Evercore Inc. 10-K

Item 8. Financial Statements and Supplemental Data Index to Financial Statements Page Report of Independent Registered Public Accounting Firm 56 Consolidated Statements of Financial Condition 58 Consolidated Statements of Operations 59 Consolidated Statements of Comprehensive Income 60 Consolidated Statements of Changes in Equity 61 Consolidated Statements of Cash Flows 62 Notes to Consolidated Financial Statements 64 Supplemental Financial Information Consolidated Quarterly Results of Operations (unaudited) 114 55 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Evercore Inc. New York, New York Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of financial condition of Evercore Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with the accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Investment Banking Advisory Revenue - Success Fees - Refer to Notes 2 and 4 to the consolidated financial statements Critical Audit Matter Description The Company recognizes investment banking advisory revenue that includes success fees for investment banking advisory services as performance obligations are fulfilled and these advisory services are provided to the Company’s clients. However, the recognition of success fees, which are included in investment banking advisory revenue, is generally constrained until substantially all services have been provided, specified conditions have been met and it is probable that a significant reversal of 56 Table of Contents the applicable revenue will not occur in a future period. In certain instances, success fees may meet the criteria for recognition during a given reporting period although the transaction closed subsequent to the reporting period end. The Company applies careful analysis and judgment to the remaining factors necessary for completion of a transaction, including any factors outside of their control, to determine whether it is probable a significant reversal of the success fee revenue will not occur. A transaction can fail to be completed for many reasons, which are outside of the Company’s control, including but not limited to, failure of parties to agree upon final terms with the counterparty, securing necessary board or shareholder approvals, securing necessary financing or to achieve necessary regulatory approvals, or due to adverse market conditions. Given the considerations to determine whether it is probable a significant reversal of success fee revenue will not occur at year end, performing audit procedures to evaluate such considerations involved a high degree of auditor judgement. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the timing of recording success fee revenue for investment banking advisory services at year end included the following, among others: • We tested the effectiveness of controls over recognizing success fees for investment banking advisory services, including those over the timing of revenue recognition. • We selected a sample of contracts with clients for which revenue was recognized prior to December 31, 2020 as well as the period subsequent to year end and performed the following: – Evaluated whether the Company appropriately identified performance obligations and recognized revenue in the correct period by obtaining and evaluating evidence, including, but not limited to, inquiry with management, transaction close documents, press releases, confirmations, court approvals, executed agreements and communications, regarding the extent of uncertainty associated with variable consideration. – Evaluated the accuracy of management’s calculation of investment banking advisory services fees by recalculating the revenue amounts and comparing our expectation to management’s calculation. – Evaluated whether it was probable that a significant reversal of the applicable revenue would not occur. /s/ DELOITTE & TOUCHE LLP New York, New York February 25, 2021 We have served as the Company’s auditor since 2003. 57 Table of Contents EVERCORE INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands, except share data) December 31, 2020 2019 Assets Current Assets Cash and Cash Equivalents $ 829,598 $ 633,808 Investment Securities and Certificates of Deposit (includes available-for-dale debt securities with an amortized cost of $ 402,824 and $ 114,204 at December 31, 2020 and 2019, respectively) 1,060,836 623,946 Financial Instruments Owned and Pledged as Collateral at Fair Value — 12,431 Securities Purchased Under Agreements to Resell — 13,566 Accounts Receivable (net of allowances of $ 5,372 and $ 7,881 at December 31, 2020 and 2019, respectively) 368,346 296,355 Receivable from Employees and Related Parties 23,593 22,416 Other Current Assets 92,231 87,900 Total Current Assets 2,374,604 1,690,422 Investments 86,681 89,490 Deferred Tax Assets 257,862 268,591 Operating Lease Right-of-Use Assets 270,498 199,988 Furniture, Equipment and Leasehold Improvements (net of accumulated depreciation and amortization of $ 139,572 and $ 117,387 at December 31, 2020 and 2019, respectively) 148,832 126,799 Goodwill 129,126 130,758 Intangible Assets (net of accumulated amortization of $ 2,932 and $ 7,292 at December 31, 2020 and 2019, respectively) 698 2,303 Other Assets 102,587 90,262 Total Assets $ 3,370,888 $ 2,598,613 Liabilities and Equity Current Liabilities Accrued Compensation and Benefits $ 778,043 $ 518,991 Accounts Payable and Accrued Expenses 37,961 39,726 Securities Sold Under Agreements to Repurchase — 26,000 Payable to Employees and Related Parties 24,047 31,703 Operating Lease Liabilities 42,871 33,316 Taxes Payable 15,346 3,400 Current Portion of Notes Payable 37,974 — Other Current Liabilities 127,691 15,517 Total Current Liabilities 1,063,933 668,653 Operating Lease Liabilities 300,275 217,251 Notes Payable 338,518 375,062 Amounts Due Pursuant to Tax Receivable Agreements 76,860 84,952 Other Long-term Liabilities 101,928 126,445 Total Liabilities 1,881,514 1,472,363 Commitments and Contingencies (Note 20) Equity Evercore Inc. Stockholders' Equity Common Stock Class A, par value $ 0.01 per share ( 1,000,000,000 shares authorized, 72,195,283 and 68,698,675 issued at December 31, 2020 and 2019, respectively, and 40,750,225 and 39,176,010 outstanding at December 31, 2020 and 2019, respectively) 722 687 Class B, par value $ 0.01 per share ( 1,000,000 shares authorized, 48 and 84 issued and outstanding at December 31, 2020 and 2019, respectively) — — Additional Paid-In-Capital 2,266,136 2,016,524 Accumulated Other Comprehensive Income (Loss) ( 9,758 ) ( 27,596 ) Retained Earnings 798,573 558,269 Treasury Stock at Cost ( 31,445,058 and 29,522,665 shares at December 31, 2020 and 2019, respectively) ( 1,824,727 ) ( 1,678,168 ) Total Evercore Inc. Stockholders' Equity 1,230,946 869,716 Noncontrolling Interest 258,428 256,534 Total Equity 1,489,374 1,126,250 Total Liabilities and Equity $ 3,370,888 $ 2,598,613 See Notes to Consolidated Financial Statements. 58 Table of Contents EVERCORE INC. CONSOLIDATED STATEMENTS OF OPERATIONS (dollars and share amounts in thousands, except per share data) For the Years Ended December 31, 2020 2019 2018 Revenues Investment Banking: Advisory Fees $ 1,755,273 $ 1,653,585 $ 1,743,473 Underwriting Fees 276,191 89,681 71,691 Commissions and Related Fees 205,767 189,506 200,015 Asset Management and Administration Fees 54,397 50,611 48,246 Other Revenue, Including Interest and Investments ( 6,309 ) 45,454 19,051 Total Revenues 2,285,319 2,028,837 2,082,476 Interest Expense 21,414 20,139 17,771 Net Revenues 2,263,905 2,008,698 2,064,705 Expenses Employee Compensation and Benefits 1,372,339 1,200,977 1,197,173 Occupancy and Equipment Rental 74,107 68,285 58,971 Professional Fees 80,883 81,851 82,393 Travel and Related Expenses 25,887 75,395 68,754 Communications and Information Services 54,274 47,315 41,319 Depreciation and Amortization 26,245 31,023 27,054 Execution, Clearing and Custody Fees 13,592 12,967 11,470 Special Charges, Including Business Realignment Costs 46,645 10,141 5,012 Acquisition and Transition Costs 562 1,013 21 Other Operating Expenses 42,938 42,020 30,461 Total Expenses 1,737,472 1,570,987 1,522,628 Income Before Income from Equity Method Investments and Income Taxes 526,433 437,711 542,077 Income from Equity Method Investments 14,398 10,996 9,294 Income Before Income Taxes 540,831 448,707 551,371 Provision for Income Taxes 128,151 95,046 108,520 Net Income 412,680 353,661 442,851 Net Income Attributable to Noncontrolling Interest 62,106 56,225 65,611 Net Income Attributable to Evercore Inc. $ 350,574 $ 297,436 $ 377,240 Net Income Attributable to Evercore Inc. Common Shareholders $ 350,574 $ 297,436 $ 377,240 Weighted Average Shares of Class A Common Stock Outstanding Basic 40,553 39,994 40,595 Diluted 42,623 43,194 45,279 Net Income Per Share Attributable to Evercore Inc. Common Shareholders: Basic $ 8.64 $ 7.44 $ 9.29 Diluted $ 8.22 $ 6.89 $ 8.33 See Notes to Consolidated Financial Statements. 59 Table of Contents EVERCORE INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (dollars in thousands) For the Years Ended December 31, 2020 2019 2018 Net Income $ 412,680 $ 353,661 $ 442,851 Other Comprehensive Income (Loss), net of tax: Unrealized Gain (Loss) on Securities and Investments, net ( 1,503 ) ( 564 ) ( 275 ) Foreign Currency Translation Adjustment Gain (Loss), net 26,707 3,915 ( 1,180 ) Other Comprehensive Income (Loss) 25,204 3,351 ( 1,455 ) Comprehensive Income 437,884 357,012 441,396 Comprehensive Income Attributable to Noncontrolling Interest 69,472 56,738 65,408 Comprehensive Income Attributable to Evercore Inc. $ 368,412 $ 300,274 $ 375,988 See Notes to Consolidated Financial Statements. 60 Table of Contents EVERCORE INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (dollars in thousands, except share data) Accumulated Additional Other Class A Common Stock Paid-In Comprehensive Retained Treasury Stock Noncontrolling Total Shares Dollars Capital Income (Loss) Earnings Shares Dollars Interest Equity Balance at December 31, 2017 62,119,904 $ 621 $ 1,600,699 $ ( 31,411 ) $ 79,461 ( 23,017,750 ) $ ( 1,105,406 ) $ 252,404 $ 796,368 Cumulative Effect of Accounting Change (1) — — — 2,229 ( 2,229 ) — — — — Net Income — — — — 377,240 — — 65,611 442,851 Other Comprehensive Income (Loss) — — — ( 1,252 ) — — — ( 203 ) ( 1,455 ) Treasury Stock Purchases — — — — — ( 3,105,688 ) ( 289,681 ) — ( 289,681 ) Evercore LP Units Exchanged for Class A Common Stock 1,181,669 12 70,550 — — — — ( 46,594 ) 23,968 Equity-based Compensation Awards 2,570,441 26 172,309 — — — — 19,860 192,195 Dividends — — — — ( 89,590 ) — — — ( 89,590 ) Noncontrolling Interest (Note 17) — — ( 25,458 ) — — — — ( 41,259 ) ( 66,717 ) Balance at December 31, 2018 65,872,014 659 1,818,100 ( 30,434 ) 364,882 ( 26,123,438 ) ( 1,395,087 ) 249,819 1,007,939 Net Income — — — — 297,436 — — 56,225 353,661 Other Comprehensive Income — — — 2,838 — — — 513 3,351 Treasury Stock Purchases — — — — — ( 3,399,227 ) ( 283,081 ) — ( 283,081 ) Evercore LP Units Exchanged for Class A Common Stock 353,383 3 32,964 — — — — ( 15,142 ) 17,825 Equity-based Compensation Awards 2,473,278 25 206,942 — — — — 27,890 234,857 Dividends — — — — ( 104,049 ) — — — ( 104,049 ) Noncontrolling Interest (Note 17) — — ( 41,482 ) — — — — ( 62,771 ) ( 104,253 ) Balance at December 31, 2019 68,698,675 687 2,016,524 ( 27,596 ) 558,269 ( 29,522,665 ) ( 1,678,168 ) 256,534 1,126,250 Cumulative Effect of Accounting Change (2) — — — — ( 1,310 ) — — — ( 1,310 ) Net Income — — — — 350,574 — — 62,106 412,680 Other Comprehensive Income — — — 17,838 — — — 7,366 25,204 Treasury Stock Purchases — — — — — ( 1,922,393 ) ( 146,559 ) — ( 146,559 ) Evercore LP Units Exchanged for Class A Common Stock 898,585 9 46,946 — — — — ( 37,683 ) 9,272 Equity-based Compensation Awards 2,598,023 26 204,231 — — — — 14,618 218,875 Dividends — — — — ( 108,960 ) — — — ( 108,960 ) Noncontrolling Interest (Note 17) — — ( 1,565 ) — — — — ( 44,513 ) ( 46,078 ) Balance at December 31, 2020 72,195,283 $ 722 $ 2,266,136 $ ( 9,758 ) $ 798,573 ( 31,445,058 ) $ ( 1,824,727 ) $ 258,428 $ 1,489,374 (1) The cumulative adjustment relates to the adoption of Accounting Standards Update ("ASU") No. 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01") on January 1, 2018, for which the Company recorded an adjustment to Retained Earnings to reflect cumulative unrealized losses, net of tax, on available-for-sale equity securities previously recorded in Accumulated Other Comprehensive Income (Loss). (2) The cumulative adjustment relates to the adoption of ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13") on January 1, 2020, for which the Company recorded an adjustment to Retained Earnings to reflect the increase in the Company's Allowance for Doubtful Accounts as a result of the use of the current expected credit loss model. See Notes 2 and 3 for further information. See Notes to Consolidated Financial Statements. 61 Table of Contents EVERCORE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) For the Years Ended December 31, 2020 2019 2018 Cash Flows From Operating Activities Net Income $ 412,680 $ 353,661 $ 442,851 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Net (Gains) Losses on Investments, Investment Securities and Contingent Consideration ( 8,681 ) ( 13,750 ) 10,718 Equity Method Investments ( 1,636 ) 403 1,352 Equity-Based and Other Deferred Compensation 367,438 360,341 293,507 Net Loss on Sale and Wind-down of Operations in Mexico, Including Release of Cumulative Foreign Exchange Losses 35,247 — — Impairment of Goodwill — 2,921 — Noncash Lease Expense 38,626 29,259 — Depreciation, Amortization and Accretion 30,002 35,730 29,374 Bad Debt Expense 6,878 10,451 3,365 Deferred Taxes 13,824 ( 10,503 ) ( 3,981 ) Decrease (Increase) in Operating Assets: Investment Securities 3,559 ( 491 ) ( 546 ) Financial Instruments Owned and Pledged as Collateral at Fair Value ( 1,516 ) 10,629 ( 2,961 ) Securities Purchased Under Agreements to Resell ( 399 ) ( 10,541 ) 8,166 Accounts Receivable ( 78,573 ) 5,241 ( 130,956 ) Receivable from Employees and Related Parties ( 1,170 ) 1,450 ( 6,849 ) Other Assets ( 19,043 ) ( 58,962 ) ( 21,830 ) (Decrease) Increase in Operating Liabilities: Accrued Compensation and Benefits 82,364 ( 180,767 ) 208,088 Accounts Payable and Accrued Expenses ( 796 ) ( 745 ) 5,496 Securities Sold Under Agreements to Repurchase 1,935 ( 115 ) ( 5,183 ) Payables to Employees and Related Parties ( 7,980 ) ( 599 ) 4,387 Taxes Payable 11,946 ( 30,221 ) 16,099 Other Liabilities 93,666 1,305 ( 1,523 ) Net Cash Provided by Operating Activities 978,371 504,697 849,574 Cash Flows From Investing Activities Investments Purchased ( 143 ) ( 3,843 ) ( 95 ) Distributions of Private Equity Investments 650 1,893 2,143 Investment Securities: Proceeds from Sales and Maturities of Investment Securities and Futures Contracts Activity 555,624 510,151 191,779 Purchases of Investment Securities and Futures Contracts Activity ( 1,201,617 ) ( 698,995 ) ( 336,596 ) Maturity of Certificates of Deposit 214,266 100,000 63,527 Purchase of Certificates of Deposit — ( 211,861 ) ( 100,000 ) Purchase of Furniture, Equipment and Leasehold Improvements ( 53,330 ) ( 70,816 ) ( 33,324 ) Proceeds from Sale of Business, Net of Cash Sold 679 — — Net Cash Provided by (Used In) Investing Activities ( 483,871 ) ( 373,471 ) ( 212,566 ) Cash Flows From Financing Activities Issuance of Noncontrolling Interests 540 600 1,165 Distributions to Noncontrolling Interests ( 44,915 ) ( 54,706 ) ( 41,413 ) Payments Under Tax Receivable Agreement ( 9,425 ) ( 9,490 ) ( 13,345 ) Short-Term Borrowings — 30,000 30,000 Repayment of Short-Term Borrowings — ( 30,000 ) ( 30,000 ) Repayment of Subordinated Borrowings — — ( 6,799 ) Issuance of Notes Payable — 205,718 — Debt Issuance Costs — ( 2,032 ) — Purchase of Treasury Stock and Noncontrolling Interests ( 147,411 ) ( 333,296 ) ( 315,233 ) Dividends ( 106,582 ) ( 96,803 ) ( 77,302 ) Net Cash Provided by (Used in) Financing Activities ( 307,793 ) ( 290,009 ) ( 452,927 ) Effect of Exchange Rate Changes on Cash 7,631 2,573 ( 1,370 ) Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash 194,338 ( 156,210 ) 182,711 Cash, Cash Equivalents and Restricted Cash-Beginning of Period 643,886 800,096 617,385 Cash, Cash Equivalents and Restricted Cash-End of Period $ 838,224 $ 643,886 $ 800,096 62 Table of Contents SUPPLEMENTAL CASH FLOW DISCLOSURE Payments for Interest $ 23,748 $ 16,405 $ 17,818 Payments for Income Taxes $ 111,319 $ 155,478 $ 86,232 Accrued Dividends $ 13,734 $ 14,642 $ 12,288 Noncash Purchase of Noncontrolling Interest $ 851 $ 2,701 $ — See Notes to Consolidated Financial Statements. 63 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Note 1 – Organization Evercore Inc., together with its subsidiaries (the "Company"), is an investment banking and investment management firm, incorporated in Delaware and headquartered in New York, New York. The Company is a holding company which owns a controlling interest in, and is the sole general partner of, Evercore LP, a Delaware limited partnership ("Evercore LP"). The Company operates from its offices and through its affiliates in North America, Europe, the Middle East and Asia. The Investment Banking segment includes the advisory business through which the Company provides advice to clients on significant mergers, acquisitions, divestitures, shareholder activism and other strategic corporate transactions, with a particular focus on advising prominent multinational corporations and substantial private equity firms on large, complex transactions. The Company also provides restructuring advice to companies in financial transition, as well as to creditors, shareholders and potential acquirers. In addition, the Company provides its clients with capital markets advice, underwrites securities offerings, raises funds for financial sponsors and provides advisory services focused on secondary transactions for private funds interests, as well as on primary and secondary transactions for real estate oriented financial sponsors and private equity interests. The Investment Banking business also includes the Evercore ISI business through which the Company offers macroeconomic, policy and fundamental equity research and agency-based equity securities trading for institutional investors. The Investment Management segment includes the wealth management business through which the Company provides investment advisory, wealth management and fiduciary services for high-net-worth individuals and associated entities, and the private equity business, which holds interests in private equity funds which are not managed by the Company. The Company's results also include the institutional asset management business, through which the Company directly and through affiliates, manages financial assets for sophisticated institutional investors. This business included Evercore Casa de Bolsa, S.A. de C.V. ("ECB"), which was sold during 2020. See Note 5 for further information. Note 2 – Significant Accounting Policies Basis of Presentation – The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The consolidated financial statements of the Company are comprised of the consolidation of Evercore LP and Evercore LP's wholly-owned and majority-owned direct and indirect subsidiaries, including Evercore Group L.L.C. ("EGL"), a registered broker-dealer in the U.S. The Company's policy is to consolidate all subsidiaries in which it has a controlling financial interest, as well as any variable interest entities ("VIEs") where the Company is deemed to be the primary beneficiary, when it has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb significant losses or the right to receive benefits that could potentially be significant to the VIE. The Company reviews factors, including the rights of the equity holders and obligations of equity holders to absorb losses or receive expected residual returns, to determine if the investment is a VIE. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly or indirectly by the Company. The consolidation analysis is generally performed qualitatively. This analysis, which requires judgment, is performed at each reporting date. Evercore LP is a VIE and the Company is the primary beneficiary. Specifically, the Company has the majority economic interest in Evercore LP and has decision making authority that significantly affects the economic performance of the entity while the limited partners have no kick-out or substantive participating rights. The assets and liabilities of Evercore LP represent substantially all of the consolidated assets and liabilities of the Company with the exception of U.S. corporate taxes and related items, which are presented on the Company's (Parent Company Only) Condensed Statements of Financial Condition in Note 25. Evercore ISI International Limited ("Evercore ISI U.K."), Evercore Partners International LLP ("Evercore U.K."), Evercore (Japan) Ltd. ("Evercore Japan"), Evercore Consulting (Beijing) Co. Ltd. ("Evercore Beijing") and Evercore Partners Canada Ltd. ("Evercore Canada") are also VIEs, and the Company is the primary beneficiary of these VIEs. Specifically for Evercore ISI U.K., Evercore Japan, Evercore Beijing and Evercore Canada (as of January 1, 2019 for Evercore Japan and Evercore Beijing, and as of January 1, 2020 for Evercore Canada), the Company provides financial support through transfer pricing agreements with these entities, which exposes the Company to losses that are potentially significant to these entities, and has decision making authority that significantly affects the economic performance of these entities. The Company has the majority economic interest in Evercore U.K. and has decision making authority that significantly affects the economic performance of this entity. The Company included in its Consolidated Statements of Financial Condition Evercore ISI U.K., Evercore U.K., Evercore Japan, Evercore Beijing and Evercore Canada assets of $ 377,878 and liabilities of $ 164,779 at 64 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) December 31, 2020 and Evercore ISI U.K., Evercore U.K., Evercore Japan and Evercore Beijing assets of $ 227,885 and liabilities of $ 129,494 at December 31, 2019. All intercompany balances and transactions with the Company's subsidiaries have been eliminated upon consolidation. Evercore LP partnership units Class A LP Units – At the time of the formation transaction, the members of Evercore LP (the "Members") received Class A limited partnership units of Evercore LP ("Class A LP Units") in consideration for their contribution of the various entities included in the historical combined financial statements of the Company. The Class A LP Units were subject to vesting requirements and transfer restrictions and are exchangeable on a one -for-one basis for shares of Class A common stock of the Company ("Class A Shares"). At December 31, 2013, all Class A LP Units were fully vested. Class E LP Units – As a result of the acquisition of the operating businesses of International Strategy & Investment ("ISI") in 2014 and the conversion of the Class J limited partnership units of Evercore LP ("Class J LP Units"), the Company has Class E limited partnership units of Evercore LP ("Class E LP Units") outstanding. At December 31, 2020, all Class E LP Units were fully vested. Class I-P Units – In 2016, in conjunction with the appointment of a current Co-Chief Executive Officer (then Executive Chairman) , the Company issued unvested Class I-P Units of Evercore LP ("Class I-P Units"). The Class I-P Units are contingently exchangeable into Class I limited partnership units of Evercore LP ("Class I LP Units"), which are exchangeable on a one -for-one basis for Class A Shares. Class K-P Units – In 2017 and 2019, the Company issued unvested Class K-P Units of Evercore LP ("Class K-P Units"). The Class K-P Units are contingently exchangeable into Class K limited partnership units of Evercore LP ("Class K LP Units"), which are ultimately exchangeable on a one -for-one basis for Class A Shares. See Note 19 for further information. The Company accounts for exchanges of Evercore LP partnership units ("LP Units") for Class A Shares based on the carrying amounts of the Members' LP Units immediately before the exchange. The Company's interest in Evercore LP is within the scope of Accounting Standards Codification ("ASC") 810-20, " Control of Partnerships and Similar Entities." The Company consolidates Evercore LP and records noncontrolling interest for the economic interest in Evercore LP held directly by others, which includes the Members. Revenue Recognition – The Company adopted ASU No. 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09") on January 1, 2018 using the modified retrospective method of transition applied to contracts which were not completed as of January 1, 2018. The Company did not have a cumulative-effect adjustment as of the date of adoption. ASU 2014-09 creates ASC 606, "Revenue from Contracts with Customers," ("ASC 606"), which provides a five step model to revenue recognition as follows: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation The Company applies this model to its Investment Banking and Asset Management revenue streams. Investment Banking Revenue – The Company earns investment banking fees from clients for providing advisory services on strategic matters, including mergers, acquisitions, divestitures, leveraged buyouts, restructurings, activism and defense and similar corporate finance matters. The Company's Investment Banking services also include services related to securities underwriting, private placement services and commissions for agency-based equity trading services and equity research. Revenue is recognized as the Company satisfies performance obligations, upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for these services. The Company’s contracts with customers may include promises to transfer multiple services to a customer. Determining whether services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. For performance obligations satisfied over time, determining a measure of progress requires the Company to make significant judgments that affect the timing of revenue recognized. For certain advisory services, the Company has 65 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) concluded that performance obligations are satisfied over time. This is based on the premise that the Company transfers control of services and the client simultaneously receives benefits from these services over the course of an engagement. For performance obligations satisfied at a point in time, determining when control transfers requires the Company to make significant judgments that affect the timing of when revenue is recognized. The Company records Investment Banking Revenue on the Consolidated Statements of Operations for the following: Advisory Fees – In general, advisory fees are paid at the time the Company signs an engagement letter, during the course of the engagement or when an engagement is completed. In some circumstances, and as a function of the terms of an engagement letter, the Company may receive fixed retainer fees for financial advisory services concurrent with, or soon after, the execution of the engagement letter or over the course of the engagement, where the engagement letter will specify a future service period associated with those fees. The Company may also receive announcement fees upon announcement of a transaction in addition to success fees upon closing of a transaction or another defined outcome, both of which represent variable consideration. This variable consideration will be included in the transaction price, as defined, and recognized as revenue to the extent that it is probable that a significant reversal of revenue will not occur. When assessing probability, the Company applies careful analysis and judgment to the remaining factors necessary for completion of a transaction, including factors outside of the Company's control. A transaction can fail to be completed for many reasons which are outside of the Company’s control, including failure of parties to agree upon final terms, to secure necessary board or shareholder approvals, to secure necessary financing, to achieve necessary regulatory approvals, or due to adverse market conditions. In the case of bankruptcy engagements, fees are subject to approval of the court. With respect to retainer, announcement and success fees, there are no distinct performance obligations aside from advisory activities, which are generally focused on achieving a milestone (typically, the announcement and/or the closing of a transaction). These advisory services are provided over time throughout the contract period. The Company recognizes revenue when distinct services are performed and when it is probable that a reversal of revenue will not occur, which is generally upon the announcement or closing of a transaction. Accordingly, in any given period, advisory fees recognized for certain transactions may relate to services performed in prior periods. In circumstances in which retainer fees are received in advance of services, these fees are initially recorded as deferred revenue (a contract liability), which is recorded in Other Current Liabilities on the Consolidated Statements of Financial Condition, and subsequently recognized as advisory fee revenue in Advisory Fees on the Consolidated Statements of Operations during the applicable time period within which the service is rendered. Announcement fees for advisory services are recognized upon announcement (the point at which it is determined that the reversal of revenue is not probable) and all other requirements for revenue recognition are satisfied. A portion of the announcement fee may be deferred based on the services remaining to be completed, if any. Success fees for advisory services, such as merger and acquisition ("M&A") advice, are recognized when it is determined that the reversal of revenue is not probable and all other requirements for revenue recognition are satisfied, which is generally at closing of the transaction. With respect to fairness or valuation opinions, fees are fixed and there is a distinct performance obligation, since the opinion is rendered separate from any other advisory activities. Revenues related to fairness or valuation opinions are recognized at the point in time when the opinion has been rendered and delivered to the client. In the event the Company was to receive an opinion or success fee in advance of the completion conditions noted above, such fee would initially be recorded as deferred revenue (a contract liability) in Other Current Liabilities on the Consolidated Statements of Financial Condition and subsequently recognized as advisory fee revenue in Advisory Fees on the Consolidated Statements of Operations when the conditions of completion have been satisfied. Placement fee revenues are attributable to capital raising on both corporations and financial sponsors. The Company recognizes placement fees in accordance with the terms of the engagement letter, which are generally contingent on the achievement of a capital commitment by an investor, at the time of the client's acceptance of capital or capital commitments. Underwriting Fees – Underwriting fees are attributable to public and private offerings of equity and debt securities and are recognized at the point in time when the offering has been deemed to be completed by the lead manager of the underwriting group. When the offering is completed, the performance obligation has been satisfied and the Company recognizes the applicable management fee, selling concession and underwriting fee. Offering expenses are presented gross in the Consolidated Statements of Operations. Commissions and Related Fees – Commissions and Related Fees include commissions received from customers for the execution of agency-based brokerage transactions in listed and over-the-counter equities. The execution of each trade order represents a distinct performance obligation and the transaction price at the point in time of trade order execution is fixed. Trade execution is satisfied at the point in time that the customer has control of the asset and as such, fees are recorded on a trade date 66 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) basis or, in the case of payments under commission sharing arrangements, when earned. The Company also earns subscription fees for the sales of research. The delivery of research under subscription arrangements represents a distinct performance obligation that is satisfied over time. The fees are fixed and are recognized over the period in which the performance obligation is satisfied. Cash received before the subscription period ends is initially recorded as deferred revenue (a contract liability) in Other Current Liabilities on the Consolidated Statements of Financial Condition, and is recognized in Commissions and Related Fees on the Consolidated Statements of Operations ratably over the period in which the related services are rendered. Taxes collected from customers and remitted to governmental authorities are presented on a net basis on the Consolidated Statements of Operations. Asset Management and Administration Fees – The Company's Investment Management business generates revenues from the management of client assets and through interests in private equity funds which are not managed by the Company. The Company’s contracts with customers may include promises to transfer multiple services to a customer. Determining whether services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. For performance obligations satisfied over time, determining a measure of progress requires the Company to make significant judgments that affect the timing of revenue recognized. Asset management fees for third-party clients are generally based on the value of the assets under management and any performance fees that may be negotiated with the client. The management of asset portfolios represents a distinct performance obligation that is satisfied over time. These fees are generally recognized over the period that the related services are provided and in which the performance obligation is satisfied, based upon the beginning, ending or average value of the assets for the relevant period. Fees paid in advance of services rendered are initially recorded as deferred revenue (a contract liability), which is recorded in Other Current Liabilities on the Consolidated Statements of Financial Condition, and are recognized in Asset Management and Administration Fees on the Consolidated Statements of Operations ratably over the period in which the related service is rendered. Generally, to the extent performance fee arrangements have been negotiated, these fees are earned when the likelihood of clawback is mathematically improbable. Fees generated for serving as an independent fiduciary and/or trustee are either based on a flat fee, are pre-negotiated with the client or are based on the value of assets under administration. The management of assets under administration represents a distinct performance obligation that is satisfied over time. For ongoing engagements, fees are billed monthly or quarterly either in advance or in arrears. Fees paid in advance of services rendered and satisfaction of the performance obligation are initially recorded as deferred revenue (a contract liability) in Other Current Liabilities on the Consolidated Statements of Financial Condition, and are recognized in Asset Management and Administration Fees on the Consolidated Statements of Operations ratably over the period in which the related services are rendered and the performance obligation is satisfied. Other Revenue, Including Interest and Investments, and Interest Expense – Other Revenue and Interest Expense is derived from investing customer funds in financing transactions. These transactions are principally repurchases and resales of Mexican government and government agency securities. Revenue and expenses associated with these transactions are recognized over the term of the repurchase or resale transaction. These transactions were part of the Company's ECB business in Mexico, which was sold on December 16, 2020. See Note 5 for further information. Other Revenue also includes the following: • Income (losses) earned on investment securities, including our investment funds and futures contracts which are used as an economic hedge against the Company's deferred cash compensation program, certificates of deposit, cash and cash equivalents and on the Company’s debt security investment in G5 Holdings S.A. ("G5") • Adjustments to amounts due pursuant to the Company’s tax receivable agreement, subsequent to its initial establishment, related to changes in enacted tax rates • Gains (losses) resulting from foreign currency fluctuations • Principal trading and realized and unrealized gains and losses on interests in Private Equity funds which are not managed by the Company • A net loss on the sales of the Company's businesses at ECB, as well as a loss related to the release of cumulative foreign exchange losses resulting from the sale and wind-down of the Company's businesses in Mexico in 2020 67 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Interest Expense also includes interest expense associated with the Company’s Notes Payable, subordinated borrowings and lines of credit. Client Expense Reimbursement – In the conduct of its financial advisory service engagements, the Company receives reimbursement for certain expenses incurred by the Company in the course of performing services. Transaction-related expenses, which are billable to clients, are recognized as revenue and recorded in Accounts Receivable on the later of the date of an executed engagement letter or the date the expense is incurred. Noncontrolling Interest – Noncontrolling interest recorded in the consolidated financial statements relates to the portions of the Company's subsidiaries not owned by the Company. The Company allocates net income to noncontrolling interests held at Evercore LP and at the operating entity level, where required, by multiplying the relative ownership interest of the noncontrolling interest holders for the period by the net income or loss for the entity to which the noncontrolling interest relates. In circumstances where the governing documents of the entity to which the noncontrolling interest relates require special allocations of profits (losses) to the controlling and noncontrolling interest holders, the net income or loss of these entities is allocated based on these special allocations. ASC 810 " Consolidation " ("ASC 810") requires reporting entities to present noncontrolling (minority) interests as equity (as opposed to as a liability or mezzanine equity) and provides guidance on the accounting for transactions between an entity and noncontrolling interests. Noncontrolling Interest is presented as a component of Total Equity on the Consolidated Statements of Financial Condition and below Net Income on the Consolidated Statements of Operations. In addition, there is an allocation of the components of Total Comprehensive Income between controlling interests and noncontrolling interests. Changes in a parent's ownership interest while the parent retains control of its subsidiary are accounted for as equity transactions. Fair Value of Financial Instruments – The majority of the Company's assets and liabilities are recorded at fair value or at amounts that approximate fair value. Such assets and liabilities include cash and cash equivalents, investments, investment securities, financial instruments owned and pledged as collateral, repurchase and reverse repurchase agreements, receivables and payables and accruals. See Note 12 for further information. Cash and Cash Equivalents – Cash and Cash Equivalents consist of short-term highly-liquid investments with original maturities of three months or less. Investment Securities and Certificates of Deposit and Futures Contracts – During 2019, the Company renamed "Marketable Securities and Certificates of Deposit" to "Investment Securities and Certificates of Deposit" on the Consolidated Statements of Financial Condition. Investment Securities include investments in U.S. Treasury securities, corporate, municipal and other debt securities and investments in readily-marketable equity securities, which are accounted for under ASC 320-10, " Investments - Debt Securities" and ASC 321-10, " Investments - Equity Securities," ("ASC 321-10"). The securities are carried at fair value on the Consolidated Statements of Financial Condition; debt securities are valued based on quoted prices that exist in the marketplace for similar issues and equity securities are valued using quoted market prices on applicable exchanges or markets. Investment Securities transactions are recorded as of the trade date. The Company also periodically enters into futures contracts. In accordance with ASC 815, "Derivatives and Hedging," ("ASC 815") futures contracts are carried at fair value. The Company invests in readily marketable debt and equity securities, as well as in a portfolio of exchange-traded funds and mutual funds, and periodically enters into futures contracts, as an economic hedge against the Company’s deferred cash compensation program. Debt securities are classified as available-for-sale and any unrealized gains and losses are recorded as net increases or decreases to Accumulated Other Comprehensive Income (Loss), net of tax, and realized gains and losses on these securities are included in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations. Realized and unrealized gains and losses on equity securities are recorded in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations. Realized and unrealized gains and losses on futures contracts are recorded in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations. EGL and other broker-dealers also invest in fixed income portfolios consisting primarily of U.S. Treasury securities, municipal bonds and other debt securities, which are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations, as required for broker-dealers in securities. Certificates of Deposit consist of investments with certain banks with original maturities of six months or less when purchased. 68 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Financial Instruments Owned and Pledged as Collateral at Fair Value – The Company's Financial Instruments Owned and Pledged as Collateral at Fair Value consist principally of foreign government obligations, which are recorded on a trade-date basis and are stated at quoted market values. Related gains and losses are reflected in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations. The Company pledges the Financial Instruments Owned and Pledged as Collateral at Fair Value to collateralize certain financing arrangements, which permits the counterparty to pledge the securities. The Company's ECB business was sold in December 2020; following the sale, there are no remaining Financial Instruments Owned and Pledged as Collateral at Fair Value. See Notes 5 and 9 for further information. Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase – Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase are treated as collateralized financing transactions. The agreements provide that the transferor will receive substantially the same securities in return at the maturity of the agreement. These transactions are carried at the amounts at which the related securities will be subsequently resold or repurchased, plus accrued interest payable or receivable. As the maturities on these transactions are short-term in nature (i.e. mature on the next business day) and the underlying securities are debt instruments of the Mexican Government or its agencies, their carrying amounts approximate fair value. The Company periodically assesses the collectability or credit quality related to securities purchased under agreements to resell. The Company's ECB business was sold in December 2020; following the sale, there are no remaining Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase. See Notes 5 and 9 for further information. Accounts Receivable and Contract Assets – Accounts Receivable consists primarily of investment banking fees and expense reimbursements charged to the Company's clients. The Company records Accounts Receivable, net of any allowance for doubtful accounts, when relevant revenue recognition criteria has been achieved and payment is conditioned on the passage of time. The Company maintains an allowance for doubtful accounts to provide coverage for estimated losses from its client receivables. The Company adopted ASU 2016-13 on January 1, 2020, using a modified retrospective method of transition. The Company recorded a cumulative-effect adjustment to decrease retained earnings by $ 1,310 as of January 1, 2020. Following the adoption of ASU 2016-13, the Company determines the adequacy of the allowance by estimating the probability of loss based on the Company's analysis of historical credit loss experience of its client receivables, and taking into consideration current market conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company has determined that long-term forecasted information is not relevant to its fee receivables, which are primarily short-term. The Company updates its average credit loss rates periodically and maintains a quarterly allowance review process to consider current factors that would require an adjustment to the credit loss allowance. In addition, the Company periodically performs a qualitative assessment to monitor risks associated with current and forecasted conditions that may require an adjustment to the expected credit loss rates. Expected credit losses for newly recognized financial assets and changes to expected credit losses during the period are recognized in earnings. The Investment Banking and Investment Management receivables collection periods generally are within 90 days of invoice, with the exception of placement fees, which are generally collected within 180 days of invoice, and fees related to private funds capital raising, which are collected in a period exceeding one year . The collection period for restructuring transaction receivables may exceed 90 days. Receivables that are collected in a period exceeding one year are reflected in Other Assets on the Consolidated Statements of Financial Condition. The Company records contract assets within Other Current Assets and Other Assets on the Consolidated Statements of Financial Condition when payment is due from a client conditioned on future performance or the occurrence of other events. The Company also recognizes a contract asset for the incremental costs of obtaining a contract with a customer if the benefit of those costs is expected to be longer than one year . The Company applies a practical expedient to expense costs to obtain a contract as incurred when the amortization period is one year or less. Investments – The Company's investments include investments in unconsolidated affiliated companies and other investments in private equity partnerships: Affiliates – The Company has equity interests in ABS Investment Management Holdings LP and ABS Investment Management GP LLC (collectively, "ABS"), Atalanta Sosnoff Capital, LLC ("Atalanta Sosnoff") and Luminis Partners ("Luminis") and includes its share of the income (losses) within Income from Equity Method Investments, as a component of Income Before Income Taxes, on the Consolidated Statements of Operations. The Company assesses its equity method investments annually for impairment, or more frequently if circumstances indicate impairment may have occurred. See Note 11 for further information. 69 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Private Equity – The investments in private equity funds consist primarily of investments in marketable and non-marketable securities of the portfolio companies. The underlying investments held by the private equity funds are valued based on quoted market prices or estimated fair value if there is no public market. The fair value of non-marketable securities is determined by giving consideration to a range of factors, including but not limited to, market conditions, operating performance (current and projected) and subsequent financing transactions. Due to the inherent uncertainty in the valuation of these non-marketable securities, estimated values may materially differ from the values that would have been used had a ready market existed for these investments. Investments in publicly-traded securities held by the private equity funds are valued using quoted market prices. The Company recognizes its allocable share of the changes in fair value of the private equity funds' underlying investments as realized and unrealized gains (losses) within Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations. The Company also maintains investments in Glisco Manager Holdings LP, Trilantic Capital Partners ("Trilantic") and equity securities in private companies, which are accounted for as equity securities without readily determinable fair values in accordance with ASC 321-10, as well as an investment in a debt security that is accounted for as a held-to-maturity security. The Company assesses its investments quarterly for impairment, or more frequently if circumstances indicate impairment may have occurred. See Note 11 for further information. Leases – The Company adopted ASC 842, " Leases " ("ASC 842") on January 1, 2019, using the modified retrospective method of transition. The Company did not have a cumulative-effect adjustment as of the date of adoption. The Company elected to apply the package of practical expedients, which does not require reassessment of whether contracts are or contain leases, of lease classification and of initial direct costs. The Company also elected the transition option in ASU No. 2018-11, " Leases (Topic 842): Targeted Improvements ," ("ASU 2018-11") to not apply the new lease standard in comparative periods presented in financial statements in the year of adoption. Following the adoption of ASC 842, the Company includes all leases, including short-term leases, on its Consolidated Statements of Financial Condition. The Company does not separate lease and non-lease components of contracts for leases for the use of office space and equipment. Operating leases for office space generally contain payments for real estate taxes, common area maintenance and other operating expenses in addition to rent payments that are not fixed; the Company accounts for these costs as variable payments and does not include these as part of the lease component. Following the adoption of ASC 842, the present values of the Company's lease commitments are reflected as long-term assets, within Operating Lease Right-of-Use Assets, with corresponding liabilities classified as current and non-current, within Operating Lease Liabilities on the Company's Consolidated Statement of Financial Condition. The Company determines if an arrangement is a lease at inception. Right-of-use assets represent the Company's right to use the underlying assets for their lease terms and lease liabilities represent the Company's obligation to make lease payments arising from these leases. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Right-of-use assets are subject to certain adjustments for lease incentives and initial direct costs. The lease terms include options to extend the lease when it is reasonably certain that the Company will exercise that option. The Company's lease agreements do not contain any residual value guarantees. Operating lease expense is included in Occupancy and Equipment Rental on the Company's Consolidated Statements of Operations (which did not change from the legacy U.S. GAAP presentation). See Note 10 for further information. Furniture, Equipment and Leasehold Improvements – Fixed assets, including equipment, hardware and software and leasehold improvements, are stated at cost, net of accumulated depreciation and amortization. Furniture, equipment and computer hardware and software are depreciated using the straight-line method over the estimated useful lives of the assets, primarily ranging from three years to seven years . Leasehold improvements are amortized over the shorter of the term of the lease or the useful life of the asset. Certain costs associated with the acquisition or development of internal-use software and cloud computing arrangements are also capitalized. Once the software is ready for its intended use, the capitalized costs are amortized using the straight-line method over the estimated useful life of the software or hosting arrangement. Capitalized costs associated with cloud computing arrangements are presented in the same line item on the Consolidated Statements of Financial Condition that a prepayment of the fees for the associated hosting arrangement is presented in (within Other Assets). The capitalized costs associated with cloud computing arrangements are amortized over the term of the arrangement and the expense is presented in the same line item on the Consolidated Statements of Operations as the fees associated with the hosting element of the arrangement (within Communications and Information Services). Goodwill and Intangible Assets – Goodwill is tested for impairment annually, as of November 30 th , or more frequently if circumstances indicate impairment may have occurred. The Company assesses whether any goodwill allocated to its applicable 70 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) reporting unit is impaired by comparing the fair value of each reporting unit with its respective carrying amount. For acquired businesses, contingent consideration is recognized and measured at fair value as of the acquisition date and at subsequent reporting periods. The Company tests goodwill for impairment at the reporting unit level. In determining the fair value for each reporting unit the Company utilizes either a market multiple approach or a discounted cash flow methodology based on the adjusted cash flows from operations, or a weighted combination of both a market multiple approach and discounted cash flow methodology. The market multiple approach includes applying the average earnings multiples of comparable public companies for their respective reporting unit multiplied by the forecasted earnings of the respective reporting unit to yield an estimate of fair value. The discounted cash flow methodology begins with the forecasted adjusted cash flows from each of the reporting units and uses a discount rate that reflects the weighted average cost of capital adjusted for the risks inherent in the future cash flows. The Company adopted ASU No. 2017-04, "Simplifying the Test for Goodwill Impairment" ("ASU 2017-04") effective April 1, 2017. ASU 2017-04 eliminates Step 2 from the goodwill impairment test and requires companies to recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value. Intangible assets with finite lives are amortized over their estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable as prescribed by ASC 360, " Property, Plant, and Equipment". See Note 5 for further information. Compensation and Benefits – Compensation includes salaries, bonuses (discretionary awards and guaranteed amounts), severance, deferred cash and share-based compensation. Cash bonuses are accrued over the respective service periods to which they relate and deferred cash and share-based bonuses are expensed prospectively over their requisite service period. Share-Based Payments and Other Deferred Compensation – The Company accounts for share-based payments in accordance with ASC 718, " Compensation – Stock Compensation" ("ASC 718"). See Note 19 for further information. Compensation expense recognized pursuant to share-based awards is based on the grant date fair value of the award. The fair value (as measured on the grant date) of awards that vest from one year to five years ("Service-based Awards") is amortized over the vesting periods or requisite service periods as required under ASC 718, however, the vesting of some Service-based Awards will accelerate upon the occurrence of certain events. The Company amortizes the grant-date fair value of share-based compensation awards made to employees, who are or will become retirement eligible prior to the stated vesting date, over the expected substantive service period. For the purposes of calculating diluted net income per share attributable to Evercore Inc. common shareholders, unvested Service-based Awards are included in the diluted weighted average Class A Shares outstanding using the treasury stock method. Once vested, restricted stock units, ("RSUs") and restricted stock are included in the basic and diluted weighted average Class A Shares outstanding. Expense relating to RSUs, restricted stock and LP Units is charged to Employee Compensation and Benefits on the Consolidated Statements of Operations. Compensation expense is recognized pursuant to performance-based awards if it is probable that the performance condition will be achieved. See Note 19 for a discussion of the Company's Long-term Incentive Plan and other performance-based awards. Awards classified as liabilities as required under ASC 718, such as cash settled share-based awards, are re-measured at fair value at each reporting period. Foreign Currency Translation – Foreign currency assets and liabilities have been translated at rates of exchange prevailing at the end of the periods presented. Income and expenses transacted in foreign currency have been translated at average monthly exchange rates during the period. Translation gains and losses are included in Foreign Currency Translation Adjustment Gain (Loss), net, as a component of Other Comprehensive Income (Loss) on the Consolidated Statements of Changes in Equity and the Consolidated Statements of Comprehensive Income. Transactional exchange gains and losses, as well as releases of cumulative foreign currency translation gains and losses from Accumulated Other Comprehensive Income (Loss), are included in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations. Income Taxes – The Company accounts for income taxes in accordance with ASC 740, " Income Taxes" ("ASC 740") which requires the recognition of tax benefits or expenses on temporary differences between the financial reporting and tax basis of its assets and liabilities, as disclosed in Note 22. 71 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Deferred income taxes reflect the net tax effects of temporary differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. Such temporary differences are reflected on the Company's Consolidated Statements of Financial Condition as deferred tax assets and liabilities. The Company accounts for the impact of changes in statutory income tax rates on deferred tax assets and liabilities in the year of enactment. Deferred tax assets are reduced by a valuation allowance when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Significant management judgment is required in determining the Company's provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against the Company's net deferred tax assets. Excess tax benefits and deficiencies from the delivery of Class A Shares under share-based payment arrangements are recognized in the Company's Provision for Income Taxes. See Note 22 for further information. ASC 740 provides a benefit recognition model with a two-step approach consisting of "more-likely-than-not" recognition criteria, and a measurement attribute that measures the position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. ASC 740 also requires the recognition of liabilities created by differences between tax positions taken in a tax return and amounts recognized in the financial statements. See Note 22 for further information. Reclassifications – During 2018, the Company disaggregated "Investment Banking Revenue" into "Advisory Fees", "Underwriting Fees" and "Commissions and Related Fees" on the Consolidated Statements of Operations. The Company also renamed Investment Management Revenue" to "Asset Management and Administration Fees" on the Consolidated Statements of Operations, which includes management fees from the wealth management and institutional asset management businesses. Note 3 – Recent Accounting Pronouncements ASU 2016-13 – In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13. ASU 2016-13 provides amendments to ASC 326, "Financial Instruments - Credit Losses," which amend the guidance on the impairment of financial instruments and add an impairment model (the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Entities will recognize an allowance for its estimate of expected credit losses as of the end of each reporting period. ASU 2016-13 also eliminates the concept of other-than-temporary impairment for available-for-sale debt securities and requires impairments on these securities to be recognized in earnings through an allowance when fair value is less than amortized cost and a credit loss exists or when the securities are expected to be sold before a recovery of amortized cost. The amendments in this update are effective during interim and annual periods beginning after December 15, 2019, with early adoption permitted after December 15, 2018. The Company adopted ASU 2016-13 on January 1, 2020 using the modified retrospective approach by means of a cumulative-effect adjustment to decrease retained earnings by $ 1,310 as of January 1, 2020. As a result of adopting ASU 2016-13, the Company’s allowance for credit losses on financial assets that are measured at amortized cost reflects management’s estimate of credit losses over the remaining expected life of such assets. These expected credit losses are measured based on historical experience, current conditions and forecasts that affect the collectability of the reported amounts. Expected credit losses for newly recognized financial assets, and changes to expected credit losses during the period are recognized in earnings. The impact of the new guidance primarily relates to the Company’s trade accounts receivable. The Company previously used the specific identification method for establishing credit provisions and write-offs of its trade accounts receivable. ASU 2018-13 – In August 2018, the FASB issued ASU No. 2018-13, "Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13 provides amendments to ASC 820, " Fair Value Measurements and Disclosures" ("ASC 820"), which remove the requirements surrounding the disclosure and policy of transfers between fair value levels and the valuation processes for recurring Level 3 fair value measurements. In addition, ASU 2018-13 adds disclosure requirements for changes in unrealized gains and losses for Level 3 measurements and the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. The amendments in this update are effective during interim and annual periods beginning after December 15, 2019, with early adoption permitted. The amendments on changes in unrealized gains and losses and unobservable inputs for Level 3 measurements should be applied prospectively, and all other amendments in this update should be applied retrospectively. The Company adopted ASU 2018-13 on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto. 72 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) ASU 2018-17 – In October 2018, the FASB issued ASU No. 2018-17, "Consolidation (Topic 810) - Targeted Improvements to Related Party Guidance for Variable Interest Entities" ("ASU 2018-17"). ASU 2018-17 provides amendments to ASC 810, " Consolidation" which states that any indirect interest held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The amendments in this update are effective during interim and annual periods beginning after December 15, 2019, with early adoption permitted. The amendments are required to be applied retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company adopted ASU 2018-17 on January 1, 2020. The adoption of ASU 2018-17 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto. ASU 2019-12 – In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes" ("ASU 2019-12"). ASU 2019-12 provides amendments to ASC 740 which simplify the accounting for income taxes by removing certain exceptions in ASC 740 and clarify and amend certain existing guidance. The amendments in this update are effective during interim and annual periods beginning after December 15, 2020, with early adoption permitted. The amendments on separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented, amendments on ownership changes of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis, with a cumulative-effect adjustment recorded through retained earnings as of the beginning of the period of adoption, and all other amendments should be applied prospectively. The adoption of ASU 2019-12 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto. ASU 2020-01 – In January 2020, the FASB issued ASU No. 2020-01, "Clarifying the Interactions Between Topic 321, 323, and Topic 815" ("ASU 2020-01"). ASU 2020-01 provides amendments to clarify the accounting for certain equity securities when the equity method of accounting is applied or discontinued and scope considerations related to forward contracts and purchased options on certain securities. The amendments in this update are effective during interim and annual periods beginning after December 15, 2020, with early adoption permitted. The adoption of ASU 2020-01 did not have a material impact on the Company's financial condition, results of operations and cash flows, or disclosures thereto. ASU 2020-06 – In August 2020, the FASB issued ASU No. 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" ("ASU 2020-06"). ASU 2020-06 provides amendments to reduce the number of models used to account for convertible instruments and to simplify the accounting for contracts in an entity's own equity. ASU 2020-06 also provides amendments to diluted earnings per share calculations, which require entities to use the if-converted method for convertible instruments and to include the effect of potential share settlement from instruments that may be settled in cash or in shares. The amendments in this update are effective during interim and annual periods beginning after December 15, 2021, with early adoption permitted. The amendments should be applied using a modified or full retrospective transition method. The Company is currently assessing the impact of this update on the Company's financial condition, results of operations and cash flows, or disclosures thereto. 73 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Note 4 – Revenue and Accounts Receivable The following table presents revenue recognized by the Company for the years ended December 31, 2020, 2019 and 2018: For the Years Ended December 31, 2020 2019 2018 Investment Banking: Advisory Fees $ 1,755,273 $ 1,653,585 $ 1,743,473 Underwriting Fees 276,191 89,681 71,691 Commissions and Related Fees 205,767 189,506 200,015 Total Investment Banking $ 2,237,231 $ 1,932,772 $ 2,015,179 Investment Management: Asset Management and Administration Fees: Wealth Management $ 53,069 $ 48,083 $ 44,875 Institutional Asset Management 1,328 2,528 3,371 Total Investment Management $ 54,397 $ 50,611 $ 48,246 Contract Balances The change in the Company’s contract assets and liabilities during the periods primarily reflects timing differences between the Company’s performance and the client’s payment. The Company’s receivables, contract assets and deferred revenue (contract liabilities) for the years ended December 31, 2020 and 2019 are as follows: For the Year Ended December 31, 2020 Receivables (Current) (1) Receivables (Long-term) (2) Contract Assets (Current) (3) Contract Assets (Long-term) (2) Deferred Revenue (Current Contract Liabilities) (4) Deferred Revenue (Long-term Contract Liabilities) (5) Balance at January 1, 2020 $ 296,355 $ 63,554 $ 31,525 $ 2,504 $ 2,492 $ 615 Increase (Decrease) 71,991 7,421 ( 2,198 ) 2,779 6,881 ( 468 ) Balance at December 31, 2020 $ 368,346 $ 70,975 $ 29,327 $ 5,283 $ 9,373 $ 147 For the Year Ended December 31, 2019 Receivables (Current) (1) Receivables (Long-term) (2) Contract Assets (Current) (3) Contract Assets (Long-term) (2) Deferred Revenue (Current Contract Liabilities) (4) Deferred Revenue (Long-term Contract Liabilities) (5) Balance at January 1, 2019 $ 309,075 $ 60,948 $ 2,833 $ 541 $ 4,016 $ 1,731 Increase (Decrease) ( 12,720 ) 2,606 28,692 1,963 ( 1,524 ) ( 1,116 ) Balance at December 31, 2019 $ 296,355 $ 63,554 $ 31,525 $ 2,504 $ 2,492 $ 615 (1) Included in Accounts Receivable on the Consolidated Statements of Financial Condition. (2) Included in Other Assets on the Consolidated Statements of Financial Condition. (3) Included in Other Current Assets on the Consolidated Statements of Financial Condition. (4) Included in Other Current Liabilities on the Consolidated Statements of Financial Condition. (5) Included in Other Long-term Liabilities on the Consolidated Statements of Financial Condition. The Company's contract assets represent arrangements in which an estimate of variable consideration has been included in the transaction price and thereby recognized as revenue that precedes the contractual due date. Under ASC 606, revenue is 74 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) recognized when all material conditions for completion have been met and it is probable that a significant revenue reversal will not occur in a future period. The Company recognized revenue of $ 23,409 , $ 15,115 and $ 16,468 on the Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018, respectively, that was initially included in deferred revenue on the Company’s Consolidated Statements of Financial Condition. Generally, performance obligations under client arrangements will be settled within one year ; therefore, the Company has elected to apply the practical expedient in ASC 606-10-50-14. The allowance for credit losses for the years ended December 31, 2020 and 2019 is as follows: For the Years Ended December 31, 2020 2019 Beginning Balance (1) $ 9,191 $ 6,037 Bad debt expense 6,878 10,451 Write-offs, foreign currency translation and other adjustments ( 10,697 ) ( 8,607 ) Ending Balance $ 5,372 $ 7,881 (1) Beginning Balance for the year ended December 31, 2020 includes the cumulative-effect adjustment of $ 1,310 , which reflects the increase in the Company's Allowance for Doubtful Accounts as a result of the use of the current expected credit loss model related to the adoption of ASU 2016-13 on January 1, 2020. See Notes 2 and 3 for further information. The change in the balance during the year ended December 31, 2020 is primarily related to an increase in the current period provision of expected credit losses, which is impacted by the change in the amount of receivables outstanding greater than 120 days at December 31, 2020, and the write-off of aged receivables. For long-term accounts receivable and long-term contract assets, the Company monitors clients’ creditworthiness based on collection experience and other internal metrics. The following table presents the Company’s long-term accounts receivable and long-term contract assets from the Company's private and secondary fund advisory businesses as of December 31, 2020, by year of origination: Amortized Cost Basis by Origination Year 2020 2019 2018 2017 Total Long-term Accounts Receivable and Long-Term Contract Assets $ 47,466 $ 19,538 $ 8,478 $ 776 $ 76,258 Note 5 – Business Changes and Developments Business Developments Sale of ECB Business and Wind-down of Mexico Advisory – During 2020, the Company completed the sale of its ECB businesses and the transition of its advisory presence in Mexico: • On July 2, 2020, the Company completed the sale of the trust business of ECB (the "ECB Trust business") , which was a part of its Investment Management segment, for a purchase price of MXN 39,500 ($ 1,830 ). As a result of this transaction, the Company deconsolidated assets of $ 475 , representing an allocation of goodwill based on the relative fair value of the business being sold to the total fair value of the Institutional Asset Management reporting unit. This transaction resulted in a pre-tax gain of $ 1,355 included in Other Revenue, Including Interest and Investments, on the Consolidated Statement of Operations for the year ended December 31, 2020. • On December 16, 2020, the Company completed the sale of its remaining ECB business for a purchase price of MXN 35,000 ($ 1,634 ). The ECB business was part of the Company’s Investment Management segment. As a result of this transaction, the Company deconsolidated assets of $ 32,487 , comprised primarily of $ 24,742 of Financial Instruments Owned and Pledged as Collateral at Fair Value, $ 3,317 of Investment Securities and $ 2,785 of Cash and Cash Equivalents and Restricted Cash and deconsolidated liabilities of $ 26,519 , comprised primarily of $ 24,764 of Securities Sold Under Agreements to Repurchase. This transaction resulted in a pre-tax loss of $ 4,796 included in 75 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Other Revenue, Including Interest and Investments, on the Consolidated Statement of Operations for the year ended December 31, 2020. • In 2020, the Company completed the transition of its advisory presence in Mexico to a strategic alliance relationship with a newly-formed independent strategic advisory firm founded by certain former employees. The Company is in the process of winding down the business, which is expected to be completed in 2021. Following the above transactions, the Company concluded that the liquidation of its operations in Mexico was substantially complete. This determination resulted in the reclassification of $ 20,337 and $ 7,028 of cumulative foreign currency translation losses from Accumulated Other Comprehensive Income (Loss) and Noncontrolling Interest, respectively, on the Consolidated Statement of Financial Condition to Other Revenue, Including Interest and Investments, on the Consolidated Statement of Operations for the year ended December 31, 2020. In addition, the Company recorded $ 1,656 in Special Charges, Including Business Realignment Costs, on the Consolidated Statement of Operations for the year ended December 31, 2020, for charges related to the impairment of assets resulting from the wind-down of the Company's businesses in Mexico. This was comprised of a charge of $ 1,176 related to the impairment of operating lease right-of-use assets and a charge of $ 480 related to the impairment of leasehold improvements. Goodwill and Intangible Assets Goodwill associated with the Company's acquisitions is as follows: Investment Banking Investment Management Total Balance at December 31, 2018 (1) $ 120,464 $ 10,923 $ 131,387 Impairment of Goodwill — ( 2,921 ) ( 2,921 ) Foreign Currency Translation and Other 2,292 — 2,292 Balance at December 31, 2019 (2) 122,756 8,002 130,758 Sale of ECB Trust Business — ( 475 ) ( 475 ) Foreign Currency Translation and Other ( 1,157 ) — ( 1,157 ) Balance at December 31, 2020 (2) $ 121,599 $ 7,527 $ 129,126 (1) The amount of the Company's goodwill before accumulated impairment losses of $ 35,607 was $ 166,994 at December 31, 2018. (2) The amount of the Company's goodwill before accumulated impairment losses of $ 38,528 was $ 167,654 and $ 169,286 at December 31, 2020 and 2019, respectively. Intangible assets associated with the Company's acquisitions are as follows: December 31, 2020 Gross Carrying Amount Accumulated Amortization Investment Banking Investment Management Total Investment Banking Investment Management Total Client Related $ — $ 3,630 $ 3,630 $ — $ 2,932 $ 2,932 Total $ — $ 3,630 $ 3,630 $ — $ 2,932 $ 2,932 December 31, 2019 Gross Carrying Amount Accumulated Amortization Investment Banking Investment Management Total Investment Banking Investment Management Total Client Related $ — $ 3,830 $ 3,830 $ — $ 2,743 $ 2,743 Other 5,320 445 5,765 4,159 390 4,549 Total $ 5,320 $ 4,275 $ 9,595 $ 4,159 $ 3,133 $ 7,292 76 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Expense associated with the amortization of intangible assets was $ 1,605 , $ 8,077 and $ 9,199 for the years ended December 31, 2020, 2019 and 2018, respectively. Based on the intangible assets above, as of December 31, 2020, annual amortization of intangibles for each of the next five years is as follows: 2021 $ 363 2022 $ 335 2023 $ — 2024 $ — 2025 $ — Impairments of Goodwill At November 30, 2020, in accordance with ASC 350, "Intangibles - Goodwill and Other" ("ASC 350"), the Company performed its annual goodwill impairment assessment and concluded that the fair value of its reporting units substantially exceeded their carrying values. At November 30, 2019, the Company determined that the fair value of its reporting units substantially exceeded their carrying values, with the exception of its Institutional Asset Management reporting unit, which was less than its carrying value. In determining the fair value of this reporting unit, the Company utilized a discounted cash flow methodology based on the adjusted cash flows from operations. As a result of this analysis, the Company recorded a goodwill impairment charge of $ 833 in the Investment Management segment, which is included within Special Charges, Including Business Realignment Costs, on the Consolidated Statement of Operations for the year ended December 31, 2019. This charge resulted in a decrease of $ 543 to Net Income Attributable to Evercore Inc. (after adjustments for noncontrolling interest and income taxes) for the year ended December 31, 2019. Additionally, in December 2019, the Company performed an impairment assessment of the goodwill remaining in the Institutional Asset Management reporting unit following the classification of the ECB Trust business as Held for Sale, in accordance with ASC 350. In determining the fair value of this reporting unit, the Company utilized a discounted cash flow methodology based on the adjusted cash flows from operations. As a result of this analysis, the Company determined that the fair value of the remaining business in the Institutional Asset Management reporting unit was less than its carrying value. Accordingly, the Company recorded a goodwill impairment charge of $ 2,088 in the Investment Management segment, which is included within Special Charges, Including Business Realignment Costs, on the Consolidated Statement of Operations for the year ended December 31, 2019. This charge resulted in a decrease of $ 1,361 to Net Income Attributable to Evercore Inc. (after adjustments for noncontrolling interest and income taxes) for the year ended December 31, 2019. Note 6 – Acquisition and Transition Costs and Special Charges, Including Business Realignment Costs Acquisition and Transition Costs The Company recognized $ 562 , $ 1,013 and $ 21 for the years ended December 31, 2020, 2019 and 2018, respectively, as Acquisition and Transition Costs incurred in connection with acquisitions, divestitures, and other ongoing business development initiatives. These costs are primarily comprised of professional fees for legal and other services, including costs in 2020 associated with the sale of the ECB business. Special Charges, Including Business Realignment Costs The Company recognized $ 46,645 for the year ended December 31, 2020, as Special Charges, Including Business Realignment Costs, including expenses of $ 41,669 primarily for separation and transition benefits for certain employees terminated as a result of the Company's review of its operations, described below, $ 3,320 related to the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of the Company's headquarters in New York and the Company's business realignment initiatives, and $ 1,656 for charges related to the impairment of assets resulting from the wind-down of the Company's businesses in Mexico. See Note 5 for further information. In 2020, the Company completed a review of its operations focused on markets, sectors and people which delivered lower levels of productivity in an effort to attain greater flexibility of operations and better position itself for future growth. This 77 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) review, which began in the fourth quarter of 2019, generated reductions of 8 % of the Company's headcount. In conjunction with the employment reductions, the Company incurred costs (including costs related to the acceleration of deferred compensation) of $ 41,669 and $ 2,850 for the years ended December 31, 2020 and 2019, respectively, which has been recorded in Special Charges, Including Business Realignment Costs. The Company recognized $ 10,141 for the year ended December 31, 2019, as Special Charges, Including Business Realignment Costs, including expenses of $ 4,370 related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of the Company's headquarters in New York, a charge of $ 2,921 associated with the impairment of goodwill in the Company's Institutional Asset Management reporting unit and separation and transition benefits for certain employees terminated as a result of the Company's review of its operations of $ 2,850 (described above). The Company recognized $ 5,012 for the year ended December 31, 2018, as Special Charges, Including Business Realignment Costs, related to separation benefits and costs for the termination of certain contracts associated with closing the Company's agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of the Company's headquarters in New York. Note 7 – Related Parties Investment Banking Revenue includes advisory fees earned from clients that have Senior Managing Directors and certain Senior Advisors and executives as a member of their Board of Directors of $ 15,641 for the year ended December 31, 2020. Other Assets on the Consolidated Statements of Financial Condition includes the long-term portion of loans receivable from certain employees of $ 10,159 and $ 13,137 as of December 31, 2020 and 2019, respectively. Receivable from Employees and Related Parties on the Consolidated Statements of Financial Condition consisted of the following at December 31, 2020 and 2019: December 31, 2020 2019 Advances to Employees $ 22,874 $ 20,923 Personal Expenses Paid on Behalf of Employees and Related Parties 278 1,114 Other 441 379 Receivable from Employees and Related Parties $ 23,593 $ 22,416 Payable to Employees and Related Parties on the Consolidated Statements of Financial Condition consisted of the following at December 31, 2020 and 2019: December 31, 2020 2019 Board of Director Fees $ 550 $ 567 Amounts Due to U.K. Members 13,606 21,566 Amounts Due Pursuant to Tax Receivable Agreements (a) 9,891 9,570 Payable to Employees and Related Parties $ 24,047 $ 31,703 (a) Relates to the current portion of the Member exchange of Class A LP Units for Class A Shares. The long-term portion of $ 76,860 and $ 84,952 is disclosed in Amounts Due Pursuant to Tax Receivable Agreements on the Consolidated Statements of Financial Condition at December 31, 2020 and 2019, respectively. 78 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Note 8 – Investment Securities and Certificates of Deposit The Company's Investment Securities and Certificates of Deposit as of December 31, 2020 and 2019 were as follows: December 31, 2020 December 31, 2019 Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Debt Securities $ 402,824 $ 39 $ — $ 402,863 $ 114,204 $ 591 $ 11 $ 114,784 Equity Securities 666 — 73 593 666 — 168 498 Debt Securities Carried by Broker-Dealers 550,002 27 3 550,026 225,727 1,648 20 227,355 Investment Funds 87,612 19,742 — 107,354 58,704 7,809 — 66,513 Total Investment Securities (carried at fair value) $ 1,041,104 $ 19,808 $ 76 $ 1,060,836 $ 399,301 $ 10,048 $ 199 $ 409,150 Certificates of Deposit (carried at contract value) — 214,796 Total Investment Securities and Certificates of Deposit $ 1,060,836 $ 623,946 Scheduled maturities of the Company's available-for-sale debt securities as of December 31, 2020 and 2019 were as follows: December 31, 2020 December 31, 2019 Amortized Cost Fair Value Amortized Cost Fair Value Due within one year $ 402,824 $ 402,863 $ 108,662 $ 109,217 Due after one year through five years — — 5,542 5,567 Total $ 402,824 $ 402,863 $ 114,204 $ 114,784 The Company has the ability and intent to hold available-for-sale securities until a recovery of fair value is equal to an amount approximating its amortized cost, which may be at maturity. Further, the securities are all U.S. Treasuries, and the Company has not incurred credit losses on its securities. As such, the Company does not consider these securities to be impaired at December 31, 2020 and has not recorded a credit allowance on these securities. Debt Securities Debt Securities are classified as available-for-sale securities within Investment Securities and Certificates of Deposit on the Consolidated Statements of Financial Condition. These securities are stated at fair value with unrealized gains and losses included in Accumulated Other Comprehensive Income (Loss) and realized gains and losses included in earnings. The Company had net realized gains (losses) of $ 75 , ($ 14 ) and ($ 28 ) for the years ended December 31, 2020, 2019 and 2018, respectively. Equity Securities Equity Securities are carried at fair value with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations. The Company had net realized and unrealized gains (losses) of $ 95 , $ 243 and ($ 193 ) for the years ended December 31, 2020, 2019 and 2018, respectively. Debt Securities Carried by Broker-Dealers EGL and other broker-dealers invest in fixed income portfolios consisting primarily of U.S. Treasury bills, municipal bonds and other debt securities. At December 31, 2020, this portfolio consisted solely of U.S. Treasury bills. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations, as required for broker-dealers in securities. The Company had net realized and unrealized gains (losses) of ($ 1,216 ), $ 491 and $ 546 for the years ended December 31, 2020, 2019 and 2018, respectively. 79 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Included in Investment Securities above are $ 99,983 of U.S. Treasury bills purchased on December 31, 2020, which did not settle until January 4, 2021. As of December 31, 2020, the Company had a payable to the broker for securities purchased of $ 99,983 recorded in Other Current Liabilities on the Consolidated Statements of Financial Condition. Investment Funds The Company invests in a portfolio of exchange-traded funds and mutual funds as an economic hedge against the Company's deferred cash compensation program. See Note 19 for further information. These securities are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations. The Company had net realized and unrealized gains (losses) of $ 16,913 , $ 13,785 and ($ 5,113 ) for the years ended December 31, 2020, 2019 and 2018, respectively. The Company periodically enters into futures contracts as an economic hedge against the Company's deferred cash compensation program. See Note 20 for further information. Certificates of Deposit At December 31, 2019, the Company held certificates of deposit of $ 214,796 with certain banks with original maturities of six months or less when purchased. These certificates of deposit matured in January 2020. Note 9 – Financial Instruments Owned and Pledged as Collateral at Fair Value, Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase The Company's ECB business was sold in December 2020. See Note 5 for further information. Prior to its sale, the Company, through its ECB business, entered into repurchase agreements with clients seeking overnight money market returns whereby ECB transferred to the clients Mexican government securities in exchange for cash and concurrently agreed to repurchase the securities at a future date for an amount equal to the cash exchanged plus a stipulated premium or interest factor. ECB deployed the cash received from, and acquired the securities deliverable to, clients under these repurchase arrangements by purchasing securities in the open market, which the Company reflected as Financial Instruments Owned and Pledged as Collateral at Fair Value on the Consolidated Statements of Financial Condition, or by entering into reverse repurchase agreements with unrelated third parties. The Company accounted for these repurchase and reverse repurchase agreements as collateralized financing transactions, which were carried at their contract amounts, which approximated fair value given that the contracts matured the following business day. The Company recorded a liability on its Consolidated Statements of Financial Condition in relation to repurchase transactions executed with clients as Securities Sold Under Agreements to Repurchase. The Company recorded as assets on its Consolidated Statements of Financial Condition, Financial Instruments Owned and Pledged as Collateral at Fair Value (where the Company had acquired the securities deliverable to clients under these repurchase arrangements by purchasing securities in the open market) and Securities Purchased Under Agreements to Resell (where the Company had acquired the securities deliverable to clients under these repurchase agreements by entering into reverse repurchase agreements with unrelated third parties). These Mexican government securities were pledged as collateral against repurchase agreements. Generally, collateral was posted equal to the contract value at inception and was subject to market changes. These repurchase agreements were primarily with institutional customer accounts managed by ECB and permitted the counterparty to pledge the securities. There were no remaining assets or liabilities related to collateralized financing activities as of December 31, 2020. See Note 5 for further information. As of December 31, 2019, a summary of the Company's assets, liabilities and collateral received or pledged related to these transactions is as follows: December 31, 2019 Asset (Liability) Balance Market Value of Collateral Received or (Pledged) Assets Financial Instruments Owned and Pledged as Collateral at Fair Value $ 12,431 Securities Purchased Under Agreements to Resell 13,566 $ 13,572 Total Assets $ 25,997 Liabilities Securities Sold Under Agreements to Repurchase $ ( 26,000 ) $ ( 25,992 ) 80 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Note 10 – Leases Operating Leases – The Company leases office space under non-cancelable lease agreements, which expire on various dates through 2035. The lease terms include options to extend the lease when it is reasonably certain that the Company will exercise that option. The Company reflects lease expense over the lease terms on a straight-line basis. Occupancy lease agreements, in addition to base rentals, generally are subject to escalation provisions based on certain costs incurred by the landlord. The Company does not have any leases with variable lease payments. Occupancy and Equipment Rental on the Consolidated Statements of Operations includes operating lease cost for office space of $ 48,561 and $ 41,257 for the years ended December 31, 2020 and 2019, respectively, and variable lease cost of $ 7,490 and $ 8,474 for the years ended December 31, 2020 and 2019, respectively. On July 1, 2018, the Company entered into a new lease agreement for office space at its headquarters at 55 East 52nd St., New York, New York. Under the terms of the agreement, the Company committed to extend the lease term for the Company's current space and add space on up to seven additional floors, three of which commenced as of the lease’s effective date. The Company anticipates that it will take possession of the remainder of these floors over the next three years . On December 6, 2019, the lease was modified to add an additional floor and to extend the lease term for all current and prospective space to end on December 31, 2035. In conjunction with the lease of office space, the Company has entered into letters of credit in the amounts of $ 5,550 and $ 5,536 , as of December 31, 2020 and 2019, respectively, which are secured by cash that is included in Other Assets on the Consolidated Statements of Financial Condition. The Company has entered into various operating leases for the use of office equipment (primarily computers, printers, copiers and other information technology related equipment). Occupancy and Equipment Rental on the Consolidated Statements of Operations includes operating lease cost for office equipment of $ 4,709 and $ 4,107 for the years ended December 31, 2020 and 2019, respectively. The Company uses its secured incremental borrowing rate to determine the present value of its right-of-use assets and lease liabilities. The determination of an appropriate incremental borrowing rate requires significant assumptions and judgment. The Company's incremental borrowing rate was calculated based on the Company's recent debt issuances and current market conditions. The Company scales the rates appropriately depending on the life of the leases. The Company incurred net operating cash outflows of $ 30,709 and $ 20,175 for the years ended December 31, 2020 and 2019, respectively, related to its operating leases, which was net of cash received from lease incentives of $ 14,732 and $ 18,771 for the years ended December 31, 2020 and 2019, respectively. Upon adoption of ASC 842 on January 1, 2019, the Company recorded Right-of-Use Assets on its statement of financial condition of $ 180,935 . Other information as it relates to the Company's operating leases is as follows: For the Years Ended December 31, 2020 2019 New Right-of-Use Assets obtained in exchange for new operating lease liabilities $ 112,215 $ 57,004 December 31, 2020 2019 Weighted-average remaining lease term - operating leases 11.4 years 10.5 years Weighted-average discount rate - operating leases 4.08 % 4.38 % 81 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) As of December 31, 2020, the maturities of the undiscounted operating lease liabilities for which the Company has commenced use are as follows: 2021 $ 53,294 2022 52,367 2023 37,195 2024 30,001 2025 32,501 Thereafter 245,702 Total lease payments 451,060 Less: Tenant Improvement Allowances ( 14,134 ) Less: Imputed Interest ( 93,780 ) Present value of lease liabilities 343,146 Less: Current lease liabilities ( 42,871 ) Long-term lease liabilities $ 300,275 In conjunction with the lease agreement to expand its headquarters at 55 East 52nd St., New York, New York, and lease agreements at certain other locations, the Company entered into leases for office space which have not yet commenced and thus are not yet included on the Company's Consolidated Statements of Financial Condition as right-of-use assets and lease liabilities. The Company anticipates that it will take possession of these spaces by the end of 2023. These spaces will have lease terms of 3 to 13 years once the Company has taken possession. The additional future payments under these arrangements are $ 195,651 as of December 31, 2020. Note 11 – Investments The Company's investments reported on the Consolidated Statements of Financial Condition consist of investments in unconsolidated affiliated companies, other investments in private equity partnerships, equity securities in private companies and investments in G5, Glisco Manager Holdings LP and Trilantic. The Company's investments are relatively high-risk and illiquid assets. The Company's investments in ABS, Atalanta Sosnoff and Luminis are in voting interest entities. The Company's share of earnings (losses) on these investments is included within Income from Equity Method Investments on the Consolidated Statements of Operations. The Company also has investments in private equity partnerships which consist of investment interests in private equity funds which are voting interest entities. Realized and unrealized gains and losses on the private equity investments are included within Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations. Equity Method Investments A summary of the Company's investments accounted for under the equity method of accounting as of December 31, 2020 and 2019 was as follows: December 31, 2020 2019 ABS $ 41,439 $ 40,052 Atalanta Sosnoff 11,950 12,300 Luminis 6,119 4,923 Total $ 59,508 $ 57,275 ABS On December 29, 2011, the Company made an investment accounted for under the equity method of accounting in ABS Investment Management, LLC. Effective as of September 1, 2018, ABS Investment Management, LLC underwent an internal 82 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) reorganization pursuant to which the Company contributed its ownership interest in ABS Investment Management, LLC to ABS in exchange for ownership interests in ABS Investment Management Holdings LP and ABS Investment Management GP LLC. Taken together, the ownership interests in ABS Investment Management Holdings LP and ABS Investment Management GP LLC are substantially equivalent to the contributed ownership interests in ABS Investment Management, LLC. At December 31, 2020, the Company's economic ownership interest in ABS was 46 %. This investment resulted in earnings of $ 10,855 , $ 8,870 and $ 7,565 for the years ended December 31, 2020, 2019 and 2018, respectively, included within Income from Equity Method Investments on the Consolidated Statements of Operations. Atalanta Sosnoff On December 31, 2015, the Company amended the Operating Agreement with Atalanta Sosnoff and deconsolidated its assets and liabilities, accounting for its interest under the equity method of accounting from that date forward. At December 31, 2020, the Company's economic ownership interest in Atalanta Sosnoff was 49 %. This investment resulted in earnings of $ 1,997 , $ 1,210 and $ 1,211 for the years ended December 31, 2020, 2019 and 2018, respectively, included within Income from Equity Method Investments on the Consolidated Statements of Operations. Luminis On January 1, 2017, the Company acquired an interest in Luminis and accounted for its interest under the equity method of accounting. At December 31, 2020, the Company's ownership interest in Luminis was 20 %. This investment resulted in earnings of $ 1,546 , $ 916 and $ 518 for the years ended December 31, 2020, 2019 and 2018, respectively, included within Income from Equity Method Investments on the Consolidated Statements of Operations. Other The Company allocates the purchase price of its equity method investments, in part, to the inherent finite-lived identifiable intangible assets of the investees. The Company's share of the earnings of the investees has been reduced by the amortization of these identifiable intangible assets of $ 316 , $ 684 and $ 893 for the years ended December 31, 2020, 2019 and 2018, respectively. The Company assesses its equity method investments for impairment annually, or more frequently if circumstances indicate impairment may have occurred. Debt Security Investment On December 31, 2017, the Company exchanged all of its outstanding equity interests in G5 for debentures of G5. The Company records its investment in G5 as a held-to-maturity debt security within Investments on the Consolidated Statements of Financial Condition. The securities are mandatorily redeemable on December 31, 2027, or earlier, subject to the occurrence of certain events. The Company is accreting its investment to its redemption value ratably, or on an accelerated basis if certain revenue thresholds are met by G5, from December 31, 2017 to December 31, 2027. This investment is subject to currency translation from Brazilian real to the U.S. dollar, included in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations. This investment had a balance of $ 7,385 and $ 9,235 as of December 31, 2020 and 2019, respectively. Investments in Private Equity Private Equity Funds The Company's investments related to private equity partnerships and associated entities include investments in Glisco Partners II, L.P. ("Glisco II"), Glisco Partners III, L.P. ("Glisco III"), Glisco Capital Partners IV ("Glisco IV"), Trilantic Capital Partners Associates IV, L.P. ("Trilantic IV"), Trilantic Capital Partners V, L.P. ("Trilantic V") and Trilantic Capital Partners VI (North America), L.P. ("Trilantic VI"). Portfolio holdings of the private equity funds are carried at fair value. Accordingly, the Company reflects its pro rata share of unrealized gains and losses occurring from changes in fair value. Additionally, the Company reflects its pro rata share of realized gains, losses and carried interest associated with any investment realizations. During 2019, the Company made an investment of $ 3,015 in Trilantic VI. 83 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) A summary of the Company's investments in the private equity funds as of December 31, 2020 and 2019 was as follows: December 31, 2020 2019 Glisco II, Glisco III and Glisco IV $ 2,802 $ 3,820 Trilantic IV, Trilantic V and Trilantic VI 9,293 9,727 Total Private Equity Funds $ 12,095 $ 13,547 Net realized and unrealized losses on private equity fund investments were ($ 1,388 ), ($ 790 ) and ($ 397 ) for the years ended December 31, 2020, 2019 and 2018, respectively. In the event the funds perform poorly, the Company may be obligated to repay certain carried interest previously distributed. As of December 31, 2020, $ 368 of previously distributed carried interest received from the funds was subject to repayment. General Partners of Private Equity Funds which are VIEs Following the Glisco transaction, the Company concluded that Glisco Capital Partners II, Glisco Capital Partners III and Glisco Manager Holdings LP are VIEs and that the Company is not the primary beneficiary of these VIEs. The Company's assessment of the primary beneficiary of these entities included assessing which parties have the power to significantly impact the economic performance of these entities and the obligation to absorb losses, which could be potentially significant to the entities, or the right to receive benefits from the entities that could be potentially significant. Neither the Company nor its related parties will have the ability to make decisions that significantly impact the economic performance of these entities. Further, as a limited partner in these entities, the Company does not possess substantive participating rights. The Company had assets of $ 3,083 and $ 4,658 included in its Consolidated Statements of Financial Condition at December 31, 2020 and 2019, respectively, related to these unconsolidated VIEs, representing the carrying value of the Company's investments in the entities. The Company's exposure to the obligations of these VIEs is generally limited to its investments in these entities. The Company's maximum exposure to loss as of December 31, 2020 and 2019 was $ 5,572 and $ 8,810 , respectively, which represents the carrying value of the Company's investments in these VIEs, as well as any unfunded commitments to the current and future funds. Investment in Trilantic Capital Partners In 2010, the Company made a limited partnership investment in Trilantic in exchange for 500 Class A LP Units having a fair value of $ 16,090 . This investment gave the Company the right to invest in Trilantic's current and future private equity funds, beginning with Trilantic Fund IV. The Company accounts for this investment at its cost minus impairment, if any, plus or minus changes resulting from observable price changes. The Company allocates the cost of this investment to its investments in current and future Trilantic funds as the Company satisfies the capital calls of these funds. The Company bases this allocation on its expectation of Trilantic's future fundraising ability and performance. During 2020, $ 29 and $ 110 of this investment was allocated to Trilantic Fund V and VI, respectively. From 2010 to 2019, $ 1,178 , $ 5,135 and $ 3,015 of this investment was allocated to Trilantic Fund IV, V and VI, respectively. This investment had a balance of $ 6,623 and $ 6,762 as of December 31, 2020 and 2019, respectively. The Company has a $ 5,000 commitment to invest in Trilantic Fund V, of which $ 372 was unfunded at December 31, 2020. The Company also has a $ 12,000 commitment to invest in Trilantic Fund VI, of which $ 9,054 was unfunded at December 31, 2020. Other Investments In certain instances, the Company receives equity securities in private companies in exchange for advisory services. These investments, which had a balance of $ 683 and $ 1,772 as of December 31, 2020 and 2019, respectively, are accounted for at their cost minus impairment, if any, plus or minus changes resulting from observable price changes. Following the Glisco transaction in 2016, the Company recorded an investment in Glisco Manager Holdings LP representing the fair value of the deferred consideration resulting from this transaction. This investment is accounted for at its cost minus impairment, if any, plus or minus changes resulting from observable price changes. The Company amortizes the balance of its investment as distributions are received related to the deferred consideration. This investment had a balance of $ 387 and $ 899 as of December 31, 2020 and 2019, respectively. 84 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Note 12 – Fair Value Measurements ASC 820 establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily-available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. Investments measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 – Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level 1 include listed equities, listed derivatives and treasury bills. As required by ASC 820, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price. Level 2 – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. The estimated fair values of corporate bonds, municipal bonds and other debt securities held at December 31, 2020 and 2019 are based on prices provided by external pricing services. Level 3 – Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The following table presents the categorization of investments and certain other financial assets measured at fair value on a recurring basis as of December 31, 2020 and 2019: December 31, 2020 Level 1 Level 2 Level 3 Total Debt Securities Carried by Broker-Dealers $ 550,026 $ — $ — $ 550,026 Other Debt and Equity Securities (1) 410,456 — — 410,456 Investment Funds 107,354 — — 107,354 Total Assets Measured At Fair Value $ 1,067,836 $ — $ — $ 1,067,836 December 31, 2019 Level 1 Level 2 Level 3 Total Debt Securities Carried by Broker-Dealers $ 168,650 $ 58,705 $ — $ 227,355 Other Debt and Equity Securities (1) 111,823 6,449 — 118,272 Investment Funds 66,513 — — 66,513 Financial Instruments Owned and Pledged as Collateral at Fair Value 12,431 — — 12,431 Total Assets Measured At Fair Value $ 359,417 $ 65,154 $ — $ 424,571 (1) Includes $ 7,000 and $ 2,990 of treasury bills and notes and municipal bonds classified within Cash and Cash Equivalents on the Consolidated Statements of Financial Condition as of December 31, 2020 and 2019, respectively. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. During the fourth quarter of 2019, the Company determined that the fair value of the Institutional Asset Management reporting unit was $ 8,777 . The fair value of the reporting unit was estimated by utilizing a discounted cash flow methodology based on adjusted cash flows from operations. Goodwill is measured at fair value on a non-recurring basis as a Level 3 asset. See Note 5 for further information. 85 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) The carrying amount and estimated fair value of the Company's financial instrument assets and liabilities, which are not measured at fair value on the Consolidated Statements of Financial Condition, are listed in the tables below. December 31, 2020 Carrying Estimated Fair Value Amount Level 1 Level 2 Level 3 Total Financial Assets: Cash and Cash Equivalents $ 822,598 $ 822,598 $ — $ — $ 822,598 Debt Security Investment 7,385 — — 7,385 7,385 Receivables (1) 439,321 — 434,083 — 434,083 Contract Assets (2) 34,610 — 34,052 — 34,052 Receivable from Employees and Related Parties 23,593 — 23,593 — 23,593 Closely-held Equity Securities 683 — — 683 683 Financial Liabilities: Accounts Payable and Accrued Expenses $ 37,961 $ — $ 37,961 $ — $ 37,961 Payable to Employees and Related Parties 24,047 — 24,047 — 24,047 Notes Payable (3) 376,492 — 409,682 — 409,682 December 31, 2019 Carrying Estimated Fair Value Amount Level 1 Level 2 Level 3 Total Financial Assets: Cash and Cash Equivalents $ 630,818 $ 630,818 $ — $ — $ 630,818 Certificates of Deposit 214,796 — 214,796 — 214,796 Debt Security Investment 9,235 — — 9,235 9,235 Securities Purchased Under Agreements to Resell 13,566 — 13,566 — 13,566 Receivables (1) 359,909 — 357,047 — 357,047 Contract Assets (2) 34,029 — 33,854 — 33,854 Receivable from Employees and Related Parties 22,416 — 22,416 — 22,416 Closely-held Equity Securities 1,772 — — 1,772 1,772 Financial Liabilities: Accounts Payable and Accrued Expenses $ 39,726 $ — $ 39,726 $ — $ 39,726 Securities Sold Under Agreements to Repurchase 26,000 — 26,000 — 26,000 Payable to Employees and Related Parties 31,703 — 31,703 — 31,703 Notes Payable 375,062 — 382,274 — 382,274 (1) Includes Accounts Receivable, as well as long-term receivables, which are included in Other Assets on the Consolidated Statements of Financial Condition. (2) Includes current and long-term contract assets included in Other Current Assets and Other Assets on the Consolidated Statements of Financial Condition. (3) Includes current and long-term Notes Payable included in Current Portion of Notes Payable and Notes Payable on the Consolidated Statements of Financial Condition. 86 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Note 13 – Furniture, Equipment and Leasehold Improvements Furniture, Equipment and Leasehold Improvements consisted of the following: December 31, 2020 2019 Furniture and Equipment $ 77,558 $ 64,153 Leasehold Improvements 163,993 133,820 Computer and Technology-related 46,853 46,213 Total 288,404 244,186 Less: Accumulated Depreciation and Amortization ( 139,572 ) ( 117,387 ) Furniture, Equipment and Leasehold Improvements, Net $ 148,832 $ 126,799 Depreciation and amortization expense for Furniture, Equipment and Leasehold Improvements totaled $ 24,640 , $ 22,946 and $ 17,855 for the years ended December 31, 2020, 2019 and 2018, respectively. In addition, the Company recognized Special Charges, Including Business Realignment Costs, of $ 3,320 , $ 4,370 and $ 2,058 for the years ended December 31, 2020, 2019 and 2018, respectively, related to the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of the Company's headquarters in New York and the Company's business realignment initiatives. See Note 6 for further information. The Company also recorded $ 480 in Special Charges, Including Business Realignment Costs, on the Consolidated Statement of Operations for the year ended December 31, 2020, for charges related to the impairment of leasehold improvements resulting from the wind-down of the Company's businesses in Mexico. See Notes 5 and 6 for further information. Other Assets on the Consolidated Statements of Financial Condition includes capitalized costs associated with cloud computing arrangements of $ 7,033 as of December 31, 2020. Note 14 – Notes Payable On March 30, 2016, the Company issued an aggregate of $ 170,000 of senior notes, including: $ 38,000 aggregate principal amount of its 4.88 % Series A senior notes due 2021 (the "Series A Notes"), $ 67,000 aggregate principal amount of its 5.23 % Series B senior notes due 2023 (the "Series B Notes"), $ 48,000 aggregate principal amount of its 5.48 % Series C senior notes due 2026 (the "Series C Notes") and $ 17,000 aggregate principal amount of its 5.58 % Series D senior notes due 2028 (the "Series D Notes" and together with the Series A Notes, the Series B Notes and the Series C Notes, the "2016 Private Placement Notes"), pursuant to a note purchase agreement (the "2016 Note Purchase Agreement") dated as of March 30, 2016, among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933. Interest on the 2016 Private Placement Notes is payable semi-annually and the 2016 Private Placement Notes are guaranteed by certain of the Company's domestic subsidiaries. The Company may, at its option, prepay all, or from time to time any part of, the 2016 Private Placement Notes (without regard to Series), in an amount not less than 5 % of the aggregate principal amount of the 2016 Private Placement Notes then outstanding at 100 % of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the 2016 Private Placement Notes will have the right to require the Company to prepay the entire unpaid principal amounts held by each holder of the 2016 Private Placement Notes plus accrued and unpaid interest to the prepayment date. The 2016 Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio, a minimum tangible net worth and a minimum interest coverage ratio, and customary events of default. As of December 31, 2020, the Company was in compliance with all of these covenants. On August 1, 2019, the Company issued $ 175,000 and £ 25,000 of senior unsecured notes through private placement. These notes reflect a weighted average life of 12 years and a weighted average stated interest rate of 4.26 %. These notes include: $ 75,000 aggregate principal amount of its 4.34 % Series E senior notes due 2029 (the "Series E Notes"), $ 60,000 aggregate principal amount of its 4.44 % Series F senior notes due 2031 (the "Series F Notes"), $ 40,000 aggregate principal amount of its 4.54 % Series G senior notes due 2033 (the "Series G Notes") and £ 25,000 aggregate principal amount of its 3.33 % Series H senior notes due 2033 (the "Series H Notes" and together with the Series E Notes, the Series F Notes and the Series G Notes, the "2019 Private Placement Notes"), each of which were issued pursuant to a note purchase agreement dated as of August 1, 2019 (the "2019 Note Purchase Agreement"), among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933. 87 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Interest on the 2019 Private Placement Notes is payable semi-annually and the 2019 Private Placement Notes are guaranteed by certain of the Company's domestic subsidiaries. The Company may, at its option, prepay all, or from time to time any part of, the 2019 Private Placement Notes (without regard to Series), in an amount not less than 5 % of the aggregate principal amount of the 2019 Private Placement Notes then outstanding at 100 % of the principal amount thereof plus an applicable "make-whole amount." Upon the occurrence of a change of control, the holders of the 2019 Private Placement Notes will have the right to require the Company to prepay the entire unpaid principal amounts held by each holder of the 2019 Private Placement Notes plus accrued and unpaid interest to the prepayment date. The 2019 Note Purchase Agreement contains customary covenants, including financial covenants requiring compliance with a maximum leverage ratio and a minimum tangible net worth, and customary events of default. As of December 31, 2020, the Company was in compliance with all of these covenants. Notes Payable is comprised of the following as of December 31, 2020 and 2019: Carrying Value (a) December 31, Note Maturity Date Effective Annual Interest Rate 2020 2019 Evercore Inc. 4.88 % Series A Senior Notes 3/30/2021 5.16 % $ 37,974 $ 37,873 Evercore Inc. 5.23 % Series B Senior Notes 3/30/2023 5.44 % 66,702 66,581 Evercore Inc. 5.48 % Series C Senior Notes 3/30/2026 5.64 % 47,651 47,595 Evercore Inc. 5.58 % Series D Senior Notes 3/30/2028 5.72 % 16,858 16,842 Evercore Inc. 4.34 % Series E Senior Notes 8/1/2029 4.46 % 74,325 74,282 Evercore Inc. 4.44 % Series F Senior Notes 8/1/2031 4.55 % 59,449 59,422 Evercore Inc. 4.54 % Series G Senior Notes 8/1/2033 4.64 % 39,627 39,613 Evercore Inc. 3.33 % Series H Senior Notes 8/1/2033 3.42 % 33,906 32,854 Total $ 376,492 $ 375,062 Less: Current Portion of Notes Payable ( 37,974 ) — Notes Payable $ 338,518 $ 375,062 (a) Carrying value has been adjusted to reflect the presentation of debt issuance costs as a direct reduction from the related liability. As of December 31, 2020, the future payments required on the Notes Payable, including principal and interest, were as follows: 2021 $ 54,883 2022 15,956 2023 81,204 2024 12,452 2025 12,452 Thereafter 328,289 Total $ 505,236 Note 15 – Employee Benefit Plans Defined Contribution Retirement Plan – The Company, through a subsidiary, provides certain retirement benefits to employees through a qualified retirement plan. The Evercore Partners Services East L.L.C. Retirement Plan (the "Evercore Plan") is a defined contribution plan with a salary deferral feature under Section 401(k) of the Internal Revenue Code. It also includes a discretionary profit sharing feature. The Evercore Plan was formed on February 1, 1996 and subsequently amended. The Evercore Plan's year ends on December 31 of each year. The Company, at its sole discretion, determines the amount, if any, of profit to be contributed to the Evercore Plan. 88 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Effective January 1, 2020, the Evercore Plan was amended to provide for a matching contribution from the Company to be made for eligible participants, as defined by the Evercore Plan. The matching contribution from the Company will be made annually pursuant to a discretionary formula. The matching contribution will be determined as 100 % of up to 3 % of eligible compensation, defined as salary plus cash bonus compensation, to a maximum of $ 3 per employee. Catch-up contributions will not be matched. Participants will vest 100 % in the matching contribution from the Company upon completion of three years of service. The Company made no contributions to the Evercore Plan for each of the years ended December 31, 2020, 2019 and 2018. Evercore Europe Defined Contribution Benefit Plan – Evercore U.K. provides a defined contribution benefit plan, the Evercore Partners International Group Personal Pension Plan (the "Evercore Europe Plan"), for Evercore U.K. employees and members. The Evercore Europe Plan was established in November 2006 and subsequently amended. The Evercore Europe Plan, for employees starting between November 2006 and July 2011, has a salary deferral feature as permitted under existing tax guidelines for HM Customs and Revenue, the Inland Revenue Service in the United Kingdom. Evercore U.K. employees must have elected to participate in the plan prior to July 2011, and Evercore U.K. has a minimum annualized contribution of 15 % to 50 % of an employee's salary for all the employees who participated, depending on the respective employee's level within the Company. These employees are also eligible to contribute up to 10 % of their salary to the Evercore Europe Plan and under the terms of the Evercore Europe Plan, if an employee contributes a minimum of 7.5 % to 10 % of their salary to the plan, Evercore U.K. must make a matching contribution of 5 % to 10 % of the employee's salary depending on the employee's level within the Company. The Evercore Europe Plan, for employees starting after July 2011, has a salary deferral feature as permitted under existing tax guidelines for HM Customs and Revenue. Evercore U.K. has a minimum annualized contribution of 15.0 % of an employee's salary. Employees are also eligible to contribute a percentage of their salary to the Evercore Europe Plan, however, any contribution made does not entitle them to a matching contribution from Evercore U.K. The Company made contributions to the Evercore Europe Plan of $ 3,173 , $ 2,972 and $ 2,915 for the years ended December 31, 2020, 2019 and 2018, respectively. Evercore ISI U.K. Personal Pension Plan – For employees of Evercore ISI U.K., a personal pension plan is available for all employees to contribute a percentage of their salary. The Company contributed up to 5 % of an employee's salary through March 2018; starting in April 2018, the Company contributes up to 6 % of an employee's salary. The Company made contributions to the Evercore ISI U.K. Personal Pension Plan of $ 86 , $ 124 and $ 137 for the years ended December 31, 2020, 2019 and 2018, respectively. Note 16 – Evercore Inc. Stockholders' Equity Dividends – The Company's Board of Directors declared on February 2, 2021, a quarterly cash dividend of $ 0.61 per share, to the holders of record of Class A Shares as of February 26, 2021, which will be paid on March 12, 2021. During the year ended December 31, 2020, the Company declared and paid dividends of $ 2.35 per share, totaling $ 95,226 , and accrued deferred cash dividends on unvested RSUs, totaling $ 13,734 . During the year ended December 31, 2020, the Company also paid deferred cash dividends of $ 11,356 . During the year ended December 31, 2019, the Company declared and paid dividends of $ 2.24 per share, totaling $ 89,407 , and accrued deferred cash dividends on unvested RSUs, totaling $ 14,642 . During the year ended December 31, 2019, the Company also paid deferred cash dividends of $ 7,396 . Treasury Stock – During the year ended December 31, 2020, the Company purchased 1,068 Class A Shares from employees at market values ranging from $ 38.23 to $ 104.38 per share (at an average cost per share of $ 76.51 ), primarily for the net settlement of stock-based compensation awards, and 854 Class A Shares at market values ranging from $ 58.28 to $ 81.96 per share (at an average cost per share of $ 75.93 ) pursuant to the Company's share repurchase program. The aggregate 1,922 Class A Shares were purchased at an average cost per share of $ 76.25 , and the result of these purchases was an increase in Treasury Stock of $ 146,559 on the Company's Consolidated Statement of Financial Condition as of December 31, 2020. During the year ended December 31, 2019, the Company purchased 1,039 Class A Shares primarily from employees at market values ranging from $ 71.11 to $ 96.22 per share (at an average cost per share of $ 89.15 ), primarily for the net settlement of stock-based compensation awards, and 2,360 Class A Shares at market values ranging from $ 73.18 to $ 92.33 per share (at an average cost per share of $ 80.69 ) pursuant to the Company's share repurchase program. The aggregate 3,399 Class A Shares were purchased 89 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) at an average cost per share of $ 83.28 and the result of these purchases was an increase in Treasury Stock of $ 283,081 on the Company's Consolidated Statement of Financial Condition as of December 31, 2019. LP Units – During the year ended December 31, 2020, 899 LP Units were exchanged for Class A Shares, resulting in an increase to Common Stock and Additional Paid-In-Capital of $ 9 and $ 37,674 , respectively, on the Company's Consolidated Statement of Financial Condition as of December 31, 2020. During the year ended December 31, 2019, 353 LP Units were exchanged for Class A Shares, resulting in an increase to Common Stock and Additional Paid-In-Capital of $ 3 and $ 15,138 , respectively, on the Company's Consolidated Statement of Financial Condition as of December 31, 2019. See Note 22 for further discussion. Accumulated Other Comprehensive Income (Loss) – As of December 31, 2020, Accumulated Other Comprehensive Income (Loss) on the Company's Consolidated Statement of Financial Condition includes an accumulated Unrealized Gain (Loss) on Securities and Investments, net, and Foreign Currency Translation Adjustment Gain (Loss), net, of ($ 5,287 ) and ($ 4,471 ), respectively. The substantially complete liquidation of the Company's businesses in Mexico resulted in the reclassification of $ 20,337 of cumulative foreign currency translation losses from Accumulated Other Comprehensive Income (Loss) on the Consolidated Statement of Financial Condition to Other Revenue, Including Interest and Investments, on the Consolidated Statement of Operations for the year ended December 31, 2020. See Note 5 for further information. The application of ASU 2016-01 resulted in the reclassification of $ 2,229 of cumulative unrealized losses, net of tax, on Investment Securities in Accumulated Other Comprehensive Income (Loss) to Retained Earnings on the Consolidated Statement of Financial Condition as of January 1, 2018. Note 17 – Noncontrolling Interest Noncontrolling Interest recorded in the consolidated financial statements of the Company relates to the following approximate interests in certain consolidated subsidiaries, which are not owned by the Company. In circumstances where the governing documents of the entity to which the noncontrolling interest relates require special allocations of profits or losses to the controlling and noncontrolling interest holders, the net income or loss of these entities is allocated based on these special allocations. December 31, 2020 2019 2018 Subsidiary: Evercore LP 11 % 12 % 11 % EWM (1) 26 % 30 % 43 % Private Capital Advisory L.P. ("PCA") (2) — % — % 10 % Real Estate Capital Advisory ("RECA") (3) 38 % 38 % 38 % (1) Noncontrolling Interests represent a blended rate for multiple classes of interests in EWM. (2) Noncontrolling Interests represent the Common Interests of Private Capital Advisory L.P. (3) Noncontrolling Interests represent the Class R Interests of Private Capital Advisory L.P. The Noncontrolling Interests for Evercore LP, EWM and RECA have rights, in certain circumstances, to convert into Class A Shares. 90 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Changes in Noncontrolling Interest for the years ended December 31, 2020, 2019 and 2018 were as follows: For the Years Ended December 31, 2020 2019 2018 Beginning balance $ 256,534 $ 249,819 $ 252,404 Comprehensive Income: Net Income Attributable to Noncontrolling Interest 62,106 56,225 65,611 Other Comprehensive Income (Loss) 7,366 513 ( 203 ) Total Comprehensive Income 69,472 56,738 65,408 Evercore LP Units Exchanged for Class A Shares ( 37,683 ) ( 15,142 ) ( 46,594 ) Amortization and Vesting of LP Units 14,618 27,890 19,860 Other Items: Distributions to Noncontrolling Interests ( 44,915 ) ( 54,706 ) ( 41,413 ) Issuance of Noncontrolling Interest 540 3,368 1,165 Purchase of Noncontrolling Interest ( 138 ) ( 11,433 ) ( 1,011 ) Total Other Items ( 44,513 ) ( 62,771 ) ( 41,259 ) Ending balance $ 258,428 $ 256,534 $ 249,819 Other Comprehensive Income – Other Comprehensive Income (Loss) attributed to Noncontrolling Interest includes Unrealized Gain (Loss) on Securities and Investments, net, of ($ 223 ), ($ 82 ) and ($ 43 ) for the years ended December 31, 2020, 2019 and 2018, respectively, and Foreign Currency Translation Adjustment Gain (Loss), net, of $ 561 , $ 595 and ($ 160 ) for the years ended December 31, 2020, 2019 and 2018, respectively. The substantially complete liquidation of the Company's businesses in Mexico resulted in the reclassification of $ 7,028 of cumulative foreign currency translation losses from Noncontrolling Interest on the Consolidated Statement of Financial Condition to Other Revenue, Including Interest and Investments, on the Consolidated Statement of Operations for the year ended December 31, 2020. See Note 5 for further information. LP Units Exchanged – During the year ended December 31, 2020, 899 LP Units were exchanged for Class A Shares. This resulted in a decrease to Noncontrolling Interest of $ 37,683 and an increase to Additional-Paid-In-Capital of $ 37,674 on the Company's Consolidated Statement of Financial Condition as of December 31, 2020. See Note 16 for further information. Interests Issued – During 2019, 32 Class A LP Units were issued, primarily related to the purchase of EWM Class A Units. See Interests Purchased below for further information. During 2018, in conjunction with the establishment of the RECA business, certain employees of that business purchased Class R Interests, at fair value, in Private Capital Advisory L.P., resulting in an increase to Noncontrolling Interest of $ 770 on the Company's Consolidated Statement of Financial Condition as of December 31, 2018. Interests Purchased – During 2020, the Company purchased, at fair value, an additional 1 % of the EWM Class A Units for $ 1,703 (which was paid in cash of $ 852 during the year ended December 31, 2020 and through the issuance of notes payable of $ 851 , included within Other Current Liabilities on the Consolidated Statement of Financial Condition as of December 31, 2020). This purchase resulted in a decrease to Noncontrolling Interest of $ 138 and a decrease to Additional Paid-In-Capital of $ 1,565 , on the Company's Consolidated Statement of Financial Condition as of December 31, 2020. On May 31, 2019, the Company purchased, at fair value, the remaining 10 % of the Private Capital Advisory L.P. Common Interests for $ 28,382 . This purchase resulted in a decrease to Noncontrolling Interest of $ 6,674 and a decrease to Additional Paid-In-Capital of $ 21,708 , on the Company's Consolidated Statement of Financial Condition as of December 31, 2019. 91 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) On May 31, 2019, the Company also purchased, at fair value, an additional 17 % of the EWM Class A Units for $ 24,533 (in cash of $ 21,832 and the issuance of 31 Class A LP Units having a fair value of $ 2,701 ). This purchase resulted in a net decrease to Noncontrolling Interest of $ 4,759 and a decrease to Additional Paid-In-Capital of $ 19,774 , on the Company's Consolidated Statement of Financial Condition as of December 31, 2019. On March 29, 2018, the Company purchased, at fair value, an additional 15 % of the Private Capital Advisory L.P. Common Interests for $ 25,525 . This purchase resulted in a decrease to Noncontrolling Interest of $ 298 and a decrease to Additional Paid-In-Capital of $ 25,227 on the Company's Consolidated Statement of Financial Condition as of December 31, 2018. In addition, LP Units were exchanged for Class A Shares during the years ended December 31, 2020, 2019 and 2018. See Note 16 for further information. Note 18 – Net Income Per Share Attributable to Evercore Inc. Common Shareholders The calculations of basic and diluted net income per share attributable to Evercore Inc. common shareholders for the years ended December 31, 2020, 2019 and 2018 are described and presented below. For the Years Ended December 31, 2020 2019 2018 Basic Net Income Per Share Attributable to Evercore Inc. Common Shareholders Numerator: Net income attributable to Evercore Inc. common shareholders $ 350,574 $ 297,436 $ 377,240 Denominator: Weighted average Class A Shares outstanding, including vested RSUs 40,553 39,994 40,595 Basic net income per share attributable to Evercore Inc. common shareholders $ 8.64 $ 7.44 $ 9.29 Diluted Net Income Per Share Attributable to Evercore Inc. Common Shareholders Numerator: Net income attributable to Evercore Inc. common shareholders $ 350,574 $ 297,436 $ 377,240 Noncontrolling interest related to the assumed exchange of LP Units for Class A Shares (b) (b) (b) Associated corporate taxes related to the assumed elimination of Noncontrolling Interest described above (b) (b) (b) Diluted net income attributable to Evercore Inc. common shareholders $ 350,574 $ 297,436 $ 377,240 Denominator: Weighted average Class A Shares outstanding, including vested RSUs 40,553 39,994 40,595 Assumed exchange of LP Units for Class A Shares (a)(b) 72 718 1,378 Additional shares of the Company's common stock assumed to be issued pursuant to non-vested RSUs and deferred consideration, as calculated using the Treasury Stock Method 1,578 2,082 2,906 Shares that are contingently issuable (c) 420 400 400 Diluted weighted average Class A Shares outstanding 42,623 43,194 45,279 Diluted net income per share attributable to Evercore Inc. common shareholders $ 8.22 $ 6.89 $ 8.33 (a) The Company previously had outstanding Class J LP Units, which converted into Class E LP Units and ultimately became exchangeable into Class A Shares on a one -for-one basis. As of December 31, 2020, no Class J LP Units remained issued or outstanding. See Note 19 for further information. During the years ended December 31, 2020, 2019 and 2018, the Class J LP Units were dilutive and consequently the effect of their exchange into Class A Shares has been included in the 92 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) calculation of diluted net income per share attributable to Evercore Inc. common shareholders under the if-converted method. In computing this adjustment, the Company assumes that all Class J LP Units are converted into Class A Shares. (b) The Company has outstanding Class A and E LP Units, which give the holders the right to receive Class A Shares upon exchange on a one -for-one basis. During the years ended December 31, 2020, 2019 and 2018, the Class A and E LP Units were antidilutive and consequently the effect of their exchange into Class A Shares has been excluded from the calculation of diluted net income per share attributable to Evercore Inc. common shareholders. The units that would have been included in the denominator of the computation of diluted net income per share attributable to Evercore Inc. common shareholders if the effect would have been dilutive were 5,126 , 5,254 and 5,075 for the years ended December 31, 2020, 2019 and 2018, respectively. The adjustment to the numerator, diluted net income attributable to Class A common shareholders, if the effect would have been dilutive, would have been $ 45,578 , $ 39,940 and $ 46,060 for the years ended December 31, 2020, 2019 and 2018, respectively. In computing this adjustment, the Company assumes that all vested Class A LP Units and all Class E LP Units are converted into Class A Shares, that all earnings attributable to those shares are attributed to Evercore Inc. and that the Company is subject to the statutory tax rates of a C-Corporation under a conventional corporate tax structure in the U.S. at prevailing corporate tax rates. The Company does not anticipate that the Class A and E LP Units will result in a dilutive computation in future periods. (c) The Company has outstanding Class I-P Units which are contingently exchangeable into Class I LP Units, and ultimately Class A Shares, and outstanding Class K-P Units which are contingently exchangeable into Class K LP Units, and ultimately Class A Shares, as they are subject to certain performance thresholds being achieved. For the purposes of calculating diluted net income per share attributable to Evercore Inc. common shareholders, the Company's Class I-P Units and Class K-P Units are included in diluted weighted average Class A Shares outstanding as of the beginning of the period in which all necessary performance conditions have been satisfied. If all necessary performance conditions have not been satisfied by the end of the period, the number of shares that are included in diluted weighted average Class A Shares outstanding is based on the number of shares that would be issuable if the end of the reporting period were the end of the performance period. The Units that were assumed to be converted to an equal number of Class A Shares for purposes of computing diluted net income per share attributable to Evercore Inc. common shareholders were 420 for the year ended December 31, 2020 and 400 for each of the years ended December 31, 2019 and 2018. The shares of Class B common stock have no right to receive dividends or a distribution on liquidation or winding up of the Company. The shares of Class B common stock do not share in the earnings of the Company and no earnings are allocable to such class. Accordingly, basic and diluted net income per share of Class B common stock have not been presented. Note 19 – Share-Based and Other Deferred Compensation LP Units Equities business – In conjunction with the acquisition of the operating businesses of ISI in 2014, the Company issued Evercore LP units and interests which have been treated as compensation. In July 2017, the Company exchanged all of the previously outstanding 4,148 Class H limited partnership interests of Evercore LP ("Class H LP Interests") for 1,012 vested ( 963 of which were subject to certain liquidated damages and continued employment provisions) and 938 unvested Class J LP Units. These units converted into an equal amount of Class E LP Units, and became exchangeable into Class A Shares of the Company, ratably on February 15, 2018, 2019 and 2020. These Class J LP Units had the same vesting and delivery schedule, acceleration and forfeiture triggers, and distribution rights as the Class H LP Interests. In connection with this exchange, one share of Class B common stock has been issued to each holder of Class J LP Units, which entitles each holder to one vote on all matters submitted generally to holders of Class A and Class B common stock for each Class E LP Unit and Class J LP Unit held. As the number of Class J LP Units exchanged was within the number of Class H LP Interests that the Company determined were probable of being exchanged on the date of modification, the Company expensed the previously unrecognized grant date fair value of the Class H LP Interests ratably over the remaining vesting period of the Class J LP Units. Compensation expense related to the Class J LP Units was $ 1,067 , $ 18,101 and $ 15,054 for the years ended December 31, 2020, 2019 and 2018, respectively. On February 15, 2020, 223 Class J LP Units vested and were converted to an equal amount of Class E LP Units. Following the conversion, no Class J LP Units remain issued and outstanding. 93 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) The following table summarizes activity related to the LP Units for the Company's equities business during the year ended December 31, 2020: Class J LP Units Number of Units Grant Date Weighted Average Fair Value Unvested Balance at January 1, 2020 223 $ 4,311 Granted — — Modified — — Forfeited — — Vested ( 223 ) ( 4,311 ) Unvested Balance at December 31, 2020 — $ — Othe r Performance-based Awards – In November 2016, the Company issued 400 Class I-P Units in conjunction with the appointment of a current Co-Chief Executive Officer (then Executive Chairman). These Class I-P Units convert into a specified number of Class I LP Units, which are exchangeable on a one -for-one basis to Class A Shares, contingent on the achievement of certain market and service conditions, subject to vesting upon specified termination events (including retirement, upon satisfying certain eligibility criteria, on or following January 15, 2022, subject to a one year prior written notice requirement) or a change in control. These Class I-P Units are segregated into two groups of 200 units each, with share price threshold vesting conditions which are required to exceed a certain level for 20 consecutive trading days (which were met as of March 31, 2017). The Company determined the fair value of the award to be $ 24,412 and is expensing the award ratably over the implied service period, which ends on March 1, 2022. As the award contains market-based conditions, the entire expense will be recognized if the award does not vest for any reason other than the service conditions. Compensation expense related to this award was $ 4,632 for the year ended December 31, 2020 and $ 4,619 for each of the years ended December 31, 2019 and 2018. In November 2017, the Company issued 64 Class K-P Units to an employee of the Company. These Class K-P Units convert into a specified number of Class K LP Units (which are exchangeable on a one -for-one basis to Class A Shares), contingent upon the achievement of certain defined benchmark results and continued service through December 31, 2021. In June 2019, the Company issued 220 Class K-P Units to an employee of the Company. These Class K-P Units convert into a number of Class K LP Units (which are exchangeable on a one -for-one basis to Class A Shares), contingent and based upon the achievement of certain defined benchmark results and continued service through February 4, 2023 for the first tranche, which consists of 120 Class K-P Units convertible into a number of Class K LP Units, and February 4, 2028 for the second tranche, which consists of 100 Class K-P Units convertible into a number of Class K LP Units. These Class K-P Units may convert into a maximum of 460 Class K LP Units, contingent upon the achievement of certain defined benchmarks and continued service, as described above. The Company determined the grant date fair value of these awards probable to vest as of December 31, 2020 to be $ 34,684 , related to 403 Class K Units which were probable of achievement, and recognizes expense for these units over the respective service periods. Compensation expense related to the Class K-P Units was $ 8,920 , $ 3,690 and $ 1,200 for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, the total compensation cost not yet recognized related to the Class I-P Units and Class K-P Units, including awards which are subject to performance conditions, was $ 21,112 . The weighted-average period over which this compensation cost is expected to be recognized is 26 months. Stock Incentive Plan In 2006 the Company's stockholders and board of directors adopted the Evercore Inc. 2006 Stock Incentive Plan. The total number of Class A Shares which could be issued under this plan was 20,000 . During the second quarter of 2013, the Company's stockholders approved the Amended and Restated 2006 Evercore Inc. Stock Incentive Plan. The amended and restated plan, among other things, authorized an additional 5,000 shares of the Company's Class A Shares. During 2016, the Company's stockholders approved the Amended and Restated 2016 Evercore Inc. Stock Incentive Plan (the "2016 Plan"). The 2016 Plan, among other things, authorized an additional 10,000 shares of the Company's Class A Shares. During 2020, the Company's stockholders approved the Amended and Restated 2016 Evercore Inc. Stock Incentive Plan (the "Amended 2016 Plan"), which amended the 2016 Plan. The Amended 2016 Plan, among other things, authorizes an 94 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) additional 6,000 shares of the Company's Class A Shares. The Amended 2016 Plan permits the Company to grant to certain employees, directors and consultants incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, RSUs and other awards based on the Company's Class A Shares. The Company intends to use newly-issued Class A Shares to satisfy any awards under the Amended 2016 Plan and its predecessor plan. Class A Shares underlying any award granted under the 2016 Plan that expire, terminate or are canceled or satisfied for any reason without being settled in stock again become available for awards under the plans. The total shares available to be granted in the future under the Amended 2016 Plan was 7,047 as of December 31, 2020. The Company also grants, at its discretion, dividend equivalents, in the form of unvested RSU awards, or deferred cash dividends, concurrently with the payment of dividends to the holders of Class A Shares, on all unvested RSU grants awarded in conjunction with annual bonuses, as well as new hire awards. The dividend equivalents have the same vesting and delivery terms as the underlying RSU award. The Company estimates forfeitures in the aggregate compensation cost to be amortized over the requisite service period of its awards. The Company periodically monitors its estimated forfeiture rate and adjusts its assumptions to the actual occurrence of forfeited awards. A change in estimated forfeitures is recognized through a cumulative adjustment in the period of the change. The Company had 199 RSUs which were fully vested but not delivered as of December 31, 2020. Equity Grants 2020 Equity Grants. During 2020, pursuant to the above Stock Incentive Plans, the Company granted employees 1,946 RSUs that are Service-based Awards. Service-based Awards granted during 2020 had grant date fair values of $ 44.21 to $ 93.19 per share, with an average value of $ 80.94 per share, for an aggregate fair value of $ 157,508 , and generally vest ratably over four years . During 2020, 2,715 Service-based Awards vested and 121 Service-based Awards were forfeited. Compensation expense related to Service-based Awards was $ 192,070 f or the year ended December 31, 2020. The following table summarizes activity related to Service-based Awards during the year ended December 31, 2020: Service-based Awards Number of Shares Grant Date Weighted Average Fair Value Unvested Balance at January 1, 2020 6,414 $ 527,456 Granted 1,946 157,508 Modified — — Forfeited ( 121 ) ( 10,458 ) Vested ( 2,715 ) ( 209,388 ) Unvested Balance at December 31, 2020 5,524 $ 465,118 As of December 31, 2020, the total compensation cost related to unvested Service-based Awards not yet recognized was $ 226,584 . The ultimate amount of such expense is dependent upon the actual number of Service-based Awards that vest. The Company periodically assesses the forfeiture rates used for such estimates. A change in estimated forfeiture rates would cause the aggregate amount of compensation expense recognized in future periods to differ from the estimated unrecognized compensation expense described herein. The weighted-average period over which this compensation cost is expected to be recognized is 21 months. 2019 Equity Grants. During 2019, pursuant to the 2016 Plan, the Company granted employees 2,598 RSUs that are Service-based Awards. Service-based Awards granted during 2019 had grant date fair values of $ 72.11 to $ 96.22 per share, with an average value of $ 91.04 per share, for an aggregate fair value of $ 236,529 . During 2019, 2,473 Service-based Awards vested and 121 Service-based Awards were forfeited. Compensation expense related to Service-based Awards was $ 208,786 for the year ended December 31, 2019. 2018 Equity Grants. During 2018, pursuant to the 2016 Plan, the Company granted employees 1,968 RSUs that are Service-based Awards. Service-based Awards granted during 2018 had grant date fair values of $ 81.84 to $ 114.80 per share, with an average value of $ 95.01 per share, for an aggregate fair value of $ 186,964 . During 2018, 2,523 Service-based Awards 95 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) vested and 70 Service-based Awards were forfeited. Compensation expense related to Service-based Awards was $ 171,354 for the year ended December 31, 2018. Deferred Cash Deferred Cash Compensation Program – The Company's deferred cash compensation program provides participants the ability to elect to receive a portion of their deferred compensation in cash, which is indexed to notional investment portfolios selected by the participant and vests ratably over four years and requires payment upon vesting. The Company granted $ 181,165 , $ 93,366 , $ 82,592 and $ 3,750 of deferred cash awards pursuant to the deferred cash compensation program during the years ended December 31, 2020, 2019, 2018 and 2017, respectively. Compensation expense related to the Company's deferred cash compensation program was $ 112,216 , $ 66,374 and $ 36,443 for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, the Company expects to pay an aggregate of $ 315,862 related to the Company's deferred cash compensation program at various dates through 2024 and total compensation expense related to these awards not yet recognized was $ 182,542 . The weighted-average period over which this compensation cost is expected to be recognized is 28 months. Amounts due pursuant to this program are expensed over the service period of the award and are reflected in Accrued Compensation and Benefits, a component of current liabilities, on the Consolidated Statement of Financial Condition as of December 31, 2020. Other Deferred Cash Awards – In November 2016, the Company granted a restricted cash award in conjunction with the appointment of a current Co-Chief Executive Officer (then Executive Chairman) with a target payment amount of $ 35,000 , of which $ 11,000 vested on March 1, 2019, $ 6,000 vested on March 1, 2020, and $ 6,000 is scheduled to vest on each of the next three anniversaries of March 1, 2020, provided that the current Co-Chief Executive Officer continues to remain employed through each such vesting date, subject to vesting upon specified termination events (including retirement, upon satisfying certain eligibility criteria, on or following May 1, 2019, subject to a six month prior written notice requirement) or a change in control. The Company had the discretion to increase (by an amount up to $ 35,000 ) or decrease (by an amount up to $ 8,750 ) the total amount payable under this award. In 2017, the Company granted deferred cash awards of $ 29,500 to certain employees. These awards vest in five equal installments over the period ending June 30, 2022, subject to continued employment. The Company recognizes expense for these awards ratably over the vesting period. Compensation expense related to other deferred cash awards was $ 12,897 , $ 26,827 and $ 21,987 for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020 , the total compensation cost related to other defe rred cash awards not yet recognized was $ 16,555 . The weighted-average period over which this compensation cost is expected to be recognized is 19 months. 2021 Equity and Deferred Cash Grants During the first quarter of 2021, as part of the 2020 bonus awards, the Company granted to certain employees approximately 2,000 unvested RSUs pursuant to the Amended 2016 Plan, with a grant date fair value of approximately $ 232,000 . These awards will generally vest over four years . In addition, during the first quarter of 2021, the Company granted approximately $ 99,000 of deferred cash compensation to certain employees, principally pursuant to the deferred cash compensation program. These awards will generally vest over four years . Long-term Incentive Plan The Company's Long-term Incentive Plan provides for incentive compensation awards to Advisory Senior Managing Directors, excluding executive officers of the Company, who exceed defined benchmark results over four-year performance periods beginning January 1, 2013 (the "2013 Long-term Incentive Plan") and January 1, 2017 (the "2017 Long-term Incentive Plan"). The 2013 Long-term Incentive Plan was paid in cash installments in 2017, 2018 and 2019. The 2017 Long-term Incentive Plan, which aggregate $ 48,631 of current liabilities and $ 70,560 of long-term liabilities on the Consolidated Statement of Financial Condition as of December 31, 2020, is due to be paid, in cash or Class A Shares, at the Company's discretion, in three equal installments in the first quarter of 2021, 2022 and 2023, subject to employment at the time of payment. The performance period for the 2017 Long-term Incentive Plan ended on December 31, 2020. These awards are subject to retirement eligibility requirements after the performance criteria has been achieved. The Company periodically assesses the probability of the benchmarks being achieved and expenses the probable payout over the requisite service period of the award. The Company recorded $ 21,808 , $ 31,931 and $ 42,745 of expense for the years ended December 31, 2020, 2019 and 2018, 96 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) respectively. The Company distributed cash payments of $ 19,516 and $ 4,532 during the years ended December 31, 2019 and 2018, respectively, related to the 2013 Long-term Incentive Plan. As of December 31, 2020, the total remaining expense to be recognized for the 2017 Long-term Incentive Plan over the future vesting period ending March 15, 2023 is $ 25,692 . Employee Loans Receivable Periodically, the Company provides new and existing employees with cash payments in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements ranging from one to five years and in certain circumstances, subject to the achievement of performance requirements. Generally, the terms of these awards include a requirement of either full or partial repayment of these awards based on the terms of their employment agreements with the Company. In circumstances where the employee meets the Company's minimum credit standards, the Company amortizes these awards to compensation expense over the relevant service period, which is generally the period they are subject to forfeiture. Compensation expense related to these awards was $ 20,411 , $ 20,421 and $ 17,971 for the years ended December 31, 2020, 2019 and 2018, respectively. The remaining unamortized amount of these awards was $ 33,033 as of December 31, 2020. Other The total income tax benefit related to share-based compensation arrangements recognized in the Company's Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018 was $ 46,572 , $ 49,251 and $ 39,958 , respectively. Separation and Transition Benefits During 2020, the Company completed a review of operations focused on markets, sectors and people which delivered lower levels of productivity in an effort to attain greater flexibility of operations and better position itself for future growth. This review, which began in the fourth quarter of 2019, generated reductions of approximately 8 % of the Company's headcount. In conjunction with the employment reductions, for the years ended December 31, 2020 and 2019, the Company incurred expenses related to separation benefits, stay arrangements and accelerated deferred cash compensation (together, the "Termination Costs") of $ 30,340 and $ 1,578 , respectively, and the acceleration of the amortization of share-based payments previously granted to affected employees of $ 10,916 and $ 1,272 (related to 156 and 22 RSUs), respectively, each recorded in Special Charges, Including Business Realignment Costs, primarily within the Investment Banking segment, on the Company's Consolidated Statements of Operations. In conjunction with these arrangements, the Company distributed cash payments of $ 26,492 and $ 377 for the years ended December 31, 2020 and 2019, respectively. The Company granted separation and transition benefits to certain employees, resulting in expense included in Employee Compensation and Benefits, primarily within the Investment Banking segment, of $ 8,145 and $ 9,420 for the years ended December 31, 2019 and 2018, respectively. This is comprised of expense related to Termination Costs of $ 6,178 and $ 6,190 , respectively, and expense related to the acceleration of the amortization of share-based payments of $ 1,967 and $ 3,230 , respectively, for the years ended December 31, 2019 and 2018. In conjunction with these arrangements, the Company distributed cash payments of $ 6,035 and $ 8,565 for the years ended December 31, 2019 and 2018, respectively. The Company also granted separation and transition benefits to certain employees, resulting in expense included in Special Charges, Including Business Realignment Costs, of $ 2,024 for the year ended December 31, 2018. See Note 6 for further information. 97 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) The following table presents the change in the Company's Termination Costs liability for the years ended December 31, 2020 and 2019: For the Years Ended December 31, 2020 2019 Beginning Balance $ 1,151 $ 505 Termination Costs Incurred 30,340 7,756 Cash Benefits Paid ( 26,492 ) ( 6,412 ) Non-Cash Charges ( 410 ) ( 698 ) Ending Balance $ 4,589 $ 1,151 Note 20 – Commitments and Contingencies Private Equity – As of December 31, 2020, the Company had unfunded commitments for capital contributions of $ 11,975 to private equity funds. These commitments will be funded as required through the end of each private equity fund's investment period, subject to certain conditions. Such commitments are satisfied in cash and are generally required to be made as investment opportunities are consummated by the private equity funds. Lines of Credit – On June 24, 2016, Evercore Partners Services East L.L.C. ("East") entered into a loan agreement with PNC Bank, National Association ("PNC") for a revolving credit facility in an aggregate principal amount of up to $ 30,000 , to be used for working capital and other corporate activities. This facility is secured by East's accounts receivable and the proceeds therefrom, as well as certain assets of EGL, including certain of EGL's accounts receivable. In addition, the agreement contains certain reporting covenants, as well as certain debt covenants that prohibit East and the Company from incurring other indebtedness, subject to specified exceptions. The Company and its consolidated subsidiaries were in compliance with these covenants as of December 31, 2020. Drawings under this facility bear interest at the prime rate. On March 11, 2019, East drew down $ 30,000 on this facility, which was repaid on May 3, 2019. East amended this facility on October 30, 2020 such that, among other things, the interest rate provisions were modified to LIBOR plus 150 basis points and the maturity date was extended to October 31, 2022 (as amended, the "Existing PNC Facility"). On July 26, 2019, East entered into an additional loan agreement with PNC for a revolving credit facility in an aggregate principal amount of up to $ 20,000 , to be used for working capital and other corporate activities. The facility is unsecured. In addition, the agreement contains certain reporting requirements and debt covenants consistent with the Existing PNC Facility. The Company and its consolidated subsidiaries were in compliance with these covenants as of December 31, 2020. On October 30, 2020, East amended this facility such that, among other things, the revolving credit facility has increased to an aggregate principal amount of $ 30,000 . Drawings under this facility will bear interest at LIBOR plus 180 basis points and the maturity date was extended to October 31, 2022. East is only permitted to borrow under this facility if there is no undrawn availability under the Existing PNC Facility and must repay indebtedness under this facility prior to repaying indebtedness under the Existing PNC Facility. There have been no drawings under this facility as of December 31, 2020. In addition, EGL's clearing broker provides temporary funding for the settlement of securities transactions. Tax Receivable Agreement – As of December 31, 2020, the Company estimates the contractual obligations related to the Tax Receivable Agreement to be $ 86,751 . The Company expects to pay to the counterparties to the Tax Receivable Agreement $ 9,891 within one year or less, $ 20,586 in one to three years, $ 19,572 in three to five years and $ 36,702 after five years. Other Commitments – The Company enters into commitments to pay contingent consideration related to certain of its acquisitions. The Company paid $ 81 and $ 2,008 of its commitment for contingent consideration related to its acquisition of Kuna & Co, KG during the years ended December 31, 2020 and 2019, respectively. At December 31, 2020, the Company had a remaining commitment of $ 274 for contingent consideration related to its acquisition of Kuna & Co. KG. The Company also had a commitment for contingent consideration related to an arrangement with the former employer of certain RECA employees, which provided for contingent consideration to be paid to the former employer of up to $ 4,463 , based on the completion of certain client engagements. The Company recognized expenses of $ 400 and $ 3,971 for the years ended December 31, 2019 and 2018, respectively, in Professional Fees on the Company's Consolidated Statements of Operations pursuant to this arrangement. The contingent consideration was fully paid as of December 31, 2019. 98 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Restricted Cash – The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the statements of financial position that sum to the total of amounts shown in the Consolidated Statements of Cash Flows: December 31, 2020 2019 2018 Cash and Cash Equivalents $ 829,598 $ 633,808 $ 790,590 Restricted Cash included in Other Assets 8,626 10,078 9,506 Total Cash, Cash Equivalents and Restricted Cash shown in the Statement of Cash Flows $ 838,224 $ 643,886 $ 800,096 Restricted Cash included in Other Assets on the Consolidated Statements of Financial Condition primarily represents letters of credit which are secured by cash as collateral for the lease of office space and security deposits for certain equipment. The restrictions will lapse when the leases end. Futures Contracts – In February 2020, the Company entered into four-month futures contracts on a stock index fund with a notional amount of $ 38,908 , and in April 2019, the Company entered into three-month futures contracts on a stock index fund with a notional amount of $ 14,815 , as an economic hedge against the Company's deferred cash compensation program. These contracts settled in June 2020 and June 2019, respectively. In accordance with ASC 815, these contracts are carried at fair value, with changes in fair value recorded in Other Revenue, Including Interest and Investments, on the Consolidated Statements of Operations. The Company had net realized gains (losses) of ($ 3,998 ) and $ 59 for the years ended December 31, 2020 and 2019, respectively. Foreign Exchange – On occasion, the Company enters into foreign currency exchange forward contracts as an economic hedge against exchange rate risk for foreign currency denominated accounts receivable in EGL. There were no foreign currency exchange forward contracts outstanding as of December 31, 2020. The Company entered into foreign currency exchange forward contracts to sell 3.8 billion Japanese yen for $ 35,598 during the first quarter of 2019 as an economic hedge against the exchange rate risk for Japanese yen denominated accounts receivable in EGL. These contracts settled in April 2019. Contingencies In the normal course of business, from time to time, the Company and its affiliates are involved in judicial or regulatory proceedings, arbitration or mediation concerning matters arising in connection with the conduct of its businesses, including contractual and employment matters. In addition, Mexican, United Kingdom, German, Hong Kong, Singapore, Canadian, Dubai and United States government agencies and self-regulatory organizations, as well as state securities commissions in the United States, conduct periodic examinations and initiate administrative proceedings regarding the Company's business, including, among other matters, accounting and operational matters, that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer, investment advisor, or its directors, officers or employees. In view of the inherent difficulty of determining whether any loss in connection with such matters is probable and whether the amount of such loss can be reasonably estimated, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, the Company cannot estimate the amount of such loss or range of loss, if any, related to such matters, how or if such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, fine, penalty or other relief, if any, might be. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that it is not currently party to any material pending proceedings, individually or in the aggregate, the resolution of which would have a material effect on the Company. Provisions for losses are established in accordance with ASC 450, " Contingencies" when warranted. Once established, such provisions are adjusted when there is more information available or when an event occurs requiring a change. Note 21 – Regulatory Authorities EGL is a U.S. registered broker-dealer and is subject to the net capital requirements of Rule 15c3-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Under the Alternative Net Capital Requirement, EGL's minimum net capital requirement is $ 250 . EGL's regulatory net capital as of December 31, 2020 and 2019 was $ 586,814 and $ 331,510 , respectively, which exceeded the minimum net capital requirement by $ 586,564 and $ 331,260 , respectively. 99 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Certain other non-U.S. subsidiaries are subject to various securities and banking regulations and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. These subsidiaries are in excess of their local capital adequacy requirements at December 31, 2020. Evercore Trust Company, N.A. ("ETC"), which is limited to fiduciary activities, is regulated by the Office of the Comptroller of the Currency ("OCC") and is a member bank of the Federal Reserve System. The Company, Evercore LP and ETC are subject to written agreements with the OCC that, among other things, require the Company and Evercore LP to maintain at least $ 5,000 in Tier 1 capital in ETC (or such other amount as the OCC may require) and maintain liquid assets in ETC in an amount at least equal to the greater of $ 3,500 or 180 days coverage of ETC's operating expenses. The Company was in compliance with the aforementioned agreements as of December 31, 2020. Note 22 – Income Taxes As a result of the Company's formation and initial public offering, collectively referred to as the reorganization, the operating business entities of the Company were restructured and a portion of the Company's income is subject to U.S. federal, state, local and foreign income taxes and is taxed at the prevailing corporate tax rates. Taxes Payable as of December 31, 2020 and 2019 were $ 15,346 and $ 3,400 , respectively. On December 22, 2017, the SEC staff issued SAB 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available or computed analysis in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. The Company recognized a provisional tax impact related to the re-measurement of net deferred tax assets, the write down of other comprehensive income related to certain foreign subsidiaries, the valuation allowance and effects of the mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries within its consolidated financial statements for the year ended December 31, 2017. During 2018, the Company finalized the provisional tax impact. Additionally, the Company is subject to the income tax effects associated with the new global intangible low-taxed income ("GILTI") provisions in the period incurred. For the years ended December 31, 2020, 2019 and 2018, no additional income tax expense associated with the GILTI provisions has been recognized. The following table presents the U.S. and non-U.S. components of Income before income tax expense: For the Years Ended December 31, 2020 2019 2018 U.S. $ 407,015 $ 359,496 $ 449,171 Non-U.S. 71,710 32,986 36,589 Income before Income Tax Expense (a) $ 478,725 $ 392,482 $ 485,760 (a) Net of Noncontrolling Interest. The components of the provision for income taxes reflected on the Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018 consist of: For the Years Ended December 31, 2020 2019 2018 Current: Federal $ 73,119 $ 72,712 $ 80,690 Foreign 20,360 6,134 7,360 State and Local 20,848 26,703 24,451 Total Current 114,327 105,549 112,501 Deferred: Federal 9,640 ( 2,169 ) ( 4,771 ) Foreign 3,290 ( 5,022 ) ( 61 ) State and Local 894 ( 3,312 ) 851 Total Deferred 13,824 ( 10,503 ) ( 3,981 ) Total $ 128,151 $ 95,046 $ 108,520 100 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) A reconciliation between the federal statutory income tax rate and the Company's effective income tax rate for the years ended December 31, 2020, 2019 and 2018 is as follows: For the Years Ended December 31, 2020 2019 2018 Reconciliation of Federal Statutory Tax Rates: U.S. Statutory Tax Rate 21.0 % 21.0 % 21.0 % Increase Due to State and Local Taxes 3.7 % 4.2 % 3.6 % Rate Benefits as a Limited Liability Company/Flow Through ( 2.2 ) % ( 2.5 ) % ( 2.6 ) % Foreign Taxes ( 1.1 ) % ( 0.1 ) % 0.2 % Non-Deductible Expenses (1) 0.7 % 1.6 % 1.2 % ASU 2016-09 Benefit for Stock Compensation — % ( 2.7 ) % ( 4.2 ) % Tax Cuts and Jobs Act - Primarily Related to the Re-measurement of Net Deferred Tax Assets — % — % 0.1 % Valuation Allowances 1.8 % 0.3 % 0.3 % Other Adjustments ( 0.2 ) % ( 0.6 ) % 0.1 % Effective Income Tax Rate 23.7 % 21.2 % 19.7 % (1) Primarily related to non-deductible share-based compensation expense. During 2018, the Company finalized the provisional tax impact of the Tax Cuts and Jobs Act resulting in an additional charge of $ 399 , primarily related to the re-measurement of net deferred tax assets. In conjunction with the enactment of the Tax Cuts and Jobs Act, the Company's effective tax rate for the year ended December 31, 2018 was reduced by 12.3 percentage points, before the impact of ASU 2016-09. The effective tax rate for the years ended December 31, 2020, 2019 and 2018 also reflects the application of ASU 2016-09, which was adopted effective January 1, 2017. ASU 2016-09 requires that the tax deduction associated with the appreciation or depreciation in the Company's share price upon vesting of employee share-based awards above or below the original grant price be reflected in income tax expense. The effective tax rate reflects net excess tax benefits and deficiencies associated with the appreciation or depreciation in the Company's share price upon vesting of employee share-based awards above or below the original grant price. The Company's Provision for Income Taxes reflects an additional tax expense of $ 17 for the year ended December 31, 2020 and an additional tax benefit of $ 12,229 and $ 23,350 for the years ended December 31, 2019 and 2018, respectively, and resulted in a reduction in the effective tax rate of 2.7 and 4.2 percentage points for the years ended December 31, 2019 and 2018, respectively. The effective tax rate for 2020, 2019 and 2018 also reflects the effect of certain nondeductible expenses, including expenses related to Class E and J LP Units and Class I-P and K-P Units, as well as the noncontrolling interest associated with LP Units and other adjustments. Due to the enactment of the Tax Cuts and Jobs Act on December 22, 2017, the previous undistributed earnings of certain foreign subsidiaries are subject to a mandatory deemed repatriation tax. Income taxes paid or payable to foreign jurisdictions partially reduce the repatriation tax as a foreign tax credit, based on a formula that includes earnings of certain foreign subsidiaries. The Company has computed the repatriation tax and determined that it should have sufficient foreign tax credits to offset the estimated charge; any additional liability would be immaterial. 101 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the Consolidated Statements of Financial Condition. These temporary differences result in taxable or deductible amounts in future years. Details of the Company's deferred tax assets and liabilities as of December 31, 2020 and 2019 were as follows: December 31, 2020 2019 Deferred Tax Assets: Depreciation and Amortization $ 24,179 $ 37,912 Compensation and Benefits 90,787 85,567 Step up in tax basis due to the exchange of LP Units for Class A Shares (1) 90,157 99,979 Step up in tax basis due to the exchange of LP Units for Class A Shares (2) 46,215 41,286 Operating Lease (3) 80,446 58,497 Other 21,478 20,617 Total Deferred Tax Assets $ 353,262 $ 343,858 Deferred Tax Liabilities: Operating Lease (3) $ 63,460 $ 46,682 Goodwill, Intangible Assets and Other 12,873 19,012 Total Deferred Tax Liabilities $ 76,333 $ 65,694 Net Deferred Tax Assets Before Valuation Allowance 276,929 278,164 Valuation Allowance ( 19,067 ) ( 9,573 ) Net Deferred Tax Assets $ 257,862 $ 268,591 (1) Step-up in the tax basis associated with the exchange of LP Units for holders which have a tax receivable agreement. (2) Step-up in the tax basis associated with the exchange of LP Units for holders which do not have a tax receivable agreement. (3) As discussed in Note 2, in 2019, the Company adopted ASC 842 using the modified retrospective approach as of the date of adoption, which resulted in the recognition of operating lease right-of-use assets and lease liabilities. The $ 10,729 decrease in net deferred tax assets from December 31, 2019 to December 31, 2020 was primarily attributable to the net $ 13,406 decrease in compensation and benefits, depreciation and amortization, as well as the step-up in basis of the tangible and intangible assets of Evercore LP, as discussed below. In addition, management has weighed both the positive and negative evidence and determined that it was appropriate to establish a valuation allowance of $ 9,494 , primarily related to the substantial liquidation of its operations in Mexico. See Note 5 for further information. During 2020, the LP holders exchanged 822 Class A and Class E LP Units for Class A Shares, which resulted in an increase in the tax basis of the tangible and intangible assets of Evercore LP. The exchange of Class E and certain Class A LP Units resulted in a $ 8,641 step-up in the tax basis of the tangible and intangible assets of Evercore LP and a corresponding increase to Additional Paid-In-Capital on the Company's Consolidated Statement of Financial Condition as of December 31, 2020. Further, there was an exchange of 77 Class A LP Units that triggered an additional liability under the Tax Receivable Agreement that was entered into in 2006 between the Company and the LP Unit holders for the year ended December 31, 2020. The agreement provides for a payment to the LP Unit holders of 85 % of the cash tax savings (if any), resulting from the increased tax benefits from the exchange and for the Company to retain 15 % of such benefits. Accordingly, Deferred Tax Assets, Amounts Due Pursuant to Tax Receivable Agreements and Additional Paid-In-Capital increased $ 1,568 , $ 1,333 and $ 235 , respectively, on the Company's Consolidated Statement of Financial Condition as of December 31, 2020. See Note 16 for further discussion. The Company reported an increase in deferred tax assets of $ 458 associated with changes in Unrealized Gain (Loss) on Securities and Investments and a decrease of $ 7,772 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the year ended December 31, 2020. The Company reported an increase in deferred tax assets of $ 173 associated with changes in Unrealized Gain (Loss) on Securities and Investments and a decrease of $ 1,306 associated with changes in Foreign Currency Translation Adjustment Gain (Loss), in Accumulated Other Comprehensive Income (Loss) for the year ended December 31, 2019. 102 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) A reconciliation of the changes in tax positions for the years ended December 31, 2020, 2019 and 2018 is as follows: December 31, 2020 2019 2018 Beginning unrecognized tax benefit $ 494 $ — $ — Additions for tax positions of prior years — 616 — Reductions for tax positions of prior years — — — Lapse of Statute of Limitations ( 118 ) ( 122 ) — Decrease due to settlement with Taxing Authority — — — Ending unrecognized tax benefit $ 376 $ 494 $ — The Company classifies interest relating to tax matters and tax penalties as a component of income tax expense in its Consolidated Statements of Operations. As of December 31, 2020, there were $ 376 of unrecognized tax benefits that, if recognized, $ 306 would affect the effective tax rate. Related to the unrecognized tax benefits, the Company accrued interest and penalties of $ 59 and $ 2 , respectively, during the year ended December 31, 2020. In 2020, the Company recognized tax benefits of ($ 42 ) and ($ 3 ) of interest and penalties, respectively, associated with the lapse of the statute of limitations. As of December 31, 2019, there were $ 494 of unrecognized tax benefits that, if recognized, $ 402 would affect the effective tax rate. Related to the unrecognized tax benefits, the Company accrued interest and penalties of $ 216 and $ 13 , respectively, during the year ended December 31, 2019. In 2019, the Company recognized tax benefits of ($ 41 ) and ($ 3 ) of interest and penalties, respectively, associated with the lapse of the statute of limitations. The Company had no unrecognized tax benefits from January 1, 2018 through December 31, 2018. The Company is subject to taxation in the U.S. and various state, local and foreign jurisdictions. The Company and its affiliates are currently under examination by New York City for tax years 2014 through 2016 and New York State for tax years 2013 through 2015. With a few exceptions, the Company is no longer subject to U.S. federal, state, local or foreign examinations by taxing authorities for years before 2015. Note 23 – Concentrations of Credit Risk Financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, investment securities, foreign government obligations and receivables from clients. The Company has placed substantially all of its Cash and Cash Equivalents in interest-bearing deposits in U.S. commercial banks and U.S. investment banks that meet certain rating and capital requirements, as well as treasury bills. The Company's foreign subsidiaries maintain substantially all of their Cash and Cash Equivalents in interest bearing accounts at large commercial banking institutions domiciled in their respective countries of operation. Concentrations of credit risk are limited due to the quality of the Company's clients. Credit Risks The Company maintains its cash and cash equivalents, as well as certificates of deposit, with financial institutions with high credit ratings. At times, the Company may maintain deposits in federally insured financial institutions in excess of federally insured ("FDIC") limits or enter into sweep arrangements where banks will periodically transfer a portion of the Company's excess cash position to a money market fund. However, the Company believes that it is not exposed to significant credit risk due to the financial position of the depository institutions or investment vehicles in which those deposits are held. Accounts Receivable consists primarily of advisory fees and expense reimbursements billed to clients. Other Assets includes long-term receivables from fees related to private funds capital raising. Receivables are reported net of any allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts to provide coverage for probable losses from customer receivables and determines the adequacy of the allowance by estimating the probability of loss based on the Company's analysis of historical credit loss experience of the Company's client receivables, and taking into consideration current market conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The Investment Banking and Investment Management receivables collection periods generally are within 90 days of invoice, with the exception of placement fees, which are generally collected within 180 days of invoice, and fees related to private funds capital raising, which are collected in a period exceeding one year . The collection period for restructuring transaction receivables may exceed 90 days. Receivables that are collected in a period exceeding one year are reflected in Other Assets on the Consolidated Statements of Financial Condition. 103 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) At December 31, 2020 and 2019, total receivables recorded in Accounts Receivable amounted to $ 368,346 and $ 296,355 , respectively, net of an allowance, and total receivables recorded in Other Assets amounted to $ 70,975 and $ 63,554 , respectively. The Company recorded bad debt expense of $ 6,878 , $ 10,451 and $ 3,365 for the years ended December 31, 2020, 2019 and 2018, respectively. Other Current Assets and Other Assets include arrangements in which an estimate of variable consideration has been included in the transaction price and thereby recognized as revenue that precedes the contractual due date (contract assets). As of December 31, 2020, total contract assets recorded in Other Current Assets and Other Assets amounted to $ 29,327 and $ 5,283 , respectively. As of December 31, 2019, total contract assets recorded in Other Current Assets and Other Assets amounted to $ 31,525 and $ 2,504 , respectively. With respect to the Company's Investment Securities portfolio, which is comprised of highly-rated corporate and municipal bonds, treasury bills, exchange-traded funds, mutual funds and securities investments, the Company manages its credit risk exposure by limiting concentration risk and maintaining investment grade credit quality. As of December 31, 2020, the Company had Investment Securities of $ 1,060,836 , of which 90 % were treasury bills and 10 % were equity securities and exchange-traded funds. Periodically, the Company provides compensation to new and existing employees in the form of loans and/or other cash awards, which include a requirement of either full or partial repayment of these awards based on the terms of their employment agreements with the Company. See Note 19 for further information. Note 24 – Segment Operating Results Business Segments – The Company's business results are categorized into the following two segments: Investment Banking and Investment Management. Investment Banking includes providing advice to clients on significant mergers, acquisitions, divestitures and other strategic corporate transactions, as well as services related to securities underwriting, private placement services and commissions for agency-based equity trading services and equity research. Investment Management includes advising third-party investors in Institutional Asset Management and Wealth Management and interests in private equity funds which are not managed by the Company. The Company completed the sales of its ECB businesses in 2020. In addition, in 2020, the Company completed the transition of its advisory presence in Mexico to a strategic alliance relationship with a newly-formed independent strategic advisory firm founded by certain former employees. See Note 5 for further information. The Company's segment information for the years ended December 31, 2020, 2019 and 2018 is prepared using the following methodology: • Revenue, expenses and income (loss) from equity method investments directly associated with each segment are included in determining pre-tax income. • Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other performance and time-based factors. • Segment assets are based on those directly associated with each segment, or for certain assets shared across segments, those assets are allocated based on the most relevant measures applicable, including headcount and other factors. • Investment gains and losses, interest income and interest expense are allocated between the segments based on the segment in which the underlying asset or liability is held. Other Revenue, net, included in each segment's Net Revenues includes the following: • Interest income and income (losses) earned on investment securities, including our investment funds and futures contracts which are used as an economic hedge against our deferred cash compensation program, certificates of deposit, cash and cash equivalents and on the Company’s debt security investment in G5 • Adjustments to amounts due pursuant to the Company’s tax receivable agreement, subsequent to its initial establishment, related to changes in enacted tax rates • Gains (losses) resulting from foreign currency fluctuations • Principal trading and realized and unrealized gains and losses on interests in Private Equity funds which are not managed by the Company 104 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) • Interest expense associated with the Company’s Notes Payable, subordinated borrowings and lines of credit, as well as revenue and expenses associated with repurchase or resale transactions • A net loss on the sales of the Company's businesses at ECB, as well as a loss related to the release of cumulative foreign exchange losses resulting from the sale and wind-down of the Company's businesses in Mexico in 2020 Each segment's Operating Expenses include: a) employee compensation and benefits expenses that are incurred directly in support of the segment and b) non-compensation expenses, which include expenses for premises and occupancy, professional fees, travel and entertainment, communications and information services, execution, clearing and custody fees, equipment and indirect support costs (including compensation and other operating expenses related thereto) for administrative services. Such administrative services include, but are not limited to, accounting, tax, legal, technology, human capital, facilities management and senior management activities. Other Expenses include the following: • Amortization of LP Units and Certain Other Awards – Includes amortization costs associated with the vesting of Class J LP Units issued in conjunction with the acquisition of ISI and certain other related awards. • Special Charges, Including Business Realignment Costs – Includes the following expenses for the years ended December 31, 2020, 2019 and 2018: ◦ 2020 – Includes expenses related to separation and transition benefits and related costs as a result of the Company's review of its operations and the acceleration of depreciation expense for leasehold improvements and certain other fixed assets in conjunction with the expansion of the Company's headquarters in New York and the Company's business realignment initiatives, as well as charges related to the impairment of assets resulting from the wind-down of the Company's businesses in Mexico ◦ 2019 – Includes expenses related to the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of the Company's headquarters in New York, the impairment of goodwill in the Company's Institutional Asset Management reporting unit and separation and transition benefits for certain employees terminated as a result of the Company's review of its operations ◦ 2018 – Includes expenses related to separation benefits and costs for the termination of certain contracts associated with closing the Company's agency trading platform in the U.K. and separation benefits and related charges associated with the Company's businesses in Mexico, as well as the acceleration of depreciation expense for leasehold improvements in conjunction with the expansion of the Company's headquarters in New York • Acquisition and Transition Costs – Includes costs incurred in connection with acquisitions, divestitures and other ongoing business development initiatives, primarily comprised of professional fees for legal and other services, including costs in 2020 associated with the sale of the Company's ECB businesses. • Fair Value of Contingent Consideration – Includes expense, or the reversal of expense, associated with changes in the fair value of contingent consideration issued to the sellers of certain of the Company's acquisitions. • Intangible Asset and Other Amortization – Includes amortization of intangible assets and other purchase accounting-related amortization associated with certain acquisitions. The Company evaluates segment results based on net revenues and pre-tax income, both including and excluding the impact of the Other Expenses. The following information presents each segment's contribution. 105 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) For the Years Ended December 31, 2020 2019 2018 Investment Banking Net Revenues (1) $ 2,217,386 $ 1,951,795 $ 2,012,023 Operating Expenses 1,637,542 1,485,477 1,448,301 Other Expenses (2) 49,112 33,618 30,366 Operating Income 530,732 432,700 533,356 Income from Equity Method Investments 1,546 916 518 Pre-Tax Income $ 532,278 $ 433,616 $ 533,874 Identifiable Segment Assets $ 3,186,864 $ 2,393,647 $ 1,923,783 Investment Management Net Revenues (1) $ 46,519 $ 56,903 $ 52,682 Operating Expenses 50,473 48,645 43,940 Other Expenses (2) 345 3,247 21 Operating Income (Loss) ( 4,299 ) 5,011 8,721 Income from Equity Method Investments 12,852 10,080 8,776 Pre-Tax Income $ 8,553 $ 15,091 $ 17,497 Identifiable Segment Assets $ 184,024 $ 204,966 $ 201,884 Total Net Revenues (1) $ 2,263,905 $ 2,008,698 $ 2,064,705 Operating Expenses 1,688,015 1,534,122 1,492,241 Other Expenses (2) 49,457 36,865 30,387 Operating Income 526,433 437,711 542,077 Income from Equity Method Investments 14,398 10,996 9,294 Pre-Tax Income $ 540,831 $ 448,707 $ 551,371 Identifiable Segment Assets $ 3,370,888 $ 2,598,613 $ 2,125,667 106 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) (1) Net revenues include Other Revenue, net, allocated to the segments as follows: For the Years Ended December 31, 2020 2019 2018 Investment Banking (A) $ ( 19,845 ) $ 19,023 $ ( 3,156 ) Investment Management (B) ( 7,878 ) 6,292 4,436 Total Other Revenue, net $ ( 27,723 ) $ 25,315 $ 1,280 (A) Investment Banking Other Revenue, net, includes interest expense on the Notes Payable, subordinated borrowings and lines of credit of $ 18,197 , $ 12,917 and $ 9,201 for the years ended December 31, 2020, 2019 and 2018, respectively. Investment Banking Other Revenue, net, also includes a loss of $ 21,070 related to the release of cumulative foreign exchange losses resulting from the sale and wind-down of the Company's businesses in Mexico for the year ended December 31, 2020. (B) Investment Management Other Revenue, net, includes a net loss of $ 3,441 related to the sale of the Company's ECB businesses and a loss of $ 6,295 related to the release of cumulative foreign exchange losses resulting from the sale and wind-down of the Company's businesses in Mexico for the year ended December 31, 2020. (2) Other Expenses are as follows: For the Years Ended December 31, 2020 2019 2018 Investment Banking Amortization of LP Units and Certain Other Awards $ 1,067 $ 18,183 $ 15,241 Special Charges, Including Business Realignment Costs 46,600 7,202 5,012 Acquisition and Transition Costs 262 705 — Fair Value of Contingent Consideration — — 1,485 Intangible Asset and Other Amortization 1,183 7,528 8,628 Total Investment Banking 49,112 33,618 30,366 Investment Management Special Charges, Including Business Realignment Costs 45 2,939 — Acquisition and Transition Costs 300 308 21 Total Investment Management 345 3,247 21 Total Other Expenses $ 49,457 $ 36,865 $ 30,387 Geographic Information – The Company manages its business based on the profitability of the enterprise as a whole. The Company's revenues were derived from clients located and managed in the following geographical areas: For the Years Ended December 31, 2020 2019 2018 Net Revenues: (1) United States $ 1,767,976 $ 1,464,551 $ 1,591,883 Europe and Other 497,102 501,425 438,602 Latin America 26,550 17,407 32,940 Total $ 2,291,628 $ 1,983,383 $ 2,063,425 (1) Excludes Other Revenue, Including Interest and Investments, and Interest Expense. 107 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) The Company's total assets are located in the following geographical areas: December 31, 2020 2019 Total Assets: United States $ 2,862,343 $ 2,158,347 Europe and Other 504,977 373,822 Latin America 3,568 66,444 Total $ 3,370,888 $ 2,598,613 108 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Note 25 – Evercore Inc. (Parent Company Only) Financial Statements EVERCORE INC. (parent company only) CONDENSED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands, except share data) December 31, 2020 2019 ASSETS Equity Investment in Subsidiary $ 1,419,718 $ 1,066,398 Deferred Tax Assets 237,595 244,965 Goodwill 15,236 15,236 Other Assets 25,603 18,704 TOTAL ASSETS $ 1,698,152 $ 1,345,303 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Current Liabilities Payable to Related Party $ 9,891 $ 9,570 Other Current Liabilities 3,963 6,003 Current Portion of Notes Payable 37,974 — Total Current Liabilities 51,828 15,573 Amounts Due Pursuant to Tax Receivable Agreements 76,860 84,952 Long-term Debt - Notes Payable 338,518 375,062 TOTAL LIABILITIES 467,206 475,587 Stockholders' Equity Common Stock Class A, par value $ 0.01 per share ( 1,000,000,000 shares authorized, 72,195,283 and 68,698,675 issued at December 31, 2020 and 2019, respectively, and 40,750,225 and 39,176,010 outstanding at December 31, 2020 and 2019, respectively) 722 687 Class B, par value $ 0.01 per share ( 1,000,000 shares authorized, 48 and 84 issued and outstanding at December 31, 2020 and 2019, respectively) — — Additional Paid-In-Capital 2,266,136 2,016,524 Accumulated Other Comprehensive Income (Loss) ( 9,758 ) ( 27,596 ) Retained Earnings 798,573 558,269 Treasury Stock at Cost ( 31,445,058 and 29,522,665 shares at December 31, 2020 and 2019, respectively) ( 1,824,727 ) ( 1,678,168 ) TOTAL STOCKHOLDERS' EQUITY 1,230,946 869,716 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,698,152 $ 1,345,303 See notes to parent company only financial statements. 109 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) EVERCORE INC. (parent company only) CONDENSED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2020 2019 2018 REVENUES Other Revenue, Including Interest and Investments $ 18,197 $ 12,915 $ 9,202 TOTAL REVENUES 18,197 12,915 9,202 Interest Expense 18,197 12,915 9,202 NET REVENUES — — — EXPENSES TOTAL EXPENSES — — — OPERATING INCOME — — — Equity in Income of Subsidiary 451,129 383,717 473,978 Provision for Income Taxes 100,555 86,281 96,738 NET INCOME $ 350,574 $ 297,436 $ 377,240 See notes to parent company only financial statements. 110 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) EVERCORE INC. (parent company only) CONDENSED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2020 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 350,574 $ 297,436 $ 377,240 Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: Undistributed Income of Subsidiary ( 451,129 ) ( 383,717 ) ( 473,978 ) Deferred Taxes 11,395 ( 3,966 ) ( 5,311 ) Accretion on Long-term Debt 435 336 265 (Increase) Decrease in Operating Assets: Other Assets ( 6,899 ) ( 18,704 ) 9,689 Increase (Decrease) in Operating Liabilities: Taxes Payable — ( 30,749 ) 30,749 Net Cash Provided by (Used in) Operating Activities ( 95,624 ) ( 139,364 ) ( 61,346 ) CASH FLOWS FROM INVESTING ACTIVITIES Investment in Subsidiary 202,206 30,449 138,648 Net Cash Provided by Investing Activities 202,206 30,449 138,648 CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Notes Payable — 205,718 — Dividends ( 106,582 ) ( 96,803 ) ( 77,302 ) Net Cash Provided by (Used in) Financing Activities ( 106,582 ) 108,915 ( 77,302 ) NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH — — — CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of Year — — — CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of Year $ — $ — $ — SUPPLEMENTAL CASH FLOW DISCLOSURE Accrued Dividends $ 13,734 $ 14,642 $ 12,288 See notes to parent company only financial statements. 111 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) EVERCORE INC. (parent company only) NOTES TO CONDENSED FINANCIAL STATEMENTS Note A – Organization Evercore Inc. (the "Company") was incorporated as a Delaware corporation on July 21, 2005. The Company did not begin meaningful operations until the reorganization discussed below. Pursuant to a reorganization into a holding company structure, the Company became a holding company and its sole asset is a controlling equity interest in Evercore LP. As the sole general partner of Evercore LP, the Company operates and controls all of the business and affairs of Evercore LP and, through Evercore LP and its subsidiaries, continues to conduct the business now conducted by these subsidiaries. Note B – Significant Accounting Policies Basis of Presentation. The Statements of Financial Condition, Operations and Cash Flows have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Equity Investment in Subsidiary and Equity in Income of Subsidiary. Equity Investment in Subsidiary includes the Company's receivable from Evercore LP for senior notes owed by Evercore LP to the Company having similar terms as described below in Note D – issuance of Notes Payable. The Equity in Income of Subsidiary represents the Company's share of income from Evercore LP. Note C – Stockholders' Equity The Company is authorized to issue 1,000,000 shares of Class A common stock ("Class A Shares"), par value $ 0.01 per share, and 1,000 shares of Class B common stock, par value $ 0.01 per share. All Class A Shares and shares of Class B common stock vote together as a single class. At December 31, 2020, the Company has issued 72,195 Class A Shares. The Company canceled two shares of Class B common stock, which were held by limited partners of Evercore LP during 2020. During 2020, the Company purchased 1,068 Class A Shares primarily from employees at market values ranging from $ 38.23 to $ 104.38 per share (at an average cost per share of $ 76.51 ) primarily for the net settlement of stock-based compensation awards and 854 Class A Shares at market values ranging from $ 58.28 to $ 81.96 per share (at an average cost per share of $ 75.93 ) pursuant to the Company's share repurchase program. The result of these purchases was an increase in Treasury Stock of $ 146,559 on the Company's Statement of Financial Condition as of December 31, 2020. During the year ended December 31, 2020, the Company declared and paid dividends of $ 2.35 per share, totaling $ 95,226 , which were wholly funded by the Company's sole subsidiary, Evercore LP, and accrued deferred cash dividends on unvested RSUs, totaling $ 13,734 . During the year ended December 31, 2020, the Company also paid deferred cash dividends of $ 11,356 , which were wholly funded by the Company's sole subsidiary, Evercore LP. Dividends are paid and treasury shares are repurchased by a subsidiary of Evercore Inc. As discussed in Note 19 to the consolidated financial statements, both the Evercore LP partnership units and restricted stock units are exchangeable into Class A Shares on a one -for-one basis once vested. Note D – Issuance of Notes Payable On March 30, 2016, the Company issued an aggregate of $ 170,000 of senior notes (the "2016 Private Placement Notes"), including: $ 38,000 aggregate principal amount of its 4.88 % Series A senior notes due 2021, $ 67,000 aggregate principal amount of its 5.23 % Series B senior notes due 2023, $ 48,000 aggregate principal amount of its 5.48 % Series C senior notes due 2026 and $ 17,000 aggregate principal amount of its 5.58 % Series D senior notes due 2028, pursuant to a note purchase agreement dated as of March 30, 2016, among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933. On August 1, 2019, the Company issued $ 175,000 and £ 25,000 of senior unsecured notes (the "2019 Private Placement Notes"), through private placement. These notes reflect a weighted average life of 12 years and a weighted average stated interest rate of 4.26 %. These notes include: $ 75,000 aggregate principal amount of its 4.34 % Series E senior notes due 2029, $ 60,000 aggregate principal amount of its 4.44 % Series F senior notes due 2031, $ 40,000 aggregate principal amount of its 4.54 % Series G senior notes due 2033 and £ 25,000 aggregate principal amount of its 3.33 % Series H senior notes due 2033, each of which were issued pursuant to a note purchase agreement dated as of August 1, 2019, among the Company and the purchasers party thereto in a private placement exempt from registration under the Securities Act of 1933. 112 Table of Contents EVERCORE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (amounts in thousands, except per share amounts, unless otherwise noted) Note E – Commitments and Contingencies As of December 31, 2020, as discussed in Note 14 to the consolidated financial statements, the Company estimates the contractual obligations related to the 2016 and 2019 Private Placement Notes to be $ 505,236 . Pursuant to the 2016 and 2019 Private Placement Notes, the Company expects to make payments to the notes' holders of $ 54,883 within one year or less, $ 97,160 in one to three years, $ 24,904 in three to five years and $ 328,289 after five years. As of December 31, 2020, as discussed in Note 20 to the consolidated financial statements, the Company estimates the contractual obligations related to the Tax Receivable Agreement to be $ 86,751 . The company expects to pay to the counterparties to the Tax Receivable Agreement $ 9,891 within one year or less, $ 20,586 in one to three years, $ 19,572 in three to five years and $ 36,702 after five years. 113 SUPPLEMENTAL FINANCIAL INFORMATION (dollars in thousands, except per share data) Consolidated Quarterly Results of Operations (unaudited) The following represents the Company's unaudited quarterly results for the years ended December 31, 2020 and 2019. These quarterly results were prepared in accordance with U.S. GAAP and reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results. For the Three Months Ended December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Net Revenues $ 927,308 $ 402,515 $ 507,075 $ 427,007 Total Expenses 600,593 338,829 420,346 377,704 Income Before Income from Equity Method Investments and Income Taxes 326,715 63,686 86,729 49,303 Income from Equity Method Investments 5,846 3,111 2,313 3,128 Income Before Income Taxes 332,561 66,797 89,042 52,431 Provision for Income Taxes 77,109 15,677 21,814 13,551 Net Income 255,452 51,120 67,228 38,880 Net Income Attributable to Noncontrolling Interest 35,075 8,510 10,816 7,705 Net Income Attributable to Evercore Inc. $ 220,377 $ 42,610 $ 56,412 $ 31,175 Net Income Per Share Attributable to Evercore Inc. Common Shareholders Basic $ 5.40 $ 1.05 $ 1.39 $ 0.78 Diluted $ 5.02 $ 1.01 $ 1.35 $ 0.74 Dividends Declared Per Share of Class A Common Stock $ 0.61 $ 0.58 $ 0.58 $ 0.58 For the Three Months Ended December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 Net Revenues $ 660,127 $ 402,198 $ 531,046 $ 415,327 Total Expenses 503,404 331,854 404,212 331,517 Income Before Income from Equity Method Investments and Income Taxes 156,723 70,344 126,834 83,810 Income from Equity Method Investments 3,770 2,562 2,453 2,211 Income Before Income Taxes 160,493 72,906 129,287 86,021 Provision for Income Taxes 34,793 20,402 32,030 7,821 Net Income 125,700 52,504 97,257 78,200 Net Income Attributable to Noncontrolling Interest 20,516 9,226 15,515 10,968 Net Income Attributable to Evercore Inc. $ 105,184 $ 43,278 $ 81,742 $ 67,232 Net Income Per Share Attributable to Evercore Inc. Common Shareholders Basic $ 2.68 $ 1.09 $ 2.02 $ 1.66 Diluted $ 2.48 $ 1.01 $ 1.88 $ 1.52 Dividends Declared Per Share of Class A Common Stock $ 0.58 $ 0.58 $ 0.58 $ 0.50 114 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.