Annual report pursuant to section 13 and 15(d)

Segment Information

v2.4.0.6
Segment Information
 12 Months Ended
Dec. 31, 2012
Segment Reporting [Abstract]  
Segment Information

18.  Segment Information

The Company has two operating segments. The independent brokerage and advisory services segment includes the broker-dealer and investment advisory services provided by Investacorp, Securities America and Triad to their independent contractor financial advisors and Premier Trust which includes the wealth management services. The Ladenburg segment includes the investment banking, sales and trading and asset management services and investment activities conducted by Ladenburg and LTAM. During 2011, the Premier Trust segment was reclassified into our independent brokerage and advisory services segment due to the complementary nature of Premier Trust’s operations to those of the Company’s independent broker-dealer subsidiaries.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, adjusted for acquisition-related expense, amortization of retention loans and change in fair value of contingent consideration related to the Securities America acquisition, gains or losses on sales of assets, non-cash compensation expense, and clearing conversion expense is the primary profit measure the Company’s management uses in evaluating financial performance for its reportable segments. EBITDA, as adjusted, is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. The Company considers EBITDA, as adjusted, important in evaluating its financial performance on a consistent basis across various periods. Due to the significance of non-cash and non-recurring items, EBITDA, as adjusted, enables the Company’s Board of Directors and management to monitor and evaluate the business on a consistent basis. The Company uses EBITDA, as adjusted, as a primary measure, among others, to analyze and evaluate financial and strategic planning decisions regarding future operating investments and potential acquisitions. The Company believes that EBITDA, as adjusted, eliminates items that are not indicative of its core operating performance, such as amortization of retention loans for the Securities America acquisition and expenses related to Investacorp’s conversion to a single clearing firm as part of a new seven-year clearing agreement, or do not involve a cash outlay, such as stock-related compensation. EBITDA, as adjusted, should be considered in addition to, rather than as a substitute for, pre-tax income, net income and cash flows from operating activities.

Segment information for the years ended December 31, 2012, 2011 and 2010 is as follows:

       
  Independent Brokerage and Advisory Services(1)   Ladenburg   Corporate   Total
2012                                    
Revenues   $ 598,851     $ 45,701     $ 5,559     $ 650,111  
Pre-tax (loss) income     (6,087 )      65       (8,870 )(2)      (14,892 ) 
EBITDA, as adjusted(3)     30,566       1,829       (1,891 )      30,504  
Identifiable assets     318,005       17,636       2,488       338,129  
Depreciation and amortization     15,158       835       68       16,061  
Interest     19,803       79       4,659       24,541  
Capital expenditures     5,356       115       6       5,477  
Non-cash compensation     1,640       850       2,254       4,744  
2011                                    
Revenues   $ 230,897     $ 41,459     $ 1,244     $ 273,600  
Pre-tax income (loss)     1,787       (3,131 )      (10,958 )(2)      (12,302 ) 
EBITDA, as adjusted(3)     12,181       (1,032 )      (2,727 )      8,422  
Identifiable assets     322,245       18,437       6,463       347,145  
Depreciation and amortization     4,567       996       69       5,632  
Interest     3,191       89       3,263       6,543  
Capital expenditures     1,381       58       —       1,439  
Non-cash compensation     1,072       1,014       1,928       4,014  
2010                                    
Revenues   $ 151,379     $ 41,194     $ 1,953     $ 194,526  
Pre-tax income (loss)     1,086       (4,364 )      (6,812 )(2)      (10,090 ) 
EBITDA, as adjusted(3)     5,287       (1,264 )      (1,322 )      2,701  
Identifiable assets     78,306       21,484       2,035       101,825  
Depreciation and amortization     2,290       1,620       68       3,978  
Interest     26       16       3,199       3,241  
Capital expenditures     498       110       —       608  
Non-cash compensation     1,735       1,464       2,240       5,439  

(1) Includes Premier Trust from September 1, 2010 and Securities America from November 4, 2011.
(2) Includes interest on revolving credit and forgivable loan notes, compensation, acquisition-related expenses, professional fees and other general and administrative expenses.
(3) The following table reconciles EBITDA, as adjusted, to pre-tax loss for the years ended December 31, 2012, 2011 and 2010:

     
  Year Ended December 31,
EBITDA, as adjusted   2012   2011   2010
Independent Brokerage and Advisory Services   $ 30,566     $ 12,181     $ 5,287  
Ladenburg     1,829       (1,032 )      (1,264 ) 
Corporate     (1,891 )      (2,727 )      (1,322 ) 
Total segments     30,504       8,422       2,701  
Adjustments:                           
Interest income     185       70       (14 ) 
Change in fair value of contingent consideration     7,111       —       —  
Interest expense     (24,541 )      (6,543 )      (3,241 ) 
Depreciation and amortization     (16,061 )      (5,632 )      (3,978 ) 
Non-cash compensation expense     (4,744 )      (4,014 )      (5,439 ) 
Clearing conversion expense     —       —       (119 ) 
Acquisition-related expense     —       (2,971 )      —  
Amortization of retention loans     (7,346 )      (1,634 )      —  
Pre-tax loss   $ (14,892 )    $ (12,302 )    $ (10,090 )