W.P. Stewart & Co., Ltd. Announces Corporate Reorganization; Reports Third Quarter and First Nine Months of 2009 Financial Results

HAMILTON, Bermuda, April 6, 2010 (GLOBE NEWSWIRE) --

Corporate Reorganization and Arrow Transaction

W.P. Stewart & Co., Ltd. ("W.P. Stewart" or the "Company") today announced that its Board of Directors has approved the necessary steps to reorganize the Company as a Delaware corporation. The proposed corporate restructuring is intended to be effected in the following manner:

• A new Delaware corporation ("WPS Delaware") is to be formed.
• WPS Delaware will enter into an Exchange Agreement with the Company whereby each Company shareholder will exchange each Company common share outstanding for one share of WPS Delaware stock. This share exchange is to be effected by a Scheme of Arrangement under Bermuda law. The Company would thereby be a subsidiary of WPS Delaware and will, immediately following the effective time of the Scheme of Arrangement merge, into WPS Delaware and WPS Delaware, as the surviving company, will change its name to W.P. Stewart & Co., Ltd.

The Scheme of Arrangement will be subject to various conditions, including approval by the requisite vote of shareholders of the Company and sanctioning by the Supreme Court of Bermuda following a hearing for this purpose. In connection with the reorganization, the Company's headquarters and all other operations presently conducted in Bermuda will be relocated to New York.

Mark Phelps, CEO of the Company, commented "Completing the Exchange Agreement and Scheme of Arrangement will be a further step along the path of simplifying the Company's corporate structure and further reducing its underlying cost base. By relocating the Company's Bermuda operations and further concentrating our team in New York, we expect to be able to reduce net expenses by approximately $2.5 million per year."

Third Quarter 2009 Financial Results

Third Quarter Highlights

The Company reported a net loss of $3.8 million, or $0.72 per share (diluted) and $0.72 per share (basic), for the third quarter ended 30 September 2009.  This loss includes cash charges of approximately $0.1 million or $0.02 per share (diluted), on a tax-effected basis, related to professional fees incurred in the reorganization of our U.S. mutual fund.  Excluding these cash charges, the third quarter 2009 net loss was $3.7 million, or $0.70 per share (diluted). These results compare with a net loss in the third quarter of 2008 of $31.2 million, or $6.20 per share (diluted) and $6.20 per share (basic).  These prior year results include cash and non-cash charges aggregating approximately $22.2 million, or $4.42 per share (diluted), on a tax-effected basis, relating to an impairment of intangible assets and goodwill, agreements with certain employees whose employment terminated during the quarter, and the initiative to complete a strategic transaction, which initiative resulted in an investment by funds managed by Arrow Capital Management LLC in the third quarter of 2008.

Net results on a cash basis for the quarter ended 30 September 2009 were -$2.4 million (net loss of $3.8 million adjusted to include $1.4 million, representing non-cash income and expenses consisting of unrealized gains and losses, non-cash compensation, depreciation, amortization and other non-cash charges, on a tax-effected basis), or -$0.45 per share (diluted). In the same quarter of the prior year, net results on a cash basis were -$7.6 million (net loss of $31.2 million adjusted to include $23.6 million, representing non-cash income and expenses consisting of unrealized gains and losses, non-cash compensation, depreciation, amortization and other non-cash charges, including the impairment charge referred to above, on a tax-effected basis), or -$1.50 per share (diluted).

For the quarter ended 30 September 2009 there were 5,283,581 common shares outstanding on a weighted average diluted basis (5,283,581 – weighted average basic) compared to 5,040,652 common shares outstanding for the quarter ended 30 September 2008 on the same weighted average diluted basis (5,040,652 – weighted average basic). On 19 November 2008, the Company effected a one-for-ten share consolidation of the Company's authorized and issued common shares pursuant to which every ten common shares, par value $0.001 per share, were consolidated, reclassified and converted into one new common share, par value $0.01 per share.  All share numbers and per share dollar figures for the quarter and nine months ended 30 September 2009 are provided after giving effect to such share consolidation and all prior period share numbers and per share data have been restated to reflect the share consolidation. 

Nine Month Results

For the nine months ended 30 September 2009, the net loss was $13.4 million, or $2.54 per share (diluted) and $2.54 per share (basic), on revenues of $14.3 million.  This loss includes cash and non-cash charges of approximately $1.2 million or $0.23 per share (diluted), on a tax-effected basis, consisting of non-cash charges of approximately $625,000 related to an adjustment in the carrying value of an investment in an affiliate and cash charges of approximately $575,000 incurred in the period primarily reflecting the disposal of a portion of leased space in New York and professional fees related to the reorganization of our U.S. mutual fund. Excluding these cash and non-cash charges, the net loss for the nine months ended 30 September 2009 was $12.2 million, or $2.31 per share (diluted). For the nine months ended 30 September 2008, the Company recorded a net loss of $42.8 million or $8.96 per share (diluted) and $8.96 per share (basic), on revenues of $27.7 million. In the 2008 period, results also include certain cash and non-cash charges aggregating $24.4 million or $5.12 per share (diluted), on a tax-effected basis, relating to an impairment of intangible assets and goodwill, agreements with certain employees whose employment terminated during the quarter, and the initiative to complete a strategic transaction as mentioned above.

Net results on a cash basis for the nine months ended 30 September 2009 were -$8.2 million (net loss of $13.4 million adjusted to include $5.2 million, representing non-cash income and expenses consisting of unrealized gains and losses, non-cash compensation, depreciation, amortization and other non-cash charges, on a tax-effected basis), or -$1.55 per share (diluted). In the same period of the prior year, net results on a cash basis were -$10.3 million (net loss of $42.8 million adjusted to include $32.5 million, representing non-cash income and expenses consisting of unrealized gains and losses, non-cash compensation, depreciation, amortization and other non-cash charges, including the impairment charge referred to above, on a tax-effected basis), or -$2.15 per share (diluted).

For the nine months ended 30 September 2009 there were 5,262,956 common shares outstanding on a weighted average diluted basis (5,262,956 – weighted average basic) compared to 4,773,818 common shares outstanding for the nine months ended 30 September 2008 on the same weighted average diluted basis (4,773,818 – weighted average basic).

Included in this release are tables containing revenue and expense detail for the three months and nine months ended 30 September 2009 with comparisons to prior periods.

Investment Performance and Assets Under Management Update

As previously reported, the performance for the W.P. Stewart U.S. Equity Composite (the "Composite") for the year ended 31 December 2009, was 34.7%, pre-fee, and 33.7%, post-fee, compared with 26.5% for the S&P 500. Interim monthly performance for the Composite for 2010 is posted on the Company's website at www.wpstewart.com.

Assets under management ("AUM") at 19 March 2010 were approximately $1.6 billion, compared with approximately $1.5 billion at 30 September 2009.  In the attached tables a complete breakdown of AUM flows for the period ended 30 September 2009 with comparisons to earlier periods is provided.

The Company releases composite portfolio investment returns on a monthly basis and intends to release AUM data at least on a quarterly basis. The performance returns are posted on the Company's website at www.wpstewart.com, usually within one week of month-end and AUM quarterly updates will be posted usually within one month of the quarter-end. A complete history of the performance of the Composite is available on the Company's website. Performance results and AUM data are subject to change on final reconciliation of all relevant data.

Revenues and Other Financial Data

Revenues were $4.7 million for the quarter ended 30 September 2009, down 30.3% from $6.7 million for the same quarter of 2008. Revenues were $14.3 million for the nine months ended 30 September 2009, compared to $27.7 million for the same period of 2008.

The average gross management fee, annualized, was 1.08% for the quarter ended 30 September 2009 and 1.08% for the nine months ended 30 September 2009, compared to 1.09% and 1.07%, respectively, in each of the comparable periods of the prior year on an annualized basis. Excluding performance fee based accounts, which pay a lower quarterly base fee plus an annual performance fee at year-end if earned, the average gross management fee was 1.29%, annualized, for the quarter ended 30 September 2009 and 1.29% for the nine months ended 30 September 2009, compared to 1.30% and 1.26%, respectively, in each of the comparable periods of the prior year on an annualized basis.

Total operating expenses for the third quarter of 2009 were $9.2 million, including $0.1 million in cash charges, on a tax-effected basis, related to professional fees incurred in the reorganization of our U.S. mutual fund.  For the same quarter of the prior year, total operating expenses were $36.7 million, including $22.2 million in cash and non-cash charges, on a tax-effected basis, relating to an impairment of intangible assets and goodwill, agreements with certain employees whose employment terminated during the quarter, and the initiative to complete a strategic transaction as described above.  Total operating expenses for the nine months ended 30 September 2009 were $29.5 million, including $1.2 million in charges (cash and non-cash), on a tax-effected basis, relating to an adjustment in the carrying value of an investment in an affiliate, the disposal of a portion of leased spaced in New York, and professional fees incurred in the reorganization of our U.S. mutual fund. This compares to total operating expenses in the same period of the prior year of $70.4 million, including $24.4 million in charges (cash and non-cash), on a tax-effected basis, relating to an impairment of intangible assets and goodwill, agreements with certain employees whose employment terminated during the quarter, and the initiative to complete the strategic transaction mentioned above.

For the quarter and nine months ended 30 September 2009 non-cash compensation expense related to the Company's restricted share issuances to employees was approximately $1.8 million and $5.1 million, respectively. For the same periods of the prior year, these non-cash compensation charges were approximately $3.5 million and $10.2 million, respectively. These non-cash compensation expenses are included in "employee compensation and benefits".

The Company's benefit/(provision) for taxes for the quarter ended 30 September 2009 was $0.7 million versus -$1.3 million in the comparable quarter of the prior year, and was $1.8 million versus $13,000 for the nine months ended 30 September 2009 and 2008, respectively.

Please see the tables included in this release for further detail on revenue and expenses for the three and nine months ended 30 September 2009 and 2008.

The Company had cash and marketable securities at 30 September 2009 of $35.2 million. The Company has no debt. As of 19 March 2010, the Company had cash and marketable securities balances of approximately $30.5 million. It is anticipated that the joint venture company that owns the Company's headquarter building in Bermuda will complete its sale of the building during the second quarter of 2010 and will subsequently distribute its assets, including the proceeds of the sale, to its joint venture partners, The Bank of Bermuda and the Company.

Shareholders' equity at 30 September 2009 was approximately $35.6 million. 

In December 2009, the Company repurchased 34,693 of its common shares from employees for an aggregate amount of $217,859.

W.P. Stewart & Co., Ltd. is an asset management company that has provided research-intensive equity management services to clients throughout the world since 1975. The Company is headquartered in Hamilton, Bermuda and has additional operations or affiliates in the United States and Europe.

The Company's shares are currently listed for trading on the Bermuda Stock Exchange (BSX:WPS) and are currently traded in the U.S. on the Pink Sheets (Pink Sheets:WPSLF). It is anticipated that following the reorganization described above, the common stock of WPS Delaware will be traded on the Pink Sheets under a symbol to be announced, but will not be listed for trading on the Bermuda Stock Exchange.

For more information, please visit the Company's website at http://www.wpstewart.com, or call W.P. Stewart Investor Relations at 1-888-695-4092 (toll-free within the United States) or + 441-295-8585 (outside the United States) or e-mail to IRINFO@wpstewart.com. Statements made in this release concerning our assumptions, expectations, beliefs, intentions, plans or strategies are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ from those expressed or implied in these statements. Such risks and uncertainties include, without limitation, the ability of the Company to complete the proposed corporate reorganization, the adverse effect from a decline or volatility in the securities markets, the general downturn in the economy, the effects of economic, financial or political events, a loss of client accounts, inability of the Company to attract or retain qualified personnel, a challenge to our U.S. tax status, competition from other companies, changes in government policy or regulation, a decline in the Company's products' performance, inability of the Company to implement its operating strategy, the effects of the Company's delisting and deregistration under the U.S. Securities Act of 1934, inability of the Company to manage unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations, industry capacity and trends, changes in demand for the Company's services, changes in the Company's business strategy or development plans and contingent liabilities. The information in this release is as of the date of this release, and will not be updated as a result of new information or future events or developments.