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Westwood Holdings Group, Inc. Reports Second Quarter 2013 Results



  Westwood Holdings Group, Inc. Reports Second Quarter 2013 Results

         Assets Under Management Increase to Record of $15.8 Billion

              Westwood International Assets Surpass $1.5 Billion

                    Ireland Domiciled UCITS Fund Launched

Business Wire

DALLAS -- July 18, 2013

Westwood Holdings Group, Inc. (NYSE: WHG) today reported second quarter 2013
revenues of $23.5 million, a 17% increase compared to revenues of $20.1
million in both the second quarter of 2012 and the first quarter of 2013.
Economic Earnings per share (“Economic EPS”) were $1.07 compared to $0.72 in
the same quarter of the prior year and $0.76 in the first quarter of 2013.
Diluted earnings per share were $0.65 compared to $0.30 in the same quarter of
2012 and $0.38 in the first quarter of 2013.

Highlights and significant items impacting our pretax results include:

  * Quarterly revenues increased 17% over the second quarter of 2012.
  * Performance fees recorded for our Master Limited Partnership (“MLP”)
    strategy were $2.5 million compared to $1.2 million in the second quarter
    of 2012.
  * A gain of $899,000 from the sale of 100,000 shares of Teton Advisors, Inc.
    was included in other revenues during the second quarter of 2012.
  * 2012’s second quarter included $1.4 million of recruiting and other costs
    related to the hiring of team members at Westwood International Advisors
    (“WIA”).

Westwood International’s assets under management (“AUM”) exceeded $1.5 billion
at June 30, 2013, up 75% from year end. WIA contributed $1.7 million to
revenues during the second quarter of 2013 with $2 million of related costs,
compared to revenues of $1.5 million in the first quarter of this year with
$2.7 million of related costs. Excluding WIA related items, second quarter
2013 Economic EPS and diluted earnings per share would have been $1.09 and
$0.68, respectively.

Brian Casey, Westwood’s President & CEO, commented, “We are very pleased with
our second quarter financial results and the exceptionally strong performance
generated by our MLP, SmallCap, and Income Opportunity teams. The Westwood
Funds™ had record quarterly net inflows exceeding $190 million, bringing
aggregate net inflows this year to $347 million. We have experienced strong
demand for WIA’s Emerging Markets strategy with assets now exceeding $1.5
billion. We recently obtained authorization from the Central Bank of Ireland
for a new Irish UCITS umbrella fund named Westwood Investment Funds PLC. In
response to client demand, our first UCITS sub-fund will focus on our Emerging
Markets strategy, and we expect this product will receive significant new
inflows over the next two months. We look forward to expanding our UCITS
offerings in the future.”

Aggregate assets under management reached a record $15.8 billion as of June
30, 2013, an increase of 12% compared to $14.2 billion as of year end, and 20%
higher than a year ago. Mutual fund assets, now comprising ten Westwood Funds,
stood at $2.1 billion as of June 30, 2013, 32% higher than year end 2012 and
44% higher than June 30, 2012.

Westwood’s Board of Directors today declared a quarterly cash dividend of
$0.40 per common share, payable on October 1, 2013 to stockholders of record
on September 13, 2013. At June 30, 2013 Westwood had $57.5 million in cash and
investments, with stockholders’ equity of $79.4 million and no debt.

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.

Westwood will host a conference call to discuss second quarter 2013 results
and other business updates at 4:30 p.m. Eastern time today. To join the
conference call, dial 877-303-6235 (domestic) or 631-291-4837 (international).
The conference call can also be accessed via our Investor Relations page at
westwoodgroup.com and will be available for replay through July 25, 2013 by
dialing 855-859-2056 (domestic) or 404-537-3406 (international) and entering
passcode 99412344.

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 has offices in Omaha and
Toronto.

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

For more information on the Westwood Funds, please visit
www.westwoodfunds.com.

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 among a few 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, 2012 and its quarterly reports on Form 10-Q for the
quarters ended March 31, 2013 and June 30, 2013. 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.

                                
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited)
                                  
                                 Three Months Ended
                                 June 30,        March 31,       June 30,
REVENUES:                        2013            2013            2012
Advisory fees:
Asset-based                      $ 16,486        $ 15,547        $ 14,102
Performance based                  2,535           -               1,182
Trust fees                         4,574           4,217           3,757
Other, net                         (120      )     336             1,025      
Total revenues                     23,475          20,100          20,066     
                                                                  
EXPENSES:
Employee compensation and          11,907          11,843          11,885
benefits
Sales and marketing                334             287             261
Westwood mutual funds              462             404             275
Information technology             678             656             629
Professional services              1,077           1,002           2,063
General and administrative         1,284           1,189           1,201      
Total expenses                     15,742          15,381          16,314     
Income before income taxes         7,733           4,719           3,752
Provision for income taxes         2,854           1,886           1,554      
Net income                       $ 4,879         $ 2,833         $ 2,198      
Other comprehensive income:
Available-for-sale
investments:
Change in unrealized gain on       -               -               34
investment securities
Less: reclassification
adjustment for net gains           -               -               (908      )
included in earnings
Net change (net of income
taxes of $0, $0, and $(476),       -               -               (874      )
respectively)
Foreign currency translation       (158      )     (77       )     (18       )
adjustments
Other comprehensive income         (158      )     (77       )     (892      )
Total comprehensive income       $ 4,721         $ 2,756         $ 1,306      
                                                                  
Earnings per share:
Basic                            $ 0.66          $ 0.39          $ 0.31       
Diluted                          $ 0.65          $ 0.38          $ 0.30       
                                                                  
Weighted average shares
outstanding:
Basic                              7,349,868       7,287,161       7,162,540  
Diluted                            7,495,523       7,481,668       7,250,707  
                                                                  
Economic Earnings                $ 7,993         $ 5,667         $ 5,252      
Economic EPS                     $ 1.07          $ 0.76          $ 0.72       
                                                                  
Dividends declared per share     $ 0.40          $ 0.40          $ 0.37       

                                                
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)
                                                  
                                                 Six months ended June 30,
REVENUES:                                          2013            2012       
Advisory fees:
Asset-based                                      $ 32,033        $ 28,192
Performance based                                  2,535           1,182
Trust fees                                         8,791           7,228
Other, net                                         216             1,328      
Total revenues                                     43,575          37,930     
                                                                  
EXPENSES:
Employee compensation and benefits                 23,750          20,799
Sales and marketing                                621             473
Westwood mutual funds                              866             484
Information technology                             1,334           1,225
Professional services                              2,079           2,942
General and administrative                         2,473           2,171      
Total expenses                                     31,123          28,094     
Income before income taxes                         12,452          9,836
Provision for income taxes                         4,740           3,853      
Net income                                       $ 7,712         $ 5,983      
Other comprehensive income:
Available-for-sale investments:
Change in unrealized gain on investment            -               (401      )
securities
Less: reclassification adjustment for net          -               (908      )
gains included in earnings
Net change (net of income taxes of $0, and         -               (1,309    )
$(714), respectively)
Foreign currency translation adjustments           (235      )     (18       )
Other comprehensive income                         (235      )     (1,327    )
Total comprehensive income                       $ 7,477         $ 4,656      
                                                                  
Earnings per share:
Basic                                            $ 1.05          $ 0.84       
Diluted                                          $ 1.03          $ 0.82       
                                                                  
Weighted average shares outstanding:
Basic                                              7,318,688       7,125,158  
Diluted                                            7,492,392       7,272,690  
                                                                  
Economic Earnings                                $ 13,660        $ 11,072     
Economic EPS                                     $ 1.82          $ 1.52       
                                                                  
Dividends declared per share                     $ .80           $ 0.74       

                                                                 
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 2013 and December 31, 2012
(in thousands, except par value and share amounts)
                                                                   
                                               June 30,           December 31,

                                               2013 (unaudited)   2012
ASSETS
Current Assets:
Cash and cash equivalents                      $   6,133          $  3,817
Accounts receivable                                12,857            8,920
Investments, at fair value                         51,368            59,906
Deferred income taxes                              2,037             3,362
Prepaid income taxes                               1,173             -
Other current assets                               2,250             1,365    
Total current assets                               75,818            77,370
Goodwill                                           11,255            11,255
Deferred income taxes                              1,963             1,696
Intangible assets, net                             3,969             4,149
Property and equipment, net of accumulated         2,190             2,145    
depreciation of $1,932 and $1,747
Total assets                                   $   95,195         $  96,615   
                                                                   
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued liabilities       $   1,829          $  1,636
Dividends payable                                  3,517             1,201
Compensation and benefits payable                  8,362             14,537
Income taxes payable                               -                 1,438
Other current liabilities                          15                14       
Total current liabilities                          13,723            18,826
Accrued dividends                                  824               -
Deferred rent                                      1,214             1,238    
Total long-term liabilities                        2,038             1,238    
Total liabilities                                  15,761            20,064   
Stockholders’ Equity:
Common stock, $0.01 par value, authorized
25,000,000 shares, issued 8,790,875 and                               
outstanding 8,189,308 shares at June 30,
2013; issued 8,526,598 and outstanding             88                85
8,031,045 shares at December 31, 2012
Additional paid-in capital                         95,013            88,483
Treasury stock, at cost – 601,567 shares at
June 30, 2013; 495,553 shares at December          (23,139   )       (18,502 )
31, 2012
Accumulated other comprehensive income             (205      )       30
(loss)
Retained earnings                                  7,677             6,455    
Total stockholders’ equity                         79,434            76,551   
Total liabilities and stockholders’ equity     $   95,195         $  96,615   

                                                    
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                      
                                                     Six months ended June 30,
                                                        2013          2012    
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                           $  7,712       $ 5,983
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation                                            187           166
Amortization of intangible assets                       180           244
Fair value adjustment of liabilities                    -             (96    )
(Gain) on sale of available for sale investment         -             (803   )
Unrealized losses on trading investments                639           170
Loss on disposal of property                            -             1
Restricted stock amortization                           5,692         4,750
Deferred income taxes                                   937           1,857
Excess tax benefits from stock based compensation       (684    )     (676   )
Net purchases of investments – trading securities       7,880         8,166
Changes in operating assets and liabilities:
Accounts receivable                                     (4,003  )     (905   )
Other current assets                                    (864    )     (2,362 )
Accounts payable and accrued liabilities                (71     )     (2,459 )
Compensation and benefits payable                       (5,931  )     (5,171 )
Income taxes payable and prepaid income taxes           (1,991  )     (1,814 )
Other liabilities                                       18            (62    )
Net cash provided by operating activities               9,701         6,989   
                                                                     
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of available for sale investment                   -             950
Purchases of property and equipment                     (313    )     (194   )
Net cash (used in) provided by investing                (313    )     756     
activities
                                                                     
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock                             (4,637  )     (3,796 )
Excess tax benefits from stock based compensation       684           676
Proceeds from exercise of stock options                 -             210
Cash dividends                                          (2,988  )     (2,943 )
Net cash used in financing activities                   (6,941  )     (5,853 )
Effect of currency rate changes on cash                 (131    )     (18    )
NET INCREASE IN CASH AND CASH EQUIVALENTS               2,316         1,874
Cash and cash equivalents, beginning of period          3,817         5,264   
Cash and cash equivalents, end of period             $  6,133       $ 7,138   
                                                                     
Supplemental cash flow information:
Cash paid during the period for income taxes         $  5,723       $ 3,785

                                                    
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
                                                      
Reconciliation of Net Income to Economic Earnings
(in thousands, except per share data and share
amounts)
(unaudited)
                                                      
                                       Three Months Ended
                                       June 30,      March 31,     June 30,
                                       2013          2013          2012
Net Income                             $ 4,879       $ 2,833       $ 2,198
Add: Restricted stock expense            2,986         2,706         2,885
Add: Intangible amortization             90            90            122
Add: Tax benefit from goodwill           38            38            47
amortization
Economic earnings                      $ 7,993       $ 5,667       $ 5,252
                                                                    
Diluted weighted average shares          7,495,523     7,481,668     7,250,707
Economic EPS                           $ 1.07        $ 0.76        $ 0.72
                                                      
                                                     Six Months Ended
                                                                    
                                                     June 30,      June 30,
                                                     2013          2012
Net Income                                           $ 7,712       $ 5,983
Add: Restricted stock expense                          5,692         4,750
Add: Intangible amortization                           180           244
Add: Tax benefit from goodwill                         76            95
amortization
Economic earnings                                    $ 13,660      $ 11,072
                                                                    
Diluted weighted average shares                        7,492,392     7,272,690
Economic EPS                                         $ 1.82        $ 1.52
                                                                      

As supplemental information, we are providing non-GAAP performance measures
that we refer to as Economic Earnings and Economic Earnings per share (or
Economic EPS). We provide these measures in addition to, not as a substitute
for, net income and earnings per share, which are reported on a GAAP basis.
Management reviews Economic Earnings and Economic EPS 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 or earnings per share, 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. Although depreciation on fixed assets is a non-cash
expense, we do not add it back when calculating Economic Earnings because
depreciation charges represent an allocation of the 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.
Mark A. Wallace, 214-756-6900
Chief Financial Officer
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