Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.5.0.2
Segment Information
 9 Months Ended
Sep. 30, 2016
Segment Reporting [Abstract]  
Segment Information
Segment Information

The Company has three operating segments. The independent brokerage and advisory services segment includes the broker-dealer and investment advisory services provided by the Company's independent broker-dealer subsidiaries to their independent contractor financial advisors and the wealth management services provided by Premier Trust. The Ladenburg segment includes the investment banking, sales and trading and asset management services and investment activities conducted by Ladenburg and LTAM. The insurance brokerage segment includes the wholesale insurance brokerage activities provided by Highland, which delivers life insurance, fixed and equity indexed annuities and long-term care solutions to investment and insurance providers.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, adjusted for acquisition-related expense, amortization of retention and forgivable loans, change in fair value of contingent consideration related to acquisitions, loss on extinguishment of debt, non-cash compensation expense, financial advisor recruiting expense and other expense, which includes loss on write-off of receivable from subtenant, excise and franchise tax expense, severance costs and compensation expense that may be paid in stock, 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 and forgivable loans and financial advisor recruiting expenses, or do not involve a cash outlay, such as stock-related compensation, which is expected to remain a key element in our long-term incentive compensation program. EBITDA, as adjusted, should be considered in addition to, rather than as a substitute for, income (loss) before income taxes, net income (loss) and cash flows provided by (used in) operating activities.

Segment information for the three and nine months ended September 30, 2016 and 2015 was as follows:

Three Months Ended September 30, 2016
 
Independent
Brokerage and
Advisory Services
 
Ladenburg
 
Insurance Brokerage
 
Corporate
 
Total
Revenues
 
$
251,045

 
$
10,424

 
$
12,680

 
$
174

 
$
274,323

Income (loss) before income taxes
 
607

 
(1,959
)
 
(1,611
)
 
(3,948
)
(1) 
(6,911
)
EBITDA, as adjusted (4)
 
9,503

 
(1,604
)
 
462

 
(2,797
)
 
5,564

Identifiable assets (2)
 
411,577

 
33,046

 
54,301

 
44,832

(3) 
543,756

Depreciation and amortization
 
5,008

 
185

 
1,804

 
17

 
7,014

Interest
 
795

 
4

 
170

 
164

 
1,133

Capital expenditures
 
1,267

 
19

 
12

 
—

 
1,298

Non-cash compensation
 
253

 
135

 
61

 
851

 
1,300

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2015
 

 
 
 
 
 
 
 

Revenues
 
$
256,671

 
$
13,248

 
$
12,210

 
$
85

 
$
282,214

Income (loss) before income taxes
 
3,141

 
(144
)
 
(1,585
)
 
(4,561
)
(1) 
(3,149
)
EBITDA, as adjusted (4)
 
10,925

 
98

 
417

 
(3,080
)
 
8,360

Identifiable assets (2)
 
400,290

 
44,053

 
63,522

 
55,425

(3) 
563,290

Depreciation and amortization
 
4,834

 
178

 
1,769

 
17

 
6,798

Interest
 
834

 
—

 
172

 
249

 
1,255

Capital expenditures
 
1,646

 
51

 
188

 
—

 
1,885

Non-cash compensation
 
(914
)
 
151

 
60

 
945

 
242

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2016
 
Independent
Brokerage and
Advisory Services
 
Ladenburg
 
Insurance Brokerage
 
Corporate
 
Total
Revenues
 
$
738,429

 
$
33,457

 
$
37,422

 
$
586

 
$
809,894

Income (loss) before income taxes
 
7,291

 
(6,071
)
 
(4,963
)
 
(11,129
)
(1) 
(14,872
)
EBITDA, as adjusted (4)
 
32,222

 
(4,862
)
 
1,294

 
(7,505
)
 
21,149

Identifiable assets (2)
 
411,577

 
33,046

 
54,301

 
44,832

(3) 
543,756

Depreciation and amortization
 
15,173

 
546

 
5,360

 
51

 
21,130

Interest
 
2,446

 
4

 
510

 
552

 
3,512

Capital expenditures
 
4,661

 
139

 
198

 
—

 
4,998

Non-cash compensation
 
756

 
406

 
183

 
2,651

 
3,996

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
777,009

 
$
44,806

 
$
35,680

 
$
290

 
$
857,785

Income (loss) before income taxes
 
4,562

 
2,420

 
(5,628
)
 
(12,628
)
(1) 
(11,274
)
EBITDA, as adjusted (4)
 
33,677

 
4,765

 
203

 
(7,967
)
 
30,678

Identifiable assets (2)
 
400,290

 
44,053

 
63,522

 
55,425

(3) 
563,290

Depreciation and amortization
 
14,377

 
528

 
5,141

 
34

 
20,080

Interest
 
2,713

 
7

 
511

 
739

 
3,970

Capital expenditures
 
5,849

 
87

 
652

 
86

 
6,674

Non-cash compensation
 
2,191

 
486

 
179

 
3,070

 
5,926

 
 
 
 
 
 
 
 
 
 
 

(1) 
Includes interest expense, compensation, professional fees, and other general and administrative expenses.

(2) 
Identifiable assets are presented as of the end of the period.

(3) 
Includes cash and cash equivalents of $36,017 and $53,399 as of September 30, 2016 and 2015, respectively.

(4) 
The following table reconciles EBITDA, as adjusted, to loss before income taxes for the three and nine months ended September 30, 2016 and 2015.
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
September 30,
 
EBITDA, as adjusted
 
2016
 
2015
 
2016
 
2015
 
Independent Brokerage and Advisory Services
 
$
9,503

 
$
10,925

 
$
32,222

 
$
33,677

 
Ladenburg
 
(1,604
)
 
98

 
(4,862
)
 
4,765

 
Insurance Brokerage
 
462

 
417

 
1,294

 
203

 
Corporate
 
(2,797
)
 
(3,080
)
 
(7,505
)
 
(7,967
)
 
Total Segments
 
5,564

 
8,360

 
21,149

 
30,678

 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
Interest income
 
187

 
69

 
479

 
178

 
Change in fair value of contingent consideration
 
(72
)
 
—

 
(178
)
 
31

 
Loss on extinguishment of debt
 
—

 
—

 
—

 
(252
)
 
Interest expense
 
(1,133
)
 
(1,255
)
 
(3,512
)
 
(3,970
)
 
Depreciation and amortization
 
(7,014
)
 
(6,798
)
 
(21,130
)
 
(20,080
)
 
Non-cash compensation expense
 
(1,300
)
 
(242
)
 
(3,996
)
 
(5,926
)
 
Financial advisor recruiting expense
 
(514
)
 
(764
)
 
(1,191
)
 
(1,670
)
 
Amortization of retention and forgivable loans
 
(1,403
)
 
(2,223
)
 
(4,381
)
 
(7,831
)
 
Acquisition-related expenses (1)
 
(936
)
 
(139
)
 
(1,003
)
 
(257
)
 
Other (2)
 
(289
)
 
(146
)
 
(1,076
)
 
(2,136
)
 
Net loss attributable to noncontrolling interest
 
(1
)
 
(11
)
 
(33
)
 
(39
)
 
Loss before income taxes
 
$
(6,911
)
 
$
(3,149
)
 
$
(14,872
)
 
$
(11,274
)
 

(1) 
Includes $60 in the nine months ended September 30, 2016, for acquisition-related expense that was previously included in professional services expense.

(2) 
Includes loss on severance costs of $44 and $277 for the three and nine months ended September 30, 2016 and excise and franchise tax expense of $109 and $343 for the three and nine months ended September 30, 2016 and compensation expense that may be paid in stock, of $133 and $399 for the three and nine months ended September 30, 2016, respectively. Includes loss on write-off of receivable from subtenant of $855 for the nine months ended September 30, 2015, rent expense due to default of subtenant of $468 for the nine months ended September 30, 2015 and compensation expense that may be paid in stock, of $133 and $399, for the three and nine months ended September 30, 2015, respectively, and excise and franchise tax expense of $263 for the nine months ended September 30, 2015.