NEW YORK, Sept. 10, 2010 (GLOBE NEWSWIRE) -- W.P. Stewart & Co., Ltd. Reports Fourth Quarter and Full Year 2009 Financial Results and Provides Corporate Update, Including:
- Successful Completion of Corporation Restructuring
- Continued Streamlining of Business by Closing Broker-Dealer by Year End
- Completed Sale of Bermuda Office Building
- AUM of $1.4 Billion at 20 August 2010
- Cash/Marketable Securities of $29.3 Million at 20 August 2010
- Repurchase of Over 200,000 Shares
Financial Results
Fourth Quarter Highlights
W.P. Stewart & Co., Ltd. ("W.P. Stewart" or the "Company") today reported a net loss of $3.7 million, or $0.70 per share (diluted) and $0.70 per share (basic), for the fourth quarter ended 31 December 2009. This loss includes cash charges of approximately $2.5 million or $0.47 per share (diluted), on a tax-effected basis, related to (a) 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 (b) severance payments made to employees terminated in connection with the corporate restructuring. This loss 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 charges and non-cash income, the fourth quarter 2009 net loss was $4.0 million, or $0.76 per share (diluted). These results compare with a net loss in the fourth quarter of 2008 of $6.6 million, or $1.26 per share (diluted) and $1.26 per share (basic). These prior year results include cash and non-cash charges aggregating approximately $297,000, or $0.06 per share (diluted), on a tax-effected basis, primarily relating to an adjustment in the carrying value of an investment in an affiliate and agreements with certain employees whose employment terminated during the quarter.
Net results on a cash basis for the quarter ended 31 December 2009 were -$4.5 million (net loss of $3.7 million adjusted for $0.8 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 -$0.84 per share (diluted). In the same quarter of the prior year, net results on a cash basis were -$4.0 million (net loss of $6.6 million adjusted to include $2.6 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 -$0.76 per share (diluted).
For the quarter ended 31 December 2009 there were 5,323,141 common shares outstanding on a weighted average diluted basis (5,323,141 – weighted average basic) compared to 5,223,957 common shares outstanding for the quarter ended 31 December 2008 on the same weighted average diluted basis (5,223,957 – 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 year ended 31 December 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.
Full Year 2009 Highlights
For the year ended 31 December 2009, the net loss was $17.1 million, or $3.24 per share (diluted) and $3.24 per share (basic), on revenues of $19.7 million. This loss includes cash and non-cash charges of approximately $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 charges of approximately $3.1 million primarily reflecting (a) the disposal of a portion of leased space in New York, (b) 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 (c) severance payments made to employees terminated in connection with the corporate restructuring. This loss 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 31 December 2009 was $16.2 million, or $3.07 per share (diluted). For the year ended 31 December 2008, the Company recorded a net loss of $49.3 million or $10.09 per share (diluted) and $10.09 per share (basic), on revenues of $32.6 million. In 2008, results also include certain cash and non-cash charges aggregating $24.7 million or $5.06 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 year, 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 year ended 31 December 2009 were -$12.6 million (net loss of $17.1 million adjusted to include $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). In the same period of the prior year, net results on a cash basis were -$14.2 million (net loss of $49.3 million adjusted to include $35.1 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 -$2.91 per share (diluted).
For the full year ended 31 December 2009 there were 5,278,126 common shares outstanding on a weighted average diluted basis (5,278,126 – weighted average basic) compared to 4,886,968 common shares outstanding for the year ended 31 December 2008 on the same weighted average diluted basis (4,886,968 – weighted average basic).
Included in this release are tables containing revenue and expense detail for the three months and year ended 31 December 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 and quarterly performance for the Composite for 2010 are posted on the Company's website at www.wpstewart.com.
Assets under management ("AUM") at 20 August 2010 were approximately $1.4 billion (preliminary), compared with approximately $1.5 billion at 31 December 2009. In the attached tables a complete breakdown of AUM flows for the year ended 31 December 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 $5.4 million for the quarter ended 31 December 2009, up 10.5% from $4.9 million for the same quarter of 2008. Revenues were $19.7 million for the full year ended 31 December 2009, compared to $32.6 million for 2008.
The average gross management fee, annualized, was 1.07% for the quarter ended 31 December 2009 and 1.08% for the year ended 31 December 2009, compared to 1.11% and 1.08%, 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 31 December 2009 and 1.29% for the year ended 31 December 2009, compared to 1.31% and 1.27%, respectively, in each of the comparable periods of the prior year on an annualized basis.
Total operating expenses for the fourth quarter of 2009 were $10.3 million, including $2.5 million in cash charges, on a tax-effected basis, related to (a) 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 (b) severance payments made 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 same quarter of the prior year, total operating expenses were $12.6 million, including $297,000 in cash and non-cash charges, on a tax-effected basis, primarily relating to an adjustment in the carrying value of an investment in an affiliate and agreements with certain employees whose employment terminated during the quarter. Total operating expenses for the year ended 31 December 2009 were $39.7 million, including $3.7 million in charges (cash and non-cash), on a tax-effected basis, relating to (a) an adjustment in the carrying value of an investment in an affiliate, (b) the disposal of a portion of leased spaced in New York, (c) 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 (d) severance payments made 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. This compares to total operating expenses for the year ended 31 December 2008 of $83.1 million, including $24.7 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 year, and the initiative to complete the strategic transaction mentioned above.
For the quarter and year ended 31 December 2009 non-cash compensation expense related to the Company's restricted share issuances to employees was approximately $2.0 million and $7.0 million, respectively. For the same periods of the prior year, these non-cash compensation charges were approximately $2.6 million and $12.7 million, respectively. These non-cash compensation expenses are included in "employee compensation and benefits".
The Company's provision/(benefit) for taxes for each of the quarters ended 31 December 2009 and 2008 was -$1.1 million, and was -$2.9 million versus -$1.2 million for the years ended 31 December 2009 and 2008, respectively.
Please see the tables included in this release for further detail on revenue and expenses for the fourth quarter and full year ended 31 December 2009 and 2008.
The Company had cash and marketable securities at 31 December 2009 of $33.2 million. The Company has no debt. As of 20 August 2010, the Company had cash and marketable securities balances of approximately $29.3 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 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 31 December 2009 was approximately $33.7 million.
Corporate Update
The Company previously reported the completion of its corporate restructuring in May 2010 and subsequently announced some changes to its management in June 2010. The restructuring was another step in the Company's path of simplifying its corporate structure and reducing its underlying cost base, the results of which will not be reflected in reduced expenses until the latter half of 2010. Nevertheless, the Company believes other previously implemented cost savings efforts will be reflected in the results for the first half of the year, such results to be reported by the Company at a future date.
The Company continues to evaluate ways to streamline its operations while continuing to provide its clients with the high quality service it has always strived to deliver. The Company is currently working with Pershing Advisor Solutions LLC ("PAS") to enter into a relationship whereby PAS and its affiliate Pershing LLC would provide prime brokerage and brokerage related services to the Company and its clients. It is anticipated that this arrangement will be effective by the end of the current year whereupon the Company's affiliated broker-dealer, W.P. Stewart Securities LLC ("WPSSL") would cease operations. Pershing currently serves as the clearing broker for WPSSL and as custodian for many of the Company's clients.
From January through August 2010, the Company repurchased 233,199 shares of its common stock from employees or former employees for an aggregate amount of $1,165,995. The Board of Directors also recently approved 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 5.4 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.
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, 2009 | December 31, 2008 | |
| Assets: | ||
| Cash and cash equivalents | $21,407,458 | $35,158,939 |
| Fees receivable | 755,093 | 502,288 |
| Receivable from clearing broker | 13,039 | 19,042 |
| Investments in unconsolidated affiliates (net of accumulated amortization of $617,790 at December 31, 2009 and 2008, respectively) | 1,757,919 | 2,343,506 |
| Receivables from affiliates, net | 476,830 | 551,192 |
| Investments, trading (cost $2,785,735 at December 31, 2009 and $2,813,255 at December 31, 2008, respectively) | 3,311,434 | 2,691,108 |
| Investments, available for sale (cost $7,968,192 at December 31, 2009 and $96,518 at December 31, 2008, respectively) | 8,484,910 | 88,567 |
| Furniture, equipment, software and leasehold improvements (net of accumulated depreciation and amortization of $7,862,722 and $7,262,931 for December 31, 2009 and December 31, 2008, respectively) | 663,607 | 1,372,674 |
| Interest receivable on shareholders' notes | 17,709 | 17,709 |
| Income taxes receivable | 6,995,505 | 7,864,696 |
| Deferred income taxes receivable | 363,555 | 26,400 |
| Other assets | 3,061,412 | 3,668,140 |
| $47,308,471 | $54,304,261 | |
| Liabilities and Shareholders' Equity: | ||
| Liabilities: | ||
| Employee compensation and benefits payable | $4,642,976 | $453,800 |
| Fees payable | 97,755 | 1,702,699 |
| Vendor payables | 5,011,748 | 4,048,874 |
| Accrued expenses and other liabilities | 3,892,192 | 4,900,000 |
| 13,644,671 | 11,105,373 | |
| Shareholders' Equity: | ||
| Common shares, $0.01 par value (12,500,000 shares authorized 5,587,464 and 5,544,699 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively) | 55,875 | 55,447 |
| Additional paid-in-capital | 134,021,928 | 127,125,627 |
| Accumulated other comprehensive income | 1,164,630 | 477,478 |
| Retained earnings/(deficit) | (101,337,258) | (84,223,614) |
| Common shares held in treasury, at cost, $0.01 par value (2,500 shares at December 31, 2009) | (5,325) | -- |
| 33,899,850 | 43,434,938 | |
| Less: notes receivable for common shares | (236,050) | (236,050) |
| 33,663,800 | 43,198,888 | |
| $47,308,471 | $54,304,261 | |
| W.P. Stewart & Co., Ltd. | ||||||
| Unaudited Condensed Consolidated Statements of Operations | ||||||
| For the Year Ended December 31, | ||||||
| 2009 | 2008 | % | ||||
| Revenue: | ||||||
| Fees | $16,300,824 | $28,001,942 | -41.79% | |||
| Commissions | 1,350,944 | 5,442,196 | -75.18% | |||
| Realized and unrealized gains/(losses) on investments | 647,945 | (1,878,472) | -134.49% | |||
| Interest and other | 1,443,699 | 1,048,152 | 37.74% | |||
| 19,743,412 | 32,613,818 | -39.46% | ||||
| Expenses: | ||||||
| Employee compensation and benefits | 22,043,945 | 33,423,801 | -34.05% | |||
| Fees paid out | (238,152) | 3,101,457 | -107.68% | |||
| Commissions, clearance and trading | 789,014 | 1,305,301 | -39.55% | |||
| Research and administration | 7,932,095 | 9,471,949 | -16.26% | |||
| Marketing | 1,427,933 | 3,418,827 | -58.23% | |||
| Depreciation and amortization | 722,419 | 1,536,981 | -53.00% | |||
| Impairment of intangible asset | -- | 18,692,283 | -100.00% | |||
| Other operating | 7,045,413 | 12,135,265 | -41.94% | |||
| 39,722,667 | 83,085,864 | -52.19% | ||||
| Income/(loss) before taxes | (19,979,255) | (50,472,046) | -60.42% | |||
| Provision/(benefit) for taxes | (2,865,608) | (1,160,165) | 147.00% | |||
| Net income/(loss) | $(17,113,647) | $(49,311,881) | -65.30% | |||
| Earnings/(loss) per share: | ||||||
| Basic earnings/(loss) per share | $(3.24) | $(10.09) | -67.89% | |||
| Diluted earnings/(loss) per share | $(3.24) | $(10.09) | -67.89% | |||
| W.P. Stewart & Co., Ltd. | ||||||
| Unaudited Condensed Consolidated Statements of Operations | ||||||
| For the Three Months Ended December 31, | ||||||
| 2009 | 2008 | % | ||||
| Revenue: | ||||||
| Fees | $4,637,688 | $4,505,933 | 2.92% | |||
| Commissions | 298,315 | 438,456 | -31.96% | |||
| Realized and unrealized gains/(losses) on investments | 184,286 | (129,084) | -242.76% | |||
| Interest and other | 326,823 | 116,305 | 181.01% | |||
| 5,447,112 | 4,931,610 | 10.45% | ||||
| Expenses: | ||||||
| Employee compensation and benefits | 6,813,946 | 6,184,922 | 10.17% | |||
| Fees paid out | (1,080,092) | 531,201 | -303.33% | |||
| Commissions, clearance and trading | 152,895 | 239,672 | -36.21% | |||
| Research and administration | 1,656,668 | 2,113,775 | -21.63% | |||
| Marketing | 282,212 | 935,815 | -69.84% | |||
| Depreciation and amortization | 177,548 | 245,152 | -27.58% | |||
| Other operating | 2,258,808 | 2,385,629 | -5.32% | |||
| 10,261,985 | 12,636,166 | -18.79% | ||||
| Income/(loss) before taxes | (4,814,873) | (7,704,556) | -37.51% | |||
| Provision/(benefit) for taxes | (1,080,143) | (1,147,323) | -5.86% | |||
| Net income/(loss) | $(3,734,730) | $(6,557,233) | -43.04% | |||
| Earnings/(loss) per share: | ||||||
| Basic earnings/(loss) per share | $(0.70) | $(1.26) | -44.44% | |||
| Diluted earnings/(loss) per share | $(0.70) | $(1.26) | -44.44% | |||
| W.P. Stewart & Co., Ltd. | |||||||||
| Net Flows of Assets Under Management* | |||||||||
| (in millions) | |||||||||
| For the Three Months Ended | For the Year Ended | ||||||||
| Dec. 31, 2009 | Sep. 30, 2009 | Dec. 31, 2008 | Dec. 31, 2009 | Dec. 31, 2008 | |||||
| Existing Accounts: | |||||||||
| Contributions | $ 14 | $ 26 | $ 21 | $ 91 | $ 134 | ||||
| Withdrawals | (31) | (22) | (41) | (111) | (582) | ||||
| Net Flows of Existing Accounts | (17) | 4 | (20) | (20) | (448) | ||||
| Publicly Available Funds: | |||||||||
| Contributions | 29 | 18 | 7 | 57 | 51 | ||||
| Withdrawals | (42) | (8) | (28) | (76) | (320) | ||||
| Direct Accounts Opened | 4 | 9 | 4 | 26 | 11 | ||||
| Direct Accounts Closed | (45) | (9) | (48) | (207) | (1,159) | ||||
| Net New Flows | (54) | 10 | (65) | (200) | (1,417) | ||||
|
Net Flows of Assets Under Management |
$ (71) | $ 14 | $ (85) | $ (220) | $ (1,865) | ||||
| * The table above sets forth the total net flows of assets under management for the three months ended December 31, 2009, September 30, 2009 and December 31, 2008, respectively, and for the years ended December 31, 2009 and 2008, 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. | |||||||||