Accounting Policies

Basis of Financial Information

     These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions regarding

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Notes to Condensed Consolidated Financial Statements (Unaudited)

investment valuations, compensation accruals and other matters that affect the consolidated financial statements and related footnote disclosures. Management believes that the estimates used in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ materially from those estimates.

     The condensed consolidated financial statements of the Company include all consolidated accounts of Greenhill & Co., Inc. (formerly Holdings) and all other entities in which the Company has a controlling interest, including GCI, after eliminations of all significant inter-company accounts and transactions. The Company adopted the revised Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (“FIN 46-R”), Consolidation of Variable Interest Entities, in the first quarter of 2004. FIN 46-R defines variable interests and specifies the circumstances under which the consolidation of entities will be required. The adoption of FIN 46-R did not have a material impact on the Company financial position or results of operations. The adoption requires the Company to consolidate GCP Managing Partner, LP, the managing general partner of GCP, which is responsible for managing GCP’s investments made subsequent to January 1, 2004. The Company does not consolidate GCP since the Company, through its general partnership and limited partnership interests, does not have a majority of the economic interest in GCP. Also, GCP Managing Partner, LP is subject to removal by a simple majority of unaffiliated third-party investors of GCP.

     These condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2003 incorporated by reference in the Registration Statement on Form S-1 (Commission file number 333-113526) filed with the Securities and Exchange Commission. The condensed consolidated financial information as of December 31, 2003 has been derived from audited consolidated financial statements not included herein. Certain reclassifications have been made to previously reported amounts to conform to the current presentation. The results of operations for interim periods are not necessarily indicative of results for the entire year.

Minority Interest

     The interests in GCI held directly by the U.K. Managing Directors are represented as minority interests in the accompanying consolidated financial statements.

Revenue Recognition

Financial Advisory Fees

     The Company recognizes advisory fee revenue when the services related to the underlying transactions are completed in accordance with the terms of its engagement letters. Retainer fees are recognized as advisory fee income over the period in which the related service is rendered.

     The Company’s clients reimburse certain expenses incurred by the Company in the conduct of financial advisory engagements. Expenses are reported net of such client reimbursements. For the three months ended March 31, 2003 and 2004, client reimbursements totaled $0.5 million and $0.5 million, respectively.

Merchant Banking Revenues

     Merchant banking revenue consists of (i) management fees on the Company’s merchant banking activities, (ii) gains (or losses) on investments in the Company’s investment in merchant banking funds and other principal investment activities, and (iii) merchant banking profit overrides.

     Management fees earned from the Company’s merchant banking activities are recognized over the period of related service.

     The Company recognizes revenue on investments in its merchant banking funds based on its allocable share of realized and unrealized gains (or losses) reported by such investment.

     The Company will recognize merchant banking overrides when certain financial returns are achieved over the life of the fund. Overrides are calculated as a percentage of the profits earned by each fund. Future

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Notes to Condensed Consolidated Financial Statements (Unaudited)

underperformance by the fund may require amounts previously earned as overrides to be returned to the funds. Accordingly, merchant banking overrides are recognized as revenue only after material contingencies have been resolved. The Company has not earned any merchant banking overrides to date.

Investments

     The Company’s investments in merchant banking funds are recorded at estimated fair value based upon the Company’s proportionate share of the changes in the fair value of the underlying merchant banking fund’s net assets. Investments primarily include investments in GCP.

Members’ Equity

     The Senior Executive Profit Sharing Agreement (“SEPA”) dated as of January 1, 2002, as amended as of January 1, 2004, specified the manner of allocation of global operating income and provided for distributions to the Members (including LLP interests owned by the U.K. Managing Directors represented as minority interests). The governance of the Company was set forth in the Operating Agreement of Greenhill & Co. Holdings, LLC dated as of January 1, 2002. Both the SEPA and the Operating Agreement terminated on the Reorganization Date.

     Through the SEPA and other operating agreements, the U.S. and U.K. members operated under common governance and economic participation. However, these condensed consolidated financial statements present the entity’s legal form, and as such, the interests held by the U.K. Members directly in GCI are recorded as minority interest.

Property and Equipment

     Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed principally by an accelerated method over the life of the assets, which range from three to seven years. Amortization of leasehold improvements is computed by the straight-line method over the lesser of the life of the asset or the term of the lease.

Provision for Taxes

     The Company accounts for income taxes incurred in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”.

     Holdings elected to be treated as a pass-through entity for tax purposes and all items of income and expense flowed through to its Members. Holding’s Members were not personally liable for any indebtedness, liability or obligation of the Company. U.S. federal and state income taxes payable by the Members, based on their respective share of the Company’s net income, have not been reflected in the accompanying condensed consolidated financial statements. Holdings was liable for local unincorporated business tax on business conducted in New York City, and income tax on current income realized by certain foreign subsidiaries.

Foreign Currency Translation

     Foreign currency assets and liabilities have been translated at rates of exchange prevailing at the end of the periods presented. Income and expenses transacted in foreign currency have been translated at average monthly exchange rates during the period. Translation gains and losses are included in the foreign currency translation adjustment included as a component of other comprehensive income in the condensed consolidated statement of changes in members’ equity.

Cash Equivalents

     The Company considers all highly liquid investments with a maturity date of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalents on deposit with various financial institutions to limit the amount of credit exposure to any one financial institution or lender. At December 31, 2003 and March 31, 2004, the carrying value of the Company’s financial instruments approximated fair value.

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 3 – Investments

GCP

     For the three months ended March 31, 2004, merchant banking revenue includes gains related to the Company’s investment in GCP of $2.9 million. The Company earned $1.2 million and $1.1 million in management fees from GCP for the three months ended March 31, 2003 and 2004, respectively. No merchant banking overrides were earned during such periods.

     In February 2004, the Company purchased for $2.3 million additional limited partnership interests in GCP from an outside investor. As part of this investment, the Company assumed an outstanding commitment to GCP of $1.4 million. In addition, on January 1, 2004, the Company assumed outstanding funding commitments to GCP of $15 million from certain Managing Directors of the Company.

     The Company’s investments in limited partner interests in GCP had a carrying value of $5.9 million and $9.3 million at December 31, 2003 and March 31, 2004, respectively.

     As of January 2004, 50% of the GCP profit overrides for investments made in 2004, if any, will be allocated to the Company, and 50% will be allocated to the individual Managing Directors. In conjunction with this change, the Company became the controlling entity of GCP Managing Partner, LP, the managing general partner that will be responsible for all GCP matters other than those relating to investments made by GCP prior to 2004. The Managing Directors will individually retain the profit overrides, if any, for investments made prior to 2004. See Note 2 – Summary of Significant Accounting Policies for the consolidation policy of GCP Managing Partner, LP.

     The Company has an investment in GCP, L.P. (“GP”), one of the general partners of GCP, with carrying values of $0.1 million and $0.1 million at December 31, 2003 and March 31, 2004, respectively. This investment represents approximately a 5% equity interest in the GP. The remaining 95% equity interest in the GP is owned directly by the Company’s Managing Directors.

     Investments held by GCP are recorded at estimated fair value. Investments are initially carried at cost as an approximation of fair value. The carrying value of such investments is adjusted when changes in the underlying fair values are readily determinable. Public investments are valued using quoted market prices discounted for any restrictions on sale. Privately held investments are carried at estimated fair value as determined by the GP after giving consideration to the cost of the security, the pricing of other private placements of the portfolio company, the price of securities of other companies comparable to the portfolio company, purchase multiples paid in other comparable third-party transactions, the original purchase price multiple, market conditions, liquidity, operating results and other financial data.

     At March 31, 2004, the Company has commitments to invest up to $20.3 million in GCP. These commitments primarily will be funded as required through June 2005, the end of GCP’s investment period.

Summarized financial information for GCP is as follows:

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Notes to Condensed Consolidated Financial Statements (Unaudited)

     As of March 31, 2004, the Company had a 50% member interest in Barrow Street Capital LLC (“Barrow Street”), a real estate investment management company (see Note 4). Barrow Street was formed to act as the managing member, investment advisor and general partner in various real estate ventures. The Company did not have control of Barrow Street, as the Company did not have a majority voting or economic interest. The Company had veto rights over most significant management and investment decisions with respect to Barrow Street, although the Company could not force a management change. The investment in Barrow Street had a carrying value of $0.6 million and $0.4 million at December 31, 2003 and March 31, 2004, respectively. In April 2004, the Company sold its interest in Barrow Street to the controlling parties of Barrow Street for the carrying value of $0.4 million.

Note 4 – Related Parties

     At December 31, 2003 and March 31, 2004, the Company had a receivable of $0.1 million and $0.1 million due from GCP relating to expense reimbursements, which is included in due from affiliates.

     Included in expenses for the three months ended March 31, 2003 and 2004, are reimbursements of $0.1 million and $0.1 million for office space sublet by Barrow Street and reimbursements for the use of the Company’s other facilities and participation in the Company’s health care plans. At December 31, 2003 and March 31, 2004, the Company had $0.2 million and $0.1 million in rent and leasehold improvement receivables for office space sublet to Barrow Street and other obligations incurred by Barrow Street, which is also included in due from affiliates.

     Included in occupancy and equipment rental expense for the three months ended March 31, 2004, is a rent reimbursement for $11,700 for airplane and office space sublet by a firm owned by an executive of the Company.

Note 5 – Revolving Bank Loan Facility

     On December 31, 2003, the Company obtained from a U.S. commercial bank an unsecured $16,000,000 revolving loan facility to provide for working capital needs, facilitate the funding of short-term investments and other general corporate purposes. Interest on borrowings is based on LIBOR plus 2.50 percent or, at the Company’s option, the prime rate. Generally, interest is payable monthly. The revolving bank loan facility matures on June 30, 2005. In addition, at least annually, the Company must repay all loans borrowed under the facility, and it may not borrow again under the facility for a 30-day period following repayment.

     At December 31, 2003 and March 31, 2004, there were borrowings of $1.5 million and $16.0 million, respectively, against the facility outstanding, maturing within one year. A loan fee for the revolving bank loan facility of $66,667 is included in other assets. The loan fee is amortized ratably over the life of the facility. In May 2004, the $16.0 million of borrowings against the facility were repaid with a portion of the proceeds from the Company’s initial public offering.

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Note 6 – Members’ Equity

     The Members of Holdings were the current U.S. Managing Directors of the Company or their related entities. Prior to the Reorganization Date, the Members were not employees of the Company. Holdings, prior to the Reorganization Date, distributed current profits, net of amounts retained for working capital, investments and other corporate purposes, to its Members on a regular basis.

Note 7 – Regulatory Requirements

     Certain subsidiaries of the Company are subject to various regulatory requirements in the United States and United Kingdom, which specify, among other requirements, minimum net capital requirements for registered broker-dealers.

     G&Co is subject to the Securities and Exchange Commission’s Uniform Net Capital requirements under Rule 15c3-1 (the “Rule”), which specifies, among other requirements, minimum net capital requirements for registered broker-dealers. The Rule requires G&Co to maintain a minimum net capital of the greater of $5,000 or 1/15 of aggregate indebtedness, as defined in the Rule. As of March 31, 2004, G&Co’s net capital was $6.8 million, which exceeded its requirement by $6.5 million. G&Co’s aggregate indebtedness to net capital ratio was 0.66 to 1 at March 31, 2004. Certain advances, distributions and other capital withdrawals of G&Co are subject to certain notifications and restrictive provisions of the Rule.

     GCI is subject to capital requirements of the FSA. As of March 31, 2004, GCI was in compliance with its local capital adequacy requirements.

Note 8 – Business Information

     The Company’s activities as an investment banking firm constitutes a single business segment, with two principal sources of revenue:

• Financial advisory, which includes advice on mergers, acquisitions, restructuring and similar corporate finance matters; and
  
  
• Merchant banking, which includes the management of outside capital invested in GCP and the Company’s principal investments in such fund.

     The Company has historically earned its revenues almost exclusively from advisory fees earned from clients in large part upon the successful completion of the client’s transaction or restructuring. Financial advisory revenues represented approximately 92.7% and 86.4%, of the Company’s total revenues for the three months ended March 31, 2003 and 2004, respectively.

     The Company’s financial advisory and merchant banking activities are closely aligned and have similar economic characteristics. The same client and other relationships upon which the Company relies for financial advisory opportunities also generate merchant banking opportunities. Generally, the Company’s professionals and employees are treated as a common pool of available resources and the related compensation and other Company costs are not directly attributable to either particular revenue source. In reporting to management, the Company distinguishes the sources of its investment banking revenues between financial advisory and merchant banking. However, management does not evaluate other financial data or operating results such as operating expenses, profit and loss or assets by its financial advisory and merchant banking activities.

Note 9 – Pro Forma Financial Information

The pro forma financial information gives effect to the Reorganziation, including the issuance of 25,000,000 shares of common stock in connection with the Reorganization. The pro forma financial information does not give effect to the Company’s sale of 5,750,000 shares of common stock pursuant to its initial public offering or the restricted stock units awarded on the date of the initial public offering.

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Greenhill & Co., Inc. and Subsidiaries
(formerly Greenhill & Co. Holdings, LLC and Subsidiaries)
Notes to Condensed Consolidated Financial Statements (Unaudited)

The pro forma adjustments to the Condensed Consolidated Statement of Financial Condition for the three months ended March 31, 2004, include the following:

• Pro forma cash and cash equivalents have been adjusted for cash distributions to the U.S. and U.K. Members of undistributed earnings of $8.7 million.
  
  
• Pro forma minority interest has been adjusted for a cash distribution of $6.5 million in respect of the U.K. Members’ undistributed earnings in GCI.
  
  
• Historical members’ equity reflects contributed capital of $17.8 million, undistributed earnings for the U.S. members of $2.2 million, and an accumulated deficit of $5.0 million. Pro forma members’ equity reflects adjustments for a $2.2 million cash distribution to the U.S. members, as well as the contribution to Greenhill & Co., Inc. of the original $17.8 million of contributed capital less the accumulated deficit.
  
  
• Pro forma common stock reflects an adjustment of $0.3 million for the issuance of 25,000,000 shares of common stock with a par value of $0.01 per share in the Reorganization.
  
  
• Pro forma additional paid-in capital of $17.5 million reflects the contribution to Greenhill & Co., Inc. of the Company’s original contributed capital of $17.8 million less the $0.3 million included in common stock.
  
  
• Pro forma accumulated deficit of $5.0 million reflects distributions to members with respect to prior periods in excess of book income for those periods.

The following are condensed pro forma consolidated statements of income for the three months ended March 31, 2003 and 2004: