Cowen

Cowen Group, Inc. Announces 2009 Second Quarter Results

Click here for PDF version of release NEW YORK, Aug. 6 /PRNewswire-FirstCall/ -- Cowen Group, Inc. (Nasdaq: COWN) today announced its operating results for the quarter ended June 30, 2009.

Second Quarter Financial Overview

For the quarter ended June 30, 2009, the Company reported a net loss attributable to Cowen Group, Inc. of $4.4 million, or $0.38 per share, compared to a net loss attributable to Cowen Group, Inc. of $0.7 million in the prior year period, or $0.06 per share.

    --  Total revenue was $49.8 million, representing a decrease of 21% from
        $62.7 million in the prior year period and a 14% increase from $43.7
        million in the previous quarter.
    --  The compensation and benefits expense to revenue ratio was 62%
        compared to 60% in the prior year period.
        --  Excludes $0.5 million and $1.3 million of IPO award expense for
            the quarters ended June 30, 2009 and 2008, respectively.
    --  Adjusted operating loss of $4.0 million compared to an adjusted
        operating loss of $1.1 million for the second quarter of 2008 (see
        "Non-GAAP Financial Measures" below for a discussion of adjusted
        operating income).

    --  Operating income excluding non-cash items was $3.3 million in the
        second quarter of 2009 compared to income of $2.9 million in the
        second quarter of 2008 (see "Non-GAAP Financial Measures" below for a
        discussion of operating income excluding non-cash items).

    Financial Overview of Six Month Period Ended June 30, 2009
    For the six month period ended June 30, 2009, the Company reported a net
loss attributable to Cowen Group, Inc. of $11.0 million, or $0.95 per share,
compared to a net loss attributable to Cowen Group, Inc. of $0.1 million in
the prior year period, or $0.01 per share.
    --  Total revenue was $93.5 million, representing a decrease of 21% from
        $117.7 million in the prior year period.
    --  The compensation and benefits expense to revenue ratio was 63%
        compared to 60% in the prior year period.
        --  Excludes $1.3 million and a reversal of $2.9 million of IPO award
            expense for the six month periods ended June 30, 2009 and 2008,
            respectively.
    --  Adjusted operating loss of $10.0 million compared to an adjusted

operating loss of $3.0 million in the prior year period (see "Non-GAAP

Financial Measures" below for a discussion of adjusted operating

income).


    --  Operating income excluding non-cash items was $5.7 million in the six
        month period ended June 30, 2009 compared to $4.4 million for the six
        month period ended June 30, 2008 (see "Non-GAAP Financial Measures"

below for a discussion of operating income excluding non-cash items).

Second Quarter Operational Overview

    --  Second quarter underwriting revenue decreased 94% year-over-year and
        decreased 82% over the first quarter of 2009.
    --  Core brokerage revenue decreased 7% year-over-year and decreased 5%

sequentially (see "Non-GAAP Financial Measures" below for a discussion

        of core brokerage revenue).
    --  Second quarter strategic advisory revenue decreased 28% compared to
        the prior year period and increased by $6.5 million sequentially.
    --  Non-compensation expense decreased $3.2 million, or 12%,
        year-over-year.  Compared to the first quarter of 2009,
        non-compensation expense increased $1.6 million, or 7%.
    --  As of July 15, 2009, headcount was down 8%, to 424 full-time
        employees, compared to December 31, 2008.  The overall decrease
        includes the addition of 21 officer-level personnel in research,
        investment banking, brokerage and commodity trading.


    Recent Developments
    --  On June 4, 2009, Cowen and Ramius LLC, a privately-owned global

alternative asset manager, announced that they have agreed to combine

        their businesses into a new holding company.  The transaction is
        subject to Cowen stockholder approval, regulatory approval and other
        customary closing conditions.  Assuming these conditions are met, the
        transaction is expected to close in the fourth quarter of 2009.  On

July 10, 2009, a Form S-4 registration statement for the new holding

        company, LexingtonPark Parent Corp., including a proxy statement of
        Cowen, was filed in connection with the transaction.  A copy of the
        Form S-4 is available at the Securities and Exchange Commission
        website at www.sec.gov.

-- Cowen expanded its research capabilities with the addition of a senior

analyst focused on China-based education, media and consumer

companies.

-- Cowen expanded its health care investment banking capabilities with

the addition of a managing director focused on health care services.

-- Cowen expanded its brokerage capabilities with the addition of a

managing director and head of the institutional sales desk in Boston,

as well as a senior institutional research sales professional in

Chicago.

-- Cowen commenced the development of a Commodity Trading Advisor (CTA)

business with the addition of three senior professionals in the second

        quarter.

    Results of Operations

    Brokerage
    Cowen's core brokerage revenue (see "Non-GAAP Financial Measures" below
for a discussion of core brokerage revenue) decreased $2.7 million, or 7%, to
$34.3 million in the second quarter of 2009, compared to $37.0 million in the
prior year period.  Sequentially, core brokerage revenue decreased 5% compared
to $36.0 million in the first quarter of 2009.  Overall brokerage revenue
decreased $2.1 million, or 6%, to $35.0 million for the three months ended
June 30, 2009 compared with $37.1 million in the second quarter of 2008.
Compared to the first quarter of 2009, overall brokerage revenue decreased
$0.6 million, or 2%.  The year-over-year decreases in both core brokerage and
overall brokerage resulted primarily from a reduction in per share
commissions, a reduction in volumes in our traditional cash equities business,
and a higher loss ratio as we provided greater liquidity to our clients,
partially offset by increased revenue in our listed options business and our
program trading business.

Investment Banking

Investment banking revenue was $11.8 million in the second quarter of 2009, down 42% from $20.5 million in the second quarter of 2008. Sequentially, investment banking revenue increased $6.6 million from $5.2 million in the first quarter of 2009. The year-over-year results reflected decreases in revenue from both capital raising and strategic advisory activities, as follows:

-- Underwriting revenue was $0.3 million, a 94% decrease compared to the

prior year period and a decrease of 82% compared to the first quarter

        of 2009.  During the second quarter of 2009, the Company co-managed
        one debt underwritten transaction raising proceeds of $225 million.

-- Private equity revenue was $2.0 million in the second quarter of 2009,

        a decrease of $0.8 million, or 29%, compared to $2.8 million in the
        second quarter of 2008.  Compared to the first quarter of 2009,
        private equity revenue increased $1.3 million.  During the second
        quarter of 2009, the Company completed three private transactions
        raising proceeds of approximately $62 million.


    --  Strategic advisory revenue was $9.6 million in the second quarter of
        2009, a decrease of $3.8 million, or 28%, compared to $13.4 million in

the second quarter of 2008. Sequentially, strategic advisory revenue

increased by $6.5 million. The year-over-year decrease was the result

of a reduction in transaction volume. During the second quarter of

2009, Cowen completed three strategic advisory assignments, including

the $1.2 billion sale of Gmarket to eBay.

Interest and Dividend Income

Interest and dividend income was $0.1 million in the second quarter of 2009, a decrease of $0.8 million, or 88%, compared with $0.9 million in the prior year period. The decrease in the second quarter of 2009 resulted primarily from lower average interest rates compared to the prior year period.

Other

    Other revenues in the second quarter of 2009 were $2.8 million, a decrease
of $1.3 million, or 32%, compared to $4.1 million in the second quarter of
2008.  Management fees in the second quarter of 2008 included $1.6 million of
one time fees paid by investors admitted to the Cowen Healthcare Royalty Fund
during the quarter, as such investors were required to pay their pro rata
portion of fees retroactive to the date of the first closing of the fund.
Absent the one time fees, CHRP management fees increased $0.7 million in the
second quarter of 2009 compared to the second quarter of 2008.

Compensation Expense and Headcount

    Employee compensation and benefits expense decreased $7.5 million, or 19%,
to $31.4 million for the three months ended June 30, 2009 compared with $38.9
million in the second quarter of 2008.  Employee compensation and benefits
expense for the second quarter of 2009 included $0.5 million of expense
associated with the initial grant of equity to the Company's employees in
connection with its initial public offering, compared to $1.3 million of such
expense in the second quarter of 2008.  Excluding the expenses associated with
the initial grant of equity, employee compensation and benefits expense as a
percentage of total revenues was 62% and 60% for three months ended June 30,
2009 and 2008, respectively.

    As of July 15, 2009, the Company had 424 full-time employees, an 8%
reduction from December 31, 2008.  The overall reduction includes the addition
of 21 officer-level professionals in research, investment banking, brokerage
and commodity trading.

Non-Compensation Expense

    Non-compensation expense was $22.9 million in the second quarter of 2009,
a decrease of $3.2 million, or 12%, compared with $26.1 million in the prior
year period.  The decrease was primarily attributable to decreases in
communications expense, other expense, and marketing and business development
expense.  Compared to the first quarter of 2009, non-compensation expense
increased $1.6 million, or 7%, from $21.3 million. This increase was primarily
attributable to an increase in other expenses associated with professional
fees related to the proposed merger with Ramius.

Provision for Income Taxes

The Company recorded an income tax benefit of $0.1 million for the three months ended June 30, 2009, which reflects an effective tax rate of 2.9%, compared to a benefit of $1.7 million in the second quarter of 2008, which reflects an effective tax rate of 70.0%. The low effective tax rate in the second quarter of 2009 was primarily due to a net increase in the valuation allowance against certain deferred tax assets.

Additional Information

    Stockholders, investors and industry analysts are encouraged to contact
the Company directly regarding general information requests or specific
questions about the Company's financial results.  General information requests
should be directed to the Company's Director of Communications, Jean Calleja,
at (646) 562-1880.  Questions regarding the Company's financial results should
be directed to the Company's Chief Financial Officer, Tom Conner, at (646)
562-1719.

About Cowen Group, Inc.

    Cowen Group, Inc., through its operating subsidiaries, provides investment
banking, equity research, sales and trading, and alternative asset management
services to companies and institutional investor clients in the healthcare,
technology, media and telecommunications, aerospace & defense, consumer and
alternative energy sectors.  Our investment banking business includes Cowen
Latitude Asia, a boutique specializing in crossborder M&A and capital raising
transactions.

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, and in the proxy statement of Cowen contained in the registration
statement on Form S-4 of LexingtonPark Parent Corp., 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 can also be found at the Securities and Exchange Commission website at
www.sec.gov, along with the registration statement on Form S-4 of
LexingtonPark Parent Corp.  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 Consolidated Statements of Operations

                 (Dollar amounts in thousands, except per share data)

                                       Three Months Ended  Six Months Ended
                                             June 30,            June 30,
                                       ------------------  ----------------
                                         2009     2008       2009      2008
                                         ----     ----       ----      ----
    Revenues
    Investment banking                  $11,848   $20,502   $17,075  $34,364
    Brokerage                            35,015    37,116    70,623   75,199

Interest and dividend income 114 919 291

2,142
    Other                                 2,808     4,133     5,529    5,955
                                          -----     -----     -----    -----
        Total revenues                   49,785    62,670    93,518  117,660
                                         ------    ------    ------  -------
    Expenses

Employee compensation and benefits 31,388 38,905 60,533 67,714

    Floor brokerage and trade execution   3,369     3,073     6,230    5,513
    Service fees                          4,187     4,117     8,359    8,326
    Communications                        2,892     3,893     5,998    7,542
    Occupancy and equipment               4,092     4,030     8,226    8,219

Marketing and business development 2,409 3,877 5,263 7,503

Depreciation and amortization 703 649 1,505

1,287
    Other                                 5,261     6,493     8,662   11,658
                                          -----     -----     -----   ------
        Total expenses                   54,301    65,037   104,776  117,762
                                         ------    ------   -------  -------
        Loss before income taxes         (4,516)   (2,367)  (11,258)    (102)
    Benefit for income taxes               (134)   (1,656)     (410)     (45)
                                           ----    ------      ----      ---
        Net loss                         (4,382)     (711)  (10,848)     (57)
    Less: Net income attributable to
     noncontrolling interest                 55         -       104        -
                                             --         -       ---        -
        Net loss attributable to Cowen
         Group, Inc.                    $(4,437)    $(711) $(10,952)    $(57)
                                        =======     =====  ========     

====

Earnings (loss) per share:

        Basic                            $(0.38)   $(0.06)   $(0.95)  $(0.01)
        Diluted                          $(0.38)   $(0.06)   $(0.95)  $(0.01)

Weighted average shares used in per share data:

        Basic                            11,658    11,238    11,531   11,246
        Diluted                          11,658    11,238    11,531   11,246

    Other Metrics at June 30, 2009 and 2008
      Cowen Group, Inc. stockholders'
       equity                          $138,397  $206,959
      Common shares outstanding          15,124    14,367
      Book value per share                $9.15    $14.41
      Tangible book value per share *     $8.97    $10.92


    * Tangible book value per share at June 30, 2009 is calculated as
    follows: Cowen Group, Inc. stockholders' equity, less $2.8 million of
    goodwill and intangible assets, divided by common shares outstanding.

Tangible book value per share at June 30, 2008 is calculated as follows:

Cowen Group, Inc. stockholders' equity, less $50.0 million of goodwill

(written off in the third quarter of 2008), divided by common shares

    outstanding.  Tangible book value per share at March 31, 2009 was $9.01.




                                  Cowen Group, Inc.
                             Non-GAAP Financial Measures

                                                    Three
                                                    Months      Six Months
                                                    Ended         Ended
                                                  June 30,       June 30,
                                                  --------       --------
                                                 2009   2008    2009   2008
                                                 ----   ----    ----   ----
                                                   (dollars in millions)

    Reconciliation of Operating Income (Loss) to
     Adjusted Operating Income
     (Loss)
    --------------------------------------------
      Loss before income taxes                  $(4.5) $(2.4) $(11.3)

$(0.1)

Exclusion of share-based compensation

       expense (reversal) related to IPO awards   0.5    1.3     1.3   (2.9)
                                                  ---    ---     ---   ----
      Adjusted operating loss                   $(4.0) $(1.1) $(10.0) $(3.0)
                                                =====  =====  ======  =====

    Reconciliation of Operating Income (Loss) to
     Operating Income (Loss)
     Excluding Non-cash Items
    -------------------------------------------
      Loss before income taxes                  $(4.5) $(2.4) $(11.3)

$(0.1)

      Exclusion of share-based and other non-
       cash deferred compensation expense
       (benefit)                                  7.1    4.6    15.5    3.2
      Exclusion of depreciation and
       amortization expense                       0.7    0.7     1.5    1.3
                                                  ---    ---     ---    ---
        Operating income excluding non-cash
         items                                   $3.3   $2.9    $5.7   $4.4
                                                 ====   ====    ====   ====

    Reconciliation of Brokerage Revenue to Core
     Brokerage Revenue
    -------------------------------------------
      Brokerage revenue                         $35.0  $37.1   $70.6  $75.2
      Exclusion of the loss (income) from
       warrants, asset management seed
       funds, restricted stock received in
       connection with the demutualization of
       certain exchanges and mutual
       fund investments held as a
       hedge against legacy deferred
       compensation obligations                  (0.7)  (0.1)   (0.3)   1.5
                                                 ----   ----    ----    ---
        Core brokerage revenue                  $34.3  $37.0   $70.3  $76.7
                                                =====  =====   =====  =====




    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 adjusted operating income (loss),
operating income (loss) excluding non-cash items and core brokerage revenue.
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 business 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 companies, and
are not identical to corresponding measures used in our various agreements or
public filings.

    We have reported in this press release our adjusted operating loss for the
three and six month period ended June 30, 2009 and 2008 on a non-GAAP basis by
taking income (loss) before taxes and excluding the non-cash share-based
compensation expense (reversal) associated with equity awards granted in
connection with our IPO.  Management believes that the grant of equity awards
in connection with our IPO was an extraordinary non-recurring event.
Management further believes that investors will benefit from an explanation of
our results excluding the impact of this extraordinary non-recurring item as
it allows for a better understanding of our ongoing business.


We have reported in this press release our operating income excluding non-cash items for the three and six month period ended June 30, 2009 and 2008 on a non-GAAP basis by taking income (loss) before taxes and excluding:

    --  the share-based and other non-cash deferred compensation expense
        (deferred compensation expense that does not involve a cash payment
        during the period); and


    --  the non-cash depreciation and amortization expense.

Management believes that the non-GAAP calculation of operating income (loss) excluding non-cash items will allow for a better understanding of the actual cash basis income (loss) generated in each period presented.



    We have reported in this press release our core brokerage revenue for the
three and six month periods ended June 30, 2009 and 2008 on a non-GAAP basis
by:

    --  excluding the income or loss from warrants, asset management seed
        funds, restricted stock received in connection with the
        demutualization of certain exchanges and mutual fund investments held
        as a hedge against legacy deferred compensation obligations.
    Management believes that the non-GAAP calculation of core brokerage
revenue will allow for a better understanding of the revenue generated by our
sales and trading activities as it excludes gains and losses associated with
activities that are not conducted by our sales and trading professionals, but
that are required to be reported in the brokerage line item


    .
SOURCE  Cowen Group, Inc.

    -0-                           08/06/2009
    /CONTACT:  Thomas Conner, Chief Financial Officer, Cowen Group, Inc. ,
+1-646-562-1719/
    /Web Site:  http://www.cowen.com/ /
    (COWN)

CO:  Cowen Group, Inc.

ST:  New York
IN:  FIN
SU:  ERN

PR
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