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Westwood Holdings Group, Inc. Reports Third Quarter 2012 Results and Increases Quarterly Dividend; Assets Under Management



  Westwood Holdings Group, Inc. Reports Third Quarter 2012 Results and
  Increases Quarterly Dividend; Assets Under Management Increase 21%
  Year-over-year to Record $14.1 Billion; Mutual Fund Assets Increase 46%
  Year-over-year to Record $1.6 Billion

Business Wire

DALLAS -- October 18, 2012

Westwood Holdings Group, Inc. (NYSE: WHG) today reported third quarter 2012
revenues of $18.9 million, net income of $2.5 million and earnings per diluted
share of $0.34. This compares to revenues of $16.0 million, net income of $3.3
million and earnings per diluted share of $0.46 in the third quarter 2011.
Economic Earnings were $5.6 million compared to $5.9 million for the third
quarter 2011. Economic Earnings per share (“Economic EPS”) were $0.76 per
diluted share compared to $0.81 per diluted share for the third quarter 2011.
(Economic Earnings and Economic EPS are non-GAAP performance measures and are
explained and reconciled with the most comparable GAAP numbers in the attached
tables.)

Third quarter 2012 results reflect the start-up phase of Westwood
International Advisors Inc., our new Toronto-based subsidiary launched in the
second quarter 2012 to manage Emerging Markets and Global Equities strategies.
Westwood International now has eleven full-time employees and began managing
assets for external clients during the third quarter. This launch timing meant
that third quarter 2012 results reflected significant costs with little
offsetting revenue thus far. As of September 30, 2012, Westwood International
had total assets under management of $740 million, comprised of $486 million
of external client assets and $254 million in Westwood Trust common trust fund
assets.

Assets under management were $14.1 billion as of September 30, 2012, an
increase of 21% compared to $11.7 billion as of September 30, 2011 primarily
due to market appreciation and inflows from new and existing clients,
partially offset by asset outflows from certain clients. Mutual fund assets
totaled $1.6 billion as of September 30, 2012, an increase of 46% compared to
$1.1 billion as of September 30, 2011.

Westwood’s Board of Directors declared a quarterly cash dividend of $0.40 per
common share, an 8% increase from the previous quarterly dividend of $0.37 per
share, payable on December 14, 2012 to stockholders of record on December 3,
2012.

Brian Casey, Westwood’s President & CEO, commented, “We are pleased to report
assets under management of $14.1 billion, a record high, due to improved
equity markets and to positive net cash flows driven by continued inflows to
our Westwood Income Opportunity mutual fund and by strong demand for our new
Emerging Markets strategy. Westwood mutual funds also achieved record
quarter-end assets, aggregating $1.6 billion. Our new Canadian subsidiary,
Westwood International Advisors, made great progress by building out the team
to eleven talented professionals, beginning to manage its first institutional
accounts and entering into a very promising relationship with National Bank of
Canada to manage several mutual funds for Canadian investors. Many of our
employees, in Canada as well as here in the U.S., have worked extremely hard
to integrate these new operations, which represent attractive new investment
strategies for our clients and significant growth opportunities for Westwood.”

For the nine months ended September 30, 2012, Westwood reported revenues of
$56.9 million, net income of $8.5 million and earnings per diluted share of
$1.16, compared to revenues of $51.9 million, net income of $10.6 million and
earnings per diluted share of $1.47 for the same 2011 period. Economic
Earnings for the nine months ended September 30, 2012 were $16.6 million
compared to $18.7 million for the same period in 2011, while Economic EPS for
the nine months ended September 30, 2012 were $2.28 per diluted share compared
to $2.59 per diluted share for the same period in 2011.

Total expenses for the quarter were $14.6 million compared with $10.8 million
for the third quarter of 2011. Economic Expenses were $11.6 million and $8.2
million for the current and prior year quarters, respectively. (Economic
Expenses represents a non-GAAP performance measure and is explained and
reconciled with the most comparable GAAP number in the attached tables.)

Westwood will host a conference call to discuss third quarter 2012 results and
other business matters at 4:30 p.m. Eastern time today. To join the conference
call, dial 866-337-6663 (domestic) or 904-520-5771 (outside the U.S. &
Canada). The conference call can also be accessed via the Investor Relations
page at westwoodgroup.com and will be available for replay through October 25,
2012 by dialing 888-284-7564 (dial 904-596-3174 outside the U.S. & Canada) and
entering passcode 2735921.

About Westwood

Westwood Holdings Group, Inc. provides investment management services to
institutional investors, private wealth clients and financial intermediaries.
Westwood manages a variety of investment strategies including U.S., Global and
Emerging Markets equities as well as income-oriented portfolios. Access to
these strategies is available through separate accounts, commingled funds and
the Westwood Funds^TM family of mutual funds. Westwood has significant,
broad-based employee ownership and trades on the New York Stock Exchange under
the symbol “WHG.” Based in Dallas, Westwood also maintains offices in Omaha
and Toronto.

For more information on Westwood, please visit our website at
www.westwoodgroup.com.

For more information on the Westwood Funds^TM, please visit
www.westwoodfunds.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,” “may,” “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; downturns in the financial markets; new 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; 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, 2011 and its quarterly report on Form 10-Q for the
quarters ended March 31, June 30 and September 30, 2012. 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 events or circumstances after the date of this press
release or to reflect the occurrence of unanticipated events or otherwise.

                                                      
                                                        
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)
                                                        
                               Three months ended      Nine months ended

                               September 30,           September 30,
                               2012       2011         2012         2011
REVENUES:
Advisory fees
Asset-based                    $ 14,485   $ 13,376     $ 42,677     $ 41,034
Performance-based                69         -            1,251        991
Trust fees                       3,715      3,468        10,943       10,297
Other revenues, net              672        (796   )     2,000        (406   )
Total revenues                   18,941     16,048       56,871       51,916  
                                                                     
EXPENSES:
Employee compensation and        11,397     8,295        32,196       27,084
benefits
Sales and marketing              350        221          823          666
Westwood mutual funds            292        34           776          523
Information technology           649        503          1,874        1,503
Professional services            739        710          3,681        2,438
General and administrative       1,183      988          3,354        2,870   
Total expenses                   14,610     10,751       42,704       35,084  
Income before income taxes       4,331      5,297        14,167       16,832
Provision for income taxes       1,827      2,014        5,680        6,263   
Net income                       2,504      3,283        8,487        10,569  
Other comprehensive income:
Unrealized gain (loss) on
investment securities, net
of income taxes of $0, $5,       -          10           (1,309 )     717
$(714), and $386,
respectively
Foreign currency translation     78         -            60           -       
gain
Total comprehensive income     $ 2,582    $ 3,293      $ 7,238      $ 11,286  
                                                                     
Earnings per share:
Basic                          $ 0.35     $ 0.47       $ 1.19       $ 1.51
Diluted                        $ 0.34     $ 0.46       $ 1.16       $ 1.47
                                                                     
Dividends declared per share   $ 0.37     $ 0.35       $ 1.11       $ 1.05

                                                            
                                                              
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of September 30, 2012 and December 31, 2011

(in thousands, except par value and share amounts)
                                                              
                                        September 30, 2012
                                                             December 31, 2011
                                        (unaudited)
ASSETS
Current Assets:
Cash and cash equivalents               $    6,777           $    5,264
Accounts receivable                          8,209                7,707
Investments, at fair value                   52,913               54,868
Deferred income taxes                        2,505                3,142
Prepaid income taxes                         1,669                -
Other current assets                         2,190                1,501     
Total current assets                         74,263               72,482
Goodwill                                     11,255               11,255
Intangible assets, net                       4,255                4,621
Property and equipment, net of
accumulated depreciation of $1,763           2,170                2,239     
and $1,647
Total assets                            $    91,943          $    90,597    
                                                              
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued            $    1,781           $    1,674
liabilities
Dividends payable                            3,702                3,074
Compensation and benefits payable            10,710               12,677
Income taxes payable                         -                    85
Other current liabilities                    13                   13        
Total current liabilities                    16,206               17,523
Deferred income taxes                        549                  969
Deferred rent                                1,266                1,348     
Total long-term liabilities                  1,815                2,317     
Total liabilities                            18,021               19,840    
Stockholders’ Equity:
Common stock, $0.01 par value,
authorized 25,000,000 shares, issued                               
8,522,398 and outstanding 8,026,845
shares at September 30, 2012; issued         85                   81
8,105,018 and outstanding 7,707,189
shares at December 31, 2011
Additional paid-in capital                   85,584               76,969
Treasury stock, at cost – 495,553
shares at September 30, 2012; 397,829        (18,502   )          (14,706  )
shares at December 31, 2011
Accumulated other comprehensive              691                  1,940
income, net of deferred taxes
Retained earnings                            6,064                6,473     
Total stockholders’ equity                   73,922               70,757    
Total liabilities and stockholders’     $    91,943          $    90,597    
equity

                                                     
                                                       
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)
                                                       
                                                      For the nine months
                                                      ended September 30,
                                                      2012         2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                            $ 8,487      $ 10,569
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation                                            257          184
Amortization of intangible assets                       366          374
Fair value adjustment of liabilities                    (96    )     (126    )
(Gain) on sale of available for sale investment         (803   )     -
Unrealized (gains) and losses on trading                (164   )     682
investments
Restricted stock amortization                           7,635        7,601
Loss on disposal of property                            1            -
Deferred income taxes                                   931          1,147
Excess tax benefits from stock-based compensation       (676   )     (692    )
Net purchases of investments – trading securities       96           (5,109  )
Change in operating assets and liabilities:
Accounts receivable                                     (495   )     (649    )
Other current assets                                    (684   )     (168    )
Accounts payable and accrued liabilities                (2,691 )     170
Compensation and benefits payable                       (1,996 )     704
Income taxes payable and prepaid income taxes           (961   )     (706    )
Other liabilities                                       (69    )     335      
Net cash provided by operating activities               9,138        14,316   
                                                                    
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of available for sale investment                   950          -
Purchase of property and equipment                      (238   )     (1,092  )
Net cash provided by (used in) investing                712          (1,092  )
activities
                                                                    
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock                              (3,796 )     (5,858  )
Excess tax benefits from stock-based compensation       676          692
Cash dividends                                          (5,475 )     (5,295  )
Proceeds from exercise of stock options                 210          65       
Net cash used in financing activities                   (8,385 )     (10,396 )
                                                                    
EFFECT OF CURRENCY RATE CHANGES ON CASH                 48           -        
                                                                    
NET INCREASE IN CASH                                    1,513        2,828
Cash and cash equivalents, beginning of period          5,264        1,744    
Cash and cash equivalents, end of period              $ 6,777      $ 4,572    
                                                                    
Supplemental cash flow information:
Cash paid during the period for income taxes          $ 5,708      $ 5,877

                                                                       
                                                                         
Reconciliation of Net Income to Economic Earnings and Total Expenses to
Economic Expenses

(in thousands, except per share data and share amounts)

(unaudited)
                                                                         
                                     Three Months Ended
                                                                        %
                                     September 30,
                                     2012               2011            Change
Net Income                           $  2,504           $ 3,283         (24 )%
Add: Restricted stock expense           2,886             2,409         20
Add: Intangible amortization            122               125           (2  )
Add: Tax benefit from goodwill          47                47            -    
amortization
Economic earnings                    $  5,559           $ 5,864         (5  )
                                                                         
Diluted weighted average shares         7,323,245         7,216,138     1
Economic earnings per share          $  0.76            $ 0.81          (6  )
                                                                         
Total expenses                       $  14,610          $ 10,751        36
Less: Restricted stock expense          (2,886     )      (2,409    )   20
Less: Intangible amortization           (122       )      (125      )   (2  )
Economic expenses                    $  11,602          $ 8,217         41  %
                                                                         
                                     Nine Months Ended
                                                                        %
                                     September 30,
                                     2012               2011            Change
Net Income                           $  8,487           $ 10,569        (20 )%
Add: Restricted stock expense           7,635             7,601         -
Add: Intangible amortization            366               374           (2  )
Add: Tax benefit from goodwill          142               142           -    
amortization
Economic earnings                    $  16,630          $ 18,686        (11 )
                                                                         
Diluted weighted average shares         7,301,014         7,204,335     1
Economic earnings per share          $  2.28            $ 2.59          (12 )
                                                                         
Total expenses                       $  42,704          $ 35,084        22
Less: Restricted stock expense          (7,635     )      (7,601    )   -
Less: Intangible amortization           (366       )      (374      )   (2  )
Economic expenses                    $  34,703          $ 27,109        28  %
                                                                             

As supplemental information, we provide non-GAAP performance measures that we
refer to as Economic Earnings, Economic Earnings per share (or Economic EPS),
and Economic Expenses. We provide these measures in addition to, 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
Economic Earnings, Economic EPS and Economic 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 when evaluating 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 Economic Earnings as net income plus non-cash equity-based
compensation expense, amortization of intangible assets and deferred taxes
related to goodwill. We define Economic Expenses as total expenses less
non-cash equity-based compensation expense and amortization of intangible
assets. Although depreciation on fixed assets is a non-cash expense, we do not
add it back when calculating Economic Earnings or deduct it when calculating
Economic Expenses because depreciation charges represent a decline in the
value of the related assets that will ultimately require replacement. In
addition, we do not adjust Economic Earnings for tax deductions related to
restricted stock expense or amortization of intangible assets. Economic EPS
represents Economic Earnings divided by diluted weighted average shares
outstanding.

(WHG-G)

Contact:

Westwood Holdings Group, Inc.
Bill Hardcastle, 214-756-6900
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