Assets Under Management Rise to $7.7 Billion at September 30, 2007 and
Third Quarter Earnings Per Share Increases 69% Year-over-Year
DALLAS, Oct. 24 /PRNewswire-FirstCall/ -- 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
http://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 Nine months ended
September 30, 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 December 31,
(unaudited) 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 Three Months %
Ended Ended Change
September 30, September 30,
2007 2006
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 Nine Months %
Ended Ended Change
September 30, September 30,
2007 2006
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.
(WHG-G)
CONTACT:
Westwood Holdings Group, Inc.
Bill Hardcastle
(214) 756-6900
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