Annual report pursuant to Section 13 and 15(d)

Segment Information

v3.6.0.2
Segment Information
 12 Months Ended
Dec. 31, 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 Securities America, Triad, Investacorp, KMS and SSN to their independent contractor financial advisors and 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 conducted by Highland, which delivers life insurance, fixed and equity indexed annuities, as well as 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 cost 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. EBITDA, as adjusted, should be considered in addition to, rather than as a substitute for, (loss) income before income taxes, net (loss) income and cash flows provided by (used in) operating activities.

Segment information for the years ended December 31, 2016, 2015 and 2014 is as follows:
 
 
Independent Brokerage and Advisory Services
 
Ladenburg
 
Insurance Brokerage
 
Corporate
 
Total
2016
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
1,003,282

 
$
49,425

 
$
50,483

 
$
3,763

 
$
1,106,953

Income (loss) before income taxes
 
15,071

 
(3,674
)
 
(6,074
)
 
(17,609
)
(1)
(12,286
)
EBITDA, as adjusted (2)
 
47,977

 
(1,676
)
 
2,255

 
(12,785
)
 
35,771

Identifiable assets
 
423,288

 
38,665

 
54,166

 
29,884

 
546,003

Depreciation and amortization
 
20,406

 
703

 
7,161

 
64

 
28,334

Interest
 
2,828

 
4

 
682

 
748

 
4,262

Capital expenditures
 
6,784

 
139

 
209

 
—

 
7,132

Non-cash compensation
 
1,010

 
537

 
245

 
3,519

 
5,311

 
 
 
 
 
 
 
 
 
 
 
2015
 
  

 
  

 
 
 
  

 
  

Revenues
 
$
1,035,365

 
$
61,841

 
$
49,573

 
$
5,339

 
$
1,152,118

Income (loss) before income taxes
 
7,735

 
3,095

 
(6,701
)
 
(15,824
)
(1)
(11,695
)
EBITDA, as adjusted (2)
 
46,462

 
6,052

 
1,170

 
(9,639
)
 
44,045

Identifiable assets
 
417,367

 
44,050

 
61,689

 
50,999

 
574,105

Depreciation and amortization
 
19,373

 
703

 
6,949

 
52

 
27,077

Interest
 
3,532

 
7

 
683

 
947

 
5,169

Capital expenditures
 
7,341

 
87

 
783

 
87

 
8,298

Non-cash compensation
 
3,836

 
638

 
239

 
4,046

 
8,759

 
 
 
 
 
 
 
 
 
 
 
2014
 
  

 
  

 
 
 
  

 
  

Revenues
 
$
816,581


$
73,298

 
$
26,164

 
$
5,210


$
921,253

Income (loss) before income taxes
 
10,520

 
14,846

 
(841
)
 
(14,519
)
(1)
10,006

EBITDA, as adjusted (2)
 
50,596

 
16,174

 
2,315

 
(7,907
)

61,178

Identifiable assets
 
350,187

 
39,845

 
67,941

 
52,141

 
510,114

Depreciation and amortization
 
14,978

 
665

 
2,743

 
11

 
18,397

Interest
 
5,460

 
67

 
297

 
1,166

 
6,990

Capital expenditures
 
6,058

 
1,002

 
253

 
134

 
7,447

Non-cash compensation
 
6,751

 
612

 
116

 
3,062

 
10,541


(1)
Includes interest on revolving credit and forgivable loan notes, compensation, professional fees and other general and administrative expenses.

(2)
The following table reconciles income (loss) before income taxes to EBITDA, as adjusted, for the years ended December 31, 2016, 2015 and 2014:
 
 
Year Ended December 31,
 
 
 
2016
 
2015
 
2014
 
(Loss) income before income taxes
 
(12,286
)
 
(11,695
)
 
10,006

 
Adjustments:
 
  

 
  

 
  

 
Interest income
 
(672
)
 
(254
)
 
(245
)
 
Change in fair value of contingent consideration
 
216

 
(55
)
 
(12
)
 
Loss on extinguishment of debt
 
—

 
252

 
548

 
Interest expense
 
4,262

 
5,169

 
6,990

 
Depreciation and amortization
 
28,334

 
27,077

 
18,397

 
Non-cash compensation expense
 
5,311

 
8,759

 
10,541

 
Amortization of retention and forgivable loans
 
5,472

 
9,238

 
11,041

 
Financial advisor recruiting expense
 
1,882

 
2,387

 
1,489

 
Acquisition-related expense
 
1,357

 
940

(5)
2,342

 
Loss attributable to noncontrolling interest
 
42

 
62

 
81

 
Other
 
1,853

(3)
2,165

(4)
—

 
EBITDA, as adjusted
 
$
35,771

 
$
44,045

 
$
61,178

 
 
 
 
 
 
 
 
 
EBITDA, as adjusted
 
 
 
 
 
 
 
Independent Brokerage and Advisory Services
 
$
47,977

 
$
46,462

 
$
50,596

 
Ladenburg
 
(1,676
)
 
6,052

 
16,174

 
Insurance Brokerage
 
2,255

 
1,170

 
2,315

 
Corporate
 
(12,785
)
 
(9,639
)
 
(7,907
)
 
Total segments
 
$
35,771

 
$
44,045

 
$
61,178

 


(3) Includes loss on severance costs of $755, excise and franchise tax expense of $508 and compensation expense that may be paid in stock of $586.

(4) Includes loss on write-off of receivable from subtenant of $855, compensation expense that may be paid in stock of $532, rent expense due to default by subtenant of $468 and excise and franchise tax expense of $310.

(5)
Includes $409 for acquisition-related expense that was previously included in professional services expense and other expense.