GREENHILL & CO INC - FORM 10-Q

Attached files

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EX-10.2 - EXHIBIT 10.2 - GREENHILL & CO INC	ex102-q22017.htm
EX-32.1 - EXHIBIT 32.1 - GREENHILL & CO INC	ex321-q22017.htm
EX-32.2 - EXHIBIT 32.2 - GREENHILL & CO INC	ex322-q22017.htm
EX-31.2 - EXHIBIT 31.2 - GREENHILL & CO INC	ex312-q22017.htm
EX-31.1 - EXHIBIT 31.1 - GREENHILL & CO INC	ex311-q22017.htm
EX-10.3 - EXHIBIT 10.3 - GREENHILL & CO INC	ex103-q22017.htm
EX-10.1 - EXHIBIT 10.1 - GREENHILL & CO INC	ex101-q22017.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

_____________________________________________________________________________________

FORM 10-Q

_____________________________________________________________________________________

(Mark one)



þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended June 30, 2017
OR
¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to .

Commission file number 001-32147

______________________________________________________________________________________

GREENHILL & CO., INC.

(Exact Name of Registrant as Specified in its Charter)

______________________________________________________________________________________



Delaware	51-0500737
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

300 Park Avenue New York, New York	10022 (ZIP Code)
(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (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 þ 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 þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer ¨	Accelerated filer þ	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller reporting company)	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

As of August 1, 2017, there were 29,638,437 shares of the registrant's common stock outstanding.

TABLE OF CONTENTS



		Page
PART I.	Financial Information
1.	Financial Statements
	Condensed Consolidated Statements of Financial Condition as of June 30, 2017 (unaudited) and December 31, 2016	4
	Condensed Consolidated Statements of Income for the three and six months ended June 30, 2017 and 2016 (unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2017 and 2016 (unaudited)	6
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the six months ended June 30, 2017 (unaudited) and the year ended December 31, 2016	7
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

3.	Quantitative and Qualitative Disclosures About Market Risk	29

4.	Controls and Procedures	29

PART II.	Other Information
1.	Legal Proceedings	29

1A.	Risk Factors	29

2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

3.	Defaults Upon Senior Securities	29

4.	Mine Safety Disclosures	30

5.	Other Information	30

6.	Exhibits	E-1

Signatures		II-1

Exhibits

AVAILABLE INFORMATION

Greenhill & Co., Inc. files current, annual and quarterly reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the United States Securities and Exchange Commission (the “SEC”). You may read and copy any document the company files at the SEC's public reference room located at 100 F Street, N.E., 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.

Our public internet site is http://www.greenhill.com. We make available free of charge through our internet site, via a link to the SEC's internet site at http://www.sec.gov, our 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 Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Also posted on our website in the “Corporate Governance” section, and available in print upon request of any stockholder to our Investor Relations Department, are charters for our Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee, our Corporate Governance Guidelines, Related Party Transaction Policy and Code of Business Conduct & Ethics governing our directors, officers and employees. You may need to have Adobe Acrobat Reader software installed on your computer to view these documents, which are in PDF format.

Part I. Financial Information

Item 1. Financial Statements

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition

(in thousands except share and per share data)



	As of
	June 30,			December 31,
	2017			2016
	(unaudited)
Assets
Cash and cash equivalents ($4.4 million and $4.3 million restricted from use at June 30, 2017 and December 31, 2016, respectively)	$	68,022		$	98,313
Advisory fees receivable, net of allowance for doubtful accounts of $0.0 million at June 30, 2017 and December 31, 2016	50,120			68,140
Other receivables	3,716			2,830
Property and equipment, net of accumulated depreciation of $60.4 million at June 30, 2017 and $59.0 million at December 31, 2016	8,650			8,764
Goodwill	215,568			208,186
Deferred tax asset, net	55,585			62,108
Other assets	7,950			8,341
Total assets	$	409,611		$	456,682
Liabilities and Equity
Compensation payable	$	22,700		$	37,527
Accounts payable and accrued expenses	8,771			9,297
Current income taxes payable	5,635			18,968
Bank revolving loan payable	68,650			64,070
Bank term loans payable	11,250			16,875
Contingent obligation due selling unitholders of Cogent	7,582			15,095
Deferred tax liability	4,426			3,667
Total liabilities	129,014			165,499
Common stock, par value $0.01 per share; 100,000,000 shares authorized, 42,433,652 and 41,377,614 shares issued as of June 30, 2017 and December 31, 2016, respectively; 29,605,106 and 28,981,189 shares outstanding as of June 30, 2017 and December 31, 2016, respectively	424			414
Restricted stock units	65,946			85,907
Additional paid-in capital	775,390			734,728
Exchangeable shares of subsidiary; 257,156 shares issued as of June 30, 2017 and December 31, 2016; 32,804 shares outstanding as of June 30, 2017 and December 31, 2016	1,958			1,958
Retained earnings	86,503			111,798
Accumulated other comprehensive income (loss)	(25,667		)	(32,398		)
Treasury stock, at cost, par value $0.01 per share; 12,828,546 and 12,396,425 shares as of June 30, 2017 and December 31, 2016, respectively	(623,957		)	(611,224		)
Stockholders’ equity	280,597			291,183
Total liabilities and equity	$	409,611		$	456,682

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)

(in thousands except share and per share data)



	For the Three Months Ended, June 30,				For the Six Months Ended, June 30,
	2017		2016		2017		2016
Revenues
Advisory revenues	$	67,038	$	90,265	$	123,738	$	156,818
Investment revenues	231		220		460		532
Total revenues	67,269		90,485		124,198		157,350
Expenses
Employee compensation and benefits	38,843		44,110		82,893		88,616
Occupancy and equipment rental	5,290		4,879		9,998		9,550
Depreciation and amortization	760		791		1,546		1,639
Information services	2,222		2,140		4,634		4,510
Professional fees	2,001		1,749		3,611		3,258
Travel related expenses	3,494		2,958		6,214		5,774
Interest expense	789		802		1,608		1,548
Other operating expenses	4,294		3,191		1,944		6,132
Total expenses	57,693		60,620		112,448		121,027
Income before taxes	9,576		29,865		11,750		36,323
Provision for taxes	3,331		10,237		6,251		12,338
Net income allocated to common stockholders	$	6,245	$	19,628	$	5,499	$	23,985
Average shares outstanding:
Basic	31,933,830		31,712,959		32,151,409		31,898,939
Diluted	31,977,479		31,712,959		32,251,500		31,898,939
Earnings per share:
Basic	$	0.20	$	0.62	$	0.17	$	0.75
Diluted	$	0.20	$	0.62	$	0.17	$	0.75
Dividends declared and paid per share	$	0.45	$	0.45	$	0.90	$	0.90

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (unaudited)

(in thousands)



	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2017		2016			2017		2016
Net income allocated to common stockholders	$	6,245	$	19,628		$	5,499	$	23,985
Currency translation adjustment, net of tax	2,115		(3,070		)	6,731		960
Comprehensive income allocated to common stockholders	$	8,360	$	16,558		$	12,230	$	24,945

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders' Equity

(in thousands, except for per share data)



	Six Months Ended June 30,			Year Ended December 31,
	2017			2016
	(unaudited)
Common stock, par value $0.01 per share
Common stock, beginning of the period	$	414		$	405
Common stock issued	10			9
Common stock, end of the period	424			414
Restricted stock units
Restricted stock units, beginning of the period	85,907			84,969
Restricted stock units recognized, net of forfeitures	20,263			45,880
Restricted stock units delivered	(40,224		)	(44,942		)
Restricted stock units, end of the period	65,946			85,907
Additional paid-in capital
Additional paid-in capital, beginning of the period	734,728			697,607
Common stock issued and contingently issued common stock	39,815			44,789
Tax (expense) from the delivery of restricted stock units	847			(7,668		)
Additional paid-in capital, end of the period	775,390			734,728
Exchangeable shares of subsidiary
Exchangeable shares of subsidiary, beginning of the period	1,958			1,958
Exchangeable shares of subsidiary delivered	—			—
Exchangeable shares of subsidiary, end of the period	1,958			1,958
Retained earnings
Retained earnings, beginning of the period	111,798			109,860
Dividends	(30,794		)	(61,609		)
Tax benefit from payment of restricted stock unit dividends	—			2,785
Net income allocated to common stockholders	5,499			60,762
Retained earnings, end of the period	86,503			111,798
Accumulated other comprehensive income (loss)
Accumulated other comprehensive income (loss), beginning of the period	(32,398		)	(28,405		)
Currency translation adjustment, net of tax	6,731			(3,993		)
Accumulated other comprehensive income (loss), end of the period	(25,667		)	(32,398		)
Treasury stock, at cost, par value $0.01 per share
Treasury stock, beginning of the period	(611,224		)	(583,038		)
Repurchased	(12,733		)	(28,186		)
Treasury stock, end of the period	(623,957		)	(611,224		)
Total stockholders' equity	$	280,597		$	291,183

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)



	For the Six Months Ended June 30,
	2017			2016
Operating activities:
Net income allocated to common stockholders	$	5,499		$	23,985
Adjustments to reconcile net income allocated to common stockholders to net cash provided by (used in) operating activities:
Non-cash items included in net income allocated to common stockholders:
Depreciation and amortization	1,546			1,639
Net investment (gains) losses	25			35
Restricted stock units recognized	20,263			20,217
Deferred taxes	3,895			(882		)
Loss (gain) on fair value of contingent obligation	(7,513		)	1,457
Changes in operating assets and liabilities:
Advisory fees receivable	18,020			(2,504		)
Other receivables and assets	(580		)	665
Deferred tax asset, net	—			7,345
Compensation payable	(14,827		)	(3,612		)
Accounts payable and accrued expenses	(926		)	1,960
Current income taxes payable	(13,332		)	(5,283		)
Net cash provided by (used in) operating activities	12,070			45,022
Investing activities:
Distributions from investments	60			—
Purchases of property and equipment	(1,187		)	(1,013		)
Net cash used in investing activities	(1,127		)	(1,013		)
Financing activities:
Proceeds from revolving bank loan	42,430			57,329
Repayment of revolving bank loan	(37,850		)	(42,229		)
Repayment of bank term loans	(5,625		)	(11,250		)
Dividends paid	(30,794		)	(31,002		)
Purchase of treasury stock	(12,733		)	(12,753		)
Net tax (cost) from the delivery of restricted stock units and payment of dividend equivalents	—			(5,726		)
Net cash used in financing activities	(44,572		)	(45,631		)
Effect of exchange rate changes on cash and cash equivalents	3,338			(4,555		)
Net decrease in cash and cash equivalents	(30,291		)	(6,177		)
Cash and cash equivalents, beginning of period	98,313			69,962
Cash and cash equivalents, end of period	$	68,022		$	63,785
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,857		$	1,529
Cash paid for taxes, net of refunds	$	16,225		$	14,364

See accompanying notes to condensed consolidated financial statements (unaudited).

Greenhill & Co., Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1 — Organization

Greenhill & Co., Inc. and subsidiaries (the "Company" or "Greenhill") is a leading independent investment bank that provides financial and strategic advice on significant domestic and cross-border mergers and acquisitions, restructurings, financings, capital raisings and other strategic transactions to a diverse client base, including corporations, partnerships, institutions and governments globally. We act for clients located throughout the world from our global offices in the United States, Australia, Brazil, Canada, Germany, Hong Kong, Japan, Sweden, and the United Kingdom.

The Company's wholly-owned subsidiaries provide advisory services in various jurisdictions. Our most significant operating entities include: Greenhill & Co., LLC (“G&Co”), Greenhill & Co. International LLP (“GCI”), Greenhill & Co. Europe LLP ("GCE"), Greenhill & Co. Australia Pty Limited (“Greenhill Australia”) and Greenhill Cogent, LP ("GC LP").

G&Co is engaged in investment banking activities principally in the United States. G&Co is registered as a broker-dealer with the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”), and is licensed in all 50 states and the District of Columbia. GCI and GCE are engaged in investment banking activities in the United Kingdom and Europe, respectively, and are subject to regulation by the U.K. Financial Conduct Authority (“FCA”). Greenhill Australia engages in investment banking activities in Australia and New Zealand and is licensed and subject to regulation by the Australian Securities and Investment Commission (“ASIC”). GC LP is engaged in capital advisory services to institutional investors principally in the United States and is registered as a broker-dealer with the SEC and FINRA.

The Company also operates in other locations throughout the world which are subject to regulation by other governmental and regulatory bodies and self-regulatory authorities.

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 (U.S. GAAP), which require management to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and these footnotes, including investment valuations, compensation accruals and other matters. Management believes that the estimates used in preparing its condensed consolidated financial statements are reasonable and prudent. Actual results could differ materially from those estimates. Certain reclassifications have been made to prior year information to conform to current year presentation.

The condensed consolidated financial statements of the Company include all consolidated accounts of Greenhill & Co., Inc. and all other entities in which the Company has a controlling interest after eliminations of all significant inter-company accounts and transactions.

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, 2016 included in the Company's Annual Report on Form 10-K filed with the SEC. The condensed consolidated financial information as of December 31, 2016 has been derived from audited consolidated financial statements not included herein. The results of operations for interim periods are not necessarily indicative of results for the entire year.

Revenue Recognition

Advisory Revenues

It is the Company's accounting policy to recognize revenue when (i) there is persuasive evidence of an arrangement with a client, (ii) the agreed-upon services have been completed and delivered to the client or the transaction or events noted in the engagement letter are determined to be substantially complete, (iii) fees are fixed and determinable, and (iv) collection is reasonably assured.

The Company recognizes advisory fee revenues for mergers and acquisitions or financing advisory and restructuring engagements when the services related to the underlying transactions are completed in accordance with the terms of the engagement letter and all other requirements for revenue recognition are satisfied.

The Company recognizes capital advisory fees from primary capital raising transactions at the time of the client's acceptance of capital or capital commitments to a fund in accordance with the terms of the engagement letter. Generally, fee revenue is

determined based upon a fixed percentage of capital committed to the fund. For multiple closings, revenue is recognized at each interim closing based on the amount of capital committed at each closing at the fixed fee percentage. At the final closing, revenue is recognized at the fixed percentage for the amount of capital committed since the last interim closing.

The Company recognizes capital advisory fees from secondary market transactions at the time the sale or transfer of the capital interest is completed in accordance with the terms of the engagement letter. Generally, fee revenue is determined based upon a fixed percentage of the transaction value.

While the majority of the Company's fee revenue is earned at the conclusion of a transaction or closing of a fund, on-going retainer fees, substantially all of which relate to non-success based strategic advisory and financing advisory and restructuring assignments, are also earned and recognized as advisory fee revenue 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 advisory engagements. Expenses are reported net of such client reimbursements. Client reimbursements totaled $1.0 million and $1.3 million for the three months ended June 30, 2017 and 2016, respectively, and $2.1 million and $3.2 million for each of the six months ended June 30, 2017 and 2016, respectively.

Investment Revenues

Investment revenues consist of gains (or losses) on the Company's investments in certain merchant banking funds and interest income. The Company recognizes revenue on its investments in merchant banking funds based on its allocable share of realized and unrealized gains (or losses) reported by such funds.

Cash and Cash Equivalents

The Company’s cash and cash equivalents consist of (i) cash held on deposit with financial institutions, (ii) cash equivalents and (iii) restricted cash. The Company maintains its cash and cash equivalents with financial institutions with high credit ratings. The Company considers all highly liquid investments with a maturity date of three months or less, when purchased, to be cash equivalents. Cash equivalents primarily consist of money market funds and overnight deposits.

Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. See "Note 3 — Cash and Cash Equivalents".

Advisory Fees Receivables

Receivables are stated net of an allowance for doubtful accounts. The estimate for the allowance for doubtful accounts is derived by the Company by utilizing past client transaction history and an assessment of the client’s creditworthiness. The Company recorded a bad debt expense of $0.8 million for the three and six month periods ended June 30, 2017. The Company recorded a bad debt expense of $0.3 million for the three month period ended June 30, 2016 and $0.4 million for the six month period ended June 30, 2016.

Included in the advisory fees receivable balance at June 30, 2017 and December 31, 2016 were $23.4 million and $26.1 million, respectively, of long term receivables related to primary capital advisory engagements which are generally paid in installments over a period of three years.

Included as a component of investment revenues on the condensed consolidated statements of income is interest income related to primary capital advisory engagements of $0.2 million for each of the three month periods ended June 30, 2017 and 2016, and $0.4 million for each of the six month periods ended June 30, 2017 and 2016.

Credit risk related to advisory fees receivable is disbursed across a large number of clients located in various geographic areas. The Company controls credit risk through credit approvals and monitoring procedures but does not require collateral to support accounts receivable.

Goodwill

Goodwill is the cost in excess of the fair value of identifiable net assets at acquisition date. The Company tests its goodwill for impairment at least annually. An impairment loss is triggered if the estimated fair value of an operating unit is less than estimated net book value. Such loss is calculated as the difference between the estimated fair value of goodwill and its carrying value.

Goodwill is translated at the rate of exchange prevailing at the end of the periods presented in accordance with the accounting guidance for foreign currency translation. Any translation gain or loss is included in the foreign currency translation adjustment,

which is included as a component of other comprehensive income in the condensed consolidated statements of changes in stockholders' equity.

Other Assets

Included in other assets are the Company's investments in merchant banking funds, which are recorded under the equity method of accounting based upon the Company's proportionate share of the estimated fair value of the underlying merchant banking fund's net assets. The value of merchant banking fund investments is determined by management of the fund after giving consideration to the cost of the security, quoted market prices, the pricing of other sales of securities by 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 qualitative and quantitative factors. The funds may apply discounts to reflect the lack of liquidity and other transfer restrictions.

Restricted Stock Units

The Company accounts for its share-based compensation payments by recording the fair value of restricted stock units granted to employees as compensation expense. The restricted stock units are generally amortized over a four to five-year service period following the date of grant. Compensation expense is determined based upon the fair market value of the Company’s common stock at the date of grant. As the Company expenses the awards, the restricted stock units recognized are recorded within stockholders' equity. The restricted stock units are reclassified into common stock and additional paid-in capital upon vesting. The Company records as treasury stock the repurchase of stock delivered to its employees in settlement of tax liabilities incurred upon the vesting of restricted stock units. The Company records dividend equivalent payments on outstanding restricted stock units as a dividend payment and a charge to stockholders' equity.

Earnings per Share

The Company calculates basic earnings per share (“EPS”) by dividing net income allocated to common stockholders by the sum of (i) the weighted average number of shares outstanding for the period and (ii) the weighted average number of shares deemed issuable due to the vesting of restricted stock units for accounting purposes. See "Note 8 — Equity".

The Company calculates diluted EPS by dividing net income allocated to common stockholders by the sum of (i) basic shares per above and (ii) the dilutive effect of the common stock deliverable pursuant to restricted stock units for which future service is required. Under the treasury method, the number of shares issuable upon the vesting of restricted stock units included in the calculation of diluted EPS is the excess, if any, of the number of shares expected to be issued, less the number of shares that could be purchased by the Company with the proceeds to be received upon settlement at the average market closing price during the reporting period. See "Note 9— Earnings per Share".

Provision for Taxes

The Company accounts for taxes in accordance with the accounting guidance for income taxes which requires the recognition of tax benefits or expenses on the temporary differences between the financial reporting and tax bases of its assets and liabilities. Additionally, the Company accounts for the net tax (cost) from the delivery of restricted stock units and payment of dividend equivalents as an income tax expense or benefit. See "Note 10 — Income Taxes".

The Company follows the guidance for income taxes in recognizing, measuring, presenting and disclosing in its financial statements uncertain tax positions taken or expected to be taken on its income tax returns. Income tax expense is based on pre-tax accounting income, including adjustments made for the recognition or derecognition related to uncertain tax positions. The recognition or derecognition of income tax expense related to uncertain tax positions is determined under the guidance, and the Company's policy is to treat interest and penalties related to uncertain tax positions as part of pre-tax income.

Deferred tax assets and liabilities are recognized for the future tax attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period of change. Management applies the “more-likely-than-not criteria” when determining tax benefits.

Foreign Currency Translation

Assets and liabilities denominated in foreign currencies have been translated at rates of exchange prevailing at the end of the periods presented in accordance with the accounting guidance for foreign currency translation. Revenues 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, which is included as a component of other comprehensive

income (loss) in the condensed consolidated statements of changes in stockholders' equity. Foreign currency transaction gains and losses are included in the condensed consolidated statements of income.

Financial Instruments and Fair Value

The Company accounts for financial instruments measured at fair value in accordance with accounting guidance for fair value measurements and disclosures which establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the pronouncement are described below:

Basis of Fair Value Measurement

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities that are subject to these disclosures. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3. Transfers between levels are recognized as of the end of the period in which they occur. See "Note 5 — Fair Value of Financial Instruments".

Fair Value of Other Financial Instruments

The Company believes that the carrying values of all other financial instruments presented in the condensed consolidated statements of financial condition approximate their fair value generally due to their short-term nature and generally negligible credit risk. These fair value measurements would be categorized as Level 2 within the fair value hierarchy.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the life of the assets. Amortization of leasehold improvements is computed using the straight-line method over the lesser of the life of the asset or the remaining term of the lease. Estimated useful lives of the Company’s fixed assets are generally as follows:

Aircraft – 7 years

Equipment – 5 years

Furniture and fixtures – 7 years

Leasehold improvements – the lesser of 10 years or the remaining lease term

Business Information

The Company's activities as an investment banking firm constitute a single business segment, with substantially all revenues generated from advisory services, which includes engagements relating to mergers and acquisitions, financing advisory and restructuring, and capital advisory services. The Company earns less than 1% of its revenues from interest income and investment gains (losses) on investments.

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 amends the guidance in former ASC Topic 718, Compensation – Stock Compensation. The standard is effective for public entities for annual reporting periods beginning after December 15, 2016 and the Company adopted these amendments effective on January 1, 2017. The impact of ASU No. 2016-09 resulted in a net increase to the provision for income taxes during the six month period ending June 30, 2017 related to excess tax benefits and tax deficiencies for its restricted stock

unit compensation, which under the prior standard was recorded as an adjustment to retained earnings. See "Note 10 — Income Taxes".

Accounting Developments

In February 2016, the FASB issued ASU No. 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 amends the guidance in former ASC 840, Leases. Management is currently evaluating the impact of the future adoption of ASU 2016-02 on the Company’s consolidated financial statements. The standard is effective for public entities for annual reporting periods beginning after December 15, 2018 and the Company will adopt these amendments effective on January 1, 2019.

In May 2014, the FASB issued ASU 2014-9 "Revenue from Contracts with Customers" codifying ASC 606, Revenue Recognition - Revenue from Contracts with Customers, which amends the guidance in former ASC 605, Revenue Recognition. The new guidance was effective for fiscal years beginning after December 15, 2016. In August 2015, the FASB issued ASU No. 2015-14, "Deferral of the Effective Date," which defers the effective date of its new recognition standard by one year. The standard would be effective for public entities for annual reporting periods beginning after December 15, 2017. The Company has been evaluating the impact of the future adoption of ASU 2014-09 on our consolidated financial Statements which requires applying the new standard to prior comparative periods when reporting under the new standard becomes effective. As the AICPA industry task force on Broker-Dealers, the AICPA's Revenue Recognition Working Group and the AICPA's Financial Reporting Executive Committee (FinREC) provide further guidance on ASU 2014-09, the Company will continue to re-evaluate the financial impact on the Company's consolidated financial statements.

Note 3 — Cash and Cash Equivalents

The carrying values of the Company's cash and cash equivalents are as follows:



	As of June 30,		As of December 31,
	2017		2016
	(in thousands, unaudited)		(in thousands)
Cash	$	56,086	$	85,047
Cash equivalents	7,488		9,013
Restricted cash - letters of credit	4,448		4,253
Total cash and cash equivalents	$	68,022	$	98,313

The carrying value of the Company's cash equivalents approximates fair value.

Letters of credit are secured by cash held on deposit.

Note 4 — Other Assets

At June 30, 2017 and December 31, 2016, the Company had an investment in a previously sponsored merchant banking fund, Greenhill Capital Partners II (“GCP II”), and an interest in Barrow Street III, a real estate investment fund. At June 30, 2017 the Company had no remaining unfunded commitments.

Other assets consist of the following:



	As of June 30,		As of December 31,
	2017		2016
	(in thousands, unaudited)		(in thousands)
Prepaid expenses	$	3,839	$	4,295
Investments in merchant banking funds	1,604		1,689
Rent deposits	1,753		1,517
Other tangible assets	604		540
Intangible assets	150		300
Total other assets	$	7,950	$	8,341

Note 5 — Fair Value of Financial Instruments

There were no Level 1 or Level 2 assets or liabilities measured in the fair value hierarchy during the three and six month periods ended June 30, 2017 and 2016. There were no Level 3 assets measured at fair value during the three and six month periods ended June 30, 2017 and 2016.

In connection with the acquisition of Cogent Partners, LP and its affiliates ("Cogent") (now known as our secondary advisory business), the Company agreed to pay to the sellers in the future $18.9 million in cash and 334,048 shares of Greenhill common stock if certain agreed revenue targets are achieved (the "Earnout"). The cash payment and the issuance of common shares related to the Earnout will be made if secondary capital advisory revenues of $80.0 million or more are earned during either the two year period ending on the second anniversary of the closing or the two year period ending on the fourth anniversary of the closing. The revenue generated by our secondary fund placement business for the first two year period ended March 31, 2017 was slightly less than required to achieve the Cogent earnout. If the revenue target is achieved during the second two period ending on March 31, 2019, the contingent consideration will be paid promptly after that date. If the revenue target is not achieved during the remaining two year earnout period, a payment will not be made. The fair value of the contingent cash consideration was valued on the date of the acquisition at $13.1 million and is remeasured quarterly based on a probability weighted present value discount that the revenue target may be achieved. At June 30, 2017, based on changes in the estimated probability of achievement and the present value of the remaining term, the contingent cash consideration was valued at $7.6 million. For the three and six month periods ended June 30, 2017, the Company recognized decreases in other operating expenses of $1.5 million and $7.5 million, respectively. For the three and six month periods ended June 30, 2016, the Company recognized increases in other operating expenses of $1.1 million and $1.5 million, respectively. See "Note 9 - Earnings Per Share".

The following table sets forth the measurement at fair value on a recurring basis of the contingent cash consideration due the selling unitholders of Cogent related to the Earnout. The liability arose as a result of the acquisition of Cogent and is categorized as a Level 3 liability, which is remeasured each quarterly period based on the probability of achieving the target revenue threshold and weighted average discount rate as discussed below.

Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2017



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of June 30, 2017
	(in thousands, unaudited)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	—	$	—	$	7,582	$	7,582
Total	$	—	$	—	$	7,582	$	7,582

Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2016



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2016
	(in thousands, unaudited)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	—	$	—	$	15,095	$	15,095
Total	$	—	$	—	$	15,095	$	15,095

Changes in Level 3 liabilities measured at fair value on a recurring basis for the three and six month periods ended June 30, 2017 are as follows:



	Opening Balance as of April 1, 2017		Total realized and unrealized gains (losses) included in Net Income		Unrealized gains (losses) included in Other Comprehensive Income		Purchases		Issues		Sales		Settlements		Closing Balance as of June 30, 2017		Unrealized gains (losses) for Level 3 liabilities outstanding at June 30, 2017
	(in thousands, unaudited)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	9,090	$	1,508	$	—	$	—	$	—	$	—	$	—	$	7,582	$	1,508
Total	$	9,090	$	1,508	$	—	$	—	$	—	$	—	$	—	$	7,582	$	1,508



	Opening Balance as of January 1, 2017		Total realized and unrealized gains (losses) included in Net Income		Unrealized gains (losses) included in Other Comprehensive Income		Purchases		Issues		Sales		Settlements		Closing Balance as of June 30, 2017		Unrealized gains (losses) for Level 3 liabilities outstanding at June 30, 2017
	(in thousands, unaudited)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	15,095	$	7,513	$	—	$	—	$	—	$	—	$	—	$	7,582	$	7,513
Total	$	15,095	$	7,513	$	—	$	—	$	—	$	—	$	—	$	7,582	$	7,513

Changes in Level 3 liabilities measured at fair value on a recurring basis for the three and six month periods ended June 30, 2016 are as follows:



	Opening Balance as of April 1, 2016		Total realized and unrealized gains (losses) included in Net Income			Unrealized gains (losses) included in Other Comprehensive Income		Purchases		Issues		Sales		Settlements		Closing Balance as of June 30, 2016		Unrealized gains (losses) for Level 3 liabilities outstanding at June 30, 2016
	(in thousands, unaudited)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	14,032	$	(1,072	)	$	—	$	—	$	—	$	—	$	—	$	15,104	$	(1,072	)
Total	$	14,032	$	(1,072	)	$	—	$	—	$	—	$	—	$	—	$	15,104	$	(1,072	)



	Opening Balance as of January 1, 2016		Total realized and unrealized gains (losses) included in Net Income			Unrealized gains (losses) included in Other Comprehensive Income		Purchases		Issues		Sales		Settlements		Closing Balance as of June 30, 2016		Unrealized gains (losses) for Level 3 liabilities outstanding at June 30, 2016
	(in thousands, unaudited)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	13,647	$	(1,457	)	$	—	$	—	$	—	$	—	$	—	$	15,104	$	(1,457	)
Total	$	13,647	$	(1,457	)	$	—	$	—	$	—	$	—	$	—	$	15,104	$	(1,457	)

Realized and unrealized gains (losses) are reported as a component of other operating expenses in the condensed consolidated statements of income.

The following table presents quantitative information about the significant unobservable inputs utilized by the Company in the fair value measure of Level 3 liabilities measured at fair value on a recurring basis, as of June 30, 2017:



	Fair Value as of June 30, 2017		Valuation Technique(s)	Unobservable Input(s)		Range (Weighted Average)
	(in thousands, unaudited)
Liabilities
Contingent obligation due selling unitholders of Cogent	$	7,582	Present value of expected payments	Discount rate		13	%
				Forecast revenue	(a)

_____________________________________________

(a) The Company's estimate of contingent consideration as of June 30, 2017 was principally based on the acquired business' (i) actual revenue generation from April 1, 2015 through March 31, 2017 and (ii) actual and projected revenue generation from April 1, 2017 through March 31, 2019.

Valuation Processes - Level 3 Measurements - The Company utilizes a valuation technique based on a present value method applied to the probability of achieving a range of potential revenue outcomes. The valuation was conducted by the Company. The Company updates unobservable inputs each reporting period and has a formal process in place to review changes in fair value.

Sensitivity Analysis - Level 3 Measurements - The significant unobservable inputs used in determining fair value are the discount rate and forecast revenue information. Significant increases (decreases) in the discount rate would have resulted in a lower (higher) fair value measurement. Significant increases (decreases) in the forecast revenue information would result in a higher (lower) fair value measurement. For all significant unobservable inputs used in the fair value measurement of the Level 3 liabilities, a change in one of the inputs would not necessarily result in a directionally similar change in the other inputs.

Note 6 — Related Parties

At June 30, 2017 and December 31, 2016, the Company had no amounts receivable or payable to related parties.

The Company subleases airplane and office space to a firm owned by the Chairman of the Company. The Company recognized rent reimbursements of $0.02 million for each of the three month periods ended June 30, 2017 and 2016, respectively, and $0.04 million and for each of the six month periods ended June 30, 2017 and 2016, respectively, which are included as a reduction of occupancy and equipment rental on the condensed consolidated statements of income.

Note 7 — Bank Loan Facilities

At June 30, 2017, the Company had a $80.0 million revolving bank loan facility to provide for working capital needs and for other general corporate purposes. In March 2017, the borrowing capacity under the revolving loan facility was increased by

$10.0 million, from $70.0 million to $80.0 million, and the maturity date was extended to April 30, 2018. Interest on the borrowings is based on the higher of 3.50% or the U.S. Prime Rate (4.25% at June 30, 2017) and is payable monthly. The weighted average daily borrowings outstanding under the revolving bank loan facility were approximately $62.7 million and $49.3 million for the six months ended June 30, 2017 and 2016, respectively. The weighted average interest rate was 3.89% and 3.50% for the six months ended June 30, 2017 and 2016, respectively.

In connection with the acquisition of Cogent in April 2015, the Company borrowed $45.0 million, which was comprised of two bank term loan facilities (the "Term Loan Facilities"), each in an original principal amount of $22.5 million. One Term Loan Facility was paid in full in advance of its maturity date in April 2016. The other Term Loan Facility matures on April 30, 2018 (the "Three Year Facility"), is payable in four equal semi-annual installments beginning on October 31, 2016 and bears interest at the Prime Rate plus one and one-quarter percent (1.25%) per annum, which interest rate will be reduced to the Prime Rate plus three-quarters of one percent (0.75%) per annum when the amount outstanding on the Three Year Facility is $7.5 million or less. At June 30, 2017, the outstanding principal balance of the Three Year Facility was $11.3 million. The second installment of $5.6 million of the Three Year Facility was repaid in April 2017. Future installments of $5.6 million each are due on October 31, 2017 and April 30, 2018. There are no prepayment penalties for the early repayment of the Term Loan Facilities and principal amounts repaid cannot be reborrowed. The interest rate applicable to the Term Loan Facilities can never be less than four percent (4.00%) per annum. The weighted average interest rate related to the Term Loan Facilities was 5.12% and 4.75% for the six months ended June 30, 2017 and 2016, respectively.

The bank loan facilities are provided by a U.S. banking institution and are secured by any cash distributed in respect of the Company’s investment in the U.S. based merchant banking funds and cash distributions from G&Co, CP LP and GCI and advisory fees receivable from G&Co. In addition, the bank loan facilities have a prohibition on the incurrence of additional indebtedness without the prior approval of the lenders and the Company is required to comply with certain financial and liquidity covenants. At June 30, 2017, the Company was compliant with all bank loan covenants.

Note 8 — Equity

On June 21, 2017, a dividend of $0.45 per share was paid to stockholders of record on June 7, 2017. For the six months ended June 30, 2017, dividend payments of $0.90 per share were paid to stockholders. Dividends include dividend equivalents of $4.1 million, which were paid on outstanding restricted stock units for each of the six months ended June 30, 2017 and 2016, respectively.

During the six months ended June 30, 2017, 1,049,998 restricted stock units vested and were issued as common stock of which the Company is deemed to have repurchased 432,121 shares at an average price of $29.46 per share in conjunction with the payment of tax liabilities in respect of stock delivered to its employees in settlement of restricted stock units.

During the six months ended June 30, 2016, 805,521 restricted stock units vested and were issued as common stock of which the Company is deemed to have repurchased 306,095 shares at an average price of $25.33 per share in conjunction with the payment of tax liabilities in respect of stock delivered to its employees in settlement of restricted stock units. In addition, during the six months ended June 30, 2016, the Company repurchased in open market transactions 252,207 shares of its common stock at an average price of $19.82 per share.

Note 9 — Earnings per Share

The computations of basic and diluted EPS are set forth below:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2017		2016		2017		2016
	(in thousands, except per share amounts, unaudited)
Numerator for basic and diluted EPS — net income allocated to common stockholders	$	6,245	$	19,628	$	5,499	$	23,985
Denominator for basic EPS — weighted average number of shares	31,934		31,713		32,151		31,899
Add — dilutive effect of:
Weighted average number of incremental shares issuable from restricted stock units	44		—		100		—
Denominator for diluted EPS — weighted average number of shares and dilutive potential shares	31,977		31,713		32,252		31,899
Earnings per share:
Basic	$	0.20	$	0.62	$	0.17	$	0.75
Diluted	$	0.20	$	0.62	$	0.17	$	0.75

The weighted number of shares and dilutive potential shares do not include 334,048 shares of common stock, which will be issued to certain selling unitholders of Cogent, following the fourth anniversary of the acquisition if the revenue target related to the Earnout is achieved. In the event that the revenue target is achieved, such shares will be included in the Company’s share count at March 31, 2019. If the revenue target is not achieved such shares of common stock will not be issued. See "Note 5 - Fair Value of Financial Instruments".

Note 10 — Income Taxes

The Company's effective tax rate varies depending on the jurisdiction in which the income is earned. Certain foreign sourced income is taxed at a lower effective rate than U.S. income.

Under the requirements of ASC 740, the Company intends to indefinitely reinvest its non-U.S. subsidiaries earnings outside the United States and does not provide for residual U.S. tax on these earnings.

The provision for income taxes for the six months ending June 30, 2017 reflects a net charge of $1.5 million related to excess tax benefits and tax deficiencies for its restricted stock unit compensation as required by new accounting guidance for share-based compensation effective January 1, 2017. In prior periods, these excess tax benefits and tax deficiencies were recorded as a charge or benefit to stockholders' equity.

The Company believes it is more likely than not that the deferred tax asset, which relates principally to compensation expense deducted for book purposes but not yet deducted for tax purposes, will be realized as offsets to: (i) the realization of its deferred tax liabilities and (ii) future taxable income.

Any gain or loss resulting from the translation of deferred taxes for foreign affiliates is included in the foreign currency translation adjustment incorporated as a component of other comprehensive income, net of tax, in the condensed consolidated statements of changes in stockholders' equity and the condensed consolidated statements of comprehensive income.

The Company's income tax returns are routinely examined by the U.S. federal, U.S. state, and international tax authorities. The Company regularly assesses its tax positions with respect to applicable income tax issues for open tax years in each respective jurisdiction in which the Company operates. As of June 30, 2017, the Company does not believe the resolution of any current ongoing income tax examinations will have a material adverse impact on the financial position of the Company.

Note 11 — Regulatory Requirements

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

G&Co is subject to the SEC’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 June 30, 2017, G&Co’s net capital was $9.4 million, which exceeded its requirement by $8.7 million. G&Co’s aggregate indebtedness to net capital ratio was 1.1 to 1 at June 30, 2017. Certain 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 FCA. Greenhill Australia is subject to capital requirements of the ASIC. GC LP is subject to capital requirements of the SEC and the FCA. We are also subject to certain regulatory capital requirements in other jurisdictions. As of June 30, 2017, GCI, Greenhill Australia, GC LP and our other regulated operations were in compliance with local capital adequacy requirements.

Note 12 — Subsequent Events

The Company evaluates subsequent events through the date on which the financial statements are issued.

On July 26, 2017, the Board of Directors of the Company declared a quarterly dividend of $0.45 per share. The dividend will be payable on September 27, 2017 to the common stockholders of record on September 13, 2017.

On August 4, 2017, the Company repaid the third installment of the Three Year Term Loan Facility due on October 31, 2017 of $5.6 million. As a result of the repayment the interest rate on the Three Year Term Loan decreased by one-half of one percent (0.50%) per annum. Effective immediately after the repayment, the interest rate on the final installment due on or before April 30, 2018 is the Prime Rate plus three quarters of one percent (0.75%) per annum.

On August 8, 2017, the borrowing capacity under the revolving loan facility was increased from $80.0 million to $90.0 million through the maturity date of the facility on April 30, 2018.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this Management's Discussion and Analysis of Financial Condition and Results of Operations, "Greenhill", “we”, “our”, “Firm” and “us” refer to Greenhill & Co., Inc.

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Cautionary Statement Concerning Forward-Looking Statements

The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes that appear elsewhere in this report. We have made statements in this discussion that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “expect”, “plan”, “outlook”, “anticipate”, “believe”, “estimate”, “intend”, “predict”, “potential” or “continue”, the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks outlined under “Risk Factors” in our 2016 Annual Report on Form 10-K.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to and we do not undertake any obligation to update or review any of these forward-looking statements after the date of this filing to conform our prior statements to actual results or revised expectations whether as a result of new information, future developments or otherwise.

Overview

Greenhill is a leading independent investment bank that provides financial and strategic advice on significant domestic and cross-border mergers and acquisitions, divestitures, restructurings, financings, capital raisings and other strategic transactions to a diverse client base, including corporations, partnerships, institutions and governments globally. We serve as a trusted advisor to our clients throughout the world from our offices in the United States, Australia, Brazil, Canada, Germany, Hong Kong, Japan, Sweden, and the United Kingdom.

Our revenues are principally derived from advisory services on mergers and acquisitions (or M&A), financings and restructurings and are primarily driven by total deal volume and the size of individual transactions. Additionally, our global capital advisory group provides capital raising advisory services in the primary market for real estate funds, where revenues are driven primarily by the amount of capital raised, and in the secondary market for alternative assets, where revenue is determined based upon a fixed percentage of the transaction value.

Greenhill was established in 1996 by Robert F. Greenhill, the former President of Morgan Stanley and former Chairman and Chief Executive Officer of Smith Barney. Since our founding, Greenhill has grown by recruiting talented managing directors and other senior professionals, by acquiring complementary advisory businesses and by training, developing and promoting professionals internally. We have expanded beyond merger and acquisition advisory services to include financing, restructuring and capital advisory services, and we have expanded the breadth of our sector expertise to cover substantially all major industries. Since the opening of our original office in New York, we have expanded globally to 14 offices across five continents.

Over our 21 years as an independent investment banking firm, we have sought to opportunistically recruit new managing directors with a range of industry and transaction specialties, as well as high-level corporate and other relationships, from major investment banks, independent financial advisory firms and other institutions. We also have sought to expand our geographic reach both through recruiting managing directors in new locations and through strategic acquisitions, such as our 2006 acquisition of Beaufort Partners Limited (now Greenhill Canada) in Canada and our 2010 acquisition of Caliburn Partnership Pty Limited (now Greenhill Australia) in Australia. Additionally, we expanded the breadth of our advisory services through the recruitment of a team of managing directors focused on real estate capital advisory services, through the hiring of managing directors to focus on financing and restructuring advisory services, and through our acquisition in 2015 of Cogent Partners, LP, which provides advisory services related to the secondary fund placement market. Through our recruiting and acquisition activity, we have significantly increased our geographic reach by adding offices in the United States, United Kingdom, Germany, Canada, Japan, Australia, Hong Kong, Sweden and Brazil. We intend to continue our efforts to recruit new managing directors with industry

sector experience and/or geographic reach who can help expand our advisory capabilities. During 2017, we have announced the recruitment of nine corporate advisory focused managing directors, who have or will be joining our teams in the United States, Australia, Canada and Europe, including two who extend our reach into the Spanish market.

Business Environment

Global economic and financial market conditions can materially affect our financial performance. See “Risk Factors” in our 2016 Annual Report on Form 10-K filed with Securities and Exchange Commission. Global deal activity in the first six months of 2017 has had a weak start in terms of both transaction completions and deal announcement activity. On a year to date basis as of June 30, 2017, the number of completed transactions globally decreased by 9% versus the prior year, while the volume of completed transactions (reflecting the sum of all transaction sizes) also decreased by 9%. The number of announced transactions globally decreased by 3% in year to date 2017 versus the same period in the prior year, while the volume of announced transactions decreased by 5%.¹

During the year to date period in 2017, our revenues were impacted by global transaction activity which favored the U.S., middle market transactions, and restructuring activity. Historically, our mix of business has a large international component, is weighted toward larger transaction activity, and our restructuring team is relatively small.

Our revenues were $67.3 million in the second quarter of 2017 compared to $90.5 million in the second quarter of 2016, a decrease of $23.2 million, or 26%. The decrease principally resulted from a decline in the number and scale of transaction completion fees, particularly in markets outside the U.S. For the six months ended June 30, 2017, revenues of $124.2 million compare to $157.4 million for the comparable period in 2016, a decrease of $33.2 million, or 21%. This decrease principally resulted from a decrease in the number and scale of merger and acquisition completion fees.

We view pre-tax margin as a key measure of operating performance. As a result of our decreased revenues in the second quarter of 2017 and the six months ended June 30, 2017 as compared to the same periods in 2016, our pre-tax earnings for the three and six months ended June 30, 2017 were $9.6 million and $11.8 million, respectively, representing a pre-tax profit margin of 14% for the second quarter of 2017 and 9% for the six months ended June 30, 2017 as compared to pre-tax profit margins of 33% for the second quarter of 2016 and 23% for the six months ended June 30, 2016. While we cannot predict our profit margin for any future period, our annual pre-tax margin was 26% for 2016 and has ranged from 25% to 26% over four of the past five calendar years, except for 2015 when it was 17%.

Looking ahead, our backlog of announced pending transactions indicates that the third quarter of 2017 will be a difficult one, as research analysts are already expecting, but our backlog of announced and earlier stage assignments leads us to expect significant improvement before year end 2017 and into 2018.

We believe our business performance is best measured over longer periods of time, as we generally experience significant variations in revenues and profits from quarter to quarter. These variations can generally be attributed to the fact that our revenues are typically earned in large amounts throughout the year upon the successful completion of a transaction or restructuring or closing of a fund, the timing of which is uncertain and is not subject to our control. Accordingly, revenues and net income in any period may not be indicative of full year results or the results of any other period and may vary significantly from year to year and quarter to quarter.

________________________


(1)	Excludes transactions less than $100,000 and withdrawn/canceled deals. Source: Thomson Financial as of July 26, 2017.

Results of Operations

Revenues

Our revenues are principally derived from advisory services on mergers and acquisitions (or M&A), financings and restructurings and are primarily driven by total deal volume and the size of individual transactions. A majority of our advisory revenue is contingent upon the closing of a merger, acquisition, financing, restructuring, capital fund transaction or other advisory transaction. While fees payable upon the successful conclusion of a transaction generally represent the largest portion of our fees, we also earn other corporate advisory fees, including on-going retainer fees, substantially all of which relate to non-success based strategic advisory and financing advisory and restructuring assignments, and fees payable upon the commencement of an engagement or upon the achievement of certain milestones, such as the announcement of a transaction or the rendering of a fairness opinion. Additionally, our global capital advisory group provides capital raising advisory services in the primary market for real estate funds, where revenues are driven primarily by the amount of capital raised by the fund at each interim closing and at the final closing for the amount of capital committed since the last interim closing, and in the secondary market for alternative assets, where revenue is determined based upon a fixed percentage of the transaction value at the closing of each transaction.

We also generate a small portion of our revenues from interest income and gains (or losses) in merchant banking fund investments, which we substantially liquidated in prior years. Revenue recognized on investments in merchant banking funds is based on our allocable share of realized and unrealized gains (or losses) reported by such funds on a quarterly basis.

We generated $67.3 million in revenues in the second quarter of 2017 compared to $90.5 million in the second quarter of 2016, a decrease of $23.2 million, or 26%. The decrease principally resulted from a decline in the number and scale of transaction completion fees, particularly in markets outside the U.S.

For the six months ended June 30, 2017, revenues were $124.2 million compared to $157.4 million in 2016, a decrease of $33.2 million, or 21%. This decrease principally resulted from a decrease in the number and scale of merger and acquisition completion fees. Retainer fees for the six months ended June 30, 2017 increased over the same period last year, and advisory revenues from U.S. clients were materially higher, but those factors were outweighed by substantially reduced revenues from European clients and continued weakness in other foreign markets. Fund placement revenues for the six months ended June 30, 2017 were also lower than the same period in last year.

Completed assignments in the second quarter of 2017 included:


•	the acquisition by American Axle & Manufacturing Holdings, Inc. of Metaldyne Performance Group Inc.;


•	the representation of The British United Provident Association Limited ("BUPA") in connection with the increase of its stake in Bupa Arabia for Cooperative Insurance Co.;


•	the acquisition by Emerson Electric Co. of Pentair plc's Valves and Controls business;


•	the acquisition by GoDaddy Inc. of Host Europe Group Ltd.;


•	the representation of the Ad Hoc Group of Senior Secured Noteholders of Goodman Networks in connection with the company's chapter 11 restructuring;


•	the representation of Inenco Group Pty Ltd on the sale of 35% of its share equity to Genuine Parts Company;


•	the spin-off by TEGNA Inc. of Cars.com; and


•	the acquisition by Vector Capital of a majority stake in Experian plc's Cross-Channel Marketing business.

During the second quarter of 2017, our global capital advisory group advised real estate fund general partners on three interim closings of primary capital commitments from institutional investors. In addition, the secondary capital advisory group advised institutional investors on 26 closings of sales of limited partnership interests in secondary market transactions.

We generally experience significant variations in revenues during each quarterly period. These variations can generally be attributed to the fact that a majority of our revenues is usually earned in large amounts throughout the year upon the successful completion of transactions, the timing of which are uncertain and are not subject to our control. Accordingly, the revenues earned in any particular period may not be indicative of revenues earned in future periods.

Operating Expenses

We classify operating expenses as employee compensation and benefits expenses and non-compensation expenses. Operating expenses include non-compensation costs for occupancy and equipment rental, information services, professional fees, recruiting, travel and entertainment, insurance, communications, depreciation and amortization, interest expense and other operating expenses. A portion of certain costs are reimbursed by clients under the terms of client engagements and are netted against non-compensation expenses.

Our total operating expenses for the second quarter of 2017 were $57.7 million, which compared to $60.6 million of total operating expenses for the second quarter of 2016. The decrease in total operating expenses of $2.9 million, or 5%, resulted from a decrease in our compensation expenses, partially offset by an increase in non-compensation expenses, both as described in more detail below. The pre-tax profit margin for the three months ended June 30, 2017 was 14% as compared to 33% for the same period in 2016.

For the six months ended June 30, 2017, total operating expenses were $112.4 million, compared to $121.0 million of total operating expenses for the same period in 2016. The decrease of $8.6 million, or 7%, resulted principally from decreases in both our compensation and benefits expenses and non-compensation expenses, both as described in more detail below. The pre-tax profit margin for the six months ended June 30, 2017 was 9% as compared to 23% for the same period in 2016.

The following table sets forth information relating to our operating expenses, which are reported net of reimbursements of certain expenses by our clients:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2017		2016		2017		2016
	(in millions, unaudited)
Employee compensation and benefits expenses	$38.8		$44.1		$82.9		$88.6
% of revenues	58	%	49	%	67	%	56	%
Non-compensation expenses	18.9		16.5		29.6		32.4
% of revenues	28	%	18	%	24	%	21	%
Total operating expenses	57.7		60.6		112.4		121.0
% of revenues	86	%	67	%	91	%	77	%
Total income before tax	9.6		29.9		11.8		36.3
Pre-tax profit margin	14	%	33	%	9	%	23	%

Compensation and Benefits Expenses

Our employee compensation and benefits expenses in the second quarter of 2017 were $38.8 million, which reflected a 58% ratio of compensation to revenues. This amount compared to $44.1 million for the second quarter of 2016, which reflected a 49% ratio of compensation to revenues. The decrease of $5.3 million, or 12%, was principally attributable to a reduction in the amount of accrued year-end bonuses commensurate with the decline in revenues.

For the six months ended June 30, 2017, our employee compensation and benefits expenses were $82.9 million, which reflected a 67% ratio of compensation to revenues. This amount compared to $88.6 million for the same period in the prior year, which reflected a 56% ratio of compensation to revenues. The decrease of $5.7 million, or 6%, was principally attributable to a lower year-end bonus accrual related to lower year to date revenues.

The increases in the ratio of compensation to revenues for both the three and six month periods in 2017 as compared to the same periods in 2016 resulted from the effect of spreading slightly lower compensation costs over lower revenues.

Our compensation expense is generally based upon revenues and can fluctuate materially in any particular period depending upon changes in headcount, amount of revenues recognized, as well as other factors. Accordingly, the amount of compensation expense recognized in any particular period may not be indicative of compensation expense in future periods.

Non-Compensation Expenses

Our non-compensation expenses were $18.9 million in the second quarter of 2017 compared to $16.5 million in the second quarter of 2016, reflecting an increase of $2.4 million, or 14%. The increase in non-compensation expenses principally resulted from the charge-off of an uncollectible account and related legal costs, foreign currency losses from the funding of our investment in Brazil and increased travel expenses related to business development, offset in part by an adjustment in the estimated fair value of the contingent Cogent earnout. Interest expense, included within non-compensation expenses, for the each of the three months ended June 30, 2017 and 2016 was $0.8 million.

Non-compensation expenses as a percentage of revenues for the three months ended June 30, 2017 were 28% compared to 18% for the same period in 2016. The increase in non-compensation expenses as a percentage of revenues in the second quarter of 2017 as compared to the same period in 2016 principally resulted from the effect of spreading higher non-compensation costs over significantly lower revenues.

For the six months ended June 30, 2017, our non-compensation expenses were $29.6 million compared to $32.4 million for the same period in 2016, representing a decrease of $2.8 million, or 9%. The decrease in non-compensation expenses principally resulted from an adjustment in the estimated fair value of the contingent Cogent earnout, offset by the charge referred to above for an uncollectible account, an increase in travel costs, higher occupancy costs and foreign currency losses. Interest expense for the six months ended June 30, 2017 and 2016, included within non-compensation expense, was $1.6 million and $1.5 million, respectively.

Non-compensation expenses as a percentage of revenues for the six months ended June 30, 2017 were 24% compared to 21% for the same period in the prior year. The increase in non-compensation expenses as a percentage of revenues in the first six months of 2017 as compared to the same period in 2016 principally resulted from the spreading of slightly lower non-compensation costs over lower revenues.

As we have previously discussed, the revenue generated by our secondary fund placement business for the first two year period ended March 31, 2017 was slightly less than required to achieve the Cogent earnout and for the selling shareholders to receive additional consideration of $18.9 million in cash and the issuance of 334,048 shares of our common stock. Under the terms of the earnout arrangement there is a second opportunity for the business to achieve the earnout during the two year period ended March 31, 2019. As has been the case since we purchased Cogent, we remeasure the fair value of the contingent cash consideration quarterly based on a probability weighted present value that the revenue target may be achieved. Based on our remeasurement of the likelihood of achieving the remaining revenue target we recorded a benefit of $7.5 million for the six months ended June 30, 2017. Without the benefit of the remeasurement of the Cogent earnout, our non-compensation expenses would have been $37.1 million for the six months ended June 30, 2017 before adjusting for certain other non-recurring charges incurred during that period.

Our non-compensation expenses as a percentage of revenues can vary as a result of a variety of factors including fluctuation in revenue amounts, changes in headcount, the amount of recruiting and business development activity, the amount of office expansion, the amount of reimbursement of engagement-related expenses by clients, costs associated with acquisitions, the amount of borrowings, interest rate and currency movements and other factors, such as the contingent earnout. Accordingly, the non-compensation expenses as a percentage of revenues in any particular period may not be indicative of the non-compensation expenses as a percentage of revenues in future periods.

Provision for Income Taxes

For the second quarter of 2017, the provision for income taxes was $3.3 million, which reflected an effective tax rate of 35%. This compared to a provision for income taxes in the second quarter of 2016 of $10.2 million, which reflected an effective tax rate of 34%. The decrease in the provision for income taxes for the second quarter of 2017 as compared to the same period in the prior year was primarily attributable to lower pre-tax income and a higher effective tax rate due to the generation of a greater proportion of U.S. source earnings, which are generally taxed at a higher rate than foreign source earnings.

For the six months ended June 30, 2017, the provision for taxes was $6.3 million, which reflected an effective tax rate of 53%. This compared to a provision for taxes for the six months ended June 30, 2016 of $12.3 million, which reflected an effective tax rate of 34%. The decrease in the provision for income taxes for the six months ended June 30, 2017 as compared to the same period in 2016 principally resulted from lower pre-tax income, partially offset by a higher effective tax rate resulting from both the generation of a greater proportion of U.S source earnings and the impact of the new accounting requirement discussed below.

Effective January 1, 2017, we were subject to a new accounting pronouncement which required us to record a charge or benefit in our provision for income taxes for the tax effect of the difference between the grant price value and market price value of the awards at the time of vesting of restricted stock awards. The pronouncement also required us to record an income tax benefit for the tax effect of dividend payments on restricted stock units. In prior periods, the tax effect of these differences was recorded as a charge or benefit to stockholders equity. For the six months ended June 30, 2017, we incurred a net charge of $1.5 million related to the new accounting requirements. Excluding this charge, the provision for income taxes for the first six months of 2017 would have been $4.7 million, reflecting a tax rate of 40%, which is significantly higher than our historical tax rate due to the expected generation of substantially all of our annual earnings from the U.S.

The effective tax rate can fluctuate as a result of variations in the amount of income earned and the tax rate imposed in the tax jurisdictions in which we operate. Accordingly, the effective tax rate in any particular period may not be indicative of the effective tax rate in future periods.

Liquidity and Capital Resources

Our liquidity position, which consists of cash, other significant working capital assets and liabilities, debt and other matters relating to liquidity requirements and current market conditions, is monitored by management on a regular basis. At June 30, 2017, we had cash and cash equivalents of $68.0 million, of which $41.4 million was held outside the U.S. We retain our cash in financial institutions with high credit ratings and/or invest in short-term investments which are expected to provide liquidity.

We generate substantially all of our cash from advisory fees. We use our cash primarily for recurring operating expenses and the payment of dividends and non-recurring disbursements such as the repayment of debt obligations, the repurchase of shares of our common stock and the funding of leasehold improvements for the build out of office space. Our recurring monthly operating disbursements principally consist of base compensation expense, occupancy, travel and entertainment, and other operating expenses. Our recurring quarterly and annual disbursements consist of cash bonus payments, tax payments, dividend payments, debt repayments and repurchases of our common stock from our employees in conjunction with the payment of tax liabilities incurred on vesting of restricted stock units. These amounts vary depending upon our profitability and other factors.

Because a portion of the compensation we pay to our employees is distributed in annual cash bonus awards (usually in February of each year), our net cash balance is typically at its lowest level during the first quarter of each year and generally accumulates from our operating activities throughout the remainder of the year. In general, we collect our accounts receivable within 60 days, except for fees generated through our primary capital advisory engagements, which are generally paid in installments over a period of three years, and certain restructuring transactions, where collections may take longer due to court-ordered holdbacks. At June 30, 2017, we had advisory fees receivable of $50.1 million, including long-term receivables related to our primary capital advisory engagements of $23.4 million.

Our current liabilities primarily consist of accounts payable, which are generally paid monthly, accrued compensation, which includes accrued cash bonuses that are generally paid in the first quarter of the following year to the large majority of our employees, and current taxes payable. In February 2017, we paid to our employees cash bonuses and accrued benefits of $26.2 million relating to 2016 compensation. In addition, during the six months of 2017, we paid $16.4 million related to income taxes owed principally in the U.S. and the U.K. for the year ended December 31, 2016.

To provide for working capital needs and other general corporate purposes in the U.S, we have a revolving bank loan facility. As part of the annual renewal of the revolving loan facility, in March 2017, we extended the maturity date of the facility to April 30, 2018 and increased the size of the facility by $10.0 million to $80.0 million. Effective August 8, 2017, the size of the facility was further increased to $90.0 million for the remaining term. Historically, we have been able to extend the maturity date of the revolving bank loan facility for a new one-year period shortly before maturity of the exiting loan facility. We expect to renew the revolving bank loan facility in future periods although our ability to do so in the future is not certain. The revolving bank loan facility bears interest at the higher of the Prime Rate (4.25% at June 30, 2017) or 3.5%. At June 30, 2017, we had $68.7 million outstanding under the revolving bank loan facility.

In connection with our acquisition of Cogent in April 2015, we borrowed $45.0 million from our bank lender through two bank term loan facilities, each in an original principal amount of $22.5 million. One term loan was paid in full prior to its maturity on April 30, 2016 and the other bank term loan facility had an outstanding principle balance of $11.3 million at June 30, 2017 and is payable in two equal installments, which are due on or before October 31, 2017 and April 30, 2018, respectively. On August 4, 2017 we repaid in advance $5.6 million related to the installment due on October 31, 2017. There are no prepayment penalties for the early repayment of the term loan facility and principal amounts repaid cannot be reborrowed. The interest rate applicable to the outstanding bank term loan facility was equal to the Prime rate plus one and one-quarter percent (1.25%) per annum through August 4, 2017 and was reduced to the Prime Rate plus three-quarters of one percent (0.75%) per annum effective following the

reduction of the amount outstanding on the bank term loan facility to $7.5 million or less. The interest rate applicable to the bank term loan facility can never be less than four percent (4.00%) per annum.

Both the revolving bank loan facility and the bank term loan facility are secured by any cash distributed in respect of the Company’s investment in the U.S. based merchant banking fund, cash distributions from G&Co, GCI and GC LP, and advisory fees receivable of G&Co and GC LP. In addition, the incurrence of additional indebtedness requires the prior approval of our lender. Further, the Company is required to comply with certain financial and liquidity covenants on a quarterly basis. At June 30, 2017, we were compliant with all loan covenants and we expect to continue to be compliant with all loan covenants in future periods.

It is our objective to generally maintain global cash balances in excess of the amount outstanding under our revolving bank loan facility. At August 7, 2017, after the repayment in advance of the term loan installment due in October 2017, we had cash and cash equivalents of approximately $74.5 million, which was slightly in excess of the $73.2 million outstanding under our revolving bank loan facility.

As additional contingent consideration for the purchase of Cogent, we agreed to pay to the selling unitholders $18.9 million in cash and issue 334,048 shares of our common stock in the future if our secondary fund placement business achieves a revenue target of $80.0 million during either the two-year period ending on the second anniversary of the closing (March 31, 2017) or the two year period ending on the fourth anniversary of the closing (March 31, 2019) (the "Earnout"). For the two year period ending March 31, 2017, the revenue generated by our secondary placement business was slightly less than revenue target required to achieve the Earnout during the first two year period. If the revenue target is achieved during the two year period ended March 31, 2019, the contingent consideration will be paid promptly after that date.

Historically, we have generated significant earnings outside of the U.S. and we have repatriated a substantial portion of foreign earnings in excess of local working capital requirements and other forecast needs to the U.S. To the extent we repatriate additional foreign earnings under current U.S. tax law we will be subject to incremental U.S. tax on amounts repatriated for the difference between the U.S. tax rate of 35% and the lower rate of tax paid in the foreign jurisdictions. Accordingly, in order to make the most efficient use of these foreign earnings, it is our intention to retain our foreign earnings offshore indefinitely to reinvest in our non-U.S operations.

Over the past two years we increased our U.S. revolving loan facility to provide adequate financial flexibility in the U.S. without accessing our foreign cash holdings. Presently, a substantial portion of our foreign cash is held in the U.K, which is currently subject to tax at a rate of 19%, and scheduled to decline to 17% in 2020. If the U.S. tax law were to change and corporate federal rates were reduced to a level in the range of 15% to 25%, as have been proposed by U.S. lawmakers, we would not only likely benefit from higher earnings and cash flow as a result, but also we would also be eligible to repatriate cash from overseas to the U.S. with little or no incremental tax in order to reduce debt and/or increase returns of capital to shareholders, notwithstanding our intention to indefinitely retain these foreign earnings offshore. If necessary, we may seek to continue to increase the size of the revolving loan commitment to further increase our financial flexibility in the U.S.

In January 2017, our Board of Directors authorized the repurchase of up to $75.0 million of our common stock during 2017. For the six months ended June 30, 2017, we are deemed to have repurchased 432,121 shares of our common stock at an average price of $29.46 per share for a total cost of $12.7 million in connection with the cash settlement of tax liabilities incurred in respect of stock delivered to our employees in connection with the vesting of restricted stock units. While we expect to fund future repurchases of our common stock (if any) with operating cash flow, we are unable to predict the timing or magnitude of our share repurchases. Any future repurchases of our common stock will be dependent upon our cash flow generation and take into account the payment of dividends, repayment of the bank loan facilities, potential obligations under the Earnout and other relevant factors.

Under the terms of our stock equity plan, we generally repurchase from our employees that portion of restricted stock unit awards used to fund income tax withholding due at the time the restricted stock unit awards vest. Based upon the number of restricted stock unit grants outstanding at August 1, 2017, we estimate repurchases of our common stock from our employees in conjunction with the cash settlement of tax liabilities incurred on vesting of restricted stock units of approximately $34.4 million (as calculated based upon the closing share price as of August 1, 2017 of $18.35 per share and assuming a withholding tax rate of 42%) over the next five years, of which $0.2 million remains payable in 2017, $10.1 million will be payable in 2018, $9.4 million will be payable in 2019, $10.0 million will be payable in 2020, $4.4 million will be payable in 2021 and $0.2 million will be payable in 2022. We will realize a corporate income tax benefit concurrently with the cash settlement payments.

As part of our long-term incentive award program, we also grant deferred cash retention awards to certain eligible employees. The deferred awards, which generally vest over a three to five year service period, provide the employee with the right to receive future cash compensation payments, which are non-interest bearing. Based upon the value of the deferred cash awards outstanding at June 30, 2017, we estimate payments of $35.4 million over the next five years, of which $4.0 million remains payable in 2017,

$11.2 million will be payable in 2018, $7.6 million will be payable in 2019, $8.3 million will be payable in 2020, and $4.3 million will be payable in 2021. We will realize a corporate income tax deduction at the time of payment.

Since 2004, we have paid quarterly dividends to our shareholders and dividend equivalent payments to our employees who hold restricted stock units. Our quarterly dividend has been $0.45 per share since 2007. For the year ended December 31, 2016, we made dividend distributions of $61.6 million, or $1.80 per common share and outstanding restricted stock unit. During the six months ended June 30, 2017, we made dividend distributions of $30.8 million, or $0.90 per common share and outstanding restricted stock unit. We have declared a dividend of $0.45 per common share payable in September 2017. We intend to continue to pay quarterly dividends, subject to capital availability and periodic determinations that cash dividends are in the best interest of our stockholders. Future declaration and payment of dividends on our common stock is at the discretion of our Board of Directors and depends upon, among other things, our future operations and earnings, capital requirements and surplus, general financial condition, obligations under our bank loan facilities, potential obligations under the Earnout, contractual restrictions and other factors as our Board of Directors may deem relevant.

While we believe that the cash generated from operations and borrowings from the revolving bank loan facility will be sufficient to meet our expected operating needs, tax obligations, bank term loan repayments, common dividend payments, share repurchases, potential obligation under the Earnout and build-out costs of new office space, we may adjust our variable expenses and other disbursements, if necessary, to meet our liquidity needs. There is no assurance that our current lender will continue to renew our revolving bank loan facility annually on comparable terms, and at the current borrowing amount or at all, and if it is not renewed that we would be able to obtain a new credit facility from a different lender. In that case, we could be required to promptly repatriate foreign earnings, issue additional securities, reduce operating costs or take a combination of these actions, in each case on terms which may not be favorable to us. In the event that we are not able to meet our liquidity needs, we may consider a range of financing alternatives to meet any such needs.

Cash Flows

In the six months ending June 30, 2017, our cash and cash equivalents decreased by $30.3 million from December 31, 2016, net of an increase of $3.3 million from the effect of the translation of foreign currency amounts into U.S. dollars at the quarter-end foreign currency conversion rates. We generated $12.1 million from operating activities, which consisted of $23.7 million from net income after giving effect to non-cash items and a net increase in working capital of $11.6 million, principally from payment of annual bonuses and accrued income taxes offset by a reduction in accounts receivable. We used $1.1 million in investing activities to fund equipment purchases and leasehold improvements related to new offices. We used $44.6 million in financing activities, including $5.6 million for the repayment of the bank term loan facility, $30.8 million for the payment of dividends, $12.7 million for the repurchase of our common stock from employees in conjunction with the payment of tax liabilities in settlement of restricted stock units, offset in part by the net borrowings of $4.6 million on our revolving bank loan facility.

In the six months ending June 30, 2016, our cash and cash equivalents decreased by $6.2 million from December 31, 2015, including a decrease of $4.6 million from the effect of the translation of foreign currency amounts into U.S. dollars at the quarter-end foreign currency conversion rates. We generated $45.0 million from operating activities, which consisted of $46.5 million from net income after giving effect to non-cash items and a net increase in working capital of $1.4 million, principally from an increase in accounts payable and accrued expenses offset by the payment of annual bonuses and the payment of income taxes. We used $1.0 million in investing activities to fund equipment purchases and leasehold improvements. We used $45.6 million in financing activities, including $11.3 million for the repayment of the bank term loan facility, $31.0 million for the payment of dividends, $7.8 million for the repurchase of our common stock from employees in conjunction with the payment of tax liabilities in settlement of restricted stock units, $5.0 million for open market repurchases of our common stock, and $5.7 million of tax costs related to delivery of restricted stock units at a vesting price lower than the grant price, offset in part by the net borrowings of $15.1 million on our revolving bank loan facility.

Off-Balance Sheet Arrangements

We do not invest in any off-balance sheet vehicles that provide financing, liquidity, market risk or credit risk support, or engage in any leasing or hedging activities that expose us to any liability that is not reflected in our condensed consolidated financial statements.

Market Risk

Our investments are principally limited to short-term cash investments, which we believe do not face any material interest rate risk, equity price risk or other market risk. We maintain our cash and cash equivalents with financial institutions with high credit ratings. Although these deposits are generally not insured, management believes we are not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

We monitor the quality of our investments on a regular basis and may choose to diversify such investments to mitigate perceived market risk. Our cash and cash equivalents are denominated in U.S. dollars, Australian dollars, Canadian dollars, pound sterling, euros, yen, Swedish krona and Brazilian real, and we face foreign currency risk in our cash balances held in accounts outside the United States due to potential currency movements and the associated foreign currency translation accounting requirements. We currently do not hedge our foreign currency exposure, but we may do so if we expect we will need to fund U.S. dollar obligations with foreign currency.

In addition, the reported amounts of our advisory revenues may be affected by movements in the rate of exchange in the major markets in which we operate between the Australian dollar, Canadian dollar, pound sterling, euro, yen, krona and real (in which collectively 21% of our revenues for the six month period ended June 30, 2017 were denominated) and the dollar, in which our financial statements are denominated. We do not currently hedge against movements in these exchange rates. We analyzed our potential exposure to a decline in exchange rates by performing a sensitivity analysis on our net income in those jurisdictions in which we historically generated a significant portion of our foreign earnings, including the United Kingdom, Europe and Australia. During the six month period ended June 30, 2017, as compared to the same period in 2016, the value of the U.S. dollar strengthened relative to the pound sterling and euro and weakened relative to the Australian dollar. In aggregate, although there was a negative impact on our revenues in the first six months of 2017 as compared to the same period in 2016 as a result of movements in the foreign currency exchange rates, we did not deem the impact significant due to the timing of receipts and the mix of currencies we received, including the negotiation for the payment of certain foreign transaction fees in U.S. dollars. Further, because our operating costs in foreign jurisdictions are denominated in local currency we are effectively internally hedged against the impact in the movements of foreign currency relative to the U.S. dollar. While our earnings are subject to volatility from changes in foreign currency rates, we do not believe we face any material risk in this respect.

Critical Accounting Policies and Estimates

Descriptions of our critical accounting policies and estimates, which are those that are most important to the presentation of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments, are set forth above in "Item 1 — Notes to Condensed Consolidated Financial Statements (unaudited), Note 2 — Summary of Significant Accounting Policies” and are incorporated by reference herein.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk are set forth above in “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk”.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the Firm's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

No change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II -- Other Information

Item 1. Legal Proceedings

The Firm is from time to time involved in legal proceedings incidental to the ordinary course of its business. We do not believe any such proceedings will have a material adverse effect on our results of operations.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in our 2016 Annual Report on Form 10-K.

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

Issuer Purchases of Equity Securities in the Second Quarter of 2017:



Period	Total Number of Shares Repurchased (1)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (2) (3)
April	—	—	—	$	75,000,000
May	—	—	—	75,000,000
June	—	—	—	75,000,000
Total	—		—	$	75,000,000

_____________________________________________


(1)	Excludes 8,565 shares we are deemed to have repurchased in the second quarter of 2017 at an average price of $25.25 per share, or $0.2 million, from employees in conjunction with the payment of tax liabilities in respect of stock delivered to employees in settlement of restricted stock units.


(2)	Effective January 26, 2017, the Board of Directors authorized the repurchase of up to $75,000,000 of our common stock during the period January 1, 2017 to December 31, 2017.


(3)	The value of the shares repurchased for the six months ended June 30, 2017 excludes 432,121 shares we are deemed to have repurchased at an average price of $29.46 per share, or $12.7 million, from employees in conjunction with tax liabilities in respect of stock delivered to employees in settlement of restricted stock units.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

EXHIBIT INDEX



Exhibit Number		Description
10.1		Renewal and Modification Agreement, dated as of August 8, 2017, by and between Greenhill & Co., Inc. and First Republic Bank
10.2		Tenth Amended and Restated Promissory Note, dated as of August 8, 2017, by and between Greenhill & Co., Inc. and First Republic Bank
10.3		Security Agreement (Receivables), dated as of August 8, 2017, by and between Greenhill Cogent, LP and First Republic Bank
31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		Interactive data files pursuant to Rule 405 of Regulation S-T.



*	This information is furnished and not filed herewith for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934.

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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.

Dated: August 9, 2017



	GREENHILL & CO., INC.

	By:	/s/ SCOTT L. BOK
		Scott L. Bok
		Chief Executive Officer

	By:	/s/ HAROLD J. RODRIGUEZ, JR.
		Harold J. Rodriguez, Jr.
		Chief Financial Officer

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GREENHILL & CO INC - FORM 10-Q - August 8, 2017

Attached files

GREENHILL & CO INC Reports