Business Context and Reporting Period
Company: Cohen & Steers, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2009
Business Overview: The Company is an investment advisor specializing in income-oriented equity portfolios, including U.S. and international real estate securities, large-cap value stocks, utilities, listed infrastructure, and preferred securities. It manages assets through open-end and closed-end mutual funds and institutional separate accounts. The Company exited its investment banking business effective May 1, 2009.
Key Financial Metrics
| Metric (in thousands) | Three Months Ended June 30, 2009 |
Six Months Ended June 30, 2009 |
|---|---|---|
| Total Revenue | $26,355 | $49,855 |
| Total Expenses | $25,932 | $49,295 |
| Operating Income | $423 | $560 |
| Net Loss (Attributable to Common Shareholders) | $(6,421) | $(20,900) |
| Diluted EPS | $(0.15) | $(0.49) |
| Cash and Cash Equivalents | $129,030 | $129,030 |
| Net Cash Provided by Operating Activities | N/A | $2,260 |
| Total Assets | $285,331 | $285,331 |
| Total Liabilities | $29,149 | $29,149 |
Assets Under Management (AUM): $16.3 billion as of June 30, 2009, representing a 39% decrease from $27.0 billion at June 30, 2008, driven by market depreciation and net outflows.
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 52% for the three months and 54% for the six months ended June 30, 2009, compared to the same periods in 2008. This was primarily due to a 50% to 53% drop in average daily AUM caused by market depreciation.
- Profitability Shift: The Company reported a net loss of $6.4 million for the quarter and $20.9 million for the six months, contrasting with net income of $13.6 million and $26.6 million, respectively, in the prior year periods.
- Impairment Charges: A significant non-operating loss was recorded due to other-than-temporary impairment charges of $14.0 million for the quarter and $32.2 million for the six months, primarily related to preferred securities and seed money investments in sponsored mutual funds.
- Expense Reduction: Total operating expenses decreased 22% (quarter) and 26% (six months) year-over-year, driven by lower employee compensation (reduced bonuses), distribution fees, and general administrative costs.
Outlook, Risks, and Management Commentary
- Market Conditions: Management notes that revenue is highly correlated with market values of managed assets. Continued declines in real estate securities and general market downturns pose a risk to fee revenue.
- Liquidity: The Company maintains a highly liquid financial condition with cash and cash equivalents comprising a significant portion of assets. It exceeded regulatory net capital requirements by approximately $11.6 million for its broker-dealer subsidiary.
- Investment Strategy: The Company intends to hold available-for-sale investments with unrealized losses until recovery of fair value, believing it has sufficient liquidity to do so.
- Dividends: A quarterly cash dividend of $0.05 per share was declared on August 6, 2009, payable September 25, 2009.
- Risks: Key risks include market volatility affecting AUM, the potential for further impairment charges on investments, and the inability to raise capital for closed-end funds due to unfavorable market conditions.
Investor Verification Checklist
- Impairment Details: Verify the specific composition of the $32.2 million impairment charge and the remaining unrealized losses ($25.3 million) on available-for-sale securities.
- AUM Flows: Monitor net inflows/outflows, particularly in open-end funds which saw net outflows in the prior year but net inflows in the current six-month period.
- Fee Waivers: Review the impact of contractual fee waivers on affiliated funds, which totaled approximately $1.9 million for the six months ended June 30, 2009.
- Capital Loss Carry-forwards: Confirm the expiration dates (2013-2014) and utilization potential of the $5.2 million capital loss carry-forwards.
- Regulatory Compliance: Ensure continued compliance with SEC Uniform Net Capital Rule 15c3-1 and foreign regulatory capital requirements.