Attached files
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8-K/A - FORM 8-K/A - Evercore Inc. | d249882d8ka.htm |
EX-23.1 - CONSENT OF INDEPENDENT AUDITORS - Evercore Inc. | d249882dex231.htm |
EX-99.1 - AUDITED CONSOLIDATED BALANCE SHEET OF LEXICON - Evercore Inc. | d249882dex991.htm |
Exhibit 99.2
Evercore Partners Inc. and The Lexicon Partnership LLP
Unaudited Pro Forma Condensed Combined
Financial Statements
On August 19, 2011, Evercore Partners Inc. (the Company) completed its previously announced acquisition of all of the outstanding partnership interests of The Lexicon Partnership LLP, a U.K. incorporated limited liability partnership (Lexicon), in accordance with the definitive sale and purchase agreement entered into on June 7, 2011, for consideration consisting of cash and stock (the Acquisition). The unaudited pro forma condensed combined statements of operations and the unaudited pro forma condensed combined statement of financial condition are based upon the historical consolidated financial statements of the Company and Lexicon after giving effect to the Acquisition, and after applying the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements.
The historical consolidated financial statements of Lexicon were prepared in conformity with accounting principles generally accepted in the United Kingdom (U.K. GAAP), which differ in certain respects from accounting principles generally accepted in the United States of America (U.S. GAAP). Necessary adjustments have been made to reconcile the historical consolidated financial statements of Lexicon to U.S. GAAP. These adjustments relate primarily to differences such as the translation of foreign currency, the accrual for vacation benefits and the tax effects of such adjustments.
The Company and Lexicons fiscal year ends are December 31st and March 31st, respectively. Since these year-ends differ by less than 93 days, the Company has combined the fiscal year end results without recasting Lexicons results. Accordingly, the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2010 combines the Companys audited consolidated statement of operations for the year ended December 31, 2010 with Lexicons audited consolidated statement of operations for the year ended March 31, 2011. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2011, combines the Companys unaudited condensed consolidated statement of operations for the six months ended June 30, 2011 with Lexicons unaudited condensed consolidated statement of operations for the six months ended June 30, 2011. Lexicons results for the three months ended March 31, 2011 are included within both the full year and interim period pro forma results since Lexicons fiscal year-end is March 31st and the Companys most recent interim period is June 30, 2011. These results included pre-tax income of approximately $12.0 million. These unaudited pro forma combined statements of operations are presented as if the Acquisition had occurred on January 1, 2010, the first day of the Companys year ended December 31, 2010.
The unaudited pro forma condensed combined statement of financial condition as of June 30, 2011, combines the Companys June 30, 2011 unaudited condensed consolidated statement of financial condition with Lexicons June 30, 2011 unaudited condensed consolidated statement of financial condition, and is presented as if the Acquisition had occurred on June 30, 2011.
The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the Acquisition, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial
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statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements. In addition, the unaudited pro forma condensed combined financial statements were based on and should be read in conjunction with the:
| separate historical financial statements as of the Company as of and for the year ended December 31, 2010 and the related notes included in Companys Annual Report on Form 10-K for the year ended December 31, 2010; |
| separate historical financial statements of Lexicon as of and for the year ended March 31, 2011 and the related notes as of and for the year ended March 31, 2011, included herein, which includes a reconciliation from U.K. GAAP to U.S. GAAP; |
| separate historical financial statements of the Company as of and for the six months ended June 30, 2011 and the related notes included in the Companys Quarterly Report on Form 10-Q for the six months ended June 30, 2011. |
The financial information for Lexicon as of June 30, 2011 and for the six months ended June 30, 2011 was derived from the unaudited accounting records of Lexicon after making adjustments to convert this financial information to U.S. GAAP and accounting policies consistent with that of the Company.
The unaudited pro forma condensed combined financial information has been presented for informational purposes only. The unaudited pro forma condensed combined financial statements were prepared in accordance with regulations of the Securities and Exchange Commission and should not be considered indicative of the financial position or results of operations that would have occurred if the acquisition had been consummated on the dates indicated, nor are they indicative of the future financial position or results of operations of the combined company. There were no material transactions between the Company and Lexicon during the periods presented in the unaudited pro forma condensed combined financial statements that would need to be eliminated. The unaudited pro forma adjustments are based on currently available information and certain assumptions that we believe are reasonable and supportable.
The transaction consummated by the acquisition will be accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) No. 805, Business Combinations. The acquisition accounting is dependent upon certain valuations and other studies that are currently subject to finalization. Accordingly, the pro forma adjustments included herein are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information and may be revised as additional information becomes available and as additional analyses are performed. Differences between these preliminary estimates reflected in these unaudited condensed combined financial statements and the final acquisition accounting may occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the combined companys future results of operations, financial position and cash flows.
The unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the Acquisition or the costs to integrate the operations of the Company and Lexicon or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.
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PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
(UNAUDITED)
(dollars and share amounts in thousands, except per share data)
The Lexicon Partnership LLP | ||||||||||||||||||||
Evercore Partners Inc. |
UK GAAP | US GAAP Adjustments (1) |
Pro Forma Adjustments |
Pro Forma Combined |
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Revenues |
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Investment Banking Revenue |
$ | 301,931 | $ | 62,016 | $ | 1,033 | $ | | $ | 364,980 | ||||||||||
Investment Management Revenue |
77,579 | | | | 77,579 | |||||||||||||||
Other Revenue, Including Interest |
22,228 | 8,281 | | (1,052 | )(b) | 29,457 | ||||||||||||||
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Total Revenues |
401,738 | 70,297 | 1,033 | (1,052 | ) | 472,016 | ||||||||||||||
Interest Expense |
22,841 | 9 | | | 22,850 | |||||||||||||||
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Net Revenues |
378,897 | 70,288 | 1,033 | (1,052 | ) | 449,166 | ||||||||||||||
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Expenses |
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Employee Compensation and Benefits |
251,917 | 41,777 | (22 | ) | 34,696 | (d) | 328,368 | |||||||||||||
Occupancy and Equipment Rental |
18,329 | 2,868 | | | 21,197 | |||||||||||||||
Professional Fees |
28,464 | 509 | | | 28,973 | |||||||||||||||
Travel and Related Expenses |
16,593 | 1,631 | 1,032 | | 19,256 | |||||||||||||||
Communications and Information Services |
6,074 | 3,070 | | | 9,144 | |||||||||||||||
Depreciation and Amortization |
10,077 | 331 | | | 10,408 | |||||||||||||||
Acquisition and Transition Costs |
3,399 | | | | 3,399 | |||||||||||||||
Other Operating Expenses |
9,802 | 2,055 | (25 | ) | | 11,832 | ||||||||||||||
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Total Expenses |
344,655 | 52,241 | 985 | 34,696 | 432,577 | |||||||||||||||
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Income Before Income from Equity Method Investments and Income Taxes |
34,242 | 18,047 | 48 | (35,748 | ) | 16,589 | ||||||||||||||
Income (Loss) from Equity Method Investments |
(557 | ) | | | | (557 | ) | |||||||||||||
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Income Before Income Taxes |
33,685 | 18,047 | 48 | (35,748 | ) | 16,032 | ||||||||||||||
Provision for Income Taxes |
15,880 | 4,906 | 14 | (8,390 | )(g) | 12,410 | ||||||||||||||
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Net Income |
17,805 | 13,141 | 34 | (27,358 | ) | 3,622 | ||||||||||||||
Net Income Attributable to Noncontrolling Interest |
8,851 | | | (7,216 | )(h) | 1,635 | ||||||||||||||
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Net Income Attributable to Evercore Partners Inc. |
$ | 8,954 | $ | 13,141 | $ | 34 | $ | (20,142 | ) | $ | 1,987 | |||||||||
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Net Income Attributable to Evercore Partners Inc. Common Shareholders |
$ | 8,880 | $ | | $ | | $ | | $ | 1,913 | ||||||||||
Weighted Average Shares of Class A Common Stock Outstanding |
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Basic |
19,655 | | | 28 | (e) | 19,683 | ||||||||||||||
Diluted |
22,968 | | | 680 | (e) | 23,648 | ||||||||||||||
Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders |
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Basic |
$ | 0.45 | $ | | $ | | $ | | $ | 0.10 | ||||||||||
Diluted |
$ | 0.39 | $ | | $ | | $ | | $ | 0.08 |
(1) | See Note 19 to the separate historical financial statements of Lexicon as of and for the year ended March 31, 2011 and the related notes as of and for the year ended March 31, 2011, included herein, which includes a reconciliation from U.K. GAAP to U.S. GAAP. |
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(UNAUDITED)
(dollars and share amounts in thousands, except per share data)
The Lexicon Partnership LLP | ||||||||||||||||||||
Evercore Partners Inc. |
UK GAAP | US GAAP Adjustments (1) |
Pro Forma Adjustments |
Pro Forma Combined |
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Revenues |
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Investment Banking Revenue |
$ | 197,748 | $ | 37,176 | $ | 485 | $ | | $ | 235,409 | ||||||||||
Investment Management Revenue |
54,960 | | | | 54,960 | |||||||||||||||
Other Revenue, Including Interest |
7,971 | 7,500 | | (127 | )(b) | 15,344 | ||||||||||||||
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Total Revenues |
260,679 | 44,676 | 485 | (127 | ) | 305,713 | ||||||||||||||
Interest Expense |
10,843 | 3 | | | 10,846 | |||||||||||||||
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Net Revenues |
249,836 | 44,673 | 485 | (127 | ) | 294,867 | ||||||||||||||
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Expenses |
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Employee Compensation and Benefits |
171,024 | 25,858 | 129 | 15,679 | (d) | 212,690 | ||||||||||||||
Occupancy and Equipment Rental |
10,917 | 1,454 | | | 12,371 | |||||||||||||||
Professional Fees |
16,219 | 238 | | | 16,457 | |||||||||||||||
Travel and Related Expenses |
10,013 | 871 | 485 | | 11,369 | |||||||||||||||
Communications and Information Services |
4,182 | 1,521 | | | 5,703 | |||||||||||||||
Depreciation and Amortization |
6,062 | 183 | | | 6,245 | |||||||||||||||
Acquisition and Transition Costs |
1,134 | | | (850 | )(a) | 284 | ||||||||||||||
Other Operating Expenses |
7,943 | 1,222 | 29 | | 9,194 | |||||||||||||||
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Total Expenses |
227,494 | 31,347 | 643 | 14,829 | 274,313 | |||||||||||||||
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Income Before Income from Equity Method Investments and Income Taxes |
22,342 | 13,326 | (158 | ) | (14,956 | ) | 20,554 | |||||||||||||
Income from Equity Method Investments |
469 | | | 469 | ||||||||||||||||
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Income Before Income Taxes |
22,811 | 13,326 | (158 | ) | (14,956 | ) | 21,023 | |||||||||||||
Provision for Income Taxes |
10,235 | 4,942 | (44 | ) | (3,365 | )(g) | 11,768 | |||||||||||||
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Net Income |
12,576 | 8,384 | (114 | ) | (11,591 | ) | 9,255 | |||||||||||||
Net Income Attributable to Noncontrolling Interest |
6,727 | | | (1,323 | )(h) | 5,404 | ||||||||||||||
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Net Income Attributable to Evercore Partners Inc. |
$ | 5,849 | $ | 8,384 | $ | (114 | ) | $ | (10,268 | ) | $ | 3,851 | ||||||||
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Net Income Attributable to Evercore Partners Inc. Common Shareholders |
$ | 5,807 | $ | | $ | | $ | | $ | 3,809 | ||||||||||
Weighted Average Shares of Class A Common Stock Outstanding |
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Basic |
23,204 | | | 112 | (e) | 23,316 | ||||||||||||||
Diluted |
26,956 | | | 1,167 | (e) | 28,123 | ||||||||||||||
Net Income Per Share Attributable to Evercore Partners Inc. Common Shareholders |
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Basic |
$ | 0.25 | $ | | $ | | $ | | $ | 0.16 | ||||||||||
Diluted |
$ | 0.22 | $ | | $ | | $ | | $ | 0.14 |
(1) | See Note 19 to the separate historical financial statements of Lexicon as of and for the year ended March 31, 2011 and the related notes as of and for the year ended March 31, 2011, included herein, which includes a reconciliation from U.K. GAAP to U.S. GAAP. |
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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PRO FORMA CONDENSED COMBINED
STATEMENT OF FINANCIAL CONDITION
AS OF JUNE 30, 2011
(UNAUDITED)
(dollars in thousands)
The Lexicon Partnership LLP | ||||||||||||||||||||
Evercore Partners Inc. |
UK GAAP | US GAAP Adjustments (1) |
Pro Forma Adjustments |
Pro Forma Combined |
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Assets |
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Current Assets |
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Cash and Cash Equivalents |
$ | 204,449 | $ | 30,108 | $ | | $ | (67,088 | )(c)(f)(i) | $ | 167,469 | |||||||||
Marketable Securities |
73,456 | | | | 73,456 | |||||||||||||||
Financial Instruments Owned and Pledged as Collateral at Fair Value |
83,311 | | | | 83,311 | |||||||||||||||
Securities Purchased Under Agreements to Resell |
100,598 | | | | 100,598 | |||||||||||||||
Accounts Receivable |
83,088 | 7,688 | | | 90,776 | |||||||||||||||
Receivable from Employees and Related Parties |
6,151 | 139 | | | 6,290 | |||||||||||||||
Deferred Tax Assets - Current |
5,092 | 468 | (95 | ) | | 5,465 | ||||||||||||||
Other Current Assets |
16,540 | 2,457 | | 2,346 | (i) | 21,343 | ||||||||||||||
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Total Current Assets |
572,685 | 40,860 | (95 | ) | (64,742 | ) | 548,708 | |||||||||||||
Investments |
67,024 | | | | 67,024 | |||||||||||||||
Deferred Tax Assets - Non-Current |
182,550 | | 111 | | 182,661 | |||||||||||||||
Furniture, Equipment and Leasehold Improvements |
14,605 | 402 | | | 15,007 | |||||||||||||||
Goodwill |
140,777 | | | 42,163 | (c) | 182,940 | ||||||||||||||
Intangible Assets |
44,785 | | | 7,164 | (c) | 51,949 | ||||||||||||||
Assets Segregated for Bank Regulatory Requirements |
10,200 | | | | 10,200 | |||||||||||||||
Other Assets |
9,172 | 368 | | | 9,540 | |||||||||||||||
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Total Assets |
$ | 1,041,798 | $ | 41,630 | $ | 16 | $ | (15,415 | ) | $ | 1,068,029 | |||||||||
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Liabilities and Equity |
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Current Liabilities |
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Accrued Compensation and Benefits |
$ | 63,129 | $ | 1,729 | $ | | $ | | $ | 64,858 | ||||||||||
Accounts Payable and Accrued Expenses |
14,887 | 3,486 | 128 | | 18,501 | |||||||||||||||
Securities Sold Under Agreements to Repurchase |
184,062 | | | | 184,062 | |||||||||||||||
Payable to Employees and Related Parties |
4,031 | 1,416 | | | 5,447 | |||||||||||||||
Taxes Payable |
1,566 | 3,997 | | | 5,563 | |||||||||||||||
Other Current Liabilities |
16,698 | 10,115 | (70 | ) | 9,274 | (c) | 36,017 | |||||||||||||
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Total Current Liabilities |
284,373 | 20,743 | 58 | 9,274 | 314,448 | |||||||||||||||
Notes Payable |
98,858 | | | | 98,858 | |||||||||||||||
Amounts Due Pursuant to Tax Receivable Agreements |
142,422 | | | | 142,422 | |||||||||||||||
Other Long-term Liabilities |
16,455 | 8,072 | | (8,318 | )(f) | 16,209 | ||||||||||||||
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Total Liabilities |
542,108 | 28,815 | 58 | 956 | 571,937 | |||||||||||||||
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Redeemable Noncontrolling Interest |
25,448 | | | | 25,448 | |||||||||||||||
Equity |
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Evercore Partners Inc. Stockholders Equity |
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Common Stock |
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Class A, par value $0.01 per share |
284 | | | | 284 | |||||||||||||||
Class B, par value $0.01 per share |
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Additional Paid-In-Capital/Members Capital |
530,106 | 12,812 | (48 | ) | (12,107 | )(c) | 530,763 | |||||||||||||
Accumulated Other Comprehensive Income (Loss) |
(2,626 | ) | 3 | 6 | | (2,617 | ) | |||||||||||||
Retained Earnings (Deficit) |
(64,907 | ) | | | (2,995 | )(i) | (67,902 | ) | ||||||||||||
Treasury Stock at Cost |
(51,288 | ) | | | | (51,288 | ) | |||||||||||||
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Total Evercore Partners Inc. Stockholders Equity |
411,569 | 12,815 | (42 | ) | (15,102 | ) | 409,240 | |||||||||||||
Noncontrolling Interest |
62,673 | | | (1,269 | )(i) | 61,404 | ||||||||||||||
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Total Equity |
474,242 | 12,815 | (42 | ) | (16,371 | ) | 470,644 | |||||||||||||
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Total Liabilities and Equity |
$ | 1,041,798 | $ | 41,630 | $ | 16 | $ | (15,415 | ) | $ | 1,068,029 | |||||||||
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(1) | See Note 19 to the separate historical financial statements of Lexicon as of and for the year ended March 31, 2011 and the related notes as of and for the year ended March 31, 2011, included herein, which includes a reconciliation from U.K. GAAP to U.S. GAAP. |
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
5
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(dollars in thousands)
Note 1 Transaction Description
On August 19, 2011, the Company completed its previously announced acquisition of all of the outstanding partnership interests of Lexicon, in accordance with the definitive sale and purchase agreement entered into on June 7, 2011, for consideration consisting of cash and stock. In the aggregate, the sellers will receive approximately £46,142, or $76,167, in cash and 1,911,360 shares of the Companys Class A common stock, par value $0.01 per share (Class A Shares). Of the total consideration, £31,598, or $52,160, in cash was paid and 27,867 Class A Shares were issued to the sellers at closing, and approximately £5,619, or $9,274, in cash will be paid to the sellers on December 31, 2011.
Payment of the remaining approximately £8,925, or $14,733, in cash and 1,883,493 Class A Shares will be deferred and will vest in various installments over a four-year future service period. Accordingly, these amounts will be expensed over the vesting period. This deferred consideration, whether in the form of Class A Shares or cash, upon vesting, will be delivered to the sellers on the earlier of (i) the first anniversary of the relevant vesting date and (ii) the date of the first secondary offering by the Company following the relevant vesting date. Vesting of the Class A Shares and cash consideration will accelerate in certain circumstances, including, but not limited to, a sellers termination without cause, a qualifying retirement or upon a change of control.
In addition, upon closing the Company funded the repayment of £5,039, or $8,318, of outstanding Lexicon capital notes.
Note 2 Basis of Presentation
The unaudited pro forma condensed combined financial information was prepared using U.S. GAAP and was based on the historical consolidated financial statements of the Company and Lexicon. All pro forma financial statements use the Companys period end date and no adjustments were made to Lexicons reported information for its different period end dates for the year ended statement of operations.
The acquisition method of accounting is based on the Financial Accounting Standards Boards Accounting Standards Codification (ASC) Subtopic 805-10, Business Combinations, and uses the fair value concepts defined in ASC Subtopic 820-10, Fair Value Measurements and Disclosures, which the Company has adopted as required. The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting under U.S. GAAP. ASC Subtopic 805-10 requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. In addition, ASC Subtopic 805-10 establishes that the consideration transferred be measured at the closing date of the Acquisition at the then-current market price.
ASC Subtopic 820-10 defines the term fair value and sets forth the valuation requirements for any asset or liability measured at fair value, expands related disclosure requirements and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined in ASC Subtopic 820-10 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This is an exit price concept for the valuation of the asset or liability. In addition, market participants are assumed to be buyers and sellers in
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the principal (or the most advantageous) market for the asset or liability. Fair value measurements for an asset assume the highest and best use by these market participants. As a result of these standards, the Company may be required to record assets which are not intended to be used or sold and/or to value assets at fair value measures that do not reflect the Companys intended use of those assets. Many of these fair value measurements can be highly subjective and it is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.
Under the acquisition method of accounting, the assets acquired and liabilities assumed will be recorded as of the completion of the Acquisition, at their respective fair values and added to those of the Company. Financial statements and reported results of operations of the Company issued after completion of the Acquisition will reflect these values, but will not be retroactively restated to reflect the historical financial position or results of operations of Lexicon.
Under ASC Subtopic 805-10, acquisition-related transaction costs ( i.e., advisory, legal, valuation, and other professional fees) and certain acquisition-related restructuring charges impacting the target company are not included as a component of consideration transferred but are accounted for as expenses in the periods in which the costs are incurred. The unaudited pro forma condensed combined financial statements do not reflect any acquisition-related restructuring charges incurred in connection with the Acquisition but these costs will be expensed as incurred. Acquisition-related transaction costs were $850 for the six months ended June 30, 2011.
The historical unaudited condensed combined statement of financial condition for Lexicon was prepared in British pounds and has been translated to U. S. Dollars using a rate of $1.602, which approximates the British pound conversion rate to U.S. Dollars on June 30, 2011. The Lexicon historical audited condensed combined statement of operations for the year ended March 31, 2011 and unaudited condensed combined statement of operations for the six months ended June 30, 2011 have been translated to U.S. Dollars using exchange rates of $1.556 and $1.616, respectively, which approximate the average British pound conversion rate to U.S. Dollars for the applicable period. The pro forma adjustments have been translated to U.S. Dollars using an exchange rate of $1.651, which approximates the British pound conversion rate to U.S. Dollars on August 19, 2011, at the time of the closing of the transaction.
Note 3 Significant Accounting Policies
At this time, the Company is not aware of any differences that would have a material impact on the combined financial statements. The unaudited pro forma condensed combined financial statements do not assume any differences in accounting policies.
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NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(dollars in thousands)
Note 4 Consideration Transferred
In accordance with U.S. GAAP, the fair value of the Companys class A common stock issued as part of the consideration transferred was measured on the closing date of the Acquisition at the then-current market price. The following provides a reasonable indication of consideration transferred to effect the acquisition of Lexicon:
Shares Issued | Share Price | Fair Value | ||||||||||
Transferred At Closing: |
||||||||||||
Cash |
$ | 52,160 | ||||||||||
Class A Common Stock (1) |
27,867 | $ | 22.81 | 636 | ||||||||
Fair Value of Deferred Cash Consideration (2) |
9,274 | |||||||||||
|
|
|||||||||||
Total Consideration Transferred at Closing |
$ | 62,070 | ||||||||||
|
|
(1) | Value of Class A Common Stock determined utilizing closing share price on August 19, 2011. |
(2) | Deferred cash consideration was not discounted and the effect of discounting would have an immaterial effect as amounts will be paid at December 31, 2011. |
Note 5 Assets Acquired and Liabilities Assumed
The following is a summary of the assets acquired and liabilities assumed by the Company in the Acquisition as if it had occurred on June 30, 2011:
Fair Value of Assets Acquired and Liabilities Assumed: |
||||
Cash and Cash Equivalents |
$ | 21,812 | ||
Accounts Receivable |
7,821 | |||
Prepaid Expenses |
11,627 | |||
Fixed Assets |
429 | |||
Other Assets |
964 | |||
Intangible Assets |
7,164 | |||
Current Liabilities |
(21,592 | ) | ||
Long-term Debt |
(8,318 | ) | ||
|
|
|||
Identifiable Net Assets |
$ | 19,907 | ||
|
|
Note 6 Pro Forma Adjustments
Adjustments included in the column under the heading Pro Forma Adjustments represent the following:
(a) | To reflect advisory and legal costs incurred, which are directly attributable to the Acquisition, but which are not expected to have a continuing impact on the combined companys results, as a reduction from Acquisition and Transition Costs on the Statement of Operations of $850 for the six months ended June 30, 2011. |
(b) | To reflect the estimate of forgone interest and investment income on the combined companys cash and cash equivalents used to effect the Acquisition, for both the initial cash consideration paid as well as the cash used to redeem Lexicons capital notes, as a decrease in Other Revenue, Including Interest, on the Statement of Operations of $1,052 and $127 for the twelve months ended December 31, 2010 and six months ended June 30, 2011, respectively. These estimates were based on the actual yields earned on the Companys cash and cash equivalents for the year ended December 31, 2010 and six months ended June 30, 2011. |
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NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(dollars in thousands)
(c) | To reflect the consideration transferred in conjunction with the Acquisition, Goodwill and Intangible Assets, based on a preliminary purchase price allocation. These adjustments resulted in a decrease to Cash and Cash Equivalents of $52,160, an increase in Goodwill of $42,163, an increase in Intangible Assets of $7,164, an increase to Other Current Liabilities of $9,274 and a net decrease to Additional Paid-in-Capital/Members Capital of $12,107, on the Statement of Financial Condition. |
Amount | ||||
Purchase Price: |
||||
Cash Paid |
$ | 52,160 | ||
Fair Value of Shares Issued |
636 | |||
Fair Value of Deferred Cash Consideration |
9,274 | |||
|
|
|||
Total Fair Value of Purchase Price |
62,070 | |||
|
|
|||
Fair Value of Assets Acquired and Liabilities Assumed: |
||||
Cash and Cash Equivalents |
21,812 | |||
Accounts Receivable |
7,821 | |||
Prepaid Expenses |
11,627 | |||
Fixed Assets |
429 | |||
Other Assets |
964 | |||
Intangible Assets |
7,164 | |||
Current Liabilities |
(21,592 | ) | ||
Long-term Debt |
(8,318 | ) | ||
|
|
|||
Identifiable Net Assets |
19,907 | |||
|
|
|||
Goodwill Resulting from Business Combination |
$ | 42,163 | ||
|
|
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NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(dollars in thousands)
(d) | To reflect compensation awarded in conjunction with the Acquisition on the Statement of Operations: |
i. | Amortization of Restricted Stock and Deferred Cash Awards: |
Amortization | ||||||||
Twelve Months Ended December 31, 2010 |
Six Months Ended June 30, 2011 |
|||||||
Restricted Stock Awards (1,883,493 shares at $22.735 per share) |
$ | 18,084 | $ | 7,980 | ||||
Deferred Cash Awards (Total deferred cash awards of $14,733) |
$ | 6,762 | $ | 2,942 |
Note: Awards vest under graded vesting in various installments over a four-year period. The Company utilized the average of the high and low share price on August 19, 2011.
ii. | Amortization of Retention Awards: |
Amortization | ||||||||
Twelve Months Ended December 31, 2010 |
Six Months Ended June 30, 2011 |
|||||||
Share-based Retention Awards (135,138 shares at $22.735 per share) |
$ | 1,419 | $ | 713 | ||||
Cash-based Retention Awards (Total cash-based retention awards of $1,892) |
$ | 1,183 | $ | 420 |
Note: Share-based Awards and Cash-based Awards vest over a four-year period and two-year period, respectively, from the date of the transaction. The Company utilized the average of the high and low share price on August 19, 2011.
iii. | To reflect other compensation adjustments for Lexicon employees of approximately $7,248 and $3,624 for the twelve months ended December 31, 2010 and six months ended June 30, 2011, respectively. |
(e) | To reflect in the Companys weighted average shares of Class A common stock outstanding, 27,867 Class A Shares issued at closing as part of the purchase price, and the dilutive effects under the Treasury Stock Method of 1,883,493 deferred Class A Shares, which were issued to the sellers at closing as part of the initial consideration, treated as compensation, and 135,138 restricted stock units issued to Lexicon employees as retention awards, all of which are assumed outstanding for the full year ended December 31, 2010 and the six months ended June 30, 2011. |
(f) | To reflect the redemption of Lexicons capital notes, resulting in a decrease in Cash and Cash Equivalents and Other Long-term Liabilities of $8,318 on the Statement of Financial Condition. |
(g) | To reflect income tax adjustments associated with the Pro Forma Adjustments and the fact that Lexicon is now under a U.S. corporate holding company. The Company assumed a combined U.S. federal and state statutory rate of 40% and 41%, for the twelve months ended December 31, 2010 and six months ended June 30, 2011, respectively, when estimating all tax impacts of the acquisition. The effective tax rate of the combined company could be significantly different than the rates assumed for purposes of preparing these pro forma financials for a variety of factors, including post-acquisition activities. |
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NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(dollars in thousands)
(h) | To reflect the impact on Noncontrolling Interest for the Companys immediate contribution of Lexicon to Evercore LP, a Delaware limited partnership, for which the Companys economic interest was 67% and 80% for the twelve months ended December 31, 2010 and six months ended June 30, 2011, respectively. The Noncontrolling Interest adjustment is computed based on the after-tax effect of Lexicons earnings and the pro forma adjustments impacting Evercore LP and its subsidiaries. |
(i) | To reflect expenses incurred in conjunction with the acquisition, and related tax effects, of $1,915 related to the payment of the cash-based retention awards, $1,895 related to an introducing fee and $2,800 related to other cash compensation adjustments. These expenses resulted in a decrease to Cash and Cash Equivalents of $6,610, an increase in Other Current Assets of $2,346, a decrease in Retained Earnings of $2,995 and a decrease in Noncontrolling Interest of $1,269 on the Statement of Financial Condition. |
Note 7 Amortization of Intangible Assets
The above adjustments exclude the impact of amortization expenses of $7,164 associated with the intangible assets identified in connection with the Acquisition. The intangible assets acquired in the acquisition represent customer related intangible assets, which have an estimated useful life of six months.
11