SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
Report (Date of earliest event reported): October 24, 2007
WESTWOOD
HOLDINGS GROUP, INC.
(Exact
name of registrant as specified in charter)
|
Delaware
|
001-31234
|
75-2969997
|
|
(State
or other jurisdiction
|
(Commission
|
(IRS
Employer
|
|
of
incorporation)
|
File
Number)
|
Identification
No.)
|
200
Crescent Court, Suite 1200
Dallas,
Texas 75201
(Address
of principal executive offices)
(214)
756-6900
(Registrant's
telephone number, including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see
General
Instruction A.2. below):
| o |
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
| o |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
| o |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
|
| o |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
|
In
accordance with Securities and Exchange Commission Release No. 34-47583,
the
following information, which is being furnished pursuant to the requirements
of
Item 2.02, “Results of Operations and Financial Condition,” is being reported
under Item 7.01, “Regulation FD Disclosure.”
On
October 24, 2007, Westwood Holdings Group, Inc. issued a press release entitled
“Westwood Holdings Group, Inc. Reports Third Quarter 2007 Results and Announces
Quarterly Dividend of $0.25; Assets Under Management Rise to $7.7 Billion
at
September 30, 2007 and Third Quarter Earnings Per Share Increases 69%
Year-over-Year”, a copy of which is furnished with this Current Report on Form
8-K as Exhibit 99.1. The information in this Current Report on Form 8-K shall
not be deemed to be “filed” for the purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liabilities
of
that Section, nor shall it be deemed incorporated by reference in any filing
of
the Company under the Securities Act of 1933, as amended.
| ITEM 7.01: |
REGULATION
FD DISCLOSURE
|
Westwood
also announced today that its Board of Directors has approved the payment
of a
quarterly cash dividend of $0.25 per common share payable on January 2, 2008
to
stockholders of record on December 14, 2007.
| ITEM 9.01: |
FINANCIAL
STATEMENTS AND EXHIBITS
|
| (d) |
Exhibits:
The following exhibit is furnished with this
report:
|
|
Exhibit
Number
|
Description
|
|
99.1
|
Press
Release dated October 24, 2007, entitled “Westwood Holdings Group, Inc.
Reports Third Quarter 2007 Results and Announces Quarterly Dividend
of
$0.25; Assets Under Management Rise to $7.7 Billion at September
30, 2007
and Third Quarter Earnings Per Share Increases 69%
Year-over-Year”.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date:
October 24, 2007
| WESTWOOD HOLDINGS GROUP, INC. | ||
| |
|
|
| By: |
/s/ William
R. Hardcastle,
Jr.,
|
|
|
William
R. Hardcastle, Jr.,
|
||
|
Chief
Financial
Officer
|
||
EXHIBIT
INDEX
|
Exhibit
Number
|
Description
|
|
99.1
|
Press
Release dated October 24, 2007, entitled “Westwood Holdings Group, Inc.
Reports Third Quarter 2007 Results and Announces Quarterly Dividend
of
$0.25; Assets Under Management Rise to $7.7 Billion at September
30, 2007
and Third Quarter Earnings Per Share Increases 69%
Year-over-Year”.
|
Exhibit
99.1
Westwood
Holdings Group, Inc. Reports Third Quarter 2007 Results and
Announces
Quarterly Dividend of $0.25
Assets
Under Management Rise to $7.7 Billion at September 30, 2007
and
Third Quarter Earnings Per Share Increases 69%
Year-over-Year
Dallas,
October 24, 2007 - Westwood Holdings Group, Inc. (NYSE: WHG) today reported
2007
third quarter revenues of $8.7 million, net income of $1.7 million and earnings
per diluted share of $0.27. This compares to revenues of $6.9 million, net
income of $0.9 million and earnings per diluted share of $0.16 in the third
quarter of 2006. For the nine months ended September 30, 2007, Westwood reported
revenues of $24.0 million and net income of $4.7 million, or $0.76 per diluted
share, compared to revenues of $20.0 million and net income of $3.2 million,
or
$0.57 per diluted share, for the same 2006 period.
Cash
earnings, which we define as net income plus non-cash equity-based compensation
expense, for the third quarter of 2007 were $3.2 million, when adding back
$1.5
million in non-cash equity-based compensation expense, compared to $2.3 million
for the third quarter of 2006, when adding back $1.4 million in non-cash
equity-based compensation expense. Cash earnings per share (“Cash EPS”), which
we define as cash earnings divided by diluted weighted average shares
outstanding, for the third quarter of 2007 was $0.51 per diluted share compared
to $0.40 per diluted share for the third quarter of 2006. Cash earnings for
the
nine months ended September 30, 2007 were $8.5 million compared to $6.4 million
for the same period in 2006, while Cash EPS for the nine months ended September
30, 2007 was $1.38 per diluted share compared to $1.15 per diluted share
for the
same period in 2006. (Cash earnings and Cash EPS are non-GAAP financial measures
that are explained and reconciled with the most comparable GAAP financial
measures in the attached tables.)
Revenues
for the 2007 third quarter increased 26.7% compared to the 2006 third quarter,
primarily as a result of increased average assets under management. Assets
under
management were $7.7 billion as of September 30, 2007, a 35.4% year-over-year
increase as compared to September 30, 2006 assets under management of $5.7
billion. Average assets under management for the 2007 third quarter were
$7.3
billion, an increase of 31.0% compared with $5.5 billion for the 2006 third
quarter. The increase in period ending assets under management was primarily
due
to inflows of assets from new and existing clients and the market appreciation
of assets under management.
Total
expenses for the 2007 third quarter were $6.1 million compared to $5.3 million
for the 2006 third quarter. Cash expenses for the 2007 third quarter were
$4.6
million, which excludes $1.5 million in non-cash equity-based compensation
expense, compared to $3.9 million for the 2006 third quarter, which excludes
$1.4 million in non-cash equity-based compensation expense. (An explanation
and
reconciliation of cash expenses to total expenses are included in the attached
tables.) The primary driver of the increase in total expenses was higher
employee compensation and benefits costs, most of which was due to an increase
of $340,000 in incentive compensation expense due to higher pre-tax income
and
an increase of $150,000 in non-cash restricted stock expense due to additional
restricted stock grants in July 2007. The other significant components of
the
increase in employee compensation and benefits costs were increased salary
expense due to increased headcount and salary increases for certain
employees.
Westwood
Trust contributed revenue of $2.7 million and net income of $463,000 in the
2007
third quarter, compared to revenue of $2.1 million and net income of $300,000
in
the 2006 third quarter. Westwood Trust’s assets under management as of September
30, 2007 were $1.9 billion, an increase of 28.0% compared to $1.4 billion
as of
September 30, 2006.
The
WHG
Funds, consisting of WHG LargeCap Value, WHG SMidCap, WHG SmallCap Value,
WHG
Income Opportunity and WHG Balanced, have grown to $228 million in assets
as of
September 30, 2007. This represents an increase of approximately 145% compared
to September 30, 2006.
Westwood
also announced today that its Board of Directors declared a quarterly cash
dividend of $0.25 per common share, payable on January 2, 2008 to stockholders
of record on December 14, 2007.
Brian
Casey, Westwood’s President & CEO commented, “Our marketing and client
service teams have worked overtime to capitalize on the results produced
by our
investment teams over the past several years. As owner-employees, we are
particularly gratified to see record assets under management and record
financial results, but we are most proud of delivering superior performance
and
attentive client service to our growing client base. We never forget that
clients are the center of everything we do and we continually strive to exceed
their expectations.”
Westwood
will host a conference call to discuss the 2007 third quarter results and
other
business updates at 4:30 p.m. Eastern time today. To listen to the conference
call, dial 866-838-2054 (domestic) or 904-596-2360 (international). The
conference call will also be available via webcast and can be accessed at
Westwood’s website, http://www.westwoodgroup.com under the Investor Relations
tab. The conference call will be available for replay through October 31
by
dialing 888-284-7564 (domestic) or 904-596-3174 (international) and entering
passcode 203759.
About
Westwood
Westwood
Holdings Group, Inc. manages investment assets and provides services for
its
clients through two subsidiaries, Westwood Management Corp. and Westwood
Trust.
Westwood Management Corp. is a registered investment advisor and provides
investment advisory services to corporate pension funds, public retirement
plans, endowments, foundations, the WHG Funds, a family of institutional
mutual
funds, other mutual funds and clients of Westwood Trust. Westwood Trust provides
trust and custodial services and participation in common trust funds that
it
sponsors to institutions and high net worth individuals. Westwood Holdings
Group, Inc. trades on the New York Stock Exchange under the symbol “WHG.” For
more information, please visit Westwood’s website at www.westwoodgroup.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 significant concentration of our revenues in four 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; downturn 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; our ability to capitalize on the performance of our marketing
efforts; the acceptance of our new products with our existing and new clients;
changes in our dividend policy and uses of our cash; and the other risks
detailed from time to time in Westwood’s SEC filings, including but not limited
to, its annual report on Form 10-K for the year ended December 31, 2006 and
its
quarterly reports on Form 10-Q for the three month periods ended March 31,
2007,
June 30, 2007 and September 30, 2007. You are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the
date of
this press release. Except as required by law, Westwood is not obligated
to
publicly release any revisions to these forward-looking statements to reflect
the events or circumstances after the date of this press release or to reflect
the occurrence of unanticipated events.
WESTWOOD
HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(in
thousands, except per share amounts)
(unaudited)
|
Three
months ended
September
30,
|
Nine
months ended
September
30,
|
||||||||||||
|
2007
|
2006
|
2007
|
2006
|
||||||||||
|
REVENUES:
|
|||||||||||||
|
Advisory
fees
|
$
|
5,782
|
$
|
4,391
|
$
|
15,368
|
$
|
12,881
|
|||||
|
Trust
fees
|
2,666
|
2,086
|
7,558
|
6,026
|
|||||||||
|
Other
revenues
|
291
|
418
|
1,123
|
1,138
|
|||||||||
|
Total
revenues
|
8,739
|
6,895
|
24,049
|
20,045
|
|||||||||
|
EXPENSES:
|
|||||||||||||
|
Employee
compensation and benefits
|
4,669
|
4,058
|
12,644
|
10,979
|
|||||||||
|
Sales
and marketing
|
164
|
148
|
432
|
431
|
|||||||||
|
WHG
mutual funds
|
43
|
80
|
144
|
167
|
|||||||||
|
Information
technology
|
239
|
225
|
721
|
682
|
|||||||||
|
Professional
services
|
420
|
312
|
1,199
|
1,040
|
|||||||||
|
General
and administrative
|
565
|
508
|
1,690
|
1,522
|
|||||||||
|
Total
expenses
|
6,100
|
5,331
|
16,830
|
14,821
|
|||||||||
|
Income
before income taxes
|
2,639
|
1,564
|
7,219
|
5,224
|
|||||||||
|
Provision
for income taxes
|
957
|
643
|
2,557
|
2,060
|
|||||||||
|
Income
before cumulative effect of accounting change
|
1,682
|
921
|
4,662
|
3,164
|
|||||||||
|
Cumulative
effect of change in accounting principle, net of income taxes of
$21
|
-
|
-
|
-
|
39
|
|||||||||
|
Net
income
|
$
|
1,682
|
$
|
921
|
$
|
4,662
|
$
|
3,203
|
|||||
|
Earnings
per share:
|
|||||||||||||
|
Basic:
|
|||||||||||||
|
Continuing
operations
|
$
|
0.28
|
$
|
0.16
|
$
|
0.80
|
$
|
0.58
|
|||||
|
Cumulative
effect of an accounting change
|
-
|
-
|
-
|
-
|
|||||||||
|
Net
income
|
$
|
0.28
|
$
|
0.16
|
$
|
0.80
|
$
|
0.58
|
|||||
|
Diluted:
|
|||||||||||||
|
Continuing
operations
|
$
|
0.27
|
$
|
0.16
|
$
|
0.76
|
$
|
0.56
|
|||||
|
Cumulative
effect of an accounting change
|
-
|
-
|
-
|
0.01
|
|||||||||
|
Net
income
|
$
|
0.27
|
$
|
0.16
|
$
|
0.76
|
$
|
0.57
|
|||||
WESTWOOD
HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
As
of September 30, 2007 and December 31, 2006
(in
thousands, except par value and share amounts)
|
September
30,
2007
(unaudited)
|
December
31,
2006
|
||||||
|
ASSETS
|
|||||||
|
Current
Assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
4,953
|
$
|
2,177
|
|||
|
Accounts
receivable
|
3,680
|
3,111
|
|||||
|
Investments,
at market value
|
19,485
|
17,933
|
|||||
|
Deferred
income taxes
|
954
|
1,267
|
|||||
|
Other
current assets
|
975
|
465
|
|||||
|
Total
current assets
|
30,047
|
24,953
|
|||||
|
Goodwill
|
2,302
|
2,302
|
|||||
|
Deferred
income taxes
|
88
|
214
|
|||||
|
Property
and equipment, net of accumulated depreciation of $951 and
$774
|
1,038
|
1,253
|
|||||
|
Total
assets
|
$
|
33,475
|
$
|
28,722
|
|||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
|
Current
Liabilities:
|
|||||||
|
Accounts
payable and accrued liabilities
|
$
|
775
|
$
|
778
|
|||
|
Dividends
payable
|
3,398
|
996
|
|||||
|
Compensation
and benefits payable
|
2,566
|
2,801
|
|||||
|
Income
taxes payable
|
-
|
689
|
|||||
|
Other
current liabilities
|
11
|
10
|
|||||
|
Total
current liabilities
|
6,750
|
5,274
|
|||||
|
Deferred
rent
|
621
|
713
|
|||||
|
Total
liabilities
|
7,371
|
5,987
|
|||||
|
Stockholders’
Equity:
|
|||||||
|
Common
stock, $0.01 par value, authorized 10,000,000 shares, issued 6,834,452
and
outstanding 6,802,303 shares at September 30, 2007; issued and
outstanding
6,638,525 shares at December 31, 2006
|
68
|
66
|
|||||
|
Additional
paid-in capital
|
26,092
|
20,289
|
|||||
|
Treasury
stock, at cost - 32,149 shares at September 30, 2007; 0 shares
at December
31, 2006
|
(1,042
|
)
|
-
|
||||
|
Retained
earnings
|
986
|
2,380
|
|||||
|
Total
stockholders’ equity
|
26,104
|
22,735
|
|||||
|
Total
liabilities and stockholders’ equity
|
$
|
33,475
|
$
|
28,722
|
|||
WESTWOOD
HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
thousands)
(unaudited)
|
For
the nine months ended September 30,
|
|||||||
|
2007
|
2006
|
||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
|
Net
income
|
$
|
4,662
|
$
|
3,203
|
|||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
|
Depreciation
and amortization
|
176
|
202
|
|||||
|
Unrealized
gains on investments
|
(52
|
)
|
13
|
||||
|
Stock
option expense
|
-
|
122
|
|||||
|
Restricted
stock amortization
|
3,797
|
3,152
|
|||||
|
Deferred
income taxes
|
439
|
(296
|
)
|
||||
|
Cumulative
effect of change in accounting principle
|
-
|
(39
|
)
|
||||
|
Excess
tax benefits from stock-based compensation
|
(1,226
|
)
|
(19
|
)
|
|||
|
Net
purchases of investments - trading securities
|
(1,089
|
)
|
(788
|
)
|
|||
|
Change
in operating assets and liabilities:
|
|||||||
|
Accounts
receivable
|
(569
|
)
|
(52
|
)
|
|||
|
Other
current assets
|
(82
|
)
|
(129
|
)
|
|||
|
Accounts
payable and accrued liabilities
|
(3
|
)
|
(63
|
)
|
|||
|
Compensation
and benefits payable
|
(235
|
)
|
(1,084
|
)
|
|||
|
Income
taxes payable
|
361
|
(267
|
)
|
||||
|
Other
liabilities
|
(10
|
)
|
8
|
||||
|
Net
cash provided by operating activities
|
6,169
|
3,963
|
|||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
|
Purchases
of money market funds - available for sale
|
(5,320
|
)
|
(5,536
|
)
|
|||
|
Sales
of money market funds - available for sale
|
4,909
|
8,846
|
|||||
|
Purchase
of property and equipment
|
(45
|
)
|
(57
|
)
|
|||
|
Net
cash (used in) provided by investing activities
|
(456
|
)
|
3,253
|
||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
|
Purchase
of treasury stock
|
(1,042
|
)
|
-
|
||||
|
Excess
tax benefits from stock-based compensation
|
1,226
|
19
|
|||||
|
Proceeds
from exercise of stock options
|
533
|
293
|
|||||
|
Cash
dividends
|
(3,654
|
)
|
(1,653
|
)
|
|||
|
Net
cash used in financing activities
|
(2,937
|
)
|
(1,341
|
)
|
|||
|
NET
INCREASE IN CASH
|
2,776
|
5,875
|
|||||
|
Cash
and cash equivalents, beginning of period
|
2,177
|
1,897
|
|||||
|
Cash
and cash equivalents, end of period
|
$
|
4,953
|
$
|
7,772
|
|||
|
Supplemental
cash flow information:
|
|||||||
|
Cash
paid during the period for income taxes
|
$
|
1,756
|
$
|
2,622
|
|||
|
Issuance
of restricted stock
|
5,330
|
11,507
|
|||||
|
Tax
benefit allocated directly to equity
|
1,475
|
380
|
|||||
Reconciliation
of Net Income to Cash Earnings and Total Expenses to Cash
Expenses
(in
thousands, except share and per share amounts)
|
Three
Months Ended
September
30, 2007
|
Three
Months Ended
September
30, 2006
|
%
Change
|
||||||||
|
Net
Income
|
$
|
1,682
|
$
|
921
|
82.6
|
%
|
||||
|
Add:
Restricted stock expense
|
1,537
|
1,387
|
10.8
|
|||||||
|
Add:
Stock option expense
|
-
|
1
|
N/A
|
|||||||
|
Cash
earnings
|
$
|
3,219
|
$
|
2,309
|
39.4
|
|||||
|
Diluted
weighted average shares
|
6,263,222
|
5,817,330
|
7.7
|
|||||||
|
Cash
earnings per share
|
$
|
0.51
|
$
|
0.40
|
27.5
|
|||||
|
Total
expenses
|
$
|
6,100
|
$
|
5,331
|
14.4
|
|||||
|
Less:
Restricted stock expense
|
(1,537
|
)
|
(1,387
|
)
|
10.8
|
|||||
|
Less:
Stock option expense
|
-
|
(1
|
)
|
N/A
|
||||||
|
Cash
expenses
|
$
|
4,563
|
$
|
3,943
|
15.7
|
%
|
||||
|
|
Nine
months Ended
September
30, 2007
|
Nine
months Ended
September
30, 2006
|
%
Change
|
|||||||
|
Net
Income
|
$
|
4,662
|
$
|
3,203
|
45.6
|
%
|
||||
|
Add:
Restricted stock expense
|
3,797
|
3,152
|
20.5
|
|||||||
|
Add:
Stock option expense
|
-
|
122
|
N/A
|
|||||||
|
Less:
Cumulative effect of change in accounting principle
|
-
|
(39
|
)
|
N/A
|
||||||
|
Cash
earnings
|
$
|
8,459
|
$
|
6,438
|
31.4
|
|||||
|
Diluted
weighted average shares
|
6,142,196
|
5,612,516
|
9.4
|
|||||||
|
Cash
earnings per share
|
$
|
1.38
|
$
|
1.15
|
20.0
|
|||||
|
Total
expenses
|
$
|
16,830
|
$
|
14,821
|
13.6
|
|||||
|
Less:
Restricted stock expense
|
(3,797
|
)
|
(3,152
|
)
|
20.5
|
|||||
|
Less:
Stock option expense
|
-
|
(122
|
)
|
N/A
|
||||||
|
Cash
expenses
|
$
|
13,033
|
$
|
11,547
|
12.9
|
%
|
||||
As
supplemental information, we are providing non-GAAP performance measures
that we
refer to as cash earnings, cash earnings per share (or Cash EPS), and cash
expenses. We provide these measures in addition to, but 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 cash earnings, Cash EPS
and
cash 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 to evaluate 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
cash earnings as net income plus the non-cash expense associated with
equity-based compensation awards of restricted stock and stock options. In
calculating cash earnings for the nine months ended September 30, 2006, we
also
eliminate the non-cash cumulative effect of change in accounting principle
associated with our implementation of SFAS 123R. We define cash expenses
as
total expenses less non-cash equity-based compensation expense. Although
depreciation on fixed assets is a non-cash expense, we do not add it back
when
calculating cash earnings or deduct it when calculating cash expenses because
depreciation charges represent a decline in the value of the related assets
that
will ultimately require replacement. Cash EPS represents cash earnings divided
by diluted weighted average shares outstanding.
SOURCE:
Westwood Holdings Group, Inc.
#
#
#
(WHG-G)
CONTACT:
Westwood
Holdings Group, Inc.
Bill
Hardcastle
(214)
756-6900