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Cohen & Company Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: March 9, 2012 11:42AM
Cohen & Company Inc. (COHN) filed Annual Report for the period ended 2011-12-31.
Highlight of Business Operations:A portion of our revenues is generated from principal investing activities. Therefore, our revenues are impacted by the underlying operating results of these investments. As of December 31, 2011, we had $42,772 of other investments, at fair value representing our principal investment portfolio. Of this amount, $42,261, or 99%, is comprised of investments in three separate investment funds and permanent capital vehicles: Star Asia, EuroDekania, and Tiptree. Furthermore, the investment in Star Asia is our largest single principal investment and, as of December 31, 2011, has a fair value of $37,358, representing 87% of the total amount of other investments, at fair value. Star Asia seeks to invest in Asian commercial real estate structured finance products, including CMBS, corporate debt of REITs and real estate operating companies, whole loans, mezzanine loans, and other commercial real estate fixed income investments. Therefore, our results of operations and financial condition will be significantly impacted by the financial results of these investments and, in the case of Star Asia, the Japanese real estate market in general. Our investment in Star Asia and our principal investing revenue was impacted by the earthquake, tsunami, and nuclear disaster in Japan that occurred during the first quarter of 2011. See Year Ended December 31, 2011 compared to the Year Ended December 2010 Revenues Principal Transactions and Other Income below.
During the year ended December 31, 2011 and 2010, we recognized $6,768 and $5,973, respectively, in revenue for the Alesco X through XVII securitizations which is included in the TruPS and insurance company debt U.S. in the table above. Of these amounts, $570 and $313 represent incentive payments received from the third party under the Master Transaction Agreement during the year ended December 31, 2011 and 2010, respectively. As of December 31, 2011, we have the potential to earn additional incentive payments (through February of 2017) if certain performance hurdles are met. Not including any potential incentive fees, we expect to recognize an additional $6,806 in revenue in 2012 and beyond from the Services Agreement over its remaining term (ending February of 2013). At that point, with the exception of potential incentive payments, the Company will stop recognizing revenue from the Alesco X through XVII securitizations.
New issue and advisory revenue decreased by $193, or 5%, to $3,585 for the year ended December 31, 2011 as compared to $3,778 for the same period in 2010. The decrease is primarily attributable to a decline in new issue business activity.
New issue and advisory revenue increased by $1,962, or 108%, to $3,778 for the year ended December 31, 2010 as compared to $1,816 for the same period in 2009. The increase was primarily attributable to an increased number of new issue and advisory engagements that closed during 2010 as compared to 2009, including the arrangement of the issuance of newly created debt, equity, and hybrid financial instruments.
Cash compensation and benefits in the table above was primarily comprised of salary, incentive compensation and benefits. The increase in cash compensation and benefits was primarily a result of the increase in incentive compensation which was tied to revenue and operating profitability. The increase was partially offset by a decrease of $408 which was recorded in the second half of 2010 as a result of an agreement reached with the FINRA staff to pay restitution related to certain allegations stemming from a FINRA exam. The $408 represented the recapture by us of the incentive compensation previously paid to employees. In addition, our total headcount was 133 as of December 31, 2010 as compared to 142 at December 31, 2009.
Stocks Discussed: COHN,