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EX-32.2 - CFO CERTIFICATION - SECTION 906 - COHEN & STEERS, INC.cns10q-63017ex322.htm
EX-32.1 - CEO CERTIFICATION - SECTION 906 - COHEN & STEERS, INC.cns10q-63017ex321.htm
EX-31.2 - CFO CERTIFICATION - SECTION 302 - COHEN & STEERS, INC.cns10q-63017ex312.htm
EX-31.1 - CEO CERTIFICATION - SECTION 302 - COHEN & STEERS, INC.cns10q-63017ex311.htm


________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2017
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM              TO             
Commission File Number: 001-32236 
 ________________
COHEN & STEERS, INC.
(Exact Name of Registrant as Specified in its Charter)
 ________________ 
Delaware
 
14-1904657
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
280 Park Avenue
New York, NY
 
10017
(Address of Principal Executive Offices)
 
(Zip Code)
(212) 832-3232
(Registrant’s Telephone Number, Including Area Code)
  ________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
x
  
Accelerated filer
 
o
 
 
 
 
 
 
 
 
 
 
 
Smaller reporting company
 
o
 
 
 
 
Non-accelerated filer
 
o  (Do not check if a smaller reporting company)
  
Emerging growth company
 
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of August 1, 2017 was 46,303,257.
________________________________________________________



COHEN & STEERS, INC. AND SUBSIDIARIES
Form 10-Q
Index

 
 
Page
Part I.
Financial Information
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Part II.
Other Information *
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
* Items other than those listed above have been omitted because they are not applicable.



Forward-Looking Statements
This report and other documents filed by us contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect management’s current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “may,” “should,” “seeks,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative versions 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 forward-looking statements. We believe that these factors include, but are not limited to, the risks described in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2016 (the Form 10-K), which is accessible on the Securities and Exchange Commission’s website at www.sec.gov and on our website at www.cohenandsteers.com. These factors are not exhaustive and should be read in conjunction with the other cautionary statements that are included in this report, the Form 10-K and our other filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.



PART I—Financial Information

Item 1. Financial Statements

COHEN & STEERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(in thousands, except share data)
 
June 30,
2017
 
December 31,
2016
ASSETS
 
 
 
Cash and cash equivalents
$
178,414

 
$
183,234

Trading investments ($598 and $487) (1) ($66,417 and $6,987) (2)
73,556

 
12,689

Equity method investments
5,892

 
6,459

Available-for-sale investments
28,257

 
35,396

Accounts receivable
50,635

 
46,288

Due from brokers ($12,989 and $475) (2)
14,452

 
1,579

Property and equipment—net
15,471

 
15,964

Goodwill and intangible assets—net
19,866

 
19,118

Deferred income tax asset—net
4,450

 
5,619

Other assets ($832 and $43) (2)
6,890

 
7,382

Total assets
$
397,883

 
$
333,728

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Liabilities:
 
 
 
Accrued compensation
$
19,038

 
$
35,333

Distribution and service fees payable
7,089

 
6,452

Income tax payable
8,583

 
9,375

Due to brokers ($11,835 and $0) (2)
11,835

 

Deferred rent
6,113

 
6,229

Other liabilities and accrued expenses ($121 and $75) (2)
9,753

 
9,672

Total liabilities
62,411

 
67,061

Commitments and contingencies (See Note 11)

 

Redeemable noncontrolling interest
45,419

 
853

Stockholders’ equity:
 
 
 
Common stock, $0.01 par value; 500,000,000 shares authorized; 51,088,099 and 50,415,152 shares issued at June 30, 2017 and December 31, 2016, respectively
511

 
504

Additional paid-in capital
556,383

 
543,829

Accumulated deficit
(108,581
)
 
(127,957
)
Accumulated other comprehensive loss, net of tax
(4,511
)
 
(5,885
)
Less: Treasury stock, at cost, 4,787,883 and 4,524,694 shares at June 30, 2017 and December 31, 2016, respectively
(153,749
)
 
(144,677
)
Total stockholders’ equity
290,053

 
265,814

Total liabilities and stockholders’ equity
$
397,883

 
$
333,728

_________________________
(1)
Pledged as collateral attributable to the consolidated balances of Cohen & Steers Active Commodities Strategy Fund, Inc. as of June 30, 2017 and December 31, 2016, respectively.
(2)
Asset and liability amounts in parentheses represent the aggregated balances at June 30, 2017 and December 31, 2016 attributable to Cohen & Steers SICAV Global Listed Infrastructure Fund, Cohen & Steers SICAV Global Preferred Securities Fund and Cohen & Steers Co-Investment Partnership, L.P., which were variable interest entities as of June 30, 2017 and December 31, 2016, respectively.
See notes to condensed consolidated financial statements


1


COHEN & STEERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share data)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
Investment advisory and administration fees
$
84,893

 
$
79,090

 
$
166,796

 
$
152,178

Distribution and service fees
5,104

 
4,671

 
10,150

 
8,904

Portfolio consulting and other
2,815

 
2,612

 
5,552

 
4,972

Total revenue
92,812

 
86,373

 
182,498

 
166,054

Expenses:
 
 
 
 
 
 
 
Employee compensation and benefits
30,412

 
28,287

 
59,795

 
56,327

Distribution and service fees
10,157

 
9,773

 
19,937

 
18,475

General and administrative
13,059

 
12,489

 
25,989

 
25,224

Depreciation and amortization
1,827

 
1,693

 
3,892

 
3,590

Total expenses
55,455

 
52,242

 
109,613

 
103,616

Operating income
37,357

 
34,131

 
72,885

 
62,438

Non-operating income (loss):
 
 
 
 
 
 
 
Interest and dividend income—net
786

 
558

 
1,285

 
1,100

Gain (loss) from trading investments—net
2

 
1,017

 
275

 
810

Equity in earnings (losses) of affiliates
(279
)
 
2,640

 
(568
)
 
3,067

Gain (loss) from available-for-sale investments—net
83

 
158

 
118

 
128

Other gains (losses)—net
(331
)
 
93

 
(622
)
 
4

Total non-operating income (loss)
261

 
4,466

 
488

 
5,109

Income before provision for income taxes
37,618

 
38,597

 
73,373

 
67,547

Provision for income taxes
14,620

 
13,676

 
27,431

 
24,759

Net income
22,998

 
24,921

 
45,942

 
42,788

Less: Net (income) loss attributable to redeemable noncontrolling interest
476

 
(113
)
 
517

 
103

Net income attributable to common stockholders
$
23,474

 
$
24,808

 
$
46,459

 
$
42,891

 
 
 
 
 
 
 
 
Earnings per share attributable to common stockholders:
 
 
 
 
 
 
 
Basic
$
0.51

 
$
0.54

 
$
1.00

 
$
0.93

Diluted
$
0.50

 
$
0.53

 
$
0.99

 
$
0.93

Dividends declared per share
$
0.28

 
$
0.26

 
$
0.56

 
$
0.52

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
46,373

 
45,984

 
46,308

 
45,896

Diluted
46,902

 
46,378

 
46,753

 
46,287


See notes to condensed consolidated financial statements


2



COHEN & STEERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in thousands)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
22,998

 
$
24,921

 
$
45,942

 
$
42,788

Less: Net (income) loss attributable to redeemable noncontrolling interest
476

 
(113
)
 
517

 
103

Net income attributable to common stockholders
23,474

 
24,808

 
46,459

 
42,891

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation gain (loss)
887

 
(1,317
)
 
1,374

 
(945
)
Net unrealized gain (loss) from available-for-sale investments
(296
)
 
1,374

 
118

 
2,161

Reclassification to statements of operations of (gain) loss from available-for-sale investments
(83
)
 
(158
)
 
(118
)
 
(128
)
Other comprehensive income (loss)
508

 
(101
)
 
1,374

 
1,088

Total comprehensive income attributable to common stockholders
$
23,982

 
$
24,707

 
$
47,833

 
$
43,979

See notes to condensed consolidated financial statements


3


COHEN & STEERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND
REDEEMABLE NONCONTROLLING INTEREST (Unaudited)
(in thousands)
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated Deficit
 
Accumulated Other
Comprehensive
Income (Loss), Net of Tax
 
Treasury
Stock
 
Total
Stockholders’
Equity
 
Redeemable
Noncontrolling
Interest
 
Shares of Common Stock, Net
Beginning balance, January 1, 2016
 
$
497

 
$
519,855

 
$
(148,096
)
 
$
(3,843
)
 
$
(136,637
)
 
$
231,776

 
$
11,334

 
45,440

Dividends
 

 

 
(24,467
)
 

 

 
(24,467
)
 

 

Issuance of common stock
 
7

 
446

 

 

 

 
453

 

 
704

Repurchase of common stock
 

 

 

 

 
(7,937
)
 
(7,937
)
 

 
(272
)
Tax deficiency associated with restricted stock units—net
 

 
(1,301
)
 

 

 

 
(1,301
)
 

 

Issuance of restricted stock units
 

 
780

 

 

 

 
780

 

 

Amortization of restricted stock units—net
 

 
11,949

 

 

 

 
11,949

 

 

Forfeitures of restricted stock units
 

 
(29
)
 

 

 

 
(29
)
 

 

Net income (loss)
 

 

 
42,891

 

 

 
42,891

 
(103
)
 

Other comprehensive income (loss), net of tax
 

 

 

 
1,088

 

 
1,088

 

 

Contributions from redeemable noncontrolling interest
 

 

 

 

 

 

 
3,877

 

Distributions to redeemable noncontrolling interest
 

 

 

 

 

 

 
(181
)
 

Transfer of redeemable noncontrolling interest in consolidated entity
 

 

 

 

 

 

 
(14,036
)
 

Ending balance, June 30, 2016
 
$
504

 
$
531,700

 
$
(129,672
)
 
$
(2,755
)
 
$
(144,574
)
 
$
255,203

 
$
891

 
45,872

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance, January 1, 2017
 
$
504

 
$
543,829

 
$
(127,957
)
 
$
(5,885
)
 
$
(144,677
)
 
$
265,814

 
$
853

 
45,890

Dividends
 

 

 
(26,798
)
 

 

 
(26,798
)
 

 

Issuance of common stock
 
7

 
467

 

 

 

 
474

 

 
673

Repurchase of common stock
 

 

 

 

 
(9,072
)
 
(9,072
)
 

 
(263
)
Issuance of restricted stock units
 

 
1,156

 

 

 

 
1,156

 

 

Amortization of restricted stock units—net
 

 
11,002

 
(285
)
 

 

 
10,717

 

 

Forfeitures of restricted stock units
 

 
(71
)
 

 

 

 
(71
)
 

 

Net income (loss)
 

 

 
46,459

 

 

 
46,459

 
(517
)
 

Other comprehensive income (loss), net of tax
 

 

 

 
1,374

 

 
1,374

 

 

Contributions from redeemable noncontrolling interest
 

 

 

 

 

 

 
45,132

 

Distributions to redeemable noncontrolling interest
 

 

 

 

 

 

 
(49
)
 

Ending balance, June 30, 2017
 
$
511

 
$
556,383

 
$
(108,581
)
 
$
(4,511
)
 
$
(153,749
)
 
$
290,053

 
$
45,419

 
46,300

See notes to condensed consolidated financial statements


4


COHEN & STEERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)

 
Six Months Ended
June 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
45,942

 
$
42,788

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Stock compensation expense
10,717

 
11,992

Depreciation and amortization
3,892

 
3,590

Deferred rent
(116
)
 
(15
)
(Gain) loss from trading investments—net
(275
)
 
(810
)
Equity in (earnings) losses of affiliates
568

 
(3,067
)
(Gain) loss from available-for-sale investments—net
(118
)
 
(128
)
Deferred income taxes
1,143

 
2,561

Foreign currency (gain) loss
(96
)
 
(1,238
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(4,251
)
 
(1,884
)
Due from brokers
(12,873
)
 
(1,605
)
Deferred commissions
(952
)
 
(2,120
)
Trading investments
(60,592
)
 
(3,498
)
Other assets
(226
)
 
(642
)
Accrued compensation
(16,268
)
 
(15,212
)
Distribution and service fees payable
637

 
(127
)
Due to brokers
11,835

 
1,798

Income tax payable
(792
)
 
(1,460
)
Other liabilities and accrued expenses
269

 
(235
)
Net cash provided by (used in) operating activities
(21,556
)
 
30,688

Cash flows from investing activities:
 
 
 
Proceeds from redemptions of equity method investments—net

 
208

Purchases of available-for-sale investments
(12,552
)
 
(4,017
)
Proceeds from sales of available-for-sale investments
19,822

 
5,378

Purchases of property and equipment
(1,552
)
 
(5,233
)
Net cash provided by (used in) investing activities
5,718

 
(3,664
)
Cash flows from financing activities:
 
 
 
Issuance of common stock
403

 
385

Repurchase of common stock
(9,072
)
 
(7,937
)
Dividends to stockholders
(25,960
)
 
(23,920
)
Distributions to redeemable noncontrolling interest
(49
)
 
(181
)
Contributions from redeemable noncontrolling interest
45,132

 
3,877

Net cash provided by (used in) financing activities
10,454

 
(27,776
)
Net increase (decrease) in cash and cash equivalents
(5,384
)
 
(752
)
Effect of foreign exchange rate changes on cash and cash equivalents
564

 
(1,292
)
Cash and cash equivalents, beginning of the period
183,234

 
142,728

Cash and cash equivalents, end of the period
$
178,414

 
$
140,684

See notes to condensed consolidated financial statements


5


COHEN & STEERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
(UNAUDITED)
 
Supplemental disclosures of cash flow information:
For the six months ended June 30, 2017 and 2016, the Company paid taxes, net of tax refunds, of approximately $27,190,000 and $23,612,000, respectively.
Supplemental disclosures of non-cash investing and financing activities:
In connection with its stock incentive plan, the Company issued fully vested restricted stock units in the amount of approximately $318,000 and $234,000 for the six months ended June 30, 2017 and 2016, respectively. For the six months ended June 30, 2017 and 2016, the Company recorded restricted stock unit dividend equivalents, net of forfeitures, in the amount of approximately $838,000 and $546,000, respectively.
During the six months ended June 30, 2016, the Company’s proportionate ownership interest in Cohen & Steers Low Duration Preferred and Income Fund, Inc. (LPX) decreased and the Company deconsolidated the assets and liabilities of LPX resulting in a non-cash reduction of approximately $14,036,000 from redeemable noncontrolling interest and a non-cash increase of approximately $14,550,000 to equity method investments.
During the six months ended June 30, 2016, the Company’s proportionate ownership interest in Cohen & Steers MLP & Energy Opportunity Fund, Inc. (MLO) decreased and the Company recorded a non-cash reclassification of approximately $12,995,000, from equity method investments into available-for-sale investments.


6


COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


1. Organization and Description of Business
Cohen & Steers, Inc. (CNS) was organized as a Delaware corporation on March 17, 2004. CNS is the holding company for its direct and indirect subsidiaries, including Cohen & Steers Capital Management, Inc. (CSCM), Cohen & Steers Securities, LLC (CSS), Cohen & Steers Asia Limited (CSAL), Cohen & Steers UK Limited (CSUK) and Cohen & Steers Japan, LLC (collectively, the Company).
The Company is a global investment manager specializing in liquid real assets, including real estate securities, listed infrastructure, commodities and natural resource equities, as well as preferred securities and other income solutions. Founded in 1986, the Company is headquartered in New York City, with offices in London, Hong Kong, Tokyo and Seattle.


2. Basis of Presentation and Significant Accounting Policies
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The condensed consolidated financial statements set forth herein include the accounts of CNS and its direct and indirect subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.
The condensed consolidated financial statements of the Company included herein are unaudited and have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the interim results have been made. The Company’s condensed consolidated financial statements and the related notes should be read together with the consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
Recently Adopted Accounting Pronouncements—In March 2016, the Financial Accounting Standards Board (FASB) issued new guidance amending the current accounting for an investment that becomes qualified for the equity method of accounting. The guidance requires that the cost of acquiring an additional interest in the investment, if any, that resulted in it qualifying for the equity method be added to the carrying value of the investment. The equity method will then be applied from that point forward without any retroactive application or adjustment. This new guidance was effective for the Company’s first quarter of 2017. The adoption of this new guidance did not have a material impact on its condensed consolidated financial statements and related disclosures.
In March 2016, the FASB issued new guidance which simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, excess tax benefits, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted this guidance on January 1, 2017. As a result, the Company reclassified $285,000 from additional paid-in capital to retained earnings on January 1, 2017. Prospectively beginning January 1, 2017, excess tax benefits or tax deficiencies are now reflected in the condensed consolidated statements of operations as a component of the provision for income taxes. For the six months ended June 30, 2017, the Company recognized $54,000 of excess tax benefits. Additionally, the condensed consolidated statements of cash flows now reflects excess tax benefits from share-based payments as an operating activity, rather than a financing activity. Finally, the Company elected to account for forfeitures as they occur, rather than estimate expected forfeitures.
Accounting Estimates—The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes the estimates used in preparing the condensed consolidated financial statements are reasonable and prudent. Actual results could differ from those estimates.


7





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

Consolidation of Company-sponsored Funds—Investments in Company-sponsored funds and management fees are evaluated at inception and thereafter, if there is a reconsideration event, in order to determine whether to apply the Variable Interest Entity (VIE) model or the Voting Interest Entity (VOE) model. In performing this analysis, all of the Company’s management fees are presumed to be commensurate and at market and are therefore not considered variable interests.
A VIE is an entity in which either (a) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (b) the group of holders of the equity investment at risk lack certain characteristics of a controlling financial interest. The primary beneficiary is the entity that has (a) the power to direct the activities of the VIE that most significantly affect its performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. Investments and redemptions or amendments to the governing documents of the respective entities could affect an entity’s status as a VIE or the determination of the primary beneficiary. The Company assesses whether it is the primary beneficiary of any VIEs identified by evaluating its economic interests in the entity held either directly by the Company and its affiliates or indirectly through employees. VIEs for which the Company is deemed to be the primary beneficiary are consolidated.
Investments in Company-sponsored funds that are determined to be VOEs are consolidated when the Company’s ownership interest is greater than 50% of the outstanding voting interests of the fund or when the Company is the general partner of the fund and the limited partners do not have substantive kick-out or participating rights in the fund.
The Company records noncontrolling interests in consolidated subsidiaries for which the Company’s ownership is less than 100%. See Note 4 for further discussion about the Company’s seed investments.
Cash and Cash Equivalents—Cash equivalents consist of short-term, highly liquid investments, which are readily convertible into cash and have original maturities of three months or less.
Due from/to Brokers—The Company conducts business, primarily with respect to its consolidated seed investments, with brokers for certain of its investment activities. The clearing and custody operations for these investment activities are performed pursuant to contractual agreements. The due from/to brokers balance represents cash and cash equivalents balances at brokers/custodians and/or receivables and payables for unsettled securities transactions.
Investments—Management of the Company determines the appropriate classification of its investments at the time of purchase and re-evaluates such determination at each statement of financial condition date.
Investments classified as trading represent securities held within the affiliated funds that the Company consolidates and are measured at fair value based on quoted market prices, market prices obtained from independent pricing services engaged by management or as determined by management and approved by the Company’s valuation committee. Unrealized gains and losses are recorded as gain (loss) from trading investments—net in the Company’s condensed consolidated statements of operations.
Investments classified as equity method investments represent seed investments in which the Company owns between 20-50% of the outstanding voting interests in the affiliated fund or when it is determined that the Company is able to exercise significant influence but not control over the investments. When using the equity method, the Company recognizes its respective share of the affiliated investee fund net income or loss for the period which is recorded as equity in earnings (losses) of affiliates in the Company’s condensed consolidated statements of operations. As of June 30, 2017, the Company’s equity method investments consisted of interests in affiliated funds which measure their underlying investments at fair value based on quoted market prices or NAV (or its equivalent) as a practical expedient and report a net asset value on a recurring basis. The carrying amounts of these investments approximate their fair value.
Investments classified as available-for-sale are comprised of equity securities, fixed income securities, investment-grade preferred instruments and investments in Company-sponsored open-end funds where the Company has neither control nor the ability to exercise significant influence. These investments are carried at fair value based on quoted market prices or market prices obtained from independent pricing services engaged by management, with unrealized gains and losses, net of tax, reported in accumulated other comprehensive income. The Company periodically reviews each individual security position that has an unrealized loss, or impairment, to determine if that impairment is other-than-temporary. If the Company


8





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

believes an impairment of a security position is other-than-temporary, based on available quantitative and qualitative information as of the report date, the loss will be recognized as gain (loss) from available-for-sale investments—net in the Company’s condensed consolidated statements of operations.
From time to time, the affiliated funds consolidated by the Company enter into derivative contracts to gain exposure to the underlying commodities markets or to hedge market and credit risks of the underlying portfolios utilizing options, total return swaps, credit default swaps and futures contracts. These instruments are measured at fair value based on their settlement price at the close of trading on the associated commodities exchange or board of trade with gains and losses recorded as gain (loss) from trading investments—net in the Company’s condensed consolidated statements of operations. The fair values of these instruments are recorded in other assets or other liabilities and accrued expenses on the Company’s condensed consolidated statements of financial condition. As of June 30, 2017, none of the outstanding derivative contracts were subject to a master netting agreement or other similar arrangement.
Additionally, from time to time, the Company enters into foreign exchange contracts to hedge its currency exposure related to certain client receivables. These instruments are measured at fair value with gains and losses recorded in other non-operating income (loss) in the Company’s condensed consolidated statements of operations. The fair values of these contracts are recorded in other assets or other liabilities and accrued expenses on the Company’s condensed consolidated statements of financial condition.
Goodwill and Intangible Assets—Goodwill represents the excess of the cost of the Company’s investment in the net assets of an acquired company over the fair value of the underlying identifiable net assets at the date of acquisition. Goodwill and indefinite lived intangible assets are not amortized but are tested at least annually for impairment by comparing the fair value to their carrying amounts. Finite lived intangible assets are amortized over their useful lives and are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. See Note 3 for further discussion about the Company’s goodwill and intangible assets.
Redeemable Noncontrolling Interest—Redeemable noncontrolling interest represents third-party interests in the Company’s consolidated entities. This interest is redeemable at the option of the investors and therefore is not treated as permanent equity. Redeemable noncontrolling interest is remeasured at redemption value which approximates the fair value at each reporting period.
Investment Advisory and Administration Fees—The Company earns revenue by providing asset management services to institutional accounts and to Company-sponsored open-end and closed-end funds. Investment advisory fees are earned pursuant to the terms of investment management agreements and are based on a contractual fee rate applied to the assets in the portfolio. The Company also earns administration fees from certain Company-sponsored open-end and closed-end funds pursuant to the terms of underlying administration contracts. Administration fees are based on the average assets under management of such funds. Investment advisory and administration fee revenue is recognized as such fees are earned.
Distribution and Service Fee Revenue—Distribution and service fee revenue is based on the average daily net assets of certain share classes of the Company’s sponsored open-end funds distributed by CSS. Distribution and service fee revenue is earned daily and is recorded gross of any third-party distribution and service fee expense for applicable share classes.
Distribution and Service Fee Expense—Distribution and service fee expense includes distribution fees, shareholder servicing fees and intermediary assistance payments. Distribution and service fee expense is recorded as incurred.
Distribution fee expense represents payments made to qualified intermediaries for (i) assistance in connection with the distribution of the Company’s sponsored open-end funds’ shares and (ii) for other expenses such as advertising costs and printing and distribution of prospectuses to investors. Such amounts may also be used to pay financial intermediaries for services as specified in the terms of written agreements complying with Rule 12b-1 of the Investment Company Act of 1940 (Rule 12b-1). The Company pays distribution fee expense based on the average daily net assets under management of certain share classes of the funds.
Shareholder servicing fee expense represents payments made to qualified intermediaries for shareholder account service and maintenance. These services are provided pursuant to written agreements with such qualified institutions.


9





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

Intermediary assistance payments represent payments to qualified intermediaries for activities related to distribution, shareholder servicing and marketing and support of Company-sponsored open-end funds and are incremental to those described above. Intermediary assistance payments are generally based on the average assets under management or the number of accounts being serviced.
Portfolio Consulting and Other—The Company earns portfolio consulting and other fees by (i) providing portfolio consulting services in connection with model-based strategy accounts; (ii) earning a licensing fee for the use of the Company’s proprietary indexes; and (iii) providing portfolio monitoring services related to a number of unit investment trusts. This revenue is earned pursuant to the terms of the underlying contract, and the fee schedules for these relationships vary based on the type of services the Company provides for each relationship. This revenue is recognized as such fees are earned.
Stock-based Compensation—The Company recognizes compensation expense for the grant-date fair value of awards of equity instruments to employees. This expense is recognized over the period during which employees are required to provide service. Forfeitures are recorded as incurred.
Income Taxes—The Company records the current and deferred tax consequences of all transactions that have been recognized on its condensed consolidated financial statements in accordance with the provisions of the enacted tax laws. Deferred tax assets are recognized for temporary differences that will result in deductible amounts in future years at tax rates that are expected to apply in those years. Deferred tax liabilities are recognized for temporary differences that will result in taxable income in future years at tax rates that are expected to apply in those years. The Company records a valuation allowance, when necessary, to reduce deferred tax assets to an amount that more likely than not will be realized. The effective tax rate for interim periods represents the Company’s best estimate of the effective tax rate expected to be applied to the full fiscal year.
The calculation of the tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across the Company’s global operations. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.
Currency Translation and Transactions—Assets and liabilities of subsidiaries having non-U.S. dollar functional currencies are translated at exchange rates at the applicable condensed consolidated statement of financial condition date. Revenue and expenses of such subsidiaries are translated at average exchange rates during the period. The gains or losses resulting from translating non-U.S. dollar functional currency into U.S. dollars are included in the Company’s condensed consolidated statements of comprehensive income. The cumulative translation adjustment was $(5,471,000) and $(6,845,000) as of June 30, 2017 and December 31, 2016, respectively. Gains or losses resulting from non-U.S. dollar currency transactions are included in other non-operating income (loss) in the condensed consolidated statements of operations.
Comprehensive Income—The Company reports all changes in comprehensive income on the condensed consolidated statements of comprehensive income. Comprehensive income includes net income or loss attributable to common stockholders, as well as the net of tax amounts attributable to foreign currency translation gain (loss), unrealized gain (loss) from available-for-sale investments and reclassification of realized gain (loss) from available-for-sale investments to the statements of operations.
Recently Issued Accounting Pronouncements—In May 2017, the FASB issued new guidance for modification accounting related to share-based payment transactions in order to provide clarity and to reduce current diversity in practice. The amendments in this new guidance do not fundamentally change the notion of a modification. Instead, the amendments clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company’s first quarter of 2018 and must be applied prospectively to any awards modified on or after the adoption date. The Company does not expect the adoption of the new standard to have a material effect on its consolidated financial statements and related disclosures.


10





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

In January 2017, the FASB issued guidance to simplify the goodwill impairment test by removing the requirement to perform a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This new guidance will be effective for the Company’s first quarter of 2020. The Company is currently evaluating the potential effect of this new guidance on its condensed consolidated financial statements and related disclosures.
In August 2016, the FASB amended the current guidance on the classification of certain cash receipts and payments in the statement of cash flows. This guidance is intended to unify the currently diverse presentations and classifications, which address eight classification issues related to the statement of cash flows, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. This amended guidance will be effective for the Company’s first quarter of 2018 and requires a retrospective approach to adoption. The Company is currently evaluating the potential effect of this revised guidance on its condensed consolidated financial statements and related disclosures.
In February 2016, the FASB issued guidance introducing a new lease model which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize an ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new guidance also requires disclosures by lessees and lessors to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.
The new guidance is effective on January 1, 2019, with early adoption permitted. The Company expects to adopt the new standard on its effective date. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.
While the Company is continuing to assess the effect of adoption, it currently believes the most significant change relates to the recognition of new ROU assets and lease liabilities on its condensed consolidated statements of financial condition for its office space and other operating leases. The Company does not expect a significant change in its leasing activity between now and adoption. The Company is still assessing which of the available practical expedients it plans on electing upon adoption.
In January 2016, the FASB issued new guidance amending the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. This new guidance will be effective for the Company’s first quarter of 2018 and will require a cumulative-effect adjustment to beginning retained earnings as of the date of adoption. Upon adoption of this guidance, changes in the fair value of the Company’s available-for-sale equity investments will be reported through earnings rather than through other comprehensive income. Using values as of June 30, 2017, the cumulative-effect adjustment to beginning retained earnings would result in a reclassification of net unrealized gains from other comprehensive income to retained earnings in the amount of $930,000, net of tax. Additionally, if the Company had applied the new guidance for the three months ended June 30, 2017, $606,000 of net unrealized losses recorded in other comprehensive income would have been recorded in non-operating income (loss) in the Company’s condensed consolidated statement of operations.
In May 2014, the FASB issued new guidance which outlined a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB


11





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

issued revised guidance which clarifies the guidance related to (a) determining the appropriate unit of account under the revenue standard’s principal versus agent guidance and (b) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standard’s control principle. In April 2016, the FASB issued an amendment to provide more detailed guidance including additional implementation guidance and examples related to (a) identifying performance obligations and (b) licenses of intellectual property. In May 2016, the FASB amended the standard to clarify the guidance on assessing collectibility, presenting sales taxes, measuring noncash consideration, and certain transition matters. This new guidance will be effective for the Company’s first quarter of 2018 and requires either a retrospective or a modified retrospective approach to adoption. The Company has not yet determined which transition method will be employed upon adoption, though it has reached conclusions on key accounting assessments related to the new guidance, including identification of performance obligations, and evaluation of existing contracts and revenue streams for potential changes in the amount and timing of revenue recognition. The Company is still finalizing its assessment and quantifying the impacts related to accounting for costs incurred to obtain a contract, presentation of certain costs presented on either a gross or net basis, as well as implementing changes to its systems, processes and internal controls to meet the new guidance’s reporting and disclosure requirements.


3. Goodwill and Intangible Assets
Goodwill
Goodwill represents the excess of purchase price over the net tangible assets and identifiable intangible assets of an acquired business. At June 30, 2017 and December 31, 2016, goodwill was approximately $18,476,000 and $17,684,000, respectively. The Company’s goodwill increased by $792,000 for the six months ended June 30, 2017 as a result of foreign currency revaluation.
Intangible Assets
The following table details the gross carrying amounts and accumulated amortization of the intangible assets at June 30, 2017 and December 31, 2016 (in thousands):

 
Remaining
Amortization
Period
(in months)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Intangible
Assets, Net
June 30, 2017:
 
 
 
 
 
 
 
Amortized intangible assets:
 
 
 
 
 
 
 
Client relationships
18
 
$
1,543

 
$
(1,403
)
 
$
140

Non-amortized intangible assets:
 
 
 
 
 
 
 
Mutual fund management contracts
 
1,250

 

 
1,250

Total
 
 
$
2,793

 
$
(1,403
)
 
$
1,390

December 31, 2016:
 
 
 
 
 
 
 
Amortized intangible assets:
 
 
 
 
 
 
 
Client relationships
24
 
$
1,543

 
$
(1,359
)
 
$
184

Non-amortized intangible assets:
 
 
 
 
 
 
 
Mutual fund management contracts
 
1,250

 

 
1,250

Total
 
 
$
2,793

 
$
(1,359
)
 
$
1,434



12





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)


Amortization expense related to the intangible assets was approximately $22,000 for both the three months ended June 30, 2017 and 2016, and approximately $44,000 for both the six months ended June 30, 2017 and 2016. Remaining future amortization expense is as follows (in thousands):
 
Periods Ending December 31,
Remaining
Amortization
Expense
2017
$
45

2018
95

Total
$
140


4. Investments
The following is a summary of the Company’s seed investments as of June 30, 2017 and December 31, 2016 (in thousands):
 
June 30,
2017
 
December 31,
2016
Trading investments
$
73,556

 
$
12,689

Equity method investments
5,892

 
6,459

Available-for-sale investments
28,257

 
35,396

Gain (loss) from seed investments for the three and six months ended June 30, 2017 and 2016 are summarized below (in thousands):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Gain (loss) from trading investments—net (1)
$
2

 
$
1,017

 
$
275

 
$
810

Equity in earnings (losses) of affiliates
(279
)
 
2,640

 
(568
)
 
3,067

Gain (loss) from available-for-sale investments—net
83

 
158

 
118

 
128

Net gain (loss) from seed investments
$
(194
)
 
$
3,815

 
$
(175
)
 
$
4,005

 
 
 
 
 
 
 
 
Number of new funds seeded
1
 

 
2
 

_________________________
(1)
Includes net income (loss) attributable to redeemable noncontrolling interest for the periods presented.
Voting Interest Entities
The Cohen & Steers Funds ICAV (ICAV), an Irish alternative investment fund (AIF), and the Cohen & Steers Active Commodities Fund (Commodities Sub-Fund), a sub-fund within the ICAV, were launched by the Company in January 2017, and meet the definition of an investment company. The Company is the investment adviser of the Commodities Sub-Fund for which it receives a management fee. The ICAV and the Commodities Sub-Fund are each a VOE and the Company’s ownership interest in the ICAV is less than 20%; therefore, the Company records its investment in the Commodities Sub-Fund as an available-for-sale investment.


13





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

The Cohen & Steers Low Duration Preferred and Income Fund, Inc. (LPX), launched by the Company in December 2015, is an open-end fund for which the Company is the investment adviser. LPX is a VOE and the Company owned the majority of the outstanding voting interests through February 29, 2016. Accordingly, the underlying assets and liabilities and results of operations of LPX had been included in the Company’s consolidated financial statements with the third-party interests classified as redeemable noncontrolling interest. As a result of additional third-party subscriptions into the fund, effective March 1, 2016, the Company no longer owned the majority of the outstanding voting interest in LPX; however, it was determined that the Company had significant influence over the financial decisions of LPX and therefore recorded its investment in LPX using the equity method of accounting. Effective October 1, 2016, the Company’s ownership interest in LPX fell below 20% and the Company no longer had significant influence over LPX. Accordingly, the Company began recording its investment in LPX as an available-for-sale investment until the second quarter of 2017, when the Company sold its remaining interest in LPX.
The Cohen & Steers Active Commodities Strategy Fund, Inc. (CDF), launched by the Company in May 2014, is an open-end fund for which the Company is the investment adviser. CDF is a VOE and the Company owned the majority of the outstanding voting interests in the fund as of June 30, 2017. Accordingly, the underlying assets and liabilities and results of operations of CDF have been included in the Company’s condensed consolidated financial statements with the third-party interests classified as redeemable noncontrolling interest.
The Cohen & Steers Active Commodities Fund, LP (ACOM), launched by the Company in April 2013, is structured as a partnership. The Company is the investment adviser of ACOM for which it is entitled to receive a management fee. The limited partners of ACOM, unaffiliated with the Company, have the ability to liquidate the fund with a majority vote. As a result, the Company does not have financial control and ACOM is a VOE. The Company’s equity interest in ACOM represents a seed investment to launch the fund, adjusted for the Company’s proportionate share of the fund’s earnings. As of June 30, 2017, the Company’s ownership in ACOM was approximately 10%; however, as the general partner, the Company has significant influence over the financial decisions of ACOM and therefore records its investment in ACOM using the equity method of accounting.
The Cohen & Steers MLP & Energy Opportunity Fund, Inc. (MLO), launched by the Company in December 2013, is an open-end fund for which the Company is the investment adviser. MLO is a VOE. Effective November 1, 2014, as a result of its ownership interest, it was determined that the Company had significant influence over the financial decisions of MLO and therefore recorded its investment in MLO using the equity method of accounting. Effective June 1, 2016, the Company’s ownership interest in MLO fell below 20% and the Company no longer had significant influence over MLO. Accordingly, the Company began recording its investment in MLO as an available-for-sale investment.
Cohen & Steers Real Assets Fund, Inc. (RAP), launched by the Company in January 2012, is an open-end fund for which the Company is the investment adviser. RAP is a VOE. The Company recorded its investment in RAP as an available-for-sale investment until the fourth quarter of 2016 when the Company sold its remaining interest in RAP.
Variable Interest Entities
The Cohen & Steers SICAV Global Preferred Securities Fund (SICAV Preferred), a Luxembourg-domiciled undertaking for collective investments in transferable securities (UCITS), was launched by the Company in May 2017 and meets the definition of an investment company. The Company is the investment adviser of SICAV Preferred for which it receives a management fee. SICAV Preferred is a VIE and the Company is the primary beneficiary. As of June 30, 2017, the Company’s ownership interest in SICAV Preferred was approximately 26%. Accordingly, the underlying assets and liabilities and results of operations of SICAV Preferred have been included in the Company’s condensed consolidated financial statements with the third-party interests classified as redeemable noncontrolling interest.


14





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

The Cohen & Steers SICAV Global Listed Infrastructure Fund (GLI SICAV), a Luxembourg-domiciled UCITS, was launched by the Company in September 2015 and meets the definition of an investment company. The Company is the investment adviser of GLI SICAV for which it receives a management fee. GLI SICAV is a VIE and the Company is the primary beneficiary. As of June 30, 2017, the Company was the only investor in the fund and therefore, the Company would absorb all of the expected losses and residual returns of GLI SICAV. Accordingly, the underlying assets and liabilities and results of operations of GLI SICAV have been included in the Company’s condensed consolidated financial statements.
Cohen & Steers Global Realty Partners III-TE, L.P. (GRP-TE), which had its closing in October 2011, is structured as a partnership. The Company is the general partner and investment adviser of GRP-TE, for which it receives a management fee and is entitled to receive an incentive distribution, if earned. GRP-TE is a VIE and the Company is not the primary beneficiary. The Company’s equity interest in GRP-TE represents a seed investment to launch the fund, adjusted for the Company’s proportionate share of the fund’s earnings. As of June 30, 2017, the Company’s ownership in GRP-TE was approximately 0.2%; however, as the general partner, the Company has significant influence over the financial decisions of GRP-TE and therefore records its investment using the equity method of accounting. The Company’s risk with respect to its investment in GRP-TE is limited to its equity ownership and any uncollected management fees.
In conjunction with the launch of GRP-TE, the Company established Cohen & Steers Co-Investment Partnership, L.P. (GRP-CIP), which is used by the Company to fulfill its contractual commitment to co-invest with GRP-TE. See Note 11 for further discussion regarding the Company’s co-investment commitment. GRP-CIP is a VIE and the Company is the primary beneficiary as it owns all of the voting interest in GRP-CIP. Accordingly, the underlying assets and liabilities and results of operations of GRP-CIP have been included in the Company’s condensed consolidated financial statements.
The following represents the portion of the condensed consolidated statements of financial condition attributable to the consolidated VIEs as of June 30, 2017 and December 31, 2016. The assets may only be used to settle obligations of each VIE and the liabilities are the sole obligation of each VIE, for which creditors do not have recourse to the general credit of the Company (in thousands):
 
June 30, 2017
 
December 31, 2016
 
GLI SICAV
 
GRP-CIP
 
SICAV Preferred
 
Total
 
GLI SICAV
 
GRP-CIP
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading investments
$
5,684

 
$
2,234

 
$
58,499

 
$
66,417

 
$
5,069

 
$
1,918

 
$
6,987

Due from broker
209

 
198

 
12,582

 
12,989

 
181

 
294

 
475

Other assets
44

 

 
788

 
832

 
43

 

 
43

Total assets
$
5,937

 
$
2,432

 
$
71,869

 
$
80,238

 
$
5,293

 
$
2,212

 
$
7,505

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Due to broker
$
59

 
$

 
$
11,776

 
$
11,835

 
$

 
$

 
$

Other liabilities and accrued expenses
46

 
5

 
70

 
121

 
70

 
5

 
75

Total liabilities
$
105

 
$
5

 
$
11,846

 
$
11,956

 
$
70

 
$
5

 
$
75



15





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

The following is a summary of the fair value of trading investments and equity method investments as of June 30, 2017 and December 31, 2016 (in thousands):
 
June 30, 2017
 
December 31, 2016
 
Trading Investments
 
Equity Method Investments
 
Trading Investments
 
Equity Method Investments
Voting Interest Entities
 
 
 
 
 
 
 
ACOM
$

 
$
5,795

 
$

 
$
6,371

CDF
7,139

 

 
5,702

 

 
 
 
 
 
 
 
 
Variable Interest Entities
 
 
 
 
 
 
 
GLI SICAV
5,684

 

 
5,069

 

GRP-CIP
2,234

 

 
1,918

 

GRP-TE

 
97

 

 
88

SICAV Preferred
58,499

 

 

 

Total
$
73,556

 
$
5,892

 
$
12,689

 
$
6,459

Gain (loss) from trading investments—net for the three and six months ended June 30, 2017 and 2016, which represent realized and unrealized gains and losses recorded by the funds the Company consolidates, are summarized below (in thousands):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Voting Interest Entities
 
 
 
 
 
 
 
CDF
$
(420
)
 
$
879

 
$
(845
)
 
$
979

LPX

 

 

 
(769
)
 
 
 
 
 
 
 
 
Variable Interest Entities
 
 
 
 
 
 
 
GLI SICAV
173

 
183

 
574

 
575

GRP-CIP
(109
)
 
(45
)
 
188

 
25

SICAV Preferred
358

 

 
358

 

Total gain (loss) from trading investments—net
$
2

 
$
1,017

 
$
275

 
$
810

Equity in earnings (losses) of affiliates for the three and six months ended June 30, 2017 and 2016 are summarized below (in thousands):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017

2016
 
2017
 
2016
Voting Interest Entities
 
 
 
 
 
 
 
ACOM
$
(274
)
 
$
791

 
$
(576
)
 
$
867

LPX

 
228

 

 
474

MLO

 
1,618

 

 
1,737

 
 
 
 
 
 
 
 
Variable Interest Entities
 
 
 
 
 
 
 
GRP-TE
(5
)
 
3

 
8

 
(11
)
Total equity in earnings (losses) of affiliates
$
(279
)
 
$
2,640

 
$
(568
)
 
$
3,067



16





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

The following is a summary of the cost, gross unrealized gains, gross unrealized losses and fair value of available-for-sale investments as of June 30, 2017 and December 31, 2016 (in thousands):
 
June 30, 2017
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses (1)
 
Fair
Value
Common stocks
$
8,654

 
$
489

 
$
(276
)
 
$
8,867

Company-sponsored funds
13,376

 
1,265

 
(24
)
 
14,617

Fixed income securities
3,627

 
17

 
(24
)
 
3,620

Preferred securities
993

 
47

 

 
1,040

Other
100

 
13

 

 
113

Total available-for-sale investments
$
26,750

 
$
1,831

 
$
(324
)
 
$
28,257

_________________________
(1)    At June 30, 2017, there were no securities with material unrealized losses continuously for a period of more than 12 months.

 
December 31, 2016
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
(1)
 
Fair
Value
Common stocks
$
4,639

 
$
194

 
$
(325
)
 
$
4,508

Company-sponsored funds
28,232

 
1,755

 
(110
)
 
29,877

Preferred securities
1,020

 
13

 
(22
)
 
1,011

Total available-for-sale investments
$
33,891

 
$
1,962

 
$
(457
)
 
$
35,396

_________________________
(1)    At December 31, 2016, there were no securities with unrealized losses continuously for a period of more than 12 months.
Available-for-sale investments with a fair value of approximately $5,545,000 and $18,521,000 at June 30, 2017 and December 31, 2016, respectively, were in an unrealized loss position.
Unrealized losses on available-for-sale investments as of June 30, 2017 were generally caused by changes in market conditions. When evaluating whether an unrealized loss on an available-for-sale investment is other than temporary, the Company reviews such factors as the extent and duration of the loss, as well as quantitative and qualitative information about the financial condition and near term prospects of the funds.
As of June 30, 2017, the Company determined that it had the ability and intent to hold the remaining available-for-sale investments for which no other-than-temporary impairment has occurred until a recovery of fair value. Accordingly, impairment of these investments is considered temporary.
Sales proceeds, gross realized gains and losses from available-for-sale investments for the three and six months ended June 30, 2017 and 2016 are summarized below (in thousands):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Proceeds from sales
$
13,024

 
$
3,464

 
$
19,910

 
$
5,419

Gross realized gains
216

 
321

 
314

 
471

Gross realized losses
(133
)
 
(163
)
 
(196
)
 
(343
)



17





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

5. Fair Value
Accounting Standards Codification Topic 820, Fair Value Measurement (ASC 820) specifies a hierarchy of valuation classifications based on whether the inputs to the valuation techniques used in each valuation classification are observable or unobservable. These classifications are summarized in the three broad levels listed below:
Level 1—Unadjusted quoted prices for identical instruments in active markets.
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable.
Level 3—Valuations derived from valuation techniques in which significant inputs or significant value drivers are unobservable.
Inputs used to measure fair value might fall in different levels of the fair value hierarchy, in which case the Company defaults to the lowest level input that is significant to the fair value measurement in its entirety. These levels are not necessarily an indication of the risk or liquidity associated with the investments. In determining the appropriate levels, the Company performed a detailed analysis of the assets and liabilities that are subject to ASC 820. Transfers among levels, if any, are recorded as of the beginning of the reporting period. There were no such transfers for the three and six months ended June 30, 2017.




18





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

The following table presents fair value measurements as of June 30, 2017 (in thousands):
 
Level 1
 
Level 2
 
Level 3
 
Investments
Measured at
NAV (2)
 
Total
Cash equivalents (1)
$
148,846

 
$

 
$

 
$

 
$
148,846

Trading investments
 
 
 
 
 
 
 
 
 
Common stocks
$
5,684

 
$

 
$

 
$

 
$
5,684

Fixed income securities

 
7,139

 

 

 
7,139

Limited partnership interests

 

 
1,462

 
772

 
2,234

Preferred securities
11,715

 
46,784

 

 

 
58,499

Total trading investments
$
17,399

 
$
53,923

 
$
1,462

 
$
772

 
$
73,556

Equity method investments
$

 
$

 
$

 
$
5,892

 
$
5,892

Available-for-sale investments
 
 
 
 
 
 
 
 
 
Common stocks
$
8,867

 
$

 
$

 
$

 
$
8,867

Company-sponsored funds
14,617

 

 

 

 
14,617

Fixed income securities

 
3,620

 

 

 
3,620

Preferred securities
1,022

 
18

 

 

 
1,040

Other

 

 

 
113

 
113

Total available-for-sale investments
$
24,506

 
$
3,638

 
$

 
$
113

 
$
28,257

Derivatives - assets
 
 
 
 
 
 
 
 
 
Commodity contracts
$
344

 
$

 
$

 
$

 
$
344

Foreign exchange contracts

 
83

 

 

 
83

Total derivatives - assets
$
344

 
$
83

 
$

 
$

 
$
427

Derivatives - liabilities
 
 
 
 
 
 
 
 
 
Commodity contracts
$
287

 
$

 
$

 
$

 
$
287

Total derivatives - liabilities
$
287

 
$

 
$

 
$

 
$
287

_________________________
(1)
Comprised of investments in actively traded U.S. Treasury money market funds measured at NAV.
(2)
Comprised of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient. These investments have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on the condensed consolidated statement of financial position.
Trading investments in fixed income securities classified as level 2 in the above table were comprised of U.S. Treasury Bills carried at amortized cost, which approximates fair value. Trading investments in preferred securities classified as level 2 were comprised of corporate debt and certain preferred securities. The fair value amounts were generally determined using third-party pricing services. The pricing services may utilize evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information. Since these securities do not trade on a daily basis, the pricing services evaluate pricing applications and apply available information through processes such as yield curves, benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations.
Trading investments classified as level 3 in the above table were comprised of limited partnership interests which represent the Company’s co-investments through GRP-CIP in limited partnership vehicles that invest in private equity vehicles that invest directly in real estate which are generally valued using a discounted cash flow model.
Trading investments classified as investments measured at NAV (or its equivalent) as a practical expedient in the above table were comprised of limited partnership interests which represent the Company’s co-investments through GRP-CIP in limited partnership vehicles that invest in non-registered real estate funds, which are valued based on the NAVs of the underlying funds. As of June 30, 2017, the Company did not have the ability to redeem these interests.


19





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

Equity method investments classified as investments measured at NAV (or its equivalent) as a practical expedient in the above table were comprised of the Company’s partnership interests in ACOM and GRP-TE, which approximate their fair value based on the funds’ NAVs. ACOM invests indirectly in exchange-traded commodity futures contracts and other commodity related derivatives through an investment in the Commodities Sub-Fund. The Company has the ability to redeem its investment in ACOM monthly at NAV with prior written notice of 5 days and there are no significant restrictions to redemption. GRP-TE invests in non-registered real estate funds and in private equity vehicles that invest directly in real estate. As of June 30, 2017, the Company did not have the ability to redeem its investment in GRP-TE.
Available-for-sale investments classified as level 2 in the above table were primarily comprised of corporate bonds and certain preferred securities with the fair value generally determined using third-party pricing services. The pricing services may utilize pricing models, and inputs into those models may include reported trades, executable bid and ask prices, broker-dealer quotations, prices or yields of similar securities, benchmark curves and other market information. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security.
Available-for-sale investments classified as investments measured at NAV (or its equivalent) as a practical expedient in the above table were comprised of the Company’s co-investment in a Cayman trust invested in global listed infrastructure securities.
The following table presents fair value measurements as of December 31, 2016 (in thousands):
 
Level 1
 
Level 2
 
Level 3
 
Investments
Measured at
NAV (2)
 
Total
Cash equivalents (1)
$
140,872

 
$

 
$

 
$

 
$
140,872

Trading investments
 
 
 
 
 
 
 
 
 
Common stocks
$
5,069

 
$

 
$

 
$

 
$
5,069

Fixed income securities

 
5,702

 

 

 
5,702

Limited partnership interests

 

 
1,196

 
722

 
1,918

Total trading investment
$
5,069

 
$
5,702

 
$
1,196

 
$
722

 
$
12,689

Equity method investments
$

 
$

 
$

 
$
6,459

 
$
6,459

Available-for-sale investments
 
 
 
 
 
 
 
 
 
Common stocks
$
4,508

 
$

 
$

 
$

 
$
4,508

Company-sponsored funds
29,877

 

 

 

 
29,877

Preferred securities
1,001

 
10

 

 

 
1,011

Total available-for-sale investments
$
35,386

 
$
10

 
$

 
$

 
$
35,396

Derivatives - assets
 
 
 
 
 
 
 
 
 
Commodity contracts
$
343

 
$

 
$

 
$

 
$
343

Foreign exchange contracts

 
1,417

 

 

 
1,417

Total derivatives - assets
$
343

 
$
1,417

 
$

 
$

 
$
1,760

Derivatives - liabilities
 
 
 
 
 
 
 
 
 
Commodity contracts
$
266

 
$

 
$

 
$

 
$
266

Total derivatives - liabilities
$
266

 
$

 
$

 
$

 
$
266

_________________________
(1)
Comprised of investments in actively traded U.S. Treasury money market funds measured at NAV.
(2)
Comprised of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient. These investments have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on the condensed consolidated statement of financial position.
Trading investments classified as level 2 in the above table were comprised of U.S. Treasury Bills carried at amortized cost, which approximates fair value.


20





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

Trading investments classified as level 3 in the above table were comprised of limited partnership interests which represent the Company’s co-investments through GRP-CIP in limited partnership vehicles that invest in private equity vehicles that invest directly in real estate which are generally valued using a discounted cash flow model.
Trading investments classified as investments measured at NAV (or its equivalent) as a practical expedient in the above table were comprised of limited partnership interests which represent the Company’s co-investments through GRP-CIP in limited partnership vehicles that invest in non-registered real estate funds, which are valued based on the NAVs of the underlying funds. As of December 31, 2016, the Company did not have the ability to redeem these interests.
Equity method investments classified as investments measured at NAV (or its equivalent) as a practical expedient in the above table were comprised of the Company’s partnership interests in ACOM and GRP-TE, which approximate their fair value based on the funds’ NAVs. ACOM invested directly in exchange-traded commodity futures contracts and other commodity related derivatives. The Company has the ability to redeem its investment in ACOM monthly at NAV with prior written notice of 5 days and there are no significant restrictions to redemption. GRP-TE invests in non-registered real estate funds and in private equity vehicles that invest directly in real estate. As of December 31, 2016, the Company did not have the ability to redeem its investment in GRP-TE.
The following table summarizes the changes in level 3 investments measured at fair value on a recurring basis for the three and six months ended June 30, 2017 and 2016 (in thousands):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
 
Trading Investments
 
Limited Partnership Interests
Balance at beginning of period
$
1,476

 
$
1,338

 
$
1,196

 
$
1,312

Purchases / contributions
114

 
21

 
138

 
21

Sales / distributions

 
(53
)
 

 
(53
)
Realized gains (losses)

 

 

 

Unrealized gains (losses) (1)
(128
)
 
(2
)
 
128

 
24

Transfers into (out of) level 3

 

 

 

Balance at end of period
$
1,462

 
$
1,304

 
$
1,462

 
$
1,304

 
_________________________
(1)    Pertains to unrealized gains (losses) from securities held at June 30, 2017 and 2016.
Realized and unrealized gains (losses) from investments classified as trading investments in the above table were recorded as gain (loss) from trading investments in the Company’s condensed consolidated statements of operations.
Valuation Techniques
In certain instances, debt, equity and preferred securities are valued on the basis of prices from an orderly transaction between market participants provided by reputable brokers-dealers or independent pricing services. In determining the value of a particular investment, independent pricing services may use information with respect to transactions in such investments, broker quotes, pricing matrices, market transactions in comparable investments and various relationships between investments. As part of its independent price verification process, the Company generally performs reviews of valuations provided by broker-dealers or independent pricing services. Investments in Company-sponsored funds are valued at their closing price or NAV (or its equivalent) as a practical expedient.
Foreign exchange contracts are valued by interpolating a value using the spot foreign exchange rate and forward points (based on the spot rate and currency rate differentials), which are all inputs that are observable in active markets (level 2).


21





COHEN & STEERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(UNAUDITED)

In the absence of observable market prices, the Company values its investments using valuation methodologies applied on a consistent basis. For some investments, little market activity may exist; management’s determination of fair value is then based on the best information available in the circumstances, and may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration a combination of internal and external factors. Such investments are valued on a quarterly basis, taking into consideration any changes in key inputs and changes in economic and other relevant conditions, and valuation models are updated accordingly. The valuation process also includes a review by the Company’s valuation committee which is comprised of senior members from various departments within the Company, including investment management. The valuation committee provides independent oversight of the valuation policies and procedures.
The valuation techniques and significant unobservable inputs used in the fair value measurement of the following level 3 investments as of June 30, 2017 were:
 
Fair Value
 
Fair Value
 
Significant
 
Input /
 
(in thousands)
 
Methodology
 
Unobservable Inputs
 
Range
Limited partnership interests - direct investments in real estate
$
1,462

 
Discounted cash flows
 
Discount rates
Exit capitalization rates
Market rental rates
 
10% - 11%
7.5% - 8%
$14.50 - 16.80 psf
The valuation techniques and significant unobservable inputs used in the fair value measurement of the following level 3 investments as of December 31, 2016