Westwood Holdings Group, Inc. (NYSE: WHG) today reported 2010 fourth quarter revenues of $15.4 million, net income of $3.3 million and earnings per diluted share of $0.46. This compares to revenues of $12.7 million, net income of $2.7 million and earnings per diluted share of $0.38 in the fourth quarter of 2009. Economic Earnings were $5.7 million compared to $4.7 million for the fourth quarter of 2009. Economic Earnings per share (“Economic EPS”) were $0.81 per diluted share compared to $0.73 per diluted share for the fourth quarter of 2009. (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.)

Assets under management were $12.5 billion as of December 31, 2010, an increase of 23% compared to $10.2 billion as of December 31, 2009. The increase was primarily due to market appreciation of assets under management, the acquisition of McCarthy Group Advisors in November and asset inflows from new and existing clients, partially offset by the withdrawal of assets by certain clients. Mutual fund assets, including five WHG Funds and the McCarthy Multi-Cap Stock Fund, were $970 million as of December 31, 2010, an increase of 71% compared to assets of $566 million as of December 31, 2009. On February 1, 2011, shareholders of the McCarthy Multi-Cap Stock Fund approved the fund’s reorganization into the WHG Dividend Growth Fund (WHGDX).

Brian Casey, Westwood’s President & CEO, commented, “Westwood achieved a number of important milestones in 2010. We posted the highest levels of assets under management, revenue and net income in our history. We expanded our private wealth franchise with the acquisition of McCarthy Group Advisors and introduced SMidCap Plus+ as an investment alternative to our highly successful SMidCap product, which recently reached its maximum asset capacity. Our WHG Funds continued their strong organic growth and approached $1 billion at year-end. Looking forward, we intend to utilize our stable financial position to reinvest in our business and capitalize on attractive growth opportunities in the marketplace.”

Westwood’s Board of Directors declared a quarterly cash dividend of $0.35 per common share, an increase from the previous quarterly dividend of $0.33 per share, payable on April 1, 2011 to stockholders of record on March 15, 2011.

For the year ended December 31, 2010, Westwood reported revenues of $55.3 million, net income of $11.3 million and earnings per diluted share of $1.58, compared to revenues of $42.6 million, net income of $7.9 million and earnings per diluted share of $1.09 for 2009. Economic Earnings for the year ended December 31, 2010 were $20.8 million compared to $15.6 million for 2009, while Economic EPS for the year ended December 31, 2010 were $3.06 per diluted share compared to $2.45 per diluted share for 2009.

Total expenses for the fourth quarter were $10.3 million compared with $8.4 million for the fourth quarter of 2009. Economic Expenses were $7.9 million compared with $6.5 million for the fourth quarter of 2009. (An explanation and reconciliation of Economic Expenses to total expenses is included in the attached tables.)

Westwood will host a conference call to discuss fourth quarter 2010 results and other business updates at 4:30 p.m. Eastern time today. To join the conference call, dial 866-337-6663 (domestic) or 904-520-5771 (international). The conference call can also be accessed at www.westwoodgroup.com under the Investor Relations tab and will be available for replay through February 10 by dialing 888-284-7564 (domestic) or 904-596-3174 (international) and entering passcode 2591331.

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, other mutual funds, individuals and clients of Westwood Trust. Westwood Trust provides trust 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 on Westwood, please visit www.westwoodgroup.com.

For more information on the WHG Funds, please visit www.whgfunds.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 concentration of our revenues in a small number 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; 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; 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, 2009 and its quarterly report on Form 10-Q for the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010. 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 INCOME
(in thousands, except per share data)
(unaudited)
 
  Three months ended     Year ended
December 31, December 31,
2010   2009 2010   2009
REVENUES:
Advisory fees
Asset-based $ 11,696 $ 9,676 $ 42,153 $ 31,794
Trust fees 3,101 2,938 12,051 10,304
Other revenues, net   633   109   1,109   455
Total revenues   15,430   12,723   55,313   42,553
 
EXPENSES:
Employee compensation and benefits 7,554 6,765 29,001 23,730
Sales and marketing 254 128 823 576
WHG mutual funds 318 175 662 600
Information technology 374 296 1,351 1,221
Professional services 1,025 401 2,941 1,531
General and administrative   788   671   2,814   2,577
Total expenses   10,313   8,436   37,592   30,235
Income before income taxes 5,117 4,287 17,721 12,318
Provision for income taxes   1,862   1,566   6,441   4,423
Net income $ 3,255 $ 2,721 $ 11,280 $ 7,895
 
Earnings per share:
Basic $ 0.48 $ 0.38 $ 1.62 $ 1.10
Diluted $ 0.46 $ 0.38 $ 1.58 $ 1.09

 
 
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 2010 and 2009
(in thousands, except par value and share amounts)
 
    2010       2009  
ASSETS
Current Assets:
Cash and cash equivalents $ 1,744 $ 2,879
Accounts receivable 7,348 6,406
Investments, at market value 43,300 42,246
Deferred income taxes 2,757 2,187
Other current assets   733     625  
Total current assets 55,882 54,343
Goodwill 11,281 3,915
Intangible assets, net 5,119 1,050
Property and equipment, net of accumulated depreciation of $1,542 and $1,315   346     578  
Total assets $ 72,628   $ 59,886  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 1,290 $ 995
Dividends payable - 2,359
Compensation and benefits payable 9,369 6,273
Income taxes payable 173 823
Deferred acquisition liability 899 900
Other current liabilities   13     11  
Total current liabilities 11,744 11,361
Deferred acquisition liability - 796
Deferred income taxes 117 238
Deferred rent   90     273  
Total long-term liabilities   207     1,307  
Total liabilities   11,951     12,668  
Stockholders’ Equity:
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 7,874,873 and outstanding 7,645,678 shares at December 31, 2010; issued 7,308,812 and outstanding 7,151,472 shares at December 31, 2009

 

79

 

73
Additional paid-in capital 65,639 47,741
Treasury stock, at cost – 229,195 shares at December 31, 2010; 157,340 shares at December 31, 2009

(8,749

)

(6,026

)
Accumulated other comprehensive income 926 1,559
Retained earnings   2,782     3,871  
Total stockholders’ equity   60,677     47,218  
Total liabilities and stockholders’ equity $ 72,628   $ 59,886  

 
 
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
    2010       2009  
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,280 $ 7,895
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 274 241
Amortization of intangible assets 155 13
Fair market valuation of deferred acquisition liabilities 156 23
Unrealized gains on investments (694 ) (588 )
Restricted stock amortization 9,269 7,666
Deferred income taxes (350 ) (73 )
Excess tax benefits from stock based compensation (1,026 ) (1,518 )
Net purchases of investments – trading securities (714 ) (9,721 )
Changes in operating assets and liabilities:
Accounts receivable (942 ) 6,232
Other assets (94 ) 76
Accounts payable and accrued liabilities (2,167 ) (101 )
Compensation and benefits payable 3,096 (779 )
Income taxes payable and prepaid taxes 838 1,298
Other liabilities   (100 )   (58 )
Net cash provided by operating activities   18,981     10,606  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of money market funds – available for sale (39,877 ) (64,984 )
Sales of money market funds – available for sale 39,257 63,597
Cash paid for business combination (5,609 ) (251 )
Purchases of property and equipment   (137 )   (86 )
Net cash used in investing activities   (6,366 )   (1,724 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock (2,723 ) (2,526 )
Excess tax benefits from stock based compensation 1,026 1,518
Proceeds from exercise of stock options 213 33
Cash dividends   (12,266 )   (8,526 )
Net cash used in financing activities   (13,750 )   (9,501 )
 
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,135 ) (619 )
Cash and cash equivalents, beginning of year   2,879     3,498  
Cash and cash equivalents, end of year $ 1,744   $ 2,879  
 
Supplemental cash flow information:
Cash paid during the year for income taxes $ 5,937 $ 3,199
Issuance of restricted stock 14,664 7,263

 
 
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    
December 31 %
  2010       2009   Change
Net Income $ 3,255 $ 2,721 20 %
Add: Restricted stock expense 2,342 1,972 19
Add: Intangible amortization 76 13 485
Add: Tax benefit from goodwill amortization   31     5   520  
Economic earnings $ 5,704   $ 4,711   21  
 
Diluted weighted average shares 7,018,633 6,442,095 9
Economic earnings per share $ 0.81 $ 0.73 11
 
Total expenses $ 10,313 $ 8,436 22
Less: Restricted stock expense (2,342 ) (1,972 ) 19
Less: Intangible amortization   (76 )   (13 ) 485  
Economic expenses $ 7,895   $ 6,451   22 %
 
Year Ended
December 31 %
  2010     2009   Change
Net Income $ 11,280 $ 7,895 43 %
Add: Restricted stock expense 9,269 7,666 21
Add: Intangible amortization 155 13 1,092
Add: Tax benefit from goodwill amortization   59     5   1,080  
Economic earnings $ 20,763   $ 15,579   33  
 
Diluted weighted average shares 6,795,351 6,366,988 7
Economic earnings per share $ 3.06 $ 2.45 25
 
Total expenses $ 37,592 $ 30,235 24
Less: Restricted stock expense (9,269 ) (7,666 ) 21
Less: Intangible amortization   (155 )   (13 ) 1,092  
Economic expenses $ 28,168   $ 22,556   25 %

As supplemental information, we are providing 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)

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