News Column

Cowen Group, Inc. Announces 2014 Second Quarter Financial Results

August 7, 2014

NEW YORK--(BUSINESS WIRE)-- Cowen Group, Inc. (NASDAQ:COWN) (“Cowen” or “the Company”) today announced its operating results for the second quarter ended June 30, 2014.

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 ended June 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 ended June 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 ended June 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.

    Peter A. Cohen, Chairman and Chief Executive Officer of Cowen Group said, "The six and 12 months ended June 30, 2014 marked Cowen's most profitable period since the Cowen / Ramius business combination in 2009. During the second quarter 2014, the broker dealer saw solid contribution from the equity capital markets and cash equities businesses. Although the debt capital markets business did not contribute to revenue in the second quarter, several transactions have already closed in the current quarter. Ramius continues to have a successful asset raising year with demand for existing products attracting $1.1 billion in new assets in the quarter. Continued growth of existing and new products and strategies, as well as partnerships such as the recently announced planned strategic relationship with State Street Global Advisors, are expected to drive additional demand."

    2014 Second Quarter GAAP Financial Information and Select Balance Sheet Data

    For the second quarter 2014, the Company reported GAAP net income of $8.4 million, or $0.07 per share, as compared to a GAAP net income of $1.1 million, or $0.01 per share, in the second quarter of 2013. The year-over-year improvement was primarily due to gains on securities in other income as well as increased revenues across Cowen's business lines.

    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 June 30, 2014 and 2013.

     

    Summary GAAP Financial Information

     

    (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)

    %

    Net income (loss) $ 13.6 $ 3.3 NM $ 14.0

    (3)

    %

    $ 27.6 $ 4.3 NM

    Net income (loss) attributable to

    noncontrolling interests in consolidated

    subsidiaries

    5.2   2.3   131 % 4.2   25 % 9.4   5.8   64 %

    Net income (loss) attributable to Cowen

    Group, Inc.

    $ 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.

     



    The Company’s stockholders’ equity as of June 30, 2014, was $535.0 million, or book value per share of $4.65, compared to stockholders’ equity of $532.2 million, or book value per share of $4.61, as of March 31, 2014.

    At June 30, 2014, the Company’s tangible book value per share was $4.24 compared to $4.19 at March 31, 2014.

           

    Select Balance Sheet Data

     
    (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

     

    (Dollar amounts in millions,

    except per share information)

    Three Months EndedSix 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.

     


    2014 Second Quarter Economic Income Review

    Total Economic Income Revenue

    Total Economic Income Revenue for the second quarter 2014 was $111.5 million, a 38% increase compared to $81.1 million in the second quarter 2013. The increase in Economic Income Revenue was primarily the result of an increase in investment banking and brokerage revenue, in addition to increased revenue from the alternative investment business.

         

    Economic Income Revenue

     
    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.

     



    Compensation and Benefits Expense

    Second quarter 2014 compensation and benefits expense was $63.6 million, a 35% increase compared to $47.0 million in the second quarter 2013. The increase is due to higher revenues during the second quarter of 2014 as compared to the 2013 period, which resulted in a higher compensation and benefits accrual to remain consistent with the Company's compensation to revenue ratio despite a decline in headcount. Total headcount at the end of the second quarter was 632, a decline of 2% from the prior year period and 1% higher than the fourth quarter 2013.

    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 $5.7 million and $4.7 million in share-based compensation expense in both periods, respectively.

    Excluding $1.3 million of expenses associated with activities for which the Company is reimbursed and $0.7 million of severance expense, compensation and benefits expense was 55% of Economic Income revenue in the second quarter 2014. Excluding these same two items, compensation and benefits expense was 56% of Economic Income revenue in the prior year period.

    Fixed Non-Compensation Expenses

    Fixed non-compensation expenses in the current quarter increased 5% to $23.5 million compared to $22.4 million in the comparable prior year quarter. This was primarily due to higher professional fees related to the debt issuance during the first quarter of 2014, which were partially offset with various firm-wide efforts to reduce fixed expenses.

    Variable Non-Compensation Expenses

    Variable non-compensation expenses were $11.1 million in the second quarter 2014, an increase of 11% compared to $10.0 million in the second quarter 2013. The increase was due to greater marketing and business development expenses due to increased marketing activity firm wide.

    Interest Expense

    Interest expense was $2.7 million in the second quarter 2014 compared to $0.1 million in the prior year quarter. The increase is primarily due to the debt issued in the first quarter 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 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 $11.6 billion. The $1.1 billion AUM increase in the second quarter 2014 included $805 million in net subscriptions and $249 million of net positive performance.

    Management Fees and Incentive Income

    For the second quarter 2014, management fees were $16.2 million, compared to $14.6 million in the prior year. This increase was primarily related to an increase in management fees for our activist funds.

    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 $8.2 million in the second quarter 2014 compared to $3.8 million in the prior year period. This increase was primarily related to an increase in performance fees from our credit and activist funds.

    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 $18.0 million to $21.6 million in the second quarter 2014. The increase is due to an increase in performance from certain investment strategies, including activist, event and equities driven, as well as increases in performance from our other investments.

    Broker-Dealer Segment (“Cowen and Company”)

    Brokerage

    Brokerage revenue was $35.1 million in the second quarter 2014, an increase of 5%, compared to $33.3 million in the second quarter 2013. This was attributable to a decrease in losses related to the facilitation of customer transactions and an increase in electronic trading revenues.

    Investment Banking

    Investment banking revenue was $30.3 million in the second quarter 2014, an increase of 18%, compared to $25.6 million in the second quarter 2013. The increase in revenue was due to an increase in equity underwriting activity.

  • 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 $11.3 million of Cowen's Class A common shares from time to time. With this increase, the total amount available for repurchase under the program is $25 million.

    The $11.3 million increase is in addition to the Company's existing $60 million share purchase program, under which the Company has acquired 14.2 million shares for $46.3 million. Also, since the program was initially announced in July 2011, the Company has acquired an additional 5.3 million shares as a result of net share settlement relating to the vesting of equity awards.

    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 June 30, 2014, Cowen had approximately 115.0 million Class A shares outstanding.

    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 9:00 am EST. The call can be accessed by dialing 1-866-510-0712 domestic or 1-617-597-5380 international. The passcode for the call is 34936653. A replay of the call will be available beginning at 1:00 pm EST August 7, 2014 through August 14, 2014. To listen to the replay of this call, please dial 1-888-286-8010 domestic or 1-617-801-6888 international and enter passcode 61327673.

    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.

    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 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 EndedSix Months Ended
    June 30,   June 30,
    2014   2013     2014     2013  

    Revenues

    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

    Interest and dividends 655 241 1,141 253
    Other (2 ) 2     668     77  
    Total revenues92,902   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 taxes13,644   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 EndedSix 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 revenues111,54181,083222,296155,969
    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 expenses99,210   78,032   197,336   151,700  
    Net Economic Income (Loss) before non-controlling Interests12,3313,05124,9604,269
    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
    OtherFundsEconomic
    GAAPAdjustmentsConsolidationIncome
    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 revenues92,90218,811(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 expenses107,904(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 interests13,644875(2,188)12,331
     
    Income taxes (Benefit) 46 (46) (b)
    Economic Income (Loss) / Net income (loss) before non-controlling interests13,598921(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
    OtherFundsEconomic
    GAAPAdjustmentsConsolidationIncome
    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 revenues81,207(363)23981,083
     
    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 expenses86,612(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 interests3,506199(654)3,051
     
    Income taxes (Benefit) 158 (158) (b)
    Economic Income (Loss) / Net income (loss) before non-controlling interests3,348357(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
    OtherFundsEconomic
    GAAPAdjustmentsConsolidationIncome
    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 revenues199,57923,731(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 expenses213,932(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 interests27,750145(2,935)24,960
     
    Income taxes (Benefit) 125 (125) (b)
    Economic Income (Loss) / Net income (loss) before non-controlling interests27,625270(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
    OtherFundsEconomic
    GAAPAdjustmentsConsolidationIncome
    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 revenues148,4487,123398155,969
     
    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 expenses169,724(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 interests4,6012,022(2,354)4,269
     
    Income taxes (Benefit) 334 (334) (b)
    Economic Income (Loss) / Net income (loss) before non-controlling interests4,2672,356(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.
     





    Cowen Group, Inc.

    Stephen Lasota, 212-845-7919

    Source: Cowen Group, Inc.


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