Westwood Holdings Group, Inc. Reports 2010 Results and Increases Quarterly Dividend; Assets Under Management Increase 23% Year-over-year to Record $12.5 Billion; Mutual Fund Assets Increase 71% Year-over-year to Record $970 Million
Assets under management were
Westwood's Board of Directors declared a quarterly cash dividend of
For the year ended
Total expenses for the fourth quarter were
Westwood will host a conference call to discuss fourth quarter 2010
results and other business updates at
About Westwood
For more information on Westwood, please visit www.westwoodgroup.com.
For more information on the WHG Funds, please visit www.whgfunds.com.
Note on Forward-looking Statements
Statements in this press release that are not purely historical facts,
including statements about our expected future financial position,
results of operations or cash flows, as well as other statements
including words such as "anticipate," "believe," "plan," "estimate,"
"expect," "intend," "should," "could," "goal," "target," "designed," "on
track," "comfortable with," "optimistic" and other similar expressions,
constitute 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. Actual results and the
timing of some events could differ materially from those projected in or
contemplated by the forward-looking statements due to a number of
factors, including, without limitation: our ability to identify and
successfully market services that appeal to our customers; the
concentration of our revenues in a small number of our customers; our
relationships with investment consulting firms; our relationships with
current and potential customers; our ability to retain qualified
personnel; our ability to successfully develop and market new asset
classes; our ability to maintain our fee structure in light of
competitive fee pressures; competition in the marketplace; downturns in
the financial markets; the passage of legislation adversely affecting
the financial services industries; interest rates; changes in our
effective tax rate; our ability to maintain an effective system of
internal controls; and the other risks detailed from time to time in
Westwood's
| WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES | |||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||
| (in thousands, except per share data) | |||||||||||||
| (unaudited) | |||||||||||||
| Three months ended | Year ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||
| REVENUES: | |||||||||||||
| Advisory fees | |||||||||||||
| Asset-based | $ | 11,696 | $ | 9,676 | $ | 42,153 | $ | 31,794 | |||||
| Trust fees | 3,101 | 2,938 | 12,051 | 10,304 | |||||||||
| Other revenues, net | 633 | 109 | 1,109 | 455 | |||||||||
| Total revenues | 15,430 | 12,723 | 55,313 | 42,553 | |||||||||
| EXPENSES: | |||||||||||||
| Employee compensation and benefits | 7,554 | 6,765 | 29,001 | 23,730 | |||||||||
| Sales and marketing | 254 | 128 | 823 | 576 | |||||||||
| WHG mutual funds | 318 | 175 | 662 | 600 | |||||||||
| Information technology | 374 | 296 | 1,351 | 1,221 | |||||||||
| Professional services | 1,025 | 401 | 2,941 | 1,531 | |||||||||
| General and administrative | 788 | 671 | 2,814 | 2,577 | |||||||||
| Total expenses | 10,313 | 8,436 | 37,592 | 30,235 | |||||||||
| Income before income taxes | 5,117 | 4,287 | 17,721 | 12,318 | |||||||||
| Provision for income taxes | 1,862 | 1,566 | 6,441 | 4,423 | |||||||||
| Net income | $ | 3,255 | $ | 2,721 | $ | 11,280 | $ | 7,895 | |||||
| Earnings per share: | |||||||||||||
| Basic | $ | 0.48 | $ | 0.38 | $ | 1.62 | $ | 1.10 | |||||
| Diluted | $ | 0.46 | $ | 0.38 | $ | 1.58 | $ | 1.09 | |||||
| WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| As of December 31, 2010 and 2009 | ||||||||
| (in thousands, except par value and share amounts) | ||||||||
| 2010 | 2009 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 1,744 | $ | 2,879 | ||||
| Accounts receivable | 7,348 | 6,406 | ||||||
| Investments, at market value | 43,300 | 42,246 | ||||||
| Deferred income taxes | 2,757 | 2,187 | ||||||
| Other current assets | 733 | 625 | ||||||
| Total current assets | 55,882 | 54,343 | ||||||
| Goodwill | 11,281 | 3,915 | ||||||
| Intangible assets, net | 5,119 | 1,050 | ||||||
| Property and equipment, net of accumulated depreciation of $1,542 and $1,315 | 346 | 578 | ||||||
| Total assets | $ | 72,628 | $ | 59,886 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 1,290 | $ | 995 | ||||
| Dividends payable | - | 2,359 | ||||||
| Compensation and benefits payable | 9,369 | 6,273 | ||||||
| Income taxes payable | 173 | 823 | ||||||
| Deferred acquisition liability | 899 | 900 | ||||||
| Other current liabilities | 13 | 11 | ||||||
| Total current liabilities | 11,744 | 11,361 | ||||||
| Deferred acquisition liability | - | 796 | ||||||
| Deferred income taxes | 117 | 238 | ||||||
| Deferred rent | 90 | 273 | ||||||
| Total long-term liabilities | 207 | 1,307 | ||||||
| Total liabilities | 11,951 | 12,668 | ||||||
| Stockholders' Equity: | ||||||||
| Common stock, $0.01 par value, authorized 25,000,000 shares, issued 7,874,873 and outstanding 7,645,678 shares at December 31, 2010; issued 7,308,812 and outstanding 7,151,472 shares at December 31, 2009 |
79 |
73 |
||||||
| Additional paid-in capital | 65,639 | 47,741 | ||||||
| Treasury stock, at cost — 229,195 shares at December 31, 2010; 157,340 shares at December 31, 2009 |
(8,749 |
) |
(6,026 |
) |
||||
| Accumulated other comprehensive income | 926 | 1,559 | ||||||
| Retained earnings | 2,782 | 3,871 | ||||||
| Total stockholders' equity | 60,677 | 47,218 | ||||||
| Total liabilities and stockholders' equity | $ | 72,628 | $ | 59,886 | ||||
| WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| 2010 | 2009 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 11,280 | $ | 7,895 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 274 | 241 | ||||||
| Amortization of intangible assets | 155 | 13 | ||||||
| Fair market valuation of deferred acquisition liabilities | 156 | 23 | ||||||
| Unrealized gains on investments | (694 | ) | (588 | ) | ||||
| Restricted stock amortization | 9,269 | 7,666 | ||||||
| Deferred income taxes | (350 | ) | (73 | ) | ||||
| Excess tax benefits from stock based compensation | (1,026 | ) | (1,518 | ) | ||||
| Net purchases of investments — trading securities | (714 | ) | (9,721 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (942 | ) | 6,232 | |||||
| Other assets | (94 | ) | 76 | |||||
| Accounts payable and accrued liabilities | (2,167 | ) | (101 | ) | ||||
| Compensation and benefits payable | 3,096 | (779 | ) | |||||
| Income taxes payable and prepaid taxes | 838 | 1,298 | ||||||
| Other liabilities | (100 | ) | (58 | ) | ||||
| Net cash provided by operating activities | 18,981 | 10,606 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of money market funds — available for sale | (39,877 | ) | (64,984 | ) | ||||
| Sales of money market funds — available for sale | 39,257 | 63,597 | ||||||
| Cash paid for business combination | (5,609 | ) | (251 | ) | ||||
| Purchases of property and equipment | (137 | ) | (86 | ) | ||||
| Net cash used in investing activities | (6,366 | ) | (1,724 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Purchases of treasury stock | (2,723 | ) | (2,526 | ) | ||||
| Excess tax benefits from stock based compensation | 1,026 | 1,518 | ||||||
| Proceeds from exercise of stock options | 213 | 33 | ||||||
| Cash dividends | (12,266 | ) | (8,526 | ) | ||||
| Net cash used in financing activities | (13,750 | ) | (9,501 | ) | ||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (1,135 | ) | (619 | ) | ||||
| Cash and cash equivalents, beginning of year | 2,879 | 3,498 | ||||||
| Cash and cash equivalents, end of year | $ | 1,744 | $ | 2,879 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid during the year for income taxes | $ | 5,937 | $ | 3,199 | ||||
| Issuance of restricted stock | 14,664 | 7,263 | ||||||
| Reconciliation of Net Income to Economic Earnings and Total Expenses to Economic Expenses | ||||||||||||
| (in thousands, except per share data and share amounts) | ||||||||||||
| (unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| December 31 | % | |||||||||||
| 2010 | 2009 | Change | ||||||||||
| Net Income | $ | 3,255 | $ | 2,721 | 20 | % | ||||||
| Add: Restricted stock expense | 2,342 | 1,972 | 19 | |||||||||
| Add: Intangible amortization | 76 | 13 | 485 | |||||||||
| Add: Tax benefit from goodwill amortization | 31 | 5 | 520 | |||||||||
| Economic earnings | $ | 5,704 | $ | 4,711 | 21 | |||||||
| Diluted weighted average shares | 7,018,633 | 6,442,095 | 9 | |||||||||
| Economic earnings per share | $ | 0.81 | $ | 0.73 | 11 | |||||||
| Total expenses | $ | 10,313 | $ | 8,436 | 22 | |||||||
| Less: Restricted stock expense | (2,342 | ) | (1,972 | ) | 19 | |||||||
| Less: Intangible amortization | (76 | ) | (13 | ) | 485 | |||||||
| Economic expenses | $ | 7,895 | $ | 6,451 | 22 | % | ||||||
| Year Ended | ||||||||||||
| December 31 | % | |||||||||||
| 2010 | 2009 | Change | ||||||||||
| Net Income | $ | 11,280 | $ | 7,895 | 43 | % | ||||||
| Add: Restricted stock expense | 9,269 | 7,666 | 21 | |||||||||
| Add: Intangible amortization | 155 | 13 | 1,092 | |||||||||
| Add: Tax benefit from goodwill amortization | 59 | 5 | 1,080 | |||||||||
| Economic earnings | $ | 20,763 | $ | 15,579 | 33 | |||||||
| Diluted weighted average shares | 6,795,351 | 6,366,988 | 7 | |||||||||
| Economic earnings per share | $ | 3.06 | $ | 2.45 | 25 | |||||||
| Total expenses | $ | 37,592 | $ | 30,235 | 24 | |||||||
| Less: Restricted stock expense | (9,269 | ) | (7,666 | ) | 21 | |||||||
| Less: Intangible amortization | (155 | ) | (13 | ) | 1,092 | |||||||
| Economic expenses | $ | 28,168 | $ | 22,556 | 25 | % | ||||||
As supplemental information, we are providing non-GAAP performance measures that we refer to as Economic Earnings, Economic Earnings per share (or Economic EPS), and Economic Expenses. We provide these measures in addition to, not as a substitute for, net income, earnings per share and total expenses, which are reported on a GAAP basis. Management and our Board of Directors review Economic Earnings, Economic EPS and Economic Expenses to evaluate Westwood's ongoing performance, allocate resources and review dividend policy. We believe that these non-GAAP performance measures, while not substitutes for GAAP net income, earnings per share and total expenses, are useful for both management and investors when evaluating Westwood's underlying operating and financial performance and its available resources. We do not advocate that investors consider these non-GAAP measures without considering financial information prepared in accordance with GAAP.
We define Economic Earnings as net income plus non-cash equity-based compensation expense, amortization of intangible assets and deferred taxes related to goodwill. We define Economic Expenses as total expenses less non-cash equity-based compensation expense and amortization of intangible assets. Although depreciation on fixed assets is a non-cash expense, we do not add it back when calculating Economic Earnings or deduct it when calculating Economic Expenses because depreciation charges represent a decline in the value of the related assets that will ultimately require replacement. In addition, we do not adjust Economic Earnings for tax deductions related to restricted stock expense or amortization of intangible assets. Economic EPS represents Economic Earnings divided by diluted weighted average shares outstanding.
(WHG-G)
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