Cowen Group, Inc. : Cowen Group, Inc. Announces 2012 First Quarter Financial Results
05/04/2012| 08:05am US/Eastern
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Cowen Group, Inc. (NASDAQ: COWN) ("Cowen" or "the Company") today
announced its operating results for the first quarter ended March 31,
2012.
2012 First Quarter Highlights
GAAP:
GAAP net income was $4.0 million compared to $0.1 million in the prior
year period and a net loss of $(79.9) million in the fourth quarter
2011.
GAAP revenue was $57.5 million compared to $64.2 million in the prior
year period and $49.5 million in the fourth quarter 2011.
Book value per share increased to $4.54 at the end of the 2012 first
quarter from $4.46 at December 31, 2011.
Economic Income:
Economic Income was $5.9 million compared to $7.0 million in the prior
year period and an Economic Loss of $(33.2) million in the fourth
quarter 2011.
Broker-dealer segment revenue was $40.0 million compared to $41.8
million in the prior year period and $33.8 million in the fourth
quarter 2011.
Alternative Investment segment revenue was $39.1 million compared to
$38.0 million in the prior year period and $36.4 million in the fourth
quarter 2011.
Total non-compensation expenses were $28.2 million, an 8% decrease
compared to $30.8 million in the prior year period and a 22% decrease
compared to $36.3 million in the fourth quarter 2011.
"We reported positive first quarter results and an economic income cash
gain of over $12 million," said Peter Cohen, Chairman and Chief
Executive Officer. "We continued to make progress in the first quarter,
particularly at our broker-dealer. Our early 2012 performance is a
result of the changes we started to implement in 2011. We increased
broker-dealer segment revenues by 19% and grew hedge fund assets by 13%
from the fourth quarter, and generated over $20 million in investment
income on our invested capital. We also reduced non-compensation
expenses by over 20% compared to the fourth quarter and achieved our
run-rate 2012 expense reduction target for the first quarter. While we
have more work to do, the results for the first quarter show progress."
2012 First Quarter GAAP Financial Information and Select Balance
Sheet Data
For the first quarter 2012, the Company reported GAAP net income of $4.0
million, or $0.03 per share, compared to GAAP net income of $0.1
million, or $0.00 per share, in the first quarter 2011. The
year-over-year increase in GAAP net income was primarily due to a 35%
increase in other income, which includes net gains on securities,
derivatives and other investments, and a 7% decrease in total expenses,
partially offset by a 10% decrease in revenue.
The following table summarizes the Company's GAAP financial results for
the three months ended March 31, 2012 and 2011, and December 31, 2011.
Summary GAAP Financial Information
(Dollar amounts in millions, except per share information)
Three Months Ended
March 31,
Dec 31,
2012
2011
%
2011
%
Revenues
$
57.5
$
64.2
(10
)%
$
49.5
16
%
Expenses
(76.7
)
(82.2
)
(7
)%
(125.4
)
(39
)%
Other income (loss)
25.6
19.0
35
%
20.6
24
%
Income tax benefit (expense)
(0.1
)
(0.2
)
(50
)%
2.4
NM
Net income (loss) from continuing operations
$
6.2
$
0.9
NM
$
(52.9
)
NM
Net income (loss) from discontinued operations, net of tax
--
--
NM
(23.6
)
NM
Net income (loss) loss attributable to noncontrolling
interests in consolidated subsidiaries
2.2
0.8
NM
3.4
(35
)%
Net income (loss) attributable to Cowen Group, Inc.
$
4.0
$
0.1
NM
$
(79.9
)
NM
Earnings (loss) per share:
Income (loss) from continuing operations
$
0.03
$
0.00
NM
$
(0.49
)
NM
Income (loss) from discontinued operations
$
--
$
--
NM
$
(0.21
)
NM
Note: Amounts may not add due to rounding.
The Company's stockholders' equity as of March 31, 2012, was $517.5
million, or book value per share of $4.54, compared to stockholders'
equity of $508.5 million, or book value per share of $4.46, as of
December 31, 2011. At March 31, 2012, the Company's tangible book value
per share was $4.32 compared to $4.23 at December 31, 2011.
Select Balance Sheet Data
(Dollar amounts in millions, except per share information)
March 31,
December 31,
2012
2011
Stockholders' equity
$
517.5
$
508.5
Tangible stockholders' equity
$
492.2
$
482.7
Common shares outstanding
114.0
114.0
Book value per share
$
4.54
$
4.46
Tangible book value per share
$
4.32
$
4.23
Economic Income (Loss)
Throughout the remainder of this press release the Company presents
Economic Income financial measures that are not prepared in accordance
with Generally Accepted Accounting Principals ("GAAP"). In general,
Economic Income (Loss) is a pre-tax measure that (i) eliminates the
impact of consolidation for consolidated funds, (ii) excludes equity
award expense related to the November 2009 Ramius/Cowen transaction,
(iii) excludes certain other acquisition-related and/or reorganization
expenses, and (iv) excludes goodwill impairment. In addition, Economic
Income (Loss) revenues include investment income that represents the
income the Company has earned in investing its own capital, including
realized and unrealized gains and losses, interest and dividends, net of
associated investment related expenses. For US GAAP purposes, these
items are included in each of their respective line items. Economic
Income revenues also include management fees, incentive income and
investment income earned through the Company's investment as a general
partner in certain real estate entities and the Company's investment in
the Value and Opportunity business. For US GAAP purposes, all of these
items are recorded in other income (loss). In addition, Economic Income
(Loss) expenses are reduced by reimbursement from affiliates, which for
US GAAP purposes is presented gross as part of revenue.
For a more complete description of Economic Income (Loss) and a
reconciliation of GAAP net income (loss) to Economic Income (Loss) for
the periods presented and additional information regarding the
reconciling adjustments, please see the "Non-GAAP Financial Measures"
section of this press release.
The table below summarizes the Company's Economic Income financial
results for the three months ended March 31, 2012 and 2011, and
December 31, 2011.
Summary Economic Income (Loss) Financial Information
(Dollar amounts in millions, except per share
information)
Three Months Ended
March 31,
Dec 31,
2012
2011
%
2011
%
Revenues
$
79.2
$
79.7
(1
)%
$
70.2
13
%
Expenses
(73.0
)
(72.3
)
1
%
(100.1
)
(27
)%
Net Economic Income (Loss) before non-
controlling interests
6.2
7.4
(16
)%
(29.9
)
NM
Economic Income (Loss)
$
5.9
$
7.0
(16
)%
$
(33.2
)
NM
Economic Income (Loss) per share
$
0.05
$
0.09
(44
)%
(0.29
)
NM
Economic Income (Loss) excluding certain
non-cash items
$
12.6
$
12.2
3
%
$
(26.2
)
NM
Note: Amounts may not add due to rounding.
2012 First Quarter Economic Income Review
Total Economic Income Revenue
Total Economic Income revenue for the first quarter 2012 was $79.2
million, a 1% decrease compared to $79.7 million in the first quarter
2011. The decrease in Economic Income revenue was primarily the result
of a decrease in brokerage revenue and incentive income, partially
offset by an increase in investment income and investment banking fees.
Economic Income Revenue
Three Months Ended
March 31,
Dec 31,
(Dollar amounts in millions)
2012
2011
%
2011
%
Investment banking
$
15.6
$
14.7
6
%
$
11.1
41
%
Brokerage
24.0
27.6
(13
)%
21.0
14
%
Management fees
14.0
14.0
0
%
19.2
(27
)%
Incentive income
4.0
5.2
(23
)%
0.1
NM
Investment income
21.1
17.2
23
%
18.5
14
%
Other revenue
0.4
1.1
(64
)%
0.2
NM
Total Revenues
$
79.2
$
79.7
(1
)%
$
70.2
13
%
Note: Amounts may not add due to rounding.
Compensation and Benefits Expense
First quarter 2012 compensation and benefits expense was $45.9 million,
a 7% increase compared to $42.7 million in the first quarter 2011. The
change was primarily attributable to an increase in the amortization of
deferred compensation and investments in new professionals offset by a
decrease in severance expense. Average headcount in the first quarter
2012 increased by 6% compared to the prior year period, but decreased by
4% compared to fourth quarter 2011. Total headcount at the end of the
first quarter was 572.
The compensation to Economic Income revenue ratio increased to 58% in
the current quarter from 54% in the prior year period. Compensation and
benefits expense for the first quarter 2012 and 2011 included $4.5
million and $3.2 million, respectively, in share-based compensation
expense. Compensation and benefits expense excludes equity award expense
related to the 2009 Cowen / Ramius business combination of $1.4 million
and $3.9 million in the first quarter 2012 and 2011, respectively.
Compensation and benefits expense was 56% of Economic Income revenue in
the first quarter 2012, excluding $1.3 million of expenses associated
with activities for which the Company is reimbursed and $0.6 million of
severance expense. Excluding these same two items, compensation and
benefits expense was 50% and 78% of Economic Income revenue in the prior
year period and fourth quarter 2011, respectively.
Fixed Non-Compensation Expenses
Fixed non-compensation expenses in the current quarter decreased by 2%
to $21.2 million as compared to $21.6 million in the comparable prior
year quarter. The decrease was primarily related to a decrease in
service fees and occupancy and equipment expenses related to cost
cutting efforts made in 2011 to reduce excess services and space. This
decrease was partially offset by an increase in other costs relating to
the real estate business and the Value and Opportunity business
(subsequent to the spin off in the second quarter of 2011).
Variable Non-Compensation Expenses
Variable non-compensation expenses were $6.9 million in the first
quarter 2012, down 23% compared to $8.9 million in the first quarter
2011. The decrease was primarily due to syndication costs related to a
capital raise by an alternative investment asset fund in the first
quarter of 2011 and decreased conference related expenses.
Alternative Investment Segment ("Ramius")
Assets Under Management
As of April 1, 2012, the Company had assets under management of $10.2
billion, a 1% decrease compared to assets under management of $10.3
billion as of January 1, 2012. The $109 million decrease in assets under
management during the first quarter of 2012 included $292 million in net
redemptions, partially offset by $183 million of net positive
performance.
The decrease in assets under management was primarily due to redemptions
in our lower fee paying cash management and alternative solutions
advisory businesses. These redemptions were partially offset by asset
growth in our single strategy hedge fund products.
Management Fees
Management fees were $14.0 million in the first quarter 2012, flat
compared to the first quarter 2011. There was a decline in management
fees attributable to our healthcare royalty funds and our two
discontinued multi-strategy hedge funds. The decrease in healthcare
royalty management fees in the current year is due to an increase in
committed capital, in the prior year quarter, that resulted in
recognizing cumulative retrospective management fees. These decreases
were offset by an increase in management fees relating to our Ramius
Trading Strategies funds and our single strategy hedge fund products.
The average annualized management fee charged in the first quarter 2012
was 0.55%, as compared to 0.71% in the 2011 fourth quarter and 0.61% in
the prior year period.
Incentive Income
Incentive income decreased to $4.0 million in the first quarter 2012
from $5.2 million in the comparable prior year period. The decrease in
incentive income was primarily related to a decrease in incentive fees
earned on our real estate funds and single strategy hedge fund products
of $0.7 million and $0.4 million, respectively.
Investment Income
Investment income represents net revenues generated on our invested
capital and includes interest and dividend income received or accrued as
well as realized and unrealized gains/losses recognized during the
period. Investment income increased by $3.9 million to $21.1 million in
the first quarter 2012 from $17.2 million in the prior year period. The
increase in investment income was primarily related to our investment in
the Value and Opportunity fund.
Broker-Dealer Segment ("Cowen and Company")
Brokerage
Brokerage revenue was $24.0 million in the first quarter 2012, a
decrease of 13% compared to $27.6 million in the first quarter 2011 due
to decreases in the Company's core cash equity business.
On April 5, Cowen completed its previously-announced acquisition of
Algorithmic Trading Management, LLC ("ATM") , a provider of global,
multi-asset class algorithmic execution trading models. The acquisition
of ATM, which positions Cowen to offer algorithmic trading execution
services and direct market access, is expected to increase the Company's
revenue footprint with institutional clients.
Investment Banking
Investment banking revenue was $15.6 million in the first quarter 2012,
an increase of $0.9 million, or 6%, compared to $14.7 million in the
first quarter 2011. The increase in revenues was primarily due to an
increase in public equity underwriting.
Public equity underwriting revenue was $11.9 million from sixteen
transactions in the first quarter 2012, as compared to $11.3 million
from twelve transactions in the comparable prior year period. Of these
transactions, the Company completed six lead managed assignments in
the first quarter 2012, compared to three in the prior year period.
Strategic advisory revenue was $1.5 million in the first quarter 2012,
as compared to $0.9 million in the first quarter 2011. The Company
completed one strategic advisory transaction in first quarter 2012 as
compared to two strategic advisory transactions in the prior year
period.
Private placement and registered direct revenue was $0.9 million in
both the first quarter 2012 and the first quarter 2011. The Company
completed one private transaction in each of the respective periods.
Debt capital markets revenue was $1.3 million in the first quarter
2012, as compared to $1.5 million in the first quarter 2011. The
Company completed two debt capital markets transactions in the current
quarter compared to one transaction in the prior year period.
Earnings Conference Call with Management
The Company will host a conference call to discuss its 2012 first
quarter financial results on Friday, May 4, 2012, at 9:00 am EST. The
call can be accessed by dialing 1-866-730-5766 domestic or
1-857-350-1590 international. The passcode for the call is 66763619. A
replay of the call will be available beginning at 11:00 am EST May 4,
2012 through May 11, 2012. To listen to the replay of this call, please
dial 1-888-286-8010 domestic or 1-617-801-6888 international and enter
passcode 67607269. The call can also be accessed through live audio
webcast or by delayed replay on the Company's website at www.cowen.com.
About Cowen Group, Inc.
Cowen Group, Inc. is a diversified financial services firm and, together
with its consolidated subsidiaries, provides alternative investment,
investment banking, research, and sales and trading services through its
two business segments: Ramius and its affiliates makes up the Company's
alternative investment segment, while Cowen and Company is its
broker-dealer segment. Its alternative investment products, solutions
and services include hedge funds, replication products, managed futures
funds, funds of funds, real estate, health care royalty funds and cash
management services. Cowen and Company offers industry focused
investment banking for growth-oriented companies, domain
knowledge-driven research and a sales and trading platform for
institutional investors. Founded in 1918, the firm is headquartered in
New York and has offices located in major financial centers around the
world.
This press release contains forward-looking statements. Forward-looking
statements provide the Company's current expectations or forecasts of
future events. Forward-looking statements include statements about the
Company's expectations, beliefs, plans, objectives, intentions,
assumptions and other statements that are not historical facts.
Forward-looking statements are subject to known and unknown risks and
uncertainties and are based on potentially inaccurate assumptions that
could cause actual results to differ materially from those expected or
implied by the forward-looking statements. The Company's actual results
could differ materially from those anticipated in forward-looking
statements for many reasons, including the factors described in the
section entitled "Risk Factors" in the Company's Annual Report on
Form 10-K and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q, as filed with the
Securities and Exchange Commission. The Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q are available at our website at www.cowen.com
and at the Securities and Exchange Commission website at www.sec.gov.
Unless required by law, the Company undertakes no obligation to publicly
update or revise any forward-looking statement to reflect circumstances
or events after the date of this press release.
Cowen Group, Inc.
Preliminary Unaudited Condensed Consolidated Statements of
Operations
(Dollar amounts in thousands, except per share data)
Three Months Ended
March 31,
2012
2011
Revenues
Investment banking
$
15,630
$
14,682
Brokerage
24,013
27,591
Management fees
9,717
11,164
Incentive income
691
4,381
Interest and dividends
5,372
4,559
Reimbursement from affiliates
1,045
1,009
Other
867
690
Consolidated Funds
Interest and dividends
61
169
Other
84
--
Total revenues
57,480
64,245
Expenses
Employee compensation and benefits
46,683
45,087
Floor brokerage and trade execution
3,752
4,110
Interest and dividends
1,724
2,609
Professional, advisory and other fees
3,925
7,140
Service fees
2,237
3,612
Communications
3,401
2,893
Occupancy and equipment
5,242
5,707
Depreciation and amortization
2,155
2,058
Client services and business development
3,826
4,677
Other
3,419
3,710
Consolidated Funds
Interest and dividends
16
46
Professional, advisory and other fees
288
460
Floor brokerage and trade execution
--
--
Other
71
122
Total expenses
76,739
82,231
Other income (loss)
Net (losses) gains on securities, derivatives and other investments
19,671
17,283
Consolidated Funds net (losses) gains:
Net realized and unrealized (losses) gains on investments and other
transactions
5,964
2,343
Net realized and unrealized (losses) gains on derivatives
40
(441
)
Net (losses) gains on foreign currency transactions
(38
)
(156
)
Total other income (loss)
25,637
19,029
Income (loss) before income taxes
6,378
1,043
Income tax (benefit) expense
142
163
Net income (loss)
6,236
880
Net (income) loss attributable to noncontrolling interests in
consolidated subsidiaries
2,241
798
Net income (loss) attributable to Cowen Group, Inc. stockholders
$
3,995
$
82
Earnings (loss) per share:
Basic
$
0.03
$
0.00
Diluted
$
0.03
$
0.00
Weighted average shares used in per share data:
Basic
114,281
74,160
Diluted
115,663
76,083
Non-GAAP Financial Measures
In addition to the results presented above in accordance with generally
accepted accounting principles, or GAAP, the Company presents financial
measures that are non-GAAP measures, such as Economic Income (Loss) and
Economic Income (Loss) excluding certain non-cash items. The Company
believes that these non-GAAP measures, viewed in addition to, and not in
lieu of, the Company's reported GAAP results, provide useful information
to investors regarding its performance and overall results of
operations. These metrics are an integral part of the Company's internal
reporting to measure the performance of its businesses and the overall
effectiveness of senior management. Reconciliations to comparable GAAP
measures are available in the accompanying schedules. The non-GAAP
measures presented herein may not be comparable to similarly titled
measures presented by other public companies, and are not identical to
corresponding measures used in our various agreements or public filings.
Economic Income (Loss)
Economic Income (Loss) may not be comparable to similarly titled
measures used by other public companies. Cowen uses Economic Income
(Loss) as a measure of its operating performance, not as a measure of
liquidity. Economic Income (Loss) should not be considered in isolation
or as a substitute for operating income, net income, operating cash
flows, investing and financing activities, or other income or cash flow
statement data prepared in accordance with GAAP. As a result of the
adjustments made to arrive at Economic Income (Loss) described below,
Economic Income (Loss) has limitations in that it does not take into
account certain items included or excluded under GAAP, including its
consolidated funds. Economic Income (Loss) is considered by management
as a supplemental measure to the GAAP results to provide a more complete
understanding of its performance as management measures it.
The primary differences between GAAP net income (loss) and Economic
Income (Loss) are that in reporting Economic Income (Loss), the Company:
(i) eliminates the impact of consolidation for any of our funds;
(ii) excludes equity award expense related to the November 2009
Ramius/Cowen transaction; (iii) excludes certain other
acquisition-related and/or reorganization expenses (including the
discontinued operations of LaBranche); and (iv) excludes goodwill
impairment. In addition, in presenting Economic Income (Loss), the
Company reclassifies aggregate investment income to Revenues. This
amount represents the income the Company has earned in investing its
equity capital, including realized and unrealized gains and losses,
interest and dividends, net of associated investment related expenses.
For GAAP purposes, these items are included in each of their respective
line items. Economic Income revenues also include management fees,
incentive income and investment income earned through the Company's
investment as a general partner in certain real estate entities. For
GAAP purposes, all of these items are recorded in other income (loss).
In addition, Economic Income expenses are reduced by reimbursement from
affiliates, whereas for GAAP purposes such reimbursed expenses are shown
as part of revenue.
Additionally, we have reported in this press release our Economic Income
(Loss) excluding certain non-cash expenses. For this measure, we have
adjusted Economic Income (Loss) by the following non-cash expense items:
Depreciation and amortization, and
Share-based compensation expense.
Management believes that the non-GAAP calculation of Economic Income
(Loss) excluding certain non-cash items will allow for a better
understanding of the Company's operating results.
Cowen Group, Inc.
Unaudited Economic Income (Loss)
(Dollar amounts in thousands)
Three Months Ended
March 31,
2012
2011
Revenues
Investment banking
$
15,630
$
14,682
Brokerage
24,013
27,591
Management fees
14,020
14,047
Incentive income
4,022
5,163
Investment income
21,105
17,209
Other revenue
384
1,054
Total revenues
79,174
79,746
Expenses
Employee compensation and benefits
45,909
42,737
Interest and dividends
88
217
Fixed non-compensation expenses
21,243
21,587
Variable non-compensation expenses
6,875
8,948
Reimbursement from affiliates
(1,116
)
(1,169
)
Total expenses
72,999
72,320
Net Economic Income (Loss) before non-controlling
Interests
6,175
7,426
Non-controlling interests
(300
)
(475
)
Economic Income (Loss)
$
5,875
$
6,951
Economic Income (Loss) Excluding Certain Non-cash Items
Economic Income (Loss)
$
5,875
$
6,951
Exclusion of depreciation and amortization expense
2,155
2,058
Exclusion of share-based compensation expense
4,548
3,238
Economic Income (Loss) Excluding Certain Non-cash Items
$
12,578
$
12,247
Cowen Group, Inc.
Unaudited Reconciliation of Economic Income and GAAP Income for the
Three Months Ended March 31, 2012
(Dollar amounts in thousands)
Three Months Ended March 31, 2012
Adjustments
Other
Funds
Economic
GAAP
Adjustments
Consolidation
Income
Revenues
Investment banking
$
15,630
$
--
$
--
$
15,630
Brokerage
24,013
--
--
24,013
Management fees
9,717
3,910
(a)
393
14,020
Incentive income
691
3,331
(a)
--
4,022
Investment income
--
21,105
(c)
--
21,105
Interest and dividends
5,372
(5,372
) (c)
--
--
Reimbursement from affiliates
1,045
(1,116
) (b)
71
--
Other revenue
867
(483
) (c)
--
384
Consolidated Funds
145
--
(145
)
--
Total revenues
57,480
21,375
319
79,174
Expenses
Compensation & Benefits
46,683
(774
)
--
45,909
Interest and dividends
1,724
(1,636
) (c)
--
88
Non-compensation expenses - Fixed
--
21,243
(c)(d)
--
21,243
Non-compensation expenses - Variable
--
6,875
(c)(d)
--
6,875
Non-compensation expenses
27,957
(27,957
) (c)(d)
--
--
Reimbursement from affiliates
--
(1,116
) (b)
--
(1,116
)
Consolidated Funds
375
--
(375
)
--
Total expenses
76,739
(3,365
)
(375
)
72,999
--
--
Other income (loss)
Net gains (losses) on securities, derivatives and other
investments
19,671
(19,671
) (c)
--
--
Consolidated Funds net gains (losses)
5,966
(3,325
)
(2,641
)
--
Total other income (loss)
25,637
(22,996
)
(2,641
)
--
Income (loss) before income taxes and non-controlling interests
6,378
1,744
(1,947
)
6,175
Income taxes (Benefit)
142
(142
) (b)
--
--
Economic Income (Loss) / Net income (loss) before
non-controlling interests
6,236
1,886
(1,947
)
6,175
(Income) loss attributable to non-controlling interests in
consolidated subsidiaries
(2,241
)
(6
)
1,947
(300
)
Economic Income (Loss) / Net income (loss) available to Cowen
Group, Inc. Stockholders
$
3,995
$
1,880
$
--
$
5,875
Note: The following is a summary of the adjustments made to US GAAP
net income (loss) to arrive at Economic Income:
Funds Consolidation: The impacts of consolidation and the related
elimination entries of the Consolidated Funds are not included in
Economic Income. Adjustments include elimination of incentive income
and management fees earned from the Consolidated Funds and addition
of fund expenses excluding management fees paid, fund revenues and
investment income (loss).
Other Adjustments:
(a) Economic Income recognizes revenues (i) net of distribution fees
paid to agents and (ii) our proportionate share of management and
incentive fees of certain real estate operating entities and
activist business.
(b) Economic Income excludes income taxes as management does not
consider this item when evaluating the performance of the segment.
Also, reimbursement from affiliates is shown as a reduction of
Economic Income expenses, but is included as a part of revenues
under US GAAP.
(c) Economic Income recognizes Company income from proprietary
trading net of related expenses.
(d) Economic Income recognizes Companies proportionate share of
expenses for certain real estate and other operating entities for
which the investments are recorded under the equity method of
accounting for investments.
Cowen Group, Inc.
Unaudited Reconciliation of Economic Income and GAAP Income for the
Three Months Ended March 31, 2011
(Dollar amounts in thousands)
Three Months Ended March 31, 2011
Adjustments
Other
Funds
Economic
GAAP
Adjustments
Consolidation
Income
Revenues
Investment banking
$
14,682
$
--
$
--
$
14,682
Brokerage
27,591
--
--
27,591
Management fees
11,164
2,369
(a)
514
14,047
Incentive income
4,381
782
(a)
--
5,163
Investment income
--
17,209
(c)
--
17,209
Interest and dividends
4,559
(4,559
)
(c)
--
--
Reimbursement from affiliates
1,009
(1,168
)
(b)
159
--
Other revenue
690
364
(c)
--
1,054
Consolidated Funds
169
--
(169
)
--
Total revenues
64,245
14,997
504
79,746
Expenses
Compensation & Benefits
45,087
(2,350
)
--
42,737
Interest and dividends
2,609
(2,392
)
(c)
--
217
Non-compensation expenses - Fixed
--
21,587
(c)(d)
--
21,587
Non-compensation expenses - Variable
--
8,948
(c)(d)
--
8,948
Non-compensation expenses
33,907
(33,907
)
(c)(d)
--
--
Reimbursement from affiliates
--
(1,169
)
(b)
--
(1,169
)
Consolidated Funds
628
--
(628
)
--
Total expenses
82,231
(9,283
)
(628
)
72,320
Other income (loss)
Net gains (losses) on securities, derivatives and other investments
17,283
(17,283
)
(c)
--
--
Consolidated Funds net gains (losses)
1,746
(291
)
(1,455
)
--
Total other income (loss)
19,029
(17,574
)
(1,455
)
--
Income (loss) before income taxes and non-controlling interests
1,043
6,706
(323
)
7,426
Income taxes (Benefit)
163
(163
)
(b)
--
--
Economic Income (Loss) / Net income (loss) before non-controlling
interests
880
6,869
(323
)
7,426
(Income) loss attributable to non-controlling interests in
consolidated subsidiaries
(798
)
--
323
(475
)
Economic Income (Loss) / Net income (loss) available to Cowen
Group, Inc. Stockholders
$
82
$
6,869
$
--
$
6,951
Note: The following is a summary of the adjustments made to US GAAP
net income (loss) to arrive at Economic Income:
Funds Consolidation: The impacts of consolidation and the related
elimination entries of the Consolidated Funds are not included in
Economic Income. Adjustments include elimination of incentive income
and management fees earned from the Consolidated Funds and addition
of fund expenses excluding management fees paid, fund revenues and
investment income (loss).
Other Adjustments:
(a) Economic Income recognizes revenues (i) net of distribution fees
paid to agents and (ii) our proportionate share of management and
incentive fees of certain real estate operating entities.
(b) Economic Income excludes goodwill impairment and income taxes as
management does not consider this item when evaluating the
performance of the segment. Also, reimbursement from affiliates is
shown as a reduction of Economic Income expenses, but is included as
a part of revenues under US GAAP.
(c) Economic Income recognizes Company income from proprietary
trading net of related expenses.
(d) Economic Income recognizes Companies proportionate share of
expenses for certain real estate and other operating entities for
which the investments are recorded under the equity method of
accounting for investments.
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