Years Ended 2011 vs. 2010
Net revenues declined by $17.2 million to $99.9 million for the year ended December 31, 2011, compared to $117.1 million in the prior year. The decrease in net revenues was attributable to lower commissions and principal transactions revenues of $23.1 million due to net revenue declines of $11.1 million on asset-backed securities, and lower trading volumes in the current year. Net interest income increased $6.1 million due to increased inventory levels, partially offset by lower coupon interest received. Pre-tax income of $31.5 million for the year ended December 31, 2011 declined by $3.4 million, compared to non-GAAP pre-tax income of $34.9 million. This reduction is a direct result of the lower revenues, partially offset by lower variable compensation expense (as a result of the lower revenues). Non-GAAP pre-tax income of $34.9 million for 2010 was also impacted by higher compensation expense recorded in the fourth quarter, resulting from the previously mentioned change in vesting provisions to equity compensation awards expected to be granted as part of year-end compensation for services in 2010.
Fourth Quarter 2011 vs. 2010Net revenues increased by $1.4 million to $20.0 million for the fourth quarter of 2011 compared to $18.6 million in the fourth quarter of 2010. The increase in net revenues was primarily attributable to higher commissions and principal transaction revenues of $0.7 million, due to higher volumes. Pre-tax income of $3.4 million for the quarter ended December 31, 2011 increased by $3.3 million, compared to non-GAAP pre-tax income of $0.1 million for the fourth quarter of 2010. This increase is a direct result of the higher revenues and a larger portion of compensation expense expected to be paid in stock-based compensation compared to the prior-year quarter, partially offset by higher variable compensation expense (as a result of the higher revenues). Non-GAAP pre-tax income of $0.1 million for the fourth quarter of 2010, was also impacted by higher compensation expense resulting from a change in vesting provisions to equity compensation awards expected to be granted as part of year-end compensation for services in 2010 which is further described below as part of the “Consolidated Compensation and Benefits Expenses” discussion.
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