Cowen Group, Inc. Announces 2014 Second Quarter Financial Results
2014 Second Quarter and Six Month Highlights(1)
-
Economic income was
$8.5 million in the second quarter 2014, a$7.0 million increase over the prior year period of$1.5 million . For the six months endedJune 30, 2014 , economic income was$18.5 million versus$0.2 million in the prior year period. -
Revenue for the second quarter and six months ended
June 30, 2014 was$111.5 million and$222.3 million , respectively. This compares to revenue of$81.1 million and$156.0 million for second quarter and six months endedJune 30, 2013 , respectively. -
Broker-dealer segment revenue reflected year over year growth in both
the investment banking and brokerage businesses. Second quarter 2014
revenue was
$70.4 million , a 20% increase over the prior year period of$58.8 million . Revenue for the six months endedJune 30, 2014 was$154.0 million , a$48.1 million improvement from the year ago period of$106.0 million .(2) -
Assets under management ("AUM") grew
$1.1 billion in the second quarter and$2.2 billion in the first half of 2014. As of July 1, 2014 AUM was$11.6 billion . -
Fixed non compensation expenses were
$23.5 million in the second quarter 2014, compared to$22.4 million in the prior year period. For the first six months of 2014, fixed non compensation expenses were$46.4 million versus$44.8 million in the year ago period. The increase in both the quarter and six month period is primarily attributed to higher professional fees related to the debt issuance in the first quarter of 2014. -
On
August 6 , Cowen's Board of Directors approved an$11.3 million increase in the Company's share repurchase program. With this increase, the total amount available for repurchase under the program is$25 million .
_________________________________________________________________________________________________
(1) All financial highlights are presented on an Economic Income basis.
(2) Includes broker-dealer segment's allocation of Investment Income (Loss) and Other Revenue.
2014 Second Quarter GAAP Financial Information and Select Balance Sheet Data
For the second quarter 2014, the Company reported GAAP net income of
The following table summarizes the Company’s GAAP financial results for
the three months ended June 30, 2014 and 2013, and March 31, 2014, as
well as the six months ended
Summary GAAP Financial Information |
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(Dollar amounts in millions, except per share information) |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
June 30, |
Mar. 31, |
June 30, | ||||||||||||||||||||||||||||||||
2014 | 2013 | % | 2014 | % |
2014 |
2013 |
% |
|||||||||||||||||||||||||||
Revenues | $ | 92.9 | $ | 81.2 | 14 | % | $ | 106.7 |
(13) |
% |
$ | 199.6 | $ | 148.4 | 34 | % | ||||||||||||||||||
Expenses | 107.9 | 86.6 | 25 | % | 106.0 | 2 | % | 213.9 | 169.7 | 26 | % | |||||||||||||||||||||||
Other income (loss) | 28.6 | 8.9 | 221 | % | 13.5 | 113 | % | 42.1 | 25.9 | 63 | % | |||||||||||||||||||||||
Income tax (benefit) expense | — | 0.2 |
(71) |
% |
0.1 |
(42) |
% |
|
0.1 |
0.3 |
(63) |
% |
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Net income (loss) | $ | 13.6 | $ | 3.3 | NM | $ | 14.0 |
(3) |
% |
$ | 27.6 | $ | 4.3 | NM | ||||||||||||||||||||
Net income (loss) attributable to |
5.2 | 2.3 | 131 | % | 4.2 | 25 | % | 9.4 | 5.8 | 64 | % | |||||||||||||||||||||||
Net income (loss) attributable to Cowen |
$ | 8.4 | $ | 1.1 | NM | $ | 9.8 |
(15) |
% |
$ | 18.2 | $ | (1.5 | ) | NM | |||||||||||||||||||
Earnings (loss) per share (basic): |
$0.07 | $0.01 | NM | $0.09 | NM | $ | 0.16 | $ | (0.01 | ) | NM | |||||||||||||||||||||||
Note: Amounts may not add due to rounding. |
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The Company’s stockholders’ equity as of June 30, 2014, was
At June 30, 2014, the Company’s tangible book value per share was
Select Balance Sheet Data |
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(Dollar amounts in millions, except per share information) | June 30, | March 31, | June 30, | |||||||||
2014 | 2014 | 2013 | ||||||||||
Stockholders' equity | $ | 535.0 | $ | 532.2 | $ | 506.1 | ||||||
Tangible stockholders' equity | $ | 487.2 | 483.6 | 456.0 | ||||||||
Common shares outstanding | 115.0 | 115.4 | 117.9 | |||||||||
Book value per share | $ | 4.65 | $ | 4.61 | $ | 4.29 | ||||||
Tangible book value per share | $ | 4.24 | $ | 4.19 | $ | 3.87 | ||||||
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 Principles (“GAAP”). In general, Economic Income (Loss) is a pre-tax measure that (i) eliminates the impact of consolidation for consolidated funds and (ii) excludes certain other acquisition-related and/or reorganization expenses. 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 (Loss) 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 activist 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 June 30, 2014 and 2013, and March 31, 2014.
Summary Economic Income (Loss) Financial Information |
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(Dollar amounts in millions, except per share information) |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||
June 30, | Mar. 31, | June 30, | ||||||||||||||||||||||||||
2014 | 2013 | % | 2014 | % | 2014 | 2013 | % | |||||||||||||||||||||
Revenues | $ | 111.5 | $ | 81.1 | 38% | $ | 110.8 | 1% | $ | 222.3 | $ | 156.0 | 43 | % | ||||||||||||||
Expenses | 99.2 | 78.0 | 27% | 98.1 | 1% | 197.3 | 151.7 | 30 | % | |||||||||||||||||||
Net Economic Income (Loss) before non-controlling interests |
12.3 | 3.1 | NM | 12.6 | (2)% | 25.0 | 4.3 | NM | ||||||||||||||||||||
Economic Income (Loss) | $ | 8.5 | $ | 1.5 | NM | $ | 10.0 | (15)% | $ | 18.5 | $ | 0.2 | NM | |||||||||||||||
Economic Income (Loss) per share |
$ | 0.07 | $ | 0.01 | NM | $ | 0.09 | NM | $ | 0.16 | $ | — | NM | |||||||||||||||
Economic Income (Loss) excluding certain non-cash items |
$ | 16.6 | $ | 8.8 | 88% | $ | 17.2 | (4)% | $ | 33.8 | $ | 14.8 | 128 | % | ||||||||||||||
Note: Amounts may not add due to rounding. |
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2014 Second Quarter Economic Income Review
Total Economic Income Revenue
Total Economic Income Revenue for the second quarter 2014 was
Economic Income Revenue |
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Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
June 30, | Mar. 31, | June 30, | ||||||||||||||||||||||||||
(Dollar amounts in millions) | 2014 | 2013 | % | 2014 | % | 2014 | 2013 | % | ||||||||||||||||||||
Investment banking | $ | 30.3 | $ | 25.6 | 18% | $ | 49.6 | (39)% | $ | 79.9 | 42.7 | 87 | % | |||||||||||||||
Brokerage | 35.1 | 33.3 | 5% | 34.3 | 2% | 69.4 | 61.3 | 13 | % | |||||||||||||||||||
Management fees | 16.2 | 14.6 | 11% | 14.1 | 15% | 30.3 | 28.8 | 5 | % | |||||||||||||||||||
Incentive income | 8.2 | 3.8 | 118% | 4.7 | 73% | 12.9 | 8.9 | 45 | % | |||||||||||||||||||
Investment income | 21.6 | 3.6 | 506% | 8.2 | 164% | 29.8 | 14.4 | 106 | % | |||||||||||||||||||
Other revenue | 0.2 | 0.3 | NM | (0.1 | ) | NM | 0.1 | (0.2 | ) | NM | ||||||||||||||||||
Total Revenues | $ | 111.5 | $ | 81.1 | 38% | $ | 110.8 | 1% | $ | 222.3 | $ | 156.0 | 43 | % | ||||||||||||||
Note: Amounts may not add due to rounding. |
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|
Compensation and Benefits Expense
Second quarter 2014 compensation and benefits expense was
The compensation to Economic Income revenue ratio was 57% in the current
quarter compared to 58% in the prior year period. Compensation and
benefits expense for the second quarter 2014 and 2013 included
Excluding
Fixed Non-Compensation Expenses
Fixed non-compensation expenses in the current quarter increased 5% to
Variable Non-Compensation Expenses
Variable non-compensation expenses were
Interest Expense
Interest expense was
Non-Controlling Interest
Non-Controlling interest represents the portion of the net income or loss attributable to certain non-wholly owned subsidiaries that is allocated to other investors. The period over period increase was the result of an extension of the partnership agreement relating to our alternative solutions business which resulted in a profit split and therefore more allocations of income to non-controlling interest holders.
Alternative Investment Segment (“Ramius”)
Assets Under Management
As of July 1, 2014, the Company had assets under management of
Management Fees and Incentive Income
For the second quarter 2014, management fees were
The average annualized management fee charged in the second quarter 2014 was 0.59%, unchanged from the first quarter, and 0.65% in the prior year period. The difference is related to undrawn committed capital in certain strategies that operate with private equity structures where fees are not yet generated as well as increases in certain large mandates with tiered management fee schedules.
Incentive income was
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. Year over year investment income increased by
Broker-Dealer Segment (“Cowen and Company”)
Brokerage
Brokerage revenue was
Investment Banking
Investment banking revenue was
-
Equity underwriting revenue was
$29.9 million from 32 transactions in the second quarter 2014, as compared to$16.2 million from 17 transactions in the comparable prior year period. Of these transactions, the Company completed nine bookrun assignments in both the second quarter 2014, and the prior year period.
-
Debt capital markets revenue was nil in the second quarter 2014, as
compared to
$6.8 million from the completion of five transactions in the prior year period. -
Strategic advisory revenue was
$0.4 million in the second quarter 2014, as compared to$2.6 million in the second quarter 2013. The Company did not complete any strategic advisory transactions in the second quarter 2014 as compared to three strategic advisory transactions in the prior year period.
Share Repurchase Program
Cowen today announced that its Board of Directors approved an increase
to the Company's share repurchase program that authorizes Cowen to
purchase up to an additional
The
The program permits the Company to purchase shares from time to time
through a variety of methods, including in the open market or through
privately negotiated transactions, in accordance with applicable
securities laws. It does not obligate the Company to make any purchases
at any specific time or situation. The program may be suspended or
discontinued at any time. As of
In the second quarter 2014, the Company repurchased a total of 2.0 million shares under the program.
Earnings Conference Call with Management
The Company will host a conference call to discuss its 2014 second
quarter financial results on Thursday, August 7, 2014, at
The call can also be accessed through live audio webcast or by delayed replay on the Company’s website at www.cowen.com.
About
Cautionary Note Regarding Forward-Looking Statements
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
Cowen Group, Inc. | |||||||||||||||||
Preliminary Unaudited Condensed Consolidated Statements of Operations | |||||||||||||||||
(Dollar amounts in thousands, except per share data) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Revenues |
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Investment banking |
$ | 30,292 | $ | 25,571 | $ | 79,854 | $ | 42,737 | |||||||||
Brokerage |
33,311 | 31,521 | 66,141 | 58,121 | |||||||||||||
Management fees | 9,692 | 9,698 | 18,616 | 19,191 | |||||||||||||
Incentive income | 2,724 | 1,954 | 5,222 | 4,565 | |||||||||||||
Interest and dividends | 12,460 | 10,521 | 21,712 | 19,842 | |||||||||||||
Reimbursement from affiliates | 3,018 | 1,214 | 4,918 | 2,699 | |||||||||||||
Other | 752 | 485 | 1,307 | 963 | |||||||||||||
Consolidated Funds |
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Interest and dividends | 655 | 241 | 1,141 | 253 | |||||||||||||
Other | (2 | ) | 2 | 668 | 77 | ||||||||||||
Total revenues | 92,902 | 81,207 | 199,579 | 148,448 | |||||||||||||
Expenses | |||||||||||||||||
Employee compensation and benefits | 64,404 | 47,507 | 131,965 | 91,730 | |||||||||||||
Floor brokerage and trade execution | 5,858 | 6,320 | 11,513 | 12,173 | |||||||||||||
Interest and dividends | 10,193 | 7,489 | 17,265 | 14,109 | |||||||||||||
Professional, advisory and other fees | 4,374 | 3,002 | 7,975 | 6,855 | |||||||||||||
Service fees | 2,086 | 2,687 | 4,228 | 5,264 | |||||||||||||
Communications | 3,022 | 2,771 | 6,268 | 6,510 | |||||||||||||
Occupancy and equipment | 6,324 | 6,548 | 12,721 | 12,267 | |||||||||||||
Depreciation and amortization | 2,382 | 2,609 | 4,762 | 5,162 | |||||||||||||
Client services and business development | 5,635 | 4,659 | 10,149 | 8,758 | |||||||||||||
Other | 3,228 | 2,535 | 6,386 | 5,977 | |||||||||||||
Consolidated Funds | |||||||||||||||||
Interest and dividends | 189 | 106 | 299 | 106 | |||||||||||||
Professional, advisory and other fees | 140 | 92 | 274 | 488 | |||||||||||||
Floor brokerage and trade execution | 4 | 180 | 6 | 180 | |||||||||||||
Other | 65 | 107 | 121 | 145 | |||||||||||||
Total expenses |
107,904 | 86,612 | 213,932 | 169,724 | |||||||||||||
Other income (loss) | |||||||||||||||||
Net (losses) gains on securities, derivatives and other investments | 23,037 | 4,994 | 34,391 | 16,801 | |||||||||||||
Consolidated Funds net (losses) gains: | |||||||||||||||||
Net realized and unrealized (losses) gains on investments and other transactions | 5,778 | 3,711 | 7,942 | 8,781 | |||||||||||||
Net realized and unrealized (losses) gains on derivatives | (190 | ) | 158 | (211 | ) | 462 | |||||||||||
Net (losses) gains on foreign currency transactions | 21 | 48 | (19 | ) | (167 | ) | |||||||||||
Total other income (loss) | 28,646 | 8,911 | 42,103 | 25,877 | |||||||||||||
Income (loss) before income taxes | 13,644 | 3,506 | 27,750 | 4,601 | |||||||||||||
Income tax (benefit) expense | 46 | 158 | 125 | 334 | |||||||||||||
Net income (loss) | 13,598 | 3,348 | 27,625 | 4,267 | |||||||||||||
Net income (loss) attributable to noncontrolling interests in consolidated subsidiaries | 5,216 | 2,255 | 9,403 | 5,750 | |||||||||||||
Net income (loss) attributable to Cowen Group, Inc. stockholders | $ | 8,382 | $ | 1,093 | $ | 18,222 | $ | (1,483 | ) | ||||||||
Earnings (loss) per share: | |||||||||||||||||
Basic | $ | 0.07 | $ | 0.01 | $ | 0.16 | $ | (0.01 | ) | ||||||||
Diluted | $ | 0.07 | $ | 0.01 | $ | 0.15 | $ | (0.01 | ) | ||||||||
Weighted average shares used in per share data: | |||||||||||||||||
Basic | 115,569 | 117,235 | 115,626 | 115,471 | |||||||||||||
Diluted | 120,199 | 120,901 | 120,635 | 115,471 | |||||||||||||
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.
In general, Economic Income (Loss) is a pre-tax measure that (i) eliminates the impact of consolidation for consolidated funds and (ii) excludes certain other acquisition-related and/or reorganization expenses. 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 (Loss) 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 activist 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.
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 | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Revenues | |||||||||||||||||
Investment banking | $ | 30,292 | $ | 25,571 | $ | 79,854 | $ | 42,737 | |||||||||
Brokerage | 35,052 | 33,300 | 69,401 | 61,317 | |||||||||||||
Management fees | 16,166 | 14,606 | 30,255 | 28,750 | |||||||||||||
Incentive income | 8,193 | 3,765 | 12,919 | 8,892 | |||||||||||||
Investment income | 21,596 | 3,563 | 29,770 | 14,436 | |||||||||||||
Other revenue | 242 | 278 | 97 | (163 | ) | ||||||||||||
Total revenues | 111,541 | 81,083 | 222,296 | 155,969 | |||||||||||||
Expenses | |||||||||||||||||
Employee compensation and benefits | 63,632 | 47,026 | 130,589 | 90,860 | |||||||||||||
Fixed non-compensation expenses | 23,544 | 22,356 | 46,359 | 44,760 | |||||||||||||
Variable non-compensation expenses | 11,136 | 9,989 | 20,573 | 18,714 | |||||||||||||
Interest expense | 2,654 | 72 | 3,297 | 196 | |||||||||||||
Reimbursement from affiliates | (1,756 | ) | (1,411 | ) | (3,482 | ) | (2,830 | ) | |||||||||
Total expenses | 99,210 | 78,032 | 197,336 | 151,700 | |||||||||||||
Net Economic Income (Loss) before non-controlling Interests | 12,331 | 3,051 | 24,960 | 4,269 | |||||||||||||
Non-controlling interests | (3,818 | ) | (1,581 | ) | (6,444 | ) | (4,067 | ) | |||||||||
Economic Income (Loss) | $ | 8,513 | $ | 1,470 | $ | 18,516 | $ | 202 | |||||||||
Economic Income (Loss) Excluding Certain Non-cash Items | |||||||||||||||||
Economic Income (Loss) | $ | 8,513 | $ | 1,470 | $ | 18,516 | $ | 202 | |||||||||
Exclusion of depreciation and amortization expense | 2,380 | 2,601 | 4,757 | 5,142 | |||||||||||||
Exclusion of share-based compensation expense | 5,674 | 4,721 | 10,477 | 9,474 | |||||||||||||
Economic Income (Loss) Excluding Certain Non-cash Items | $ | 16,567 | $ | 8,792 | $ | 33,750 | $ | 14,818 |
Cowen Group, Inc. | |||||||||||||||||
Unaudited Reconciliation of Economic Income and GAAP Income for the Three Months Ended June 30, 2014 | |||||||||||||||||
(Dollar amounts in thousands) | |||||||||||||||||
Three Months Ended June 30, 2014 | |||||||||||||||||
Adjustments | |||||||||||||||||
Other | Funds | Economic | |||||||||||||||
GAAP | Adjustments | Consolidation | Income | ||||||||||||||
Revenues | |||||||||||||||||
Investment banking | $ | 30,292 | $ | — | $ | — | $ | 30,292 | |||||||||
Brokerage | 33,311 | 1,741 | (e) | — | 35,052 | ||||||||||||
Management fees | 9,692 | 6,231 | (a) | 243 | 16,166 | ||||||||||||
Incentive income | 2,724 | 5,315 | (a) | 154 | 8,193 | ||||||||||||
Investment income | — | 21,596 | (c) | — | 21,596 | ||||||||||||
Interest and dividends | 12,460 | (12,460) | (c) | — | — | ||||||||||||
Reimbursement from affiliates | 3,018 | (3,102) | (f) | 84 | — | ||||||||||||
Other revenue | 752 | (510) | (c) | — | 242 | ||||||||||||
Consolidated Funds | 653 | — | (653) | — | |||||||||||||
Total revenues | 92,902 | 18,811 | (172) | 111,541 | |||||||||||||
Expenses | |||||||||||||||||
Compensation & Benefits | 64,404 | (772) | — | 63,632 | |||||||||||||
Non-compensation expenses - Fixed | — | 23,544 | (c)(d) | — | 23,544 | ||||||||||||
Non-compensation expenses - Variable | — | 11,136 | (c)(d) | — | 11,136 | ||||||||||||
Non-compensation expenses | 32,909 | (32,909) | (c)(d) | — | — | ||||||||||||
Interest and dividends | 10,193 | (7,539) | (c) | — | 2,654 | ||||||||||||
Reimbursement from affiliates | — | (1,756) | (f) | — | (1,756) | ||||||||||||
Consolidated Funds | 398 | — | (398) | — | |||||||||||||
Total expenses | 107,904 | (8,296) | (398) | 99,210 | |||||||||||||
Other income (loss) | |||||||||||||||||
Net gains (losses) on securities, derivatives and other investments | 23,037 | (23,037) | (c) | — | — | ||||||||||||
Consolidated Funds net gains (losses) | 5,609 | (3,195) | (2,414) | — | |||||||||||||
Total other income (loss) | 28,646 | (26,232) | (2,414) | — | |||||||||||||
Income (loss) before income taxes and non-controlling interests | 13,644 | 875 | (2,188) | 12,331 | |||||||||||||
Income taxes (Benefit) | 46 | (46) | (b) | — | — | ||||||||||||
Economic Income (Loss) / Net income (loss) before non-controlling interests | 13,598 | 921 | (2,188) | 12,331 | |||||||||||||
(Income) loss attributable to non-controlling interests in consolidated subsidiaries | (5,216) | (790) | 2,188 | (3,818) | |||||||||||||
Economic Income (Loss) / Net income (loss) available to Cowen Group, Inc. Stockholders | $ | 8,382 | $ | 131 | $ | — | $ | 8,513 | |||||||||
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. | |||||||||||||||||
(e) Economic Income (Loss) recognizes stock borrow/loan activity and other brokerage dividends as brokerage revenue. | |||||||||||||||||
(f) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. | |||||||||||||||||
Cowen Group, Inc. | ||||||||||||||||||
Unaudited Reconciliation of Economic Income and GAAP Income for the Three Months Ended June 30, 2013 | ||||||||||||||||||
(Dollar amounts in thousands) | ||||||||||||||||||
Three Months Ended June 30, 2013 | ||||||||||||||||||
Adjustments | ||||||||||||||||||
Other | Funds | Economic | ||||||||||||||||
GAAP | Adjustments | Consolidation | Income | |||||||||||||||
Revenues | ||||||||||||||||||
Investment banking | $ | 25,571 | $ | — | $ | — | $ | 25,571 | ||||||||||
Brokerage | 31,521 | 1,779 | (e) | — | 33,300 | |||||||||||||
Management fees | 9,698 | 4,622 | (a) | 286 | 14,606 | |||||||||||||
Incentive income | 1,954 | 1,811 | (a) | — | 3,765 | |||||||||||||
Investment income | — | 3,563 | (c) | — | 3,563 | |||||||||||||
Interest and dividends | 10,521 | (10,521) | (c) | — | — | |||||||||||||
Reimbursement from affiliates | 1,214 | (1,410) | (f) | 196 | — | |||||||||||||
Other revenue | 485 | (207) | (c) | — | 278 | |||||||||||||
Consolidated Funds | 243 | — | (243) | — | ||||||||||||||
Total revenues | 81,207 | (363) | 239 | 81,083 | ||||||||||||||
Expenses | ||||||||||||||||||
Compensation & Benefits | 47,507 | (481) | — | 47,026 | ||||||||||||||
Non-compensation expenses - Fixed | — | 22,356 | (c)(d) | — | 22,356 | |||||||||||||
Non-compensation expenses - Variable | — | 9,989 | (c)(d) | — | 9,989 | |||||||||||||
Non-compensation expenses | 31,131 | (31,131) | (c)(d) | — | — | |||||||||||||
Interest and dividends | 7,489 | (7,417) | — | 72 | ||||||||||||||
Reimbursement from affiliates | — | (1,411) | (f) | — | (1,411) | |||||||||||||
Consolidated Funds | 485 | — | (485) | — | ||||||||||||||
Total expenses | 86,612 | (8,095) | (485) | 78,032 | ||||||||||||||
Other income (loss) | ||||||||||||||||||
Net gains (losses) on securities, derivatives and other investments | 4,994 | (4,994) | (c) | — | — | |||||||||||||
Consolidated Funds net gains (losses) | 3,917 | (2,539) | (1,378) | — | ||||||||||||||
Total other income (loss) | 8,911 | (7,533) | (1,378) | — | ||||||||||||||
Income (loss) before income taxes and non-controlling interests | 3,506 | 199 | (654) | 3,051 | ||||||||||||||
Income taxes (Benefit) | 158 | (158) | (b) | — | — | |||||||||||||
Economic Income (Loss) / Net income (loss) before non-controlling interests | 3,348 | 357 | (654) | 3,051 | ||||||||||||||
(Income) loss attributable to non-controlling interests in consolidated subsidiaries | (2,255) | 20 | 654 | (1,581) | ||||||||||||||
Economic Income (Loss) / Net income (loss) available to Cowen Group, Inc. Stockholders | $ | 1,093 | $ | 377 | $ | — | $ | 1,470 | ||||||||||
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. | ||||||||||||||||||
(e) Economic Income (Loss) recognizes stock borrow/loan activity and other brokerage dividends as brokerage revenue. | ||||||||||||||||||
(f) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. | ||||||||||||||||||
Cowen Group, Inc. | ||||||||||||||||||
Unaudited Reconciliation of Economic Income and GAAP Income for the Six Months Ended June 30, 2014 | ||||||||||||||||||
(Dollar amounts in thousands) | ||||||||||||||||||
Six Months Ended June 30, 2014 | ||||||||||||||||||
Adjustments | ||||||||||||||||||
Other | Funds | Economic | ||||||||||||||||
GAAP | Adjustments | Consolidation | Income | |||||||||||||||
Revenues | ||||||||||||||||||
Investment banking | $ | 79,854 | $ | — | $ | — | $ | 79,854 | ||||||||||
Brokerage | 66,141 | 3,260 | (e) | — | 69,401 | |||||||||||||
Management fees | 18,616 | 11,162 | (a) | 477 | 30,255 | |||||||||||||
Incentive income | 5,222 | 7,543 | (a) | 154 | 12,919 | |||||||||||||
Investment income | — | 29,770 | (c) | — | 29,770 | |||||||||||||
Interest and dividends | 21,712 | (21,712) | (c)(e) | — | — | |||||||||||||
Reimbursement from affiliates | 4,918 | (5,082) | (f) | 164 | — | |||||||||||||
Other revenue | 1,307 | (1,210) | (c) | — | 97 | |||||||||||||
Consolidated Funds | 1,809 | — | (1,809) | — | ||||||||||||||
Total revenues | 199,579 | 23,731 | (1,014) | 222,296 | ||||||||||||||
Expenses | ||||||||||||||||||
Compensation & Benefits | 131,965 | (1,376) | — | 130,589 | ||||||||||||||
Non-compensation expenses - Fixed | — | 46,359 | (c)(d) | — | 46,359 | |||||||||||||
Non-compensation expenses - Variable | — | 20,573 | (c)(d) | — | 20,573 | |||||||||||||
Non-compensation expenses | 64,002 | (64,002) | (c)(d) | — | — | |||||||||||||
Interest and dividends | 17,265 | (13,968) | — | 3,297 | ||||||||||||||
Reimbursement from affiliates | — | (3,482) | (f) | — | (3,482) | |||||||||||||
Consolidated Funds | 700 | — | (700) | — | ||||||||||||||
Total expenses | 213,932 | (15,896) | (700) | 197,336 | ||||||||||||||
Other income (loss) | ||||||||||||||||||
Net gains (losses) on securities, derivatives and other investments | 34,391 | (34,391) | (c) | — | — | |||||||||||||
Consolidated Funds net gains (losses) | 7,712 | (5,091) | (2,621) | — | ||||||||||||||
Total other income (loss) | 42,103 | (39,482) | (2,621) | — | ||||||||||||||
Income (loss) before income taxes and non-controlling interests | 27,750 | 145 | (2,935) | 24,960 | ||||||||||||||
Income taxes (Benefit) | 125 | (125) | (b) | — | — | |||||||||||||
Economic Income (Loss) / Net income (loss) before non-controlling interests | 27,625 | 270 | (2,935) | 24,960 | ||||||||||||||
(Income) loss attributable to non-controlling interests in consolidated subsidiaries | (9,403) | 24 | 2,935 | (6,444) | ||||||||||||||
Economic Income (Loss) / Net income (loss) available to Cowen Group, Inc. Stockholders | $ | 18,222 | $ | 294 | $ | — | $ | 18,516 | ||||||||||
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. | ||||||||||||||||||
(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. | ||||||||||||||||||
(e) Economic Income (Loss) recognizes stock borrow/loan activity and other brokerage dividends as brokerage revenue. | ||||||||||||||||||
(f) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. | ||||||||||||||||||
Cowen Group, Inc. | ||||||||||||||||||
Unaudited Reconciliation of Economic Income and GAAP Income for the Six Months Ended June 30, 2013 | ||||||||||||||||||
(Dollar amounts in thousands) | ||||||||||||||||||
Six Months Ended June 30, 2013 | ||||||||||||||||||
Adjustments | ||||||||||||||||||
Other | Funds | Economic | ||||||||||||||||
GAAP | Adjustments | Consolidation | Income | |||||||||||||||
Revenues | ||||||||||||||||||
Investment banking | $ | 42,737 | $ | — | $ | — | $ | 42,737 | ||||||||||
Brokerage | 58,121 | 3,196 | (e) | — | 61,317 | |||||||||||||
Management fees | 19,191 | 8,962 | (a) | 597 | 28,750 | |||||||||||||
Incentive income | 4,565 | 4,327 | (a) | — | 8,892 | |||||||||||||
Investment income | — | 14,436 | (c) | — | 14,436 | |||||||||||||
Interest and dividends | 19,842 | (19,842) | (c) | — | — | |||||||||||||
Reimbursement from affiliates | 2,699 | (2,830) | (f) | 131 | — | |||||||||||||
Other revenue | 963 | (1,126) | (c) | — | (163) | |||||||||||||
Consolidated Funds | 330 | — | (330) | — | ||||||||||||||
Total revenues | 148,448 | 7,123 | 398 | 155,969 | ||||||||||||||
Expenses | ||||||||||||||||||
Compensation & Benefits | 91,730 | (870) | — | 90,860 | ||||||||||||||
Non-compensation expenses - Fixed | — | 44,760 | (c)(d) | — | 44,760 | |||||||||||||
Non-compensation expenses - Variable | — | 18,714 | (c)(d) | — | 18,714 | |||||||||||||
Non-compensation expenses | 62,966 | (62,966) | (c)(d) | — | — | |||||||||||||
Interest and dividends | 14,109 | (13,913) | — | 196 | ||||||||||||||
Reimbursement from affiliates | — | (2,830) | (f) | — | (2,830) | |||||||||||||
Consolidated Funds | 919 | — | (919) | — | ||||||||||||||
Total expenses | 169,724 | (17,105) | (919) | 151,700 | ||||||||||||||
Other income (loss) | ||||||||||||||||||
Net gains (losses) on securities, derivatives and other investments | 16,801 | (16,801) | (c) | — | — | |||||||||||||
Consolidated Funds net gains (losses) | 9,076 | (5,405) | (3,671) | — | ||||||||||||||
Total other income (loss) | 25,877 | (22,206) | (3,671) | — | ||||||||||||||
Income (loss) before income taxes and non-controlling interests | 4,601 | 2,022 | (2,354) | 4,269 | ||||||||||||||
Income taxes (Benefit) | 334 | (334) | (b) | — | — | |||||||||||||
Economic Income (Loss) / Net income (loss) before non-controlling interests | 4,267 | 2,356 | (2,354) | 4,269 | ||||||||||||||
(Income) loss attributable to non-controlling interests in consolidated subsidiaries | (5,750) | (671) | 2,354 | (4,067) | ||||||||||||||
Economic Income (Loss) / Net income (loss) available to Cowen Group, Inc. Stockholders | $ | (1,483) | $ | 1,685 | $ | — | $ | 202 | ||||||||||
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. | ||||||||||||||||||
(e) Economic Income (Loss) recognizes stock borrow/loan activity and other brokerage dividends as brokerage revenue. | ||||||||||||||||||
(f) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of revenues under US GAAP. | ||||||||||||||||||
Source:
Cowen Group, Inc.
Stephen Lasota, 212-845-7919