NEW YORK, Nov. 7, 2013 /PRNewswire/ -- CIFC Corp.
(NASDAQ: CIFC) ("CIFC" or the "Company") today announced its
results for the third quarter ended September 30, 2013.
(Logo: http://photos.prnewswire.com/prnh/20111114/NY06218LOGO
)
Highlights
- Economic Net Income ("ENI", a non-GAAP measure) almost doubled
to $13.2 million from $6.8 million in the third quarter of the prior
year.
- GAAP net income for the quarter was $8.2
million as compared to $0.7
million for the same period in the prior year.
- Fee Earning AUM from loan-based products totaled $12.3 billion as of September 30, 2013 as compared to $11.0 billion as of September 30, 2012 and $12.4 billion as of June
30, 2013.
- The Company sponsored the issuance of one new CLO and increased
subscriptions to other loan-based products that represented
approximately $607.2 million of
new Fee Earning Assets Under Management ("Fee Earning AUM" or
"AUM").
- Subsequent to quarter end, the Company priced another CLO that
represents approximately $500 million
of new loan-based AUM. Funding for the new CLO is expected to occur
in November 2013.
- CIFC declares a third quarter cash dividend of $0.10 per share. The dividend will be paid on
December 10, 2013 to shareholders of
record as of the close of business on November 25, 2013. Year-to-date the Board of
Directors has declared $0.20 in
dividends per share.
Executive Overview
"We had growth in all revenue categories, especially incentive
fees, which reflects continued strong performance relative to
the return targets, particularly for the CIFC family of CLOs. New
CLO issuance has continued at a robust pace albeit AUM
remained flat due to the high runoff rate of legacy CLOs
driven by very high loan refinancing volumes and its impact on
older, amortizing CLOs. After quarter end, we priced our fourth CLO
of 2013 and management continues to be excited about the company's
market positioning and prospects," said Peter Gleysteen, President and Chief Executive
Officer.
Selected Financial Metrics
(In thousands, except
per share data) (unaudited)
NON-GAAP FINANCIAL
MEASURES (1)
|
3Q'13
|
3Q'12
|
% Change
vs.
3Q'12
|
YTD
'13
|
YTD
'12
|
% Change
vs.
YTD'12
|
Management Fees -
Senior
|
$
|
5,746
|
|
$
|
4,932
|
|
17%
|
$
|
17,338
|
|
$
|
14,656
|
|
18%
|
Management Fees -
Subordinated
|
8,469
|
|
7,954
|
|
6%
|
26,409
|
|
21,876
|
|
21%
|
Incentive fees
|
4,932
|
|
727
|
|
>100%
|
12,099
|
|
1,160
|
|
>100%
|
Total Investment
Advisory Fees
|
19,147
|
|
13,613
|
|
41%
|
55,846
|
|
37,692
|
|
48%
|
Net interest income
|
6,520
|
|
1,531
|
|
>100%
|
12,683
|
|
3,454
|
|
>100%
|
Realized net investment gains/(losses)
|
31
|
|
291
|
|
(89)%
|
6,056
|
|
(1,186)
|
|
>100%
|
Unrealized net investment gains/(losses)
|
(1,926)
|
|
624
|
|
>(100)%
|
(10,127)
|
|
2,286
|
|
>(100)%
|
Net Investment
Income
|
4,625
|
|
2,446
|
|
89%
|
8,612
|
|
4,554
|
|
89%
|
Total
ENI Revenues
|
23,772
|
|
16,059
|
|
48%
|
64,458
|
|
42,246
|
|
53%
|
Compensation and
benefits
|
6,200
|
|
5,188
|
|
20%
|
19,053
|
|
16,479
|
|
16%
|
Other operating
expenses
|
2,881
|
|
2,610
|
|
10%
|
9,196
|
|
9,002
|
|
2%
|
Corporate interest
expense
|
1,460
|
|
1,487
|
|
(2)%
|
4,394
|
|
4,422
|
|
(1)%
|
Total
ENI Expenses
|
10,541
|
|
9,285
|
|
14%
|
32,643
|
|
29,903
|
|
9%
|
ENI
|
$
|
13,231
|
|
$
|
6,774
|
|
95%
|
$
|
31,815
|
|
$
|
12,343
|
|
>100%
|
ENI per share -
basic
|
$
|
0.64
|
|
$
|
0.34
|
|
88%
|
$
|
1.53
|
|
$
|
0.61
|
|
>100%
|
ENI per share -
diluted (2) (3)
|
$
|
0.54
|
|
$
|
0.31
|
|
74%
|
$
|
1.31
|
|
$
|
0.59
|
|
>100%
|
ENI Weighted average
shares outstanding - basic
|
20,798
|
|
19,957
|
|
4%
|
20,802
|
|
20,201
|
|
3%
|
ENI Weighted average
shares outstanding - diluted (3)
|
25,939
|
|
24,818
|
|
5%
|
26,141
|
|
24,796
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-GAAP FINANCIAL
MEASURES (1)
|
3Q'13
|
3Q'12
|
% Change
vs.
3Q'12
|
YTD
'13
|
YTD
'12
|
% Change
vs.
YTD'12
|
EBIT (4)
|
$
|
14,691
|
|
$
|
8,261
|
|
78%
|
$
|
36,209
|
|
$
|
16,765
|
|
>100%
|
EBITDA (5)
|
$
|
14,873
|
|
$
|
8,414
|
|
77%
|
$
|
36,739
|
|
$
|
17,089
|
|
>100%
|
EBITDA Margin
(6)
|
63%
|
|
52%
|
|
11%
|
57%
|
|
40%
|
|
17%
|
Fee Related EBITDA
Margin (6)
|
54%
|
|
44%
|
|
10%
|
50%
|
|
33%
|
|
17%
|
ENI Margin
(6)
|
56%
|
|
42%
|
|
14%
|
49%
|
|
29%
|
|
20%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-GAAP FINANCIAL
MEASURES - AUM
|
9/30/2013
|
6/30/2013
|
% Change
vs.
6/30/2013
|
|
9/30/2012
|
% Change
vs.
9/30/12
|
Fee Earning AUM
from loan-based products (7)
|
$12,280,555
|
$12,386,681
|
(1)%
|
|
$10,973,507
|
12%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED GAAP
RESULTS
|
3Q'13
|
3Q'12
|
% Change
vs.
3Q'12
|
YTD
'13
|
YTD
'12
|
% Change
vs.
YTD'12
|
Total net
revenues
|
$
|
1,922
|
|
$
|
2,826
|
|
(32)%
|
$
|
6,902
|
|
$
|
8,272
|
|
(17)%
|
Total
expenses
|
$
|
13,171
|
|
$
|
11,447
|
|
15%
|
$
|
42,142
|
|
$
|
43,519
|
|
(3)%
|
Net income (loss)
attributable to CIFC Corp.
|
$
|
8,150
|
|
$
|
688
|
|
>100%
|
$
|
18,480
|
|
$
|
(6,215)
|
|
>100%
|
Earnings (loss)
per share - basic
|
$
|
0.39
|
|
$
|
0.03
|
|
>100%
|
$
|
0.89
|
|
$
|
(0.31)
|
|
>100%
|
Earnings (loss)
per share - diluted (2)
|
$
|
0.34
|
|
$
|
0.03
|
|
>100%
|
$
|
0.77
|
|
$
|
(0.31)
|
|
>100%
|
Weighted average
shares outstanding - basic
|
20,798
|
|
19,957
|
|
4%
|
20,802
|
|
20,201
|
|
3%
|
Weighted average
shares outstanding - diluted
|
25,563
|
|
21,908
|
|
17%
|
25,657
|
|
20,201
|
|
27%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Explanatory
Notes:
|
|
(1)
|
See Appendix for a
detailed description of these non-GAAP measures and reconciliations
from net income (loss) attributable to CIFC Corp. to non-GAAP
measures.
|
(2)
|
Numerator in the
dilution calculation has been adjusted to add-back the effect of
convertible note interest charges before taxes for ENI and after
taxes for GAAP.
|
(3)
|
Total diluted ENI
shares represents the pre-tax effect of weighted average shares
outstanding. Dilution assumes (i) that shares are
purchased from proceeds received from the exercise of dilutive
options, (ii) the conversion of the convertible notes, and (iii)
that all dilutive warrants have been fully exercised.
|
(4)
|
EBIT is ENI before
corporate interest expense. See Appendix.
|
(5)
|
EBITDA is EBIT before
depreciation of fixed assets. See Appendix.
|
(6)
|
EBITDA Margin is
EBITDA divided by Total ENI Revenue. Fee Related EBITDA Margin is
EBITDA less Net Investment Income divided by Total Investment
Advisory Fees. ENI Margin is ENI divided by Total ENI
Revenue.
|
(7)
|
Amount excludes Fee
Earning AUM from non-core products, which consists of legacy ABS
and Corporate Bond CDOs of $1.1 billion, $1.3 billion and $2.6
billion as of September 30, 2013, June 30, 2013 and
September 30, 2012, respectively. Fee Earning AUM on CDOs are
expected to continue to decline as these funds run-off per their
contractual terms.
|
|
Q3'13 - ENI
Total
Investment
Advisory
Fees
|
Senior management
fees
|
30%
|
Subordinated
management fees
|
44%
|
Incentive
fees
|
26%
|
Total ENI
Investment Advisory Fees
|
100%
|
|
Q3'12 - ENI
Total
Investment
Advisory
Fees
|
Senior management
fees
|
36%
|
Subordinated
management fees
|
59%
|
Incentive
fees
|
5%
|
Total ENI
Investment Advisory Fees
|
100%
|
Third Quarter 2013 Financial Overview
CIFC reported ENI of $13.2 million
for the third quarter of 2013, as compared to $6.8 million for the same period in the prior
year. ENI increased period to period by $6.4
million primarily driven by favorable incentive fee
performance on the Company's CLOs. Incentive fees increased as
(i) more CLOs reached their incentive hurdles as compared to the
same period in the prior year and (ii) the Company earned 50% of
incentive fees realized on legacy CIFC CLOs (previously, all
incentive fees were paid in connection with the 2011 merger). In
addition, new CLOs and funds sponsored since the third quarter of
2012 contributed to an increase in management fees and the
Company's investments in certain CLOs increased net interest
income. These increases were partially offset by (i) the reversal
of previous unrealized net investment gains due to the liquidation
of an investment, (ii) decreases in management fees from certain
legacy CLOs and CDOs that are amortizing pursuant to their
contractual terms and (iii) slight increases in compensation
expense to support the growth of the company.
CIFC reported GAAP net income attributable to CIFC Corp. of
$8.2 million for the third quarter of
2013, as compared to $0.7 million in
the same period of the prior year. GAAP operating results increased
by $7.5 million from the prior year
period primarily due to the activity noted above. In addition net
losses from contingent liabilities decreased due to changes in the
expected performance of certain CLOs.
Fee Earning AUM
Investment advisory fees earned from investment products the
Company manages on behalf of third party investors are the
Company's primary source of revenue. These fees typically consist
of senior and subordinated management fees based on a percentage of
the investment product's assets and, in some cases, incentive fees
based on the returns the Company generates for investors in the
products.
The Company's total loan-based Fee Earning AUM was approximately
$12.3 billion as of
September 30, 2013. During the quarter, the Company sponsored
the issuance of one new CLO and increased subscriptions to
other-loan based products, increasing new Fee Earning AUM by
approximately $607.2 million. New AUM
mostly offset the declines in Fee Earning AUM for certain CLOs
which have reached the end of their contractual reinvestment
periods, after which capital is returned to investors as the loan
assets underlying the CLOs repay principal. This reduction was
higher than historical norms due to an increase in refinancing
activity during the first half of the year. Incentive fees are
generally paid to the Company as CLOs mature when the relevant
incentive return hurdles and certain other restrictions have been
met.
The following table summarizes Fee Earning AUM for the Company's
significant loan-based products (1):
|
|
September 30,
2013
|
|
June 30,
2013
|
|
September 30,
2012
|
(in thousands,
except # of Products)
|
|
# of
Products
|
|
Fee
Earning
AUM(2)
|
|
# of
Products
|
|
Fee
Earning
AUM(2)
|
|
# of
Products
|
|
Fee
Earning
AUM(2)
|
Post 2011
CLOs
|
|
7
|
|
|
$
|
3,622,438
|
|
|
6
|
|
|
$
|
3,219,531
|
|
|
2
|
|
|
$
|
848,714
|
|
Legacy CLOs
(3)
|
|
24
|
|
|
7,626,653
|
|
|
26
|
|
|
8,344,616
|
|
|
29
|
|
|
9,804,751
|
|
Total CLOs
|
|
31
|
|
|
11,249,091
|
|
|
32
|
|
|
11,564,147
|
|
|
31
|
|
|
10,653,465
|
|
Other loan-based
products
|
|
4
|
|
|
1,031,464
|
|
|
3
|
|
|
822,534
|
|
|
2
|
|
|
320,042
|
|
AUM from
loan-based products
|
|
35
|
|
|
$
|
12,280,555
|
|
|
35
|
|
|
$
|
12,386,681
|
|
|
33
|
|
|
$
|
10,973,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Explanatory
Notes:
|
|
(1)
|
Table excludes Fee
Earning AUM from non-core products, which consists of legacy ABS
and Corporate Bond CDOs of $1.1 billion, $1.3 billion and $2.6
billion as of September 30, 2013, June 30, 2013 and
September 30, 2012, respectively. Fee Earning AUM on CDOs are
expected to continue to decline as these funds run-off per their
contractual terms.
|
(2)
|
Fee Earning AUM
generally reflects the aggregate principal or notional balance of
the collateral and, in some cases, the cash balance held by the CLO
as of the date of the last trustee report received for each CLO
prior to the respective AUM date.
|
(3)
|
Legacy CLOs represent
all managed CLOs issued prior to 2011, including CLOs acquired
since 2011 but issued prior to 2011.
|
Loan-Based Fee
Earning AUM ($ in thousands)
|
|
|
|
|
|
Legacy
CLOs
|
Post 2011
CLOs
|
Other loan
based
products
|
Q3'12
|
9,804,751
|
848,714
|
320,042
|
Q4'12
|
9,599,220
|
1,579,558
|
666,120
|
Q1'13
|
9,004,131
|
2,585,214
|
780,288
|
Q2'13
|
8,344,616
|
3,219,531
|
822,534
|
Q3'13
|
7,626,653
|
3,622,438
|
1,031,464
|
Total loan-based Fee Earning AUM activity for the three and nine
months ended September 30, 2013 are as follows ($ in
thousands):
Activity during
3Q'13
|
|
Amount
|
|
Activity during
YTD '13
|
|
Amount
|
June 30,
2013
|
|
$
|
12,386,681
|
|
|
December 31,
2012
|
|
$
|
11,844,898
|
|
CLO New
Issuances
|
|
401,543
|
|
|
CLO New
Issuances
|
|
2,029,180
|
|
CLO Principal
Paydown
|
|
(615,231)
|
|
|
CLO Principal
Paydown
|
|
(1,601,669)
|
|
CLO Calls,
Redemptions and Sales
|
|
(76,154)
|
|
|
CLO Calls,
Redemptions and Sales
|
|
(295,256)
|
|
Fund
Subscriptions
|
|
205,614
|
|
|
Fund
Subscriptions
|
|
388,211
|
|
Fund
Redemptions
|
|
—
|
|
|
Fund
Redemptions
|
|
(10,354)
|
|
Other (1)
|
|
(21,898)
|
|
|
Other (1)
|
|
(74,455)
|
|
September 30,
2013
|
|
$
|
12,280,555
|
|
|
September 30,
2013
|
|
$
|
12,280,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Explanatory
Note:
|
|
|
(1)
|
Other includes
changes in collateral balances of CLOs between periods and market
value changes in certain other loan-based products.
|
Liquidity
As of September 30, 2013, total
cash and cash equivalents was $59.9
million, an increase of $12.2
million from $47.7 million as
of December 31, 2012. The increase in
cash and cash equivalents was primarily attributable to operating
income (net of taxes), partially offset by net investment activity,
and dividend payments of $2.1
million.
Investments
Total investments held by the company increased $14.0 million to $93.2
million as of September 30, 2013 from $79.2 million as of December 31, 2012. As of
September 30, 2013, the Company's investments included CLO
residual interests of $50.5
million(a), warehouses of $16.1 million(a), loans of
$16.0 million and other loan-based
products of $10.6 million. As of
December 31, 2012, the Company's investments included CLO
residual interests of $47.4
million(a), warehouses of $26.7 million(a) and other loan-based
products of $5.1 million.
(a) Pursuant to GAAP, investments in consolidated CLO funds and
Warehouses are not reported in "Investments at Fair Value" of
Consolidated VIEs on our Consolidated Balance Sheets. See Appendix
for a Reconciliation from GAAP to Non-GAAP - Consolidated Balance
Sheets for further details.
Non-GAAP Financial Measures
The Company discloses financial measures that are calculated and
presented on a basis of methodology other than in accordance with
generally accepted accounting principles of the United States of America ("Non-GAAP") as
follows:
ENI is a non-GAAP financial measure of profitability which
management uses in addition to GAAP Net income attributable to CIFC
Corp. to measure the performance of its core business. The Company
believes ENI reflects the nature and substance of the business, the
economic results driven by investment advisory fee revenues from
the management of client funds and earnings on the Company's
investments. ENI represents net income (loss) attributable to CIFC
Corp. before taxes, gains (losses) on disposition(s) of non-core
assets, a portion of non-cash compensation related to profits
interests granted by CIFC Parent Holdings LLC (a significant
stockholder in the Company) in June
2011, amortization and impairments of intangible assets,
gains/(losses) on derivatives and contingent liabilities and
certain non-recurring operating expenses and strategic transaction
expenses (such as those associated with the mergers and
acquisitions). ENI also presents investment advisory fee
revenues net of any fee-sharing arrangements primarily resulting
from mergers or acquisitions.
EBIT and EBITDA are also non-GAAP financial measures that
management considers, in addition to net income (loss) attributable
to CIFC Corp., to evaluate the Company's core performance. EBIT
represents ENI before corporate interest expense and EBITDA
represents EBIT before depreciation of fixed assets, a non-cash
item.
ENI, EBIT and EBITDA may not be comparable to similar measures
presented by other companies, as they are non-GAAP financial
measures that are not based on a comprehensive set of accounting
rules or principles and therefore may be defined differently
by other companies. In addition, ENI, EBIT and EBITDA should be
considered an addition to, not as a substitute for, or superior to,
financial measures determined in accordance with GAAP.
A detailed calculation of ENI, EBIT and EBITDA and a
reconciliation to the most comparable GAAP financial measure is
included in the Appendix.
[Financial Tables to Follow in
Appendix]
About CIFC
CIFC is a fundamentals-based, relative value credit manager. Our
senior management team averages 30 years of credit experience
having managed credit businesses in every cycle since the 1980's.
Headquartered in New York, CIFC is
an SEC registered investment adviser and a publicly traded company
(NASDAQ: CIFC). We currently serve over 200 institutional investors
globally. For more information, please visit CIFC's website at
www.cifc.com.
Forward-Looking Statements
This release may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934 which reflect CIFC's
current views with respect to, among other things, CIFC's
operations and financial performance. You can identify these
forward-looking statements by the use of words such as "outlook,"
"believes," "expects," "potential," "continues," "may," "will,"
"should," \"seeks," "approximately," "predicts," "intends,"
"plans," "estimates," "anticipates" or the negative version of
these words or other comparable words. Such forward-looking
statements are subject to various risks and uncertainties.
Accordingly, there are or will be important factors that could
cause actual outcomes or results to differ materially from those
indicated in these statements. CIFC believes these factors include
but are not limited to those described under the section entitled
"Risk Factors" in its Annual Report on Form 10-K for the fiscal
year ended December 31, 2012, as such
factors may be updated from time to time in its periodic filings
with the Securities and Exchange Commission, which are accessible
on the SEC's website at www.sec.gov. These factors should not be
construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included in this release and
in the filings. CIFC undertakes no obligation to publicly update or
review any forward-looking statement, whether as a result of new
information, future developments or otherwise.
Appendix - Table of Contents
- Summary reconciliation of GAAP net income (loss)
attributable to CIFC Corp. to Non-GAAP measures (ENI, EBIT and
EBITDA) for the Three and Nine Months Ended September 30, 2013 and 2012
(unaudited)
- Reconciliation of GAAP to Non-GAAP measures (GAAP
basis Statement of Operations are adjusted to exclude the
consolidation of VIEs) for the Three Months Ended September 30, 2013 and 2012
(unaudited)
- Reconciliation of GAAP to Non-GAAP measures (GAAP
basis Statement of Operations are adjusted to exclude the
consolidation of VIEs) for the Nine Months Ended September 30, 2013 and 2012
(unaudited)
- Reconciliation of GAAP to Non-GAAP measures (GAAP
basis Balance Sheets are adjusted to exclude the consolidation of
VIEs) as of September 30, 2013 and
December 31, 2012
(unaudited)
- Reconciliation from GAAP to Non-GAAP measures
- Diluted Weighted Average Shares Outstanding
(unaudited)
Appendix
Summary Reconciliation of GAAP Net income (loss) attributable
to CIFC Corp. to Non-GAAP Measures (unaudited)
(In thousands)
(unaudited)
|
3Q'13
|
3Q'12
|
YTD
'13
|
YTD
'12
|
GAAP Net income
(loss) attributable to CIFC Corp.
|
$
|
8,150
|
|
$
|
688
|
|
$
|
18,480
|
|
$
|
(6,215)
|
|
Advisory fee sharing
arrangements (1)
|
(3,490)
|
|
(2,511)
|
|
(13,388)
|
|
(7,143)
|
|
Compensation costs
(2)
|
517
|
|
—
|
|
2,174
|
|
—
|
|
Insurance settlement
received
|
—
|
|
—
|
|
—
|
|
(657)
|
|
Amortization and
impairment of intangibles
|
3,573
|
|
3,649
|
|
11,721
|
|
14,772
|
|
Restructuring
charges
|
—
|
|
—
|
|
—
|
|
3,923
|
|
Net (gain)/loss on
contingent liabilities, derivatives and other
|
(1,099)
|
|
6,048
|
|
(1,598)
|
|
10,037
|
|
Strategic
transactions expenses (3)
|
—
|
|
657
|
|
—
|
|
657
|
|
Gain on sales of
contracts (4)
|
(634)
|
|
—
|
|
(1,386)
|
|
(5,772)
|
|
Income tax expense
(benefit)
|
6,214
|
|
(1,757)
|
|
15,812
|
|
2,741
|
|
Total reconciling and
non-recurring items
|
5,081
|
|
6,086
|
|
13,335
|
|
18,558
|
|
ENI
|
$
|
13,231
|
|
$
|
6,774
|
|
$
|
31,815
|
|
$
|
12,343
|
|
Add: Corporate
interest expense
|
1,460
|
|
1,487
|
|
4,394
|
|
4,422
|
|
EBIT
|
$
|
14,691
|
|
$
|
8,261
|
|
$
|
36,209
|
|
$
|
16,765
|
|
Add: Depreciation
of fixed assets
|
182
|
|
153
|
|
530
|
|
324
|
|
EBITDA
|
$
|
14,873
|
|
$
|
8,414
|
|
$
|
36,739
|
|
$
|
17,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Explanatory
Notes:
|
|
(1)
|
The Company shares
advisory fees on certain of the CLOs it manages (for example,
advisory fees on certain acquired funds are shared with the party
that sold the funds to CIFC). Investment advisory fees are
presented on a gross basis for GAAP and on a net basis for Non-GAAP
ENI.
|
(2)
|
For the three and
nine months ended September 30, 2013, compensation has been
adjusted for non-cash compensation related to profits interests
granted to CIFC employees by CIFC Parent Holdings LLC (as
significant stockholder in the Company) in 2011 and sharing of
incentive fees with certain former employees established in
connection with the Company's Columbus Nova Credit Investments
Management, LLC Acquisition ("CNCIM").
|
(3)
|
These expenses relate
to the strategic relationship transaction with General Electric
Capital Corporation.
|
(4)
|
Gains relate to the
sale of the rights to manage Gillespie CLO PLC in January
2012.
|
Reconciliation from GAAP to Non-GAAP Measures - Consolidated
Statements of Operations (unaudited) (1)
|
|
3Q'13
|
|
3Q'12
|
(In thousands)
(unaudited)
|
|
Consolidated
GAAP
|
|
Consolidation
Adjustments
|
|
Deconsolidated
Non-GAAP
|
|
Consolidated
GAAP
|
|
Consolidation
Adjustments
|
|
Deconsolidated
Non-GAAP
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment advisory
fees
|
|
$
|
1,763
|
|
|
$
|
20,874
|
|
|
$
|
22,637
|
|
|
$
|
2,750
|
|
|
$
|
13,374
|
|
|
$
|
16,124
|
|
Net investment
income
|
|
159
|
|
|
4,466
|
|
|
4,625
|
|
|
76
|
|
|
2,370
|
|
|
2,446
|
|
Total net
revenues
|
|
1,922
|
|
|
25,340
|
|
|
27,262
|
|
|
2,826
|
|
|
15,744
|
|
|
18,570
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
6,717
|
|
|
—
|
|
|
6,717
|
|
|
5,188
|
|
|
—
|
|
|
5,188
|
|
Professional
services
|
|
736
|
|
|
—
|
|
|
736
|
|
|
1,220
|
|
|
—
|
|
|
1,220
|
|
General and
administrative expenses
|
|
1,963
|
|
|
—
|
|
|
1,963
|
|
|
1,237
|
|
|
—
|
|
|
1,237
|
|
Depreciation and
amortization
|
|
3,755
|
|
|
—
|
|
|
3,755
|
|
|
3,802
|
|
|
—
|
|
|
3,802
|
|
Total
expenses
|
|
13,171
|
|
|
—
|
|
|
13,171
|
|
|
11,447
|
|
|
—
|
|
|
11,447
|
|
Other Income
(Expense) and Gain (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on
investments at fair value
|
|
287
|
|
|
(287)
|
|
|
—
|
|
|
291
|
|
|
(291)
|
|
|
—
|
|
Net gain (loss) on
contingent liabilities at fair value
|
|
1,099
|
|
|
—
|
|
|
1,099
|
|
|
(6,059)
|
|
|
—
|
|
|
(6,059)
|
|
Corporate interest
expense
|
|
(1,460)
|
|
|
—
|
|
|
(1,460)
|
|
|
(1,487)
|
|
|
—
|
|
|
(1,487)
|
|
Net gain on the sale
of management contracts
|
|
634
|
|
|
—
|
|
|
634
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Strategic
transactions expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(657)
|
|
|
—
|
|
|
(657)
|
|
Other, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
Net other income
(expense) and gain (loss)
|
|
560
|
|
|
(287)
|
|
|
273
|
|
|
(7,901)
|
|
|
(291)
|
|
|
(8,192)
|
|
Operating income
(loss)
|
|
(10,689)
|
|
|
25,053
|
|
|
14,364
|
|
|
(16,522)
|
|
|
15,453
|
|
|
(1,069)
|
|
Net results of
Consolidated VIEs
|
|
22,765
|
|
|
(22,765)
|
|
|
—
|
|
|
(153,548)
|
|
|
153,548
|
|
|
—
|
|
Income (loss)
before income tax (expense) benefit
|
|
12,076
|
|
|
2,288
|
|
|
14,364
|
|
|
(170,070)
|
|
|
169,001
|
|
|
(1,069)
|
|
Income tax (expense)
benefit
|
|
(6,214)
|
|
|
—
|
|
|
(6,214)
|
|
|
1,757
|
|
|
—
|
|
|
1,757
|
|
Net income
(loss)
|
|
5,862
|
|
|
2,288
|
|
|
8,150
|
|
|
(168,313)
|
|
|
169,001
|
|
|
688
|
|
Net (income) loss
attributable to noncontrolling interest in Consolidated
VIEs
|
|
2,288
|
|
|
(2,288)
|
|
|
—
|
|
|
169,001
|
|
|
(169,001)
|
|
|
—
|
|
Net income (loss)
attributable to CIFC Corp.
|
|
$
|
8,150
|
|
|
$
|
—
|
|
|
$
|
8,150
|
|
|
$
|
688
|
|
|
$
|
—
|
|
|
$
|
688
|
|
Explanatory
Note:
|
|
|
(1)
|
The Consolidated
Statements of Operations have been adjusted to present on a
deconsolidated non-GAAP basis, which eliminates the impact of
Consolidated VIEs. Management uses these statements in addition to
GAAP to measure the performance of its core business.
|
Reconciliation from GAAP to Non-GAAP Measures - Consolidated
Statements of Operations (continued) (1)
|
|
YTD
'13
|
|
YTD
'12
|
(In thousands)
(unaudited)
|
|
Consolidated
GAAP
|
|
Consolidation
Adjustments
|
|
Deconsolidated
Non-GAAP
|
|
Consolidated
GAAP
|
|
Consolidation
Adjustments
|
|
Deconsolidated
Non-GAAP
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment advisory
fees
|
|
$
|
6,646
|
|
|
$
|
62,588
|
|
|
$
|
69,234
|
|
|
$
|
8,048
|
|
|
$
|
36,787
|
|
|
$
|
44,835
|
|
Net investment
income
|
|
256
|
|
|
8,356
|
|
|
8,612
|
|
|
224
|
|
|
4,330
|
|
|
4,554
|
|
Total net
revenues
|
|
6,902
|
|
|
70,944
|
|
|
77,846
|
|
|
8,272
|
|
|
41,117
|
|
|
49,389
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
21,227
|
|
|
—
|
|
|
21,227
|
|
|
16,479
|
|
|
—
|
|
|
16,479
|
|
Professional
services
|
|
3,374
|
|
|
—
|
|
|
3,374
|
|
|
3,620
|
|
|
—
|
|
|
3,620
|
|
General and
administrative expenses
|
|
5,290
|
|
|
—
|
|
|
5,290
|
|
|
4,401
|
|
|
—
|
|
|
4,401
|
|
Depreciation and
amortization
|
|
12,251
|
|
|
—
|
|
|
12,251
|
|
|
13,325
|
|
|
—
|
|
|
13,325
|
|
Impairment of
intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,771
|
|
|
—
|
|
|
1,771
|
|
Restructuring
charges
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,923
|
|
|
—
|
|
|
3,923
|
|
Total
expenses
|
|
42,142
|
|
|
—
|
|
|
42,142
|
|
|
43,519
|
|
|
—
|
|
|
43,519
|
|
Other Income
(Expense) and Gain (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on
investments at fair value
|
|
887
|
|
|
(887)
|
|
|
—
|
|
|
434
|
|
|
(603)
|
|
|
(169)
|
|
Net gain (loss) on
contingent liabilities at fair value
|
|
1,598
|
|
|
—
|
|
|
1,598
|
|
|
(9,400)
|
|
|
—
|
|
|
(9,400)
|
|
Corporate interest
expense
|
|
(4,394)
|
|
|
—
|
|
|
(4,394)
|
|
|
(4,422)
|
|
|
—
|
|
|
(4,422)
|
|
Net gain on the sale
of management contracts
|
|
1,386
|
|
|
—
|
|
|
1,386
|
|
|
5,772
|
|
|
—
|
|
|
5,772
|
|
Strategic
transactions expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(657)
|
|
|
—
|
|
|
(657)
|
|
Other, net
|
|
(2)
|
|
|
—
|
|
|
(2)
|
|
|
(468)
|
|
|
—
|
|
|
(468)
|
|
Net other income
(expense) and gain (loss)
|
|
(525)
|
|
|
(887)
|
|
|
(1,412)
|
|
|
(8,741)
|
|
|
(603)
|
|
|
(9,344)
|
|
Operating income
(loss)
|
|
(35,765)
|
|
|
70,057
|
|
|
34,292
|
|
|
(43,988)
|
|
|
40,514
|
|
|
(3,474)
|
|
Net results of
Consolidated VIEs
|
|
122,925
|
|
|
(122,925)
|
|
|
—
|
|
|
(97,335)
|
|
|
97,335
|
|
|
—
|
|
Income (loss)
before income tax (expense) benefit
|
|
87,160
|
|
|
(52,868)
|
|
|
34,292
|
|
|
(141,323)
|
|
|
137,849
|
|
|
(3,474)
|
|
Income tax (expense)
benefit
|
|
(15,812)
|
|
|
—
|
|
|
(15,812)
|
|
|
(2,741)
|
|
|
—
|
|
|
(2,741)
|
|
Net income
(loss)
|
|
71,348
|
|
|
(52,868)
|
|
|
18,480
|
|
|
(144,064)
|
|
|
137,849
|
|
|
(6,215)
|
|
Net (income) loss
attributable to noncontrolling interest in
Consolidated
VIEs
|
|
(52,868)
|
|
|
52,868
|
|
|
—
|
|
|
137,849
|
|
|
(137,849)
|
|
|
—
|
|
Net income (loss)
attributable to CIFC Corp.
|
|
$
|
18,480
|
|
|
$
|
—
|
|
|
$
|
18,480
|
|
|
$
|
(6,215)
|
|
|
$
|
—
|
|
|
$
|
(6,215)
|
|
Explanatory
Note:
|
|
|
(1)
|
The Consolidated
Statements of Operations have been adjusted to present on a
deconsolidated non-GAAP basis, which eliminates the impact of
Consolidated VIEs. Management uses these statements in addition to
GAAP to measure the performance of its core business.
|
Reconciliation from GAAP to Non-GAAP - Consolidated Balance
Sheets (unaudited) (1)
|
|
September 30,
2013
|
|
December 31,
2012
|
(In thousands)
(unaudited)
|
|
GAAP
|
|
Consolidation
Adjustments
|
|
Deconsolidated
Non-GAAP
|
|
GAAP
|
|
Consolidation
Adjustments
|
|
Deconsolidated
Non-GAAP
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
59,930
|
|
|
$
|
—
|
|
|
$
|
59,930
|
|
|
$
|
47,692
|
|
|
$
|
—
|
|
|
$
|
47,692
|
|
Due from
brokers
|
|
3,988
|
|
|
—
|
|
|
3,988
|
|
|
1,150
|
|
|
—
|
|
|
1,150
|
|
Restricted cash and
cash equivalents
|
|
1,699
|
|
|
—
|
|
|
1,699
|
|
|
1,612
|
|
|
—
|
|
|
1,612
|
|
Investments at fair
value
|
|
26,569
|
|
|
66,625
|
|
|
93,194
|
|
|
5,058
|
|
|
74,176
|
|
|
79,234
|
|
Receivables
|
|
3,421
|
|
|
3,570
|
|
|
6,991
|
|
|
2,432
|
|
|
2,675
|
|
|
5,107
|
|
Prepaid and other
assets
|
|
3,889
|
|
|
—
|
|
|
3,889
|
|
|
5,392
|
|
|
—
|
|
|
5,392
|
|
Deferred tax asset,
net
|
|
54,331
|
|
|
—
|
|
|
54,331
|
|
|
50,545
|
|
|
—
|
|
|
50,545
|
|
Equipment and
improvements, net
|
|
3,929
|
|
|
—
|
|
|
3,929
|
|
|
3,979
|
|
|
—
|
|
|
3,979
|
|
Intangible assets,
net
|
|
31,417
|
|
|
—
|
|
|
31,417
|
|
|
43,136
|
|
|
—
|
|
|
43,136
|
|
Goodwill
|
|
76,000
|
|
|
—
|
|
|
76,000
|
|
|
76,000
|
|
|
—
|
|
|
76,000
|
|
Subtotal
|
|
265,173
|
|
|
70,195
|
|
|
335,368
|
|
|
236,996
|
|
|
76,851
|
|
|
313,847
|
|
Total assets of
Consolidated VIEs
|
|
10,830,724
|
|
|
(10,830,724)
|
|
|
—
|
|
|
10,267,915
|
|
|
(10,267,915)
|
|
|
—
|
|
Total
Assets
|
|
$
|
11,095,897
|
|
|
$
|
(10,760,529)
|
|
|
$
|
335,368
|
|
|
$
|
10,504,911
|
|
|
$
|
(10,191,064)
|
|
|
$
|
313,847
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to
brokers
|
|
$
|
19,891
|
|
|
$
|
—
|
|
|
$
|
19,891
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued and other
liabilities
|
|
13,575
|
|
|
—
|
|
|
13,575
|
|
|
15,734
|
|
|
—
|
|
|
15,734
|
|
Deferred purchase
payments
|
|
2,593
|
|
|
—
|
|
|
2,593
|
|
|
4,778
|
|
|
—
|
|
|
4,778
|
|
Contingent
liabilities at fair value
|
|
19,138
|
|
|
—
|
|
|
19,138
|
|
|
33,783
|
|
|
—
|
|
|
33,783
|
|
Long-term
debt
|
|
138,915
|
|
|
—
|
|
|
138,915
|
|
|
138,233
|
|
|
—
|
|
|
138,233
|
|
Subtotal
|
|
194,112
|
|
|
—
|
|
|
194,112
|
|
|
192,528
|
|
|
—
|
|
|
192,528
|
|
Total non-recourse
liabilities of Consolidated VIEs
|
|
10,629,632
|
|
|
(10,629,632)
|
|
|
—
|
|
|
10,113,035
|
|
|
(10,113,035)
|
|
|
—
|
|
Total
Liabilities
|
|
10,823,744
|
|
|
(10,629,632)
|
|
|
194,112
|
|
|
10,305,563
|
|
|
(10,113,035)
|
|
|
192,528
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
21
|
|
|
—
|
|
|
21
|
|
|
21
|
|
|
—
|
|
|
21
|
|
Treasury
stock
|
|
(915)
|
|
|
—
|
|
|
(915)
|
|
|
(664)
|
|
|
—
|
|
|
(664)
|
|
Additional paid-in
capital
|
|
959,201
|
|
|
—
|
|
|
959,201
|
|
|
955,407
|
|
|
—
|
|
|
955,407
|
|
Accumulated other
comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
|
(3)
|
|
Retained earnings
(deficit)
|
|
(817,051)
|
|
|
—
|
|
|
(817,051)
|
|
|
(833,442)
|
|
|
—
|
|
|
(833,442)
|
|
Total CIFC Corp.
Stockholder's Equity
|
|
141,256
|
|
|
—
|
|
|
141,256
|
|
|
121,319
|
|
|
—
|
|
|
121,319
|
|
Appropriated retained
earnings (deficit) of Consolidated VIEs
|
|
130,897
|
|
|
(130,897)
|
|
|
—
|
|
|
78,029
|
|
|
(78,029)
|
|
|
—
|
|
Total
Equity
|
|
272,153
|
|
|
(130,897)
|
|
|
141,256
|
|
|
199,348
|
|
|
(78,029)
|
|
|
121,319
|
|
Total Liabilities
and Stockholders' Equity
|
|
$
|
11,095,897
|
|
|
$
|
(10,760,529)
|
|
|
$
|
335,368
|
|
|
$
|
10,504,911
|
|
|
$
|
(10,191,064)
|
|
|
$
|
313,847
|
|
Explanatory
Note:
|
|
|
(1)
|
The Consolidated
Balance Sheets have been adjusted to present a deconsolidated
non-GAAP statements, which eliminates the impact of Consolidated
VIEs. Management uses these statements in addition to GAAP to
measure the performance of its core business.
|
Reconciliation of GAAP to Non-GAAP Measures - Weighted
Average Shares Outstanding (unaudited)
The table below represents Non-GAAP weighted average diluted
shares outstanding (1):
(In thousands)
(unaudited)
|
3Q'13
|
3Q'12
|
YTD
'13
|
YTD
'12
|
Basic GAAP
Weighted-average Shares
|
20,798
|
19,957
|
20,802
|
20,201
|
Add: Convertible
Notes (2)
|
4,132
|
—
|
4,132
|
—
|
Add: Stock Options
(3)
|
225
|
1,834
|
229
|
—
|
Add: Warrants
(3)
|
408
|
117
|
494
|
—
|
Diluted GAAP
Weighted-average Shares
|
25,563
|
21,908
|
25,657
|
20,201
|
|
|
|
|
|
Less: GAAP - Stock
Options Dilutive Effect
|
(225)
|
(1,834)
|
(229)
|
—
|
Add: ENI -
Convertible Notes (2)
|
—
|
4,132
|
—
|
4,132
|
Add: ENI - Stock
Options (3)
|
601
|
612
|
713
|
380
|
Add: ENI - Warrants
(3)
|
—
|
—
|
—
|
83
|
Diluted ENI
Weighted-average Shares
|
25,939
|
24,818
|
26,141
|
24,796
|
|
|
|
|
|
Explanatory
Notes:
|
|
|
(1)
|
Total diluted ENI
weighted-average shares represents the pre-tax effect of weighted
average shares outstanding. Dilution assumes (i) that shares are
purchased from proceeds received from the exercise of dilutive
options, (ii) the conversion of the convertible notes, and (iii)
that all dilutive warrants have been fully exercised.
|
(2)
|
For the three and
nine months ended September 30, 2012, convertible notes were
not included in diluted GAAP weighted-average shares outstanding,
as the notes were anti-dilutive during the periods.
|
(3)
|
For the nine months
ended September 30, 2012, dilutive shares related to options
and warrants were not included in diluted GAAP weighted-average
shares outstanding, as they were anti-dilutive during the
periods.
|
SOURCE CIFC Corp.