UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): April 30, 2015

 


 

COWEN GROUP, INC.

(Exact Name of Registrant as Specified in Charter)

 


 

Delaware

 

001-34516

 

27-0423711

(State or Other Jurisdiction

of Incorporation)

 

(Commission File Number)

 

(I.R.S. Employer

Identification No.)

 

599 Lexington Avenue

New York, NY 10022

(Address of Principal Executive Offices and Zip Code)

 

Registrant’s telephone number, including area code: (212) 845-7900

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o                 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02. Results of Operations and Financial Condition.

 

On April 30, 2015, Cowen Group, Inc., a Delaware corporation (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2015, a copy of which is attached hereto as Exhibit 99.1.

 

The information in Exhibit 99.1 is furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

 

2



 

Item 9.01. Financial Statements and Exhibits.

 

(d)

Exhibit

 

 

99.1

Press Release issued by the Company dated April 30, 2015.

 

3



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

COWEN GROUP, INC.

 

 

Date: April 30, 2015

By:

/s/ Owen S. Littman

 

 

Name:

Owen S. Littman

 

 

Title:

General Counsel

 

4


Exhibit 99.1

 

 

Press Release

 

COWEN GROUP, INC. ANNOUNCES

FIRST QUARTER 2015 FINANCIAL RESULTS

 

New York, April 30, 2015 - Cowen Group, Inc. (NASDAQ: COWN) (“Cowen” or “the Company”) today announced its operating results for the first quarter ended March 31, 2015.

 

2015 First Quarter Highlights(1)

 

·                  Economic income was $23.6 million or $0.20 per diluted common share, compared to $10.0 million or $0.08 per diluted common share in the first quarter 2014.

 

·                  GAAP net income was $16.7 million or $0.14 per diluted common share compared to $9.8 million or $0.08 per diluted common share in the prior year period.

 

·                  First quarter 2015 revenue rose 46% year over year to $161.7 million from $110.6 million in the prior year.

 

·                  Broker-dealer revenue grew 29% year over year to $107.8 million, primarily driven by strong growth in investment banking as well as investment income.(2)

 

·                  Alternative investment revenue doubled year over year to $53.8 million, due to solid gains in performance fees and investment income.

 

·                  As of April 1, 2015, assets under management (“AUM”) were at $12.8 billion, an increase of $362 million from the start of the year.

 

·                  Book value per share increased to $6.21 as of March 31, 2015 from $4.61 on March 31, 2014.

 


(1)  Unless otherwise stated, all financial highlights are presented on an Economic Income basis.

(2)  Includes broker-dealer segment’s allocation of Investment Income (Loss).

 

Peter A. Cohen, Chairman and Chief Executive Officer of Cowen Group said, “Cowen Group’s strong economic income results for the first quarter of 2015 are a result of the progress achieved in reshaping the organization to the market environment we envisioned.  Our investment banking business reached new revenue levels in what continued to be a favorable capital raising environment, and equities had another solid quarter.  Ramius’ AUM grew to $12.8 billion, reflecting consistent investor demand for the differentiated alpha that characterizes our seven investment strategies.  Positive investment performance on our invested capital was also an important contributor to our overall results.”

 



 

2015 First Quarter GAAP Financial Information and Select Balance Sheet Data

 

For the first quarter 2015, the Company reported GAAP net income of $16.7 million, or $0.14 per diluted share, as compared to a GAAP net income of $9.8 million, or $0.08 per diluted share, in the first quarter of 2014.

 

The following table summarizes the Company’s GAAP financial results for the three months ended March 31, 2015 and 2014, and December 31, 2014.

 

Summary GAAP Financial Information

 

 

 

Three Months Ended

 

(Dollar amounts in millions, except per share

 

March 31,

 

 

 

Dec. 31,

 

 

 

information)

 

2015

 

2014

 

%

 

2014

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

121.1

 

$

106.7

 

13

%

$

121.1

 

%

Net income (loss) attributable to Cowen Group, Inc.

 

$

16.7

 

$

9.8

 

70

%

$

142.5

 

(88

)%

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share (diluted)

 

$

0.14

 

$

0.08

 

76

%

$

1.21

 

(88

)%

 

Note: Amounts may not add due to rounding.  GAAP net income for the three months ended December 31, 2014 includes the Company’s deferred tax valuation allowance, which was released in the fourth quarter 2014 and resulted in a $128.1 million deferred tax benefit.

 

The Company’s stockholders’ equity as of March 31, 2015 was $690 million, or book value per share of $6.21, compared to stockholders’ equity of $532 million, or book value per share of $4.61 at March 31, 2014.  The increase in shareholders’ equity is primarily related to the release of the Company’s valuation allowance against deferred tax assets in the fourth quarter 2014.

 

Select Balance Sheet Data

 

 

 

March 31,

 

December 31,

 

March 31,

 

(Amounts in millions, except per share information)

 

2015

 

2014

 

2014

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

$

690.1

 

$

677.7

 

$

532.2

 

Common shares outstanding

 

111.2

 

111.7

 

115.4

 

 

 

 

 

 

 

 

 

Book value per share

 

$

6.21

 

$

6.07

 

$

4.61

 

 

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, (ii) excludes goodwill and intangible impairment and (iii) 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.

 

2



 

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, 2015 and 2014, and December 31, 2014.

 

Summary Economic Income (Loss) Financial Information

 

 

 

Three Months Ended

 

(Dollar amounts in millions, except per

 

March 31,

 

 

 

Dec. 31,

 

 

 

share information)

 

2015

 

2014

 

%

 

2014

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

161.7

 

$

110.6

 

46

%

$

165.8

 

(2

)%

Economic Income (Loss)

 

$

23.6

 

$

10.0

 

136

%

$

18.9

 

25

%

 

 

 

 

 

 

 

 

 

 

 

 

Economic Income (Loss) per share (diluted)

 

$

0.20

 

$

0.08

 

145

%

$

0.16

 

24

%

 

Note: Amounts may not add due to rounding.

 

2015 First Quarter Economic Income Review

 

Total Economic Income Revenue

 

Total Economic Income revenue for the first quarter 2015 was $161.7 million, a 46% increase compared to $110.6 million in the first quarter 2014.  The increase in Economic Income revenue was due to growth across all of the Company’s business segments.

 

Economic Income Revenue

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

Dec. 31,

 

 

 

(Dollar amounts in millions)

 

2015

 

2014

 

%

 

2014

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment banking

 

$

65.2

 

$

49.6

 

32

%

$

44.9

 

45

%

Brokerage

 

35.5

 

34.3

 

3

%

41.3

 

(14

)%

Management fees

 

16.6

 

14.1

 

18

%

18.2

 

(9

)%

Incentive income

 

15.4

 

4.6

 

234

%

28.8

 

(47

)%

Investment income

 

28.9

 

8.2

 

253

%

28.0

 

3

%

Other revenue

 

0.1

 

(0.1

)

(148

)%

4.7

 

(99

)%

Total Revenue

 

$

161.7

 

$

110.6

 

46

%

$

165.8

 

(2

)%

 

Note: Amounts may not add due to rounding.

 

Non-interest Expenses

 

First quarter 2015 non-interest expense was $131.2 million compared to $97.4 million in the prior year period.  Items included in non-interest expenses are discussed below.

 

Compensation and Benefits Expense

 

First quarter 2015 compensation and benefits expense was $95.1 million, a 42% increase compared to $67.0 million in the first quarter 2014.  Compensation and benefits expense grew at a slower rate than revenue.

 

3



 

The compensation to Economic Income revenue ratio was 59% in the first quarter 2015 compared to 61% in the prior year period.

 

Fixed Non-Compensation Expenses

 

First quarter 2015 fixed non-compensation expenses rose $2.5 million year over year to $25.0 million.  This increase was primarily due to higher legal and other professional fees and an increase in costs from equity method investments.

 

Variable Non-Compensation Expenses

 

First quarter 2015 variable non-compensation expenses were $13.2 million compared to $9.6 million in the first quarter 2014.  The increase is related to an increase in client services, business development and other expenses.

 

Interest Expense

 

Interest expense was $4.0 million in the first quarter 2015 compared to $0.6 million in the prior year quarter.  The increase is primarily due to debt issued in the first and fourth quarters of 2014.

 

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 partners.

 

Alternative Investment Segment (“Ramius”)

 

Assets Under Management

 

As of April 1, 2015, the Company had assets under management of $12.8 billion.  Total AUM grew by $362 million from January 1, 2015.

 

Management Fees and Incentive Income

 

For the first quarter 2015, management fees were $16.6 million, compared to $14.1 million in the prior year.  This increase was primarily related to an increase in management fees from the activist and healthcare royalty businesses.

 

Incentive income was $15.4 million in the first quarter 2015 compared to $4.6 million in the prior year period.  This increase was primarily related to an increase in performance fees from the activist and alternative solutions businesses.

 

4



 

Investment Income

 

For the first quarter 2015, investment income for the segment was $21.8 million, compared to $8.3 million in the first quarter 2014.  The increase is primarily due to increases in performance in certain investment strategies including activist and performance in our equity investments.

 

Broker-Dealer Segment (“Cowen and Company”)

 

Brokerage

 

Brokerage revenue was $35.5 million in the first quarter 2015, up 3%, compared to $34.3 million in the first quarter 2014.  Excluding revenue associated with the stock loan business which the Company decided to wind down during the fourth quarter 2014, brokerage revenue rose 6.7% year over year.  The increase was attributable to market share gains in our cash equities business as well an increase in electronic and option trading revenue offset by a decrease in the average cost per share rate on cash equities.

 

Investment Banking

 

Investment banking revenue was $65.2 million in the first quarter 2015, up 32%, compared to $49.6 million in the first quarter 2014.  The increase in revenue was primarily due to an increase in equity underwriting activity.

 

The following tables summarize the Company’s investment banking revenue and transaction count for the three months ended March 31, 2015 and 2014.

 

Investment Banking Revenue Summary

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

Equity Underwriting

 

$

61.4

 

$

46.0

 

Debt Underwriting

 

0.3

 

0.9

 

Advisory

 

3.5

 

2.6

 

Total

 

$

65.2

 

$

49.6

 

 

Investment Banking Transaction Count

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

Equity Underwriting

 

47

 

41

 

Of which bookrun:

 

27

 

14

 

Debt Underwriting

 

1

 

3

 

Advisory

 

2

 

3

 

Total

 

50

 

47

 

 

5



 

Investment Income

 

For the first quarter 2015, investment income for the segment was $7.1 million versus $(156,000) in the first quarter 2014.

 

Share Repurchase Program

 

In the first quarter 2015, the Company repurchased 1.4 million shares for $7.2 million under the Company’s existing $86 million share repurchase program, of which $17.8 million remained available for future repurchase as of March 31, 2015.  Also, the Company has acquired an additional 530,000 shares outside of the share repurchase program as a result of net share settlement relating to the vesting of equity awards.

 

Earnings Conference Call with Management

 

The Company will host a conference call to discuss its 2015 first quarter results on Thursday, April 30, 2015, at 9:00 am EST.  The call can be accessed by dialing 1-(855) 760-0961 domestic or 1-(631) 485-4850 international.  The passcode for the call is 18693894.  A replay of the call will be available beginning at 12:00 pm EST April 30, 2015 through May 7, 2014.  To listen to the replay of this call, please dial 1-(855) 859-2056 domestic or 1-(404) 537-3406 international and enter passcode 18693894.

 

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 asset management, investment banking, research, and sales and trading services through its two business segments:  Ramius and its affiliates make up the Company’s alternative investment segment, while Cowen and Company and its affiliates make up the Company’s broker-dealer segment.  Ramius provides alternative asset management solutions to a global client base and manages a significant portion of Cowen’s proprietary capital.  Cowen and Company and its affiliates offer 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 worldwide.  To download Cowen’s investor relations app, which offers access to SEC filings, news releases, webcasts and presentations, please visit the App Store for iPhone and iPad or Google Play for Android mobile devices.

 

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

 

6



 

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.

 

Investor Relations Contacts

 

Cowen Group, Inc.

Stephen Lasota, Chief Financial Officer, (212) 845-7919

Nancy Wu, (646) 562-1259

 

Source:  Cowen Group, Inc.

 

7



 

Cowen Group, Inc.

Preliminary Unaudited Condensed Consolidated Statements of Operations

(Dollar amounts in thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2015

 

2014

 

Revenue

 

 

 

 

 

Investment banking

 

$

65,233

 

$

49,562

 

Brokerage

 

35,454

 

32,830

 

Management fees

 

10,384

 

8,924

 

Incentive income

 

2,372

 

2,498

 

Interest and dividends

 

3,083

 

9,252

 

Reimbursement from affiliates

 

3,642

 

1,900

 

Other

 

668

 

555

 

Consolidated Funds

 

 

 

 

 

Interest and dividends

 

244

 

486

 

Other

 

14

 

670

 

Total revenue

 

121,094

 

106,677

 

Expenses

 

 

 

 

 

Employee compensation and benefits

 

95,864

 

67,561

 

Interest and dividends

 

5,779

 

7,072

 

General, administrative and other expenses

 

36,805

 

31,093

 

Consolidated Funds expenses

 

358

 

302

 

Total expenses

 

138,806

 

106,028

 

Other income (loss)

 

 

 

 

 

Net (losses) gains on securities, derivatives and other investments

 

38,991

 

11,354

 

Consolidated Funds net (losses) gains

 

5,086

 

2,103

 

Total other income (loss)

 

44,077

 

13,457

 

 

 

 

 

 

 

Income (loss) before income taxes

 

26,365

 

14,106

 

Income tax expense/(benefit)

 

6,947

 

79

 

Net income (loss)

 

19,418

 

14,027

 

Net income (loss) attributable to redeemable non-controlling interests in consolidated subsidiaries and funds

 

2,720

 

4,187

 

Net income (loss) attributable to Cowen Group, Inc. stockholders

 

$

16,698

 

$

9,840

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

Basic

 

$

0.15

 

$

0.09

 

Diluted

 

$

0.14

 

$

0.08

 

 

 

 

 

 

 

Weighted average shares used in per share data:

 

 

 

 

 

Basic

 

112,053

 

115,680

 

Diluted

 

118,590

 

122,898

 

 

8



 

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, (ii) excludes goodwill and intangible impairment and (iii) 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

 

 

 

March 31,

 

 

 

2015

 

2014

 

Revenue

 

 

 

 

 

Investment banking

 

$

65,233

 

$

49,562

 

Brokerage

 

35,523

 

34,349

 

Management fees

 

16,607

 

14,089

 

Incentive income

 

15,363

 

4,594

 

Investment income

 

28,880

 

8,172

 

Other revenue

 

69

 

(145

)

Total revenue

 

161,675

 

110,621

 

Expenses

 

 

 

 

 

Non-interest expense

 

131,163

 

97,351

 

Interest expense

 

4,022

 

643

 

Total expenses

 

135,185

 

97,994

 

 

 

 

 

 

 

Net Economic Income (Loss) Before Non-controlling Interests

 

26,490

 

12,627

 

Non-controlling interests

 

(2,845

)

(2,625

)

Economic Income (Loss)

 

$

23,645

 

$

10,002

 

 

 

 

 

 

 

Economic Income (Loss) Excluding Certain Non-cash Items

 

 

 

 

 

 

 

 

 

 

 

Economic Income (Loss)

 

$

23,645

 

$

10,002

 

Exclusion of depreciation and amortization expense

 

2,135

 

2,377

 

Exclusion of share-based compensation expense

 

4,162

 

4,803

 

Economic Income (Loss) Excluding Certain Non-cash Items

 

$

29,942

 

$

17,182

 

 

 

 

 

 

 

Economic Income (Loss) per share:

 

 

 

 

 

Basic

 

$

0.21

 

$

0.09

 

Diluted

 

$

0.20

 

$

0.08

 

 

 

 

 

 

 

Weighted average shares used in per share data:

 

 

 

 

 

Basic

 

112,053

 

115,680

 

Diluted

 

118,590

 

122,898

 

 

10



 

Cowen Group, Inc.

Unaudited Reconciliation of Economic Income and GAAP Income for the Three Months Ended March 31, 2015

(Dollar amounts in thousands)

 

 

 

Three Months Ended March 31, 2015

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Other

 

Funds

 

Economic

 

 

 

GAAP

 

Adjustments

 

Consolidation

 

Income

 

Revenue

 

 

 

 

 

 

 

 

 

Investment banking

 

$

65,233

 

$

 

$

 

$

65,233

 

Brokerage

 

35,454

 

69

(e)

 

35,523

 

Management fees

 

10,384

 

5,985

(a)

238

 

16,607

 

Incentive income

 

2,372

 

12,808

(a)

183

 

15,363

 

Investment income

 

 

28,880

(c)

 

28,880

 

Interest and dividends

 

3,083

 

(3,083

)(c)(e)

 

 

Reimbursement from affiliates

 

3,642

 

(3,727

)(f)

85

 

 

Other revenue

 

668

 

(599

)(c)

 

69

 

Consolidated Funds

 

258

 

 

(258

)

 

Total revenue

 

121,094

 

40,333

 

248

 

161,675

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Non interest expense

 

132,669

 

(1,506

)(c)(d)

 

131,163

 

Interest expense

 

5,779

 

(1,757

)(c)(e)

 

4,022

 

Consolidated Funds

 

358

 

 

(358

)

 

Total expenses

 

138,806

 

(3,263

)

(358

)

135,185

 

 

 

 

 

 

 

 

 

 

 

Total other income (loss)

 

44,077

 

(41,670

)(c)

(2,407

)

 

 

 

 

 

 

 

 

 

 

 

Income tax expense/(benefit)

 

6,947

 

(6,947

)(b)

 

 

(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries and funds

 

(2,720

)

(1,926

)

1,801

 

(2,845

)

Economic Income (Loss) / Net income (loss) available to Cowen Group, Inc. Stockholders

 

$

16,698

 

$

6,947

 

$

 

$

23,645

 

 

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 the activist business.

(b) Economic Income excludes income taxes as management does not consider this item when evaluating the performance of the company.

(c) Economic Income recognizes Company income from proprietary trading (including interest and dividends) 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 March 31, 2014

(Dollar amounts in thousands)

 

 

 

Three Months Ended March 31, 2014

 

 

 

 

 

Adjustments

 

 

 

 

 

 

 

Other

 

Funds

 

Economic

 

 

 

GAAP

 

Adjustments

 

Consolidation

 

Income

 

Revenue

 

 

 

 

 

 

 

 

 

Investment banking

 

$

49,562

 

$

 

$

 

$

49,562

 

Brokerage

 

32,830

 

1,519

(e)

 

34,349

 

Management fees

 

8,924

 

4,931

(a)

234

 

14,089

 

Incentive income

 

2,498

 

2,096

(a)

 

4,594

 

Investment income

 

 

8,172

(c)

 

8,172

 

Interest and dividends

 

9,252

 

(9,252

)(c)(e)

 

 

Reimbursement from affiliates

 

1,900

 

(1,980

)(f)

80

 

 

Other revenue

 

555

 

(700

)(c)

 

(145

)

Consolidated Funds

 

1,156

 

 

(1,156

)

 

Total revenue

 

106,677

 

4,786

 

(842

)

110,621

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Non interest expense

 

98,654

 

(1,303

)(c)(d)

 

97,351

 

Interest expense

 

7,072

 

(6,429

)(c)(e)

 

643

 

Consolidated Funds

 

302

 

 

(302

)

 

Total expenses

 

106,028

 

(7,732

)

(302

)

97,994

 

 

 

 

 

 

 

 

 

 

 

Total other income (loss)

 

13,457

 

(13,250

)(c)

(207

)

 

 

 

 

 

 

 

 

 

 

 

Income tax expense/(benefit)

 

79

 

(79

)(b)

 

 

(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries and funds

 

(4,187

)

815

 

747

 

(2,625

)

Economic Income (Loss) / Net income (loss) available to Cowen Group, Inc. Stockholders

 

$

9,840

 

$

162

 

$

 

$

10,002

 

 

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 the activist business.

(b) Economic Income excludes income taxes as management does not consider this item when evaluating the performance of the company.

(c) Economic Income recognizes Company income from proprietary trading (including interest and dividends) 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.