NEW YORK, Aug. 26, 2011 (GLOBE NEWSWIRE) -- W.P. Stewart & Co., Ltd. Reports Second Half and Full Year 2010 Financial Results and Provides Corporate Update, Including:
- AUM of $1.5 Billion at June 30, 2011
- Cash/Marketable Securities of $25.2 Million at August 8, 2011
- Repurchase of 450,000 Shares
Financial Results
Second Half Highlights
W.P. Stewart & Co., Ltd. ("W.P. Stewart" or the "Company") today reported a net loss of $6.6 million, or $1.28 per share (diluted) and $1.28 per share (basic), for the six months ended December 31, 2010. This loss includes cash and non-cash charges of approximately $2.6 million or $0.50 per share (diluted), on a tax-effected basis, related to (a) professional fees incurred in connection with the corporate restructuring of the Company and certain of its formerly Bermuda-based subsidiaries that was concluded in May 2010 as previously reported, (b) other costs relating to corporate consolidation and cost rationalization efforts, (c) severance payments and non-cash compensation charges related to employees whose employment terminated during the period and (d) an adjustment to tax assets and liabilities. Excluding these cash and non-cash charges, the net loss for the six months ended December 31, 2010 was $4.0 million, or $0.78 per share (diluted). These results compare with a net loss for the six months ended December 31, 2009 of $7.5 million, or $1.42 per share (diluted) and $1.42 per share (basic). These prior year results include cash and non-cash charges aggregating approximately $2.6 million, or $0.49 per share (diluted), on a tax-effected basis, primarily relating to (i) professional fees incurred in connection with (1) the reorganization of our U.S. mutual fund, (2) the exploration of a strategic transaction that was not completed and (3) the corporate restructuring of the Company and certain of its formerly Bermuda-based subsidiaries that was concluded in May 2010 as previously reported and (ii) severance payments and non-cash compensation charges related to employees terminated in connection with the corporate restructuring. The prior year results also include non-cash income of $2.8 million, or $0.53 per share (diluted), on a tax-effected basis, related to (a) a reversal of an over-accrual of fees paid out expense relating to fees payable to solicitors and (b) an adjustment to tax assets and liabilities. Excluding these cash and non-cash charges and non-cash income, the net loss for the six months ended December 31, 2009 was $7.7 million, or $1.46 per share (diluted).
Net results on a cash basis for the six months ended December 31, 2010 were -$2.1 million (net loss of $6.6 million adjusted for $4.5 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 -$0.40 per share (diluted). In the same six months of the prior year, net results on a cash basis were -$6.8 million (net loss of $7.5 million adjusted to include $0.7 million, representing non-cash income and expenses consisting of unrealized gains and losses, non-cash compensation, depreciation, amortization, the reversal of an over-accrual of fees paid out and the effect of an adjustment to tax assets and liabilities mentioned above, and other non-cash charges, on a tax-effected basis), or -$1.28 per share (diluted).
For the six months ended December 31, 2010 there were 5,155,550 common shares outstanding on a weighted average diluted basis (5,155,550 – weighted average basic) compared to 5,303,361 common shares outstanding for the six months ended December 31, 2009 on the same weighted average diluted basis (5,303,361 – weighted average basic).
Full Year 2010 Highlights
For the year ended December 31, 2010, the net loss was $11.5 million, or $2.20 per share (diluted) and $2.20 per share (basic), on revenues of $19.7 million. This loss includes cash and non-cash charges of approximately $3.2 million or $0.61 per share (diluted), on a tax-effected basis, related to (a) professional fees incurred in connection with (1) the exploration of a strategic transaction not completed and (2) the corporate restructuring concluded in May 2010, (b) other costs relating to corporate consolidation and cost rationalization efforts, (c) severance payments and non-cash compensation charges related to employees whose employment terminated during the period and (d) an adjustment to tax assets and liabilities. Excluding these cash and non-cash charges, the net loss for the year ended December 31, 2010 was $8.3 million, or $1.59 per share (diluted). For the year ended December 31, 2009, the Company recorded a net loss of $17.1 million or $3.24 per share (diluted) and $3.24 per share (basic), on revenues of $19.7 million. In 2009, results include certain cash and non-cash charges aggregating $3.7 million or $0.71 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 and non-cash charges of approximately $3.1 million primarily reflecting (i) the disposal of a portion of leased space in New York, (ii) professional fees related to the reorganization of our U.S. mutual fund, the exploration of a strategic transaction not completed and the corporate restructuring concluded in May 2010 and (iii) severance payments and non-cash compensation charges related to employees terminated in connection with the corporate restructuring. The loss in 2009 also includes non-cash income of $2.8 million, or $0.53 per share (diluted), on a tax-effected basis, related to (a) a reversal of an over-accrual of fees paid out expense relating to fees payable to solicitors and (b) an adjustment to tax assets and liabilities. Excluding these cash and non-cash charges and non-cash income, the net loss for the year ended December 31, 2009 was $16.2 million, or $3.07 (diluted).
Net results on a cash basis for the year ended December 31, 2010 were -$2.7 million (net loss of $11.5 million adjusted for $8.8 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 -$0.51 per share (diluted). For the year ended December 31, 2009, net results on a cash basis were -$12.6 million (net loss of $17.1 million adjusted for $4.5 million, representing non-cash income and expenses consisting of unrealized gains and losses, non-cash compensation, depreciation, amortization, the reversal of an over-accrual of fees paid out and the effect of an adjustment to tax assets and liabilities mentioned above, and other non-cash charges, on a tax-effected basis), or -$2.39 per share (diluted).
For the full year ended December 31, 2010 there were 5,234,651 common shares outstanding on a weighted average diluted basis (5,234,651 – weighted average basic) compared to 5,278,126 common shares outstanding for the year ended December 31, 2009 on the same weighted average diluted basis (5,278,126 – weighted average basic).
Included in this release are tables containing revenue and expense detail for the six months and year ended December 31, 2010 with comparisons to prior periods.
Investment Performance and Assets Under Management Update
The performance for the W.P. Stewart U.S. Equity Composite (the "Composite") for the year ended December 31, 2010, was 13.4%, pre-fee, and 12.4%, post-fee, compared with 15.1% for the S&P 500. As of July 31, 2011, year-to-date performance for the Composite was 2.2%, pre-fee, and 1.6%, post-fee, compared with 3.9% for the S&P 500. For the three years ending June 30, 2011, annualized performance for the Composite was 7.5%, pre-fee, and 6.4%, post-fee, which was 3.1% ahead of the S&P 500 at 3.3% for the same period. Interim monthly and quarterly performance for the Composite for 2011 are posted on the Company's website at www.wpstewart.com.
Assets under management ("AUM") at June 30, 2011 were approximately $1.5 billion (preliminary), compared with approximately $1.6 billion at December 31, 2010. In the attached tables a complete breakdown of AUM flows for the year ended December 31, 2010 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 $9.1 million for the six months ended December 31, 2010, down 10.4% from $10.1 million for the same period in the prior year. Revenues were $19.7 million for the full year ended December 31, 2010, compared to $19.7 million for 2009.
The average gross management fee, annualized, was 1.07% for the six months ended December 31, 2010 and 1.06% for the year ended December 31, 2010, compared to 1.07% for six months ended December 31, 2009 on an annualized basis and 1.08% for the year ended December 31, 2009. 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 1.27%, annualized, for the six months ended December 31, 2010 and 1.27% for the year ended December 31, 2010, compared to 1.29% for the six months ended December 31, 2009 on an annualized basis and 1.29% for the year ended December 31, 2009 respectively, in each of the comparable periods of the prior year.
Total operating expenses for the six months ended December 31, 2010 were $14.6 million, including $1.4 million in cash and non-cash charges, on a tax-effected basis, related to (a) professional fees incurred in the exploration of a strategic transaction not completed and the corporate restructuring concluded in May 2010 as mentioned above, (b) other costs relating to corporate consolidation and cost rationalization efforts, and (c) severance payments and non-cash compensation charges related to employees whose employment terminated during the period. For the same six months of the prior year, total operating expenses were $19.5 million, including $2.6 million in cash and non-cash charges, on a tax-effected basis, related to (i) professional fees incurred in the reorganization of our U.S. mutual fund, the exploration of a strategic transaction not completed and the corporate restructuring concluded in May 2010 as mentioned above and (ii) severance payments and non-cash compensation charges related to employees terminated in connection with the corporate restructuring. These expenses were somewhat offset by $1.5 million of non-cash income included in fees paid out resulting from a reversal of an over-accrual of certain fees payable to solicitors. Total operating expenses for the year ended December 31, 2010 were $29.1 million, including $2.0 million in cash and non-cash charges, on a tax-effected basis, relating to (a) professional fees incurred in the exploration of a strategic transaction and the corporate restructuring concluded in May 2010, (b) other costs relating to corporate consolidation and cost rationalization efforts, and (c) severance payments and non-cash compensation related to employees whose employment terminated during the period. This compares to total operating expenses for the year ended December 31, 2009 of $39.7 million, including $3.7 million in charges (cash and non-cash), on a tax-effected basis, relating to (1) an adjustment in the carrying value of an investment in an affiliate, (2) the disposal of a portion of leased spaced in New York, (3) professional fees incurred in the reorganization of our U.S. mutual fund, the exploration of a strategic transaction and the corporate restructuring concluded in May 2010, and (4) severance payments and non-cash compensation charges related to employees terminated in connection with the corporate restructuring. These expenses were somewhat offset by $1.5 million of non-cash income included in fees paid out resulting from a reversal of an over-accrual of certain fees payable to solicitors.
For the six months and year ended December 31, 2010 non-cash compensation expense related to the Company's restricted share issuances to employees was approximately $3.0 million and $5.5 million, respectively. For the same periods of the prior year, these non-cash compensation charges were approximately $3.8 million and $7.0 million, respectively. These non-cash compensation expenses are included in "employee compensation and benefits."
The Company's provision/(benefit) for taxes for the six months ended December 31, 2010 was $1.0 million versus -$1.8 million in the comparable period of the previous year, and was $2.1 million versus -$2.9 million for the years ended December 31, 2010 and 2009, respectively. The Company is currently engaged in audits with two taxing authorities.
Please see the tables included in this release for further detail on revenue and expenses for the six months and full years ended December 31, 2010 and 2009.
The Company had cash and marketable securities at December 31, 2010 of $25.8 million. The Company has no debt. As of August 8, 2011, the Company had cash and marketable securities balances of approximately $25.2 million. In addition, the joint venture company that owned the Company's headquarter building in Bermuda completed its sale of the building in May 2010 and is expected to shortly distribute its assets, including the proceeds of the sale, to its joint venture partners, The Bank of Bermuda and the Company.
Shareholders' equity at December 31, 2010 was approximately $25.9 million.
Other Items
From January through July 25, 2011, the Company repurchased 450,000 shares of its common stock for an aggregate amount of $2,389,500. Of such number of shares, 400,000 were repurchased from funds managed by Arrow Capital Management, and the remainder were purchased from an employee of the firm. The Board of Directors also recently reapproved (subsequent to the 400,000 share repurchase noted above) a stock repurchase program of up to 10% of the currently outstanding common shares from time to time in the discretion of the Board's Executive Committee, whether in open market or privately negotiated transactions. The Company has approximately 5.0 million shares of common stock outstanding. Any repurchased shares will be cancelled or held in treasury for general corporate purposes. The Company intends to fund any repurchases with cash on hand.
The firm has recently hired one new member for its investment management team. David Tsoupros is a Vice President and analyst for WPS Advisors, Inc., the firm's wholly-owned investment research subsidiary. In May 2011, Heath Bogin, who joined the firm's investment management team in June 2010, left the firm to pursue other interests. At the end of 2011 Samantha Epstein's role will transition from a member of the investment team to that of a consultant focusing on client service.
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 New York, New York and has additional operations or affiliates in Europe.
The Company's shares are currently traded on the Pink Sheets under the symbol "WPSL."
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 1-212-750-8585 (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 effects of the Company's 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 former 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.
| W.P. Stewart & Co., Ltd. | ||
| Condensed Consolidated Statements of Financial Condition | ||
|
December 31, 2010 |
December 31, 2009 |
|
| Assets: | ||
| Cash and cash equivalents | $ 23,676,690 | $ 21,407,458 |
| Fees receivable | 204,718 | 755,093 |
| Receivable from clearing broker | -- | 13,039 |
| Investments in unconsolidated affiliates | 2,017,832 | 1,757,919 |
| Receivables from affiliates, net | 536,784 | 476,830 |
| Investments, trading (cost $1,719,847 at December 31, 2010 and $2,785,735 at | ||
| December 31, 2009, respectively) | 2,058,284 | 3,311,434 |
| Investments, available for sale (cost $12,400 at December 31, 2010 and $7,968,192 at | ||
| December 31, 2009, respectively) | 23,730 | 8,484,910 |
| Furniture, equipment, software and leasehold improvements (net of accumulated depreciation | ||
| and amortization of $3,570,177 and $7,862,722 for December 31, 2010 and December 31, 2009, respectively) | 418,081 | 663,607 |
| Interest receivable on shareholders' notes | -- | 17,709 |
| Income taxes receivable | 4,795,996 | 6,995,505 |
| Deferred income taxes receivable | 437,392 | 363,555 |
| Other assets | 2,582,134 | 3,061,412 |
| $ 36,751,641 | $ 47,308,471 | |
| Liabilities and Shareholders' Equity: | ||
| Liabilities: | ||
| Employee compensation and benefits payable | $ 2,633,827 | $ 4,642,976 |
| Fees payable | 163,898 | 97,755 |
| Vendor payables | 2,719,774 | 5,011,748 |
| Accrued expenses and other liabilities | 5,334,677 | 3,892,192 |
| 10,852,176 | 13,644,671 | |
| Shareholders' Equity: | ||
| Common shares, $0.01 par value (12,500,000 shares authorized; 5,379,036 shares issued, | ||
| 5,376,536 shares outstanding at December 31, 2010; 5,587,464 shares issued, 5,584,964 | ||
| shares outstanding at December 31, 2009, respectively) | 53,790 | 55,875 |
| Additional paid-in-capital | 138,134,599 | 134,021,928 |
| Accumulated other comprehensive income | 566,310 | 1,164,630 |
| Retained earnings/(deficit) | (112,849,909) | (101,337,258) |
| Common shares held in treasury, at cost, $0.01 par value (2,500 shares at | ||
| December 31, 2010 and December 31, 2009, respectively) | (5,325) | (5,325) |
| 25,899,465 | 33,899,850 | |
| Less: notes receivable for common shares | -- | (236,050) |
| 25,899,465 | 33,663,800 | |
| $ 36,751,641 | $ 47,308,471 | |
| W.P. Stewart & Co., Ltd. | |||
| Unaudited Condensed Consolidated Statements of Operations | |||
| For the Year Ended December 31, | |||
| 2010 | 2009 | % | |
| Revenue: | |||
| Fees | $ 16,077,616 | $ 16,300,824 | -1.37% |
| Commissions | 781,623 | 1,350,944 | -42.14% |
| Realized and unrealized gains/(losses) on investments | 1,279,339 | 647,945 | 97.45% |
| Interest and other | 1,548,042 | 1,443,699 | 7.23% |
| 19,686,620 | 19,743,412 | -0.29% | |
| Expenses: | |||
| Employee compensation and benefits | 16,569,791 | 22,043,945 | -24.83% |
| Fees paid out | 1,666,712 | (238,152) | -799.85% |
| Commissions, clearance and trading | 486,392 | 789,014 | -38.35% |
| Research and administration | 5,047,545 | 7,932,095 | -36.37% |
| Marketing | 1,360,920 | 1,427,933 | -4.69% |
| Depreciation and amortization | 90,791 | 722,419 | -87.43% |
| Other operating | 3,922,337 | 7,045,413 | -44.33% |
| 29,144,488 | 39,722,667 | -26.63% | |
| Income/(loss) before taxes | (9,457,868) | (19,979,255) | -52.66% |
| Provision/(benefit) for taxes | 2,054,783 | (2,865,608) | -171.70% |
| Net income/(loss) | $ (11,512,651) | $ (17,113,647) | -32.73% |
| Earnings/(loss) per share: | |||
| Basic earnings/(loss) per share | $ (2.20) | $ (3.24) | -32.10% |
| Diluted earnings/(loss) per share | $ (2.20) | $ (3.24) | -32.10% |
| W.P. Stewart & Co., Ltd. | |||
| Unaudited Condensed Consolidated Statements of Operations | |||
| For the Six Months Ended December 31, | |||
| 2010 | 2009 | % | |
| Revenue: | |||
| Fees | $ 7,714,586 | $ 8,244,337 | -6.43% |
| Commissions | 412,024 | 657,356 | -37.32% |
| Realized and unrealized gains/(losses) on investments | 734,364 | 478,446 | 53.49% |
| Interest and other | 229,649 | 766,673 | -70.05% |
| 9,090,623 | 10,146,812 | -10.41% | |
| Expenses: | |||
| Employee compensation and benefits | 8,499,777 | 11,711,532 | -27.42% |
| Fees paid out | 751,695 | (766,430) | -198.08% |
| Commissions, clearance and trading | 222,288 | 390,911 | -43.14% |
| Research and administration | 2,422,853 | 3,323,580 | -27.10% |
| Marketing | 762,920 | 750,239 | 1.69% |
| Depreciation and amortization | 47,723 | 346,148 | -86.21% |
| Other operating | 1,942,009 | 3,718,608 | -47.78% |
| 14,649,265 | 19,474,588 | -24.78% | |
| Income/(loss) before taxes | (5,558,642) | (9,327,776) | -40.41% |
| Provision/(benefit) for taxes | 1,045,254 | (1,781,032) | -158.69% |
| Net income/(loss) | $ (6,603,896) | $ (7,546,744) | -12.49% |
| Earnings/(loss) per share: | |||
| Basic earnings/(loss) per share | $ (1.28) | $ (1.42) | -9.86% |
| Diluted earnings/(loss) per share | $ (1.28) | $ (1.42) | -9.86% |
| W.P. Stewart & Co., Ltd. | |||||
| Net Flows of Assets Under Management* | |||||
| (in millions) | |||||
| For the Six Months Ended | For the Year Ended | ||||
| Dec. 31, 2010 | Jun. 30, 2010 | Dec. 31, 2009 | Dec. 31, 2010 | Dec. 31, 2009 | |
| Existing Accounts: | |||||
| Contributions | $ 46 | $ 56 | $ 40 | $ 102 | $ 91 |
| Withdrawals | (47) | (49) | (53) | (96) | (111) |
| Net Flows of Existing Accounts | (1) | 7 | (13) | 6 | (20) |
| Publicly Available Funds: | |||||
| Contributions | 78 | 70 | 47 | 148 | 57 |
| Withdrawals | (60) | (49) | (50) | (109) | (76) |
| Direct Accounts Opened | 4 | 36 | 13 | 40 | 26 |
| Direct Accounts Closed | (47) | (44) | (54) | (91) | (207) |
| Net New Flows | (25) | 13 | (44) | (12) | (200) |
| Net Flows of Assets Under Management | $ (26) | $ 20 | $ (57) | $ (6) | $ (220) |
| * The table above sets forth the total net flows of assets under management for the six months ended December 31, 2010, June 30, 2010 and December 31, 2009, respectively, and for the years ended December 31, 2010 and 2009, respectively, which include changes in net flows of existing accounts and net new flows (net contributions to our publicly available funds and flows from new accounts minus closed accounts). The table excludes total capital appreciation or depreciation in assets under management with the exception of the amount attributable to withdrawals and closed accounts. | |||||