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

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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

DALLAS--(BUSINESS WIRE)-- 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 FundsTM 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 FundsTM, 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

September 30,

Nine months ended

September 30,

2012 20112012 2011
REVENUES:
Advisory fees
Asset-based$14,485$13,376$42,677$41,034
Performance-based69-1,251991
Trust fees3,7153,46810,94310,297
Other revenues, net 672 (796) 2,000  (406)
Total revenues 18,941 16,048  56,871  51,916 
 
EXPENSES:
Employee compensation and benefits11,3978,29532,19627,084
Sales and marketing350221823666
Westwood mutual funds29234776523
Information technology6495031,8741,503
Professional services7397103,6812,438
General and administrative 1,183 988  3,354  2,870 
Total expenses 14,610 10,751  42,704  35,084 
Income before income taxes4,3315,29714,16716,832
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, $(714), and $386, respectively

-

10

(1,309

)

717

Foreign currency translation gain

 78 -  60  - 
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

(unaudited)

December 31, 2011

ASSETS
Current Assets:
Cash and cash equivalents$6,777$5,264
Accounts receivable8,2097,707
Investments, at fair value52,91354,868
Deferred income taxes2,5053,142
Prepaid income taxes1,669-
Other current assets 2,190  1,501 
Total current assets74,26372,482
Goodwill11,25511,255
Intangible assets, net4,2554,621
Property and equipment, net of accumulated depreciation of $1,763 and $1,647 2,170  2,239 
Total assets$91,943 $90,597 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities$1,781$1,674
Dividends payable3,7023,074
Compensation and benefits payable10,71012,677
Income taxes payable-85
Other current liabilities 13  13 
Total current liabilities16,20617,523
Deferred income taxes549969
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 8,105,018 and outstanding 7,707,189 shares at December 31, 2011

 

85

 

81

Additional paid-in capital85,58476,969
Treasury stock, at cost - 495,553 shares at September 30, 2012; 397,829 shares at December 31, 2011

(18,502

)

(14,706

)

Accumulated other comprehensive income, net of deferred taxes6911,940
Retained earnings 6,064  6,473 
Total stockholders' equity 73,922  70,757 
Total liabilities and stockholders' equity$91,943 $90,597 

  
 

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:
Depreciation257184
Amortization of intangible assets366374
Fair value adjustment of liabilities(96)(126)
(Gain) on sale of available for sale investment(803)-
Unrealized (gains) and losses on trading investments(164)682
Restricted stock amortization7,6357,601
Loss on disposal of property1-
Deferred income taxes9311,147

Excess tax benefits from stock-based compensation

(676)(692)
Net purchases of investments - trading securities96(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 investment950-
Purchase of property and equipment (238) (1,092)
Net cash provided by (used in) investing activities 712  (1,092)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock(3,796)(5,858)

Excess tax benefits from stock-based compensation

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