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W.P. Stewart & Co., Ltd. Reports Second Half and Full Year 2012 Financial Results & Provides Corporate Update

NEW YORK, May 3, 2013 (GLOBE NEWSWIRE) -- W.P. Stewart & Co., Ltd. Reports Second Half and Full Year 2012 Financial Results & Provides Corporate Update, Including:

  • Cash/Marketable Securities of $26.5 Million at April 30, 2013
  • AUM of $1.9 Billion at April 30, 2013
  • Strong investment performance recorded in 2012 for the firm's flagship U.S. and Global investment products

Financial Results

Second Half Highlights

W.P. Stewart & Co., Ltd. ("W.P. Stewart" or the "Company") today reported a net profit on a GAAP basis of $4.2 million, or $0.83 per share (diluted) and $0.86 per share (basic), for the six months ended December 31, 2012 compared to a net loss on a GAAP basis of -$5.0 million in the second half of 2011, or -$1.05 per share (diluted) and -$1.05 per share (basic). The GAAP results were impacted by the reversal of uncertain tax positions and reflect a corresponding benefit of $4.0 million.

On a cash basis the Company reported a net profit of $0.5 million, or $0.11 per share (diluted) and $0.11 per share (basic), for the six months ended December 31, 2012 compared to a net loss on a cash basis of -$2.8 million in the second half of 2011, or -$0.60 per share (diluted) and -$0.60 per share (basic). The cash basis results reflect adjustments to net income of -$3.6 million and $2.1 million in the second half of 2012 and 2011, respectively, representing non-cash income and expenses consisting of unrealized gains and losses, non-cash compensation, depreciation, amortization, and other non-cash charges. The cash basis results are not reported on a tax-effected basis.

Full Year 2012 Highlights

For the year ended December 31, 2012 the net profit on a GAAP basis was $2.2 million, or $0.43 per share (diluted) and $0.45 per share (basic), compared to a net loss on a GAAP basis of -$8.0 million for the year ended December 31, 2011, or -$1.64 per share (diluted) and -$1.64 per share (basic). The GAAP results were impacted by the reversal of uncertain tax positions and reflect a corresponding benefit of $5.0 million.

On a cash basis the Company reported a net loss of -$1.3 million, or -$0.26 per share (diluted) and -$0.26 per share (basic), for the year ended December 31, 2012 compared to a net loss on a cash basis of -$3.4 million for the year ended December 31, 2011, or -$0.70 per share (diluted) and -$0.70 per share (basic). The cash basis results reflect adjustments to net income of -$3.4 million and $4.6 million in 2012 and 2011, respectively, representing non-cash income and expenses consisting of unrealized gains and losses, non-cash compensation, depreciation, amortization, and other non-cash charges. The cash basis results are not reported on a tax-effected basis.

Included in this release are tables containing revenue and expense detail for the six months and year ended December 31, 2012 with comparisons to prior periods.

Second Half and Full Year Business Commentary

The second half of 2012 saw a marked improvement in the business environment despite continued concerns regarding the challenging macroeconomic background. Better returns for equities over one and three years have given investors confidence to start looking at the asset class again particularly given the poor returns available from cash and bonds.

A rising market and good equity returns, on both an absolute and relative basis, provide a much more favorable background for our business in three specific ways:

  • Assets under management grow because of the rising market which improves revenues.
  • New business increases as investors begin to favor equities and our good performance encourages them to come to W.P. Stewart.
  • The absolute performance fee for the W.P. Stewart Holdings Fund increases as the NAV for the fund ended the year materially above the previous high water mark, generating a significant boost to revenues. This is in sharp contrast to the modest performance fee recorded in 2011 and no performance fee recorded in 2010, 2009 and 2008 due to the market collapse following the financial crisis.

Overall revenues grew from $16.0 million to $22.6 million reflecting the better conditions highlighted above and performance fees.

Cost control remains a priority and expenses, excluding fees paid out to solicitors and incentive compensation related to portfolio performance results, fell by 2.4% from $21.8 million to $21.2 million.

Overall the Company recorded a significantly reduced loss before taxes of $2.6 million down from $7.8 million in 2011, and after the reversal of uncertain tax positions recorded net income of $2.2 million for the year ending December 31, 2012 versus a net loss of $7.9 million in the prior year.

Throughout 2012, the Company has undertaken a major project to bring the Company into compliance with the Global Investment Performance Standards ("GIPS"). This was a significant undertaking as the Company had to go back through the client records for 38 years to demonstrate our long term investment performance in accordance with the GIPS standard. This project is now nearing completion and we are entering the external verification process which is expected to be completed by mid-year 2013. Once in compliance with the GIPS standard, we anticipate that the Company will be able to enter a number of investment management searches for institutional clients from which we have previously been excluded.

The UCITS IV Fund available to non-U.S. investors launched at the beginning of 2012 has seen modest inflows but now has a solid one year track record, on both an absolute and relative basis, from which to build.

Investment performance in 2012 remained strong and both of the Company's major products, the core W.P. Stewart U.S. Concentrated Growth Composite and the W.P. Stewart Global Growth Composite outperformed their respective benchmarks, building on their good long term performance records. Both strategies ranked in the top quartiles of their respective PSN peer groups for the year ending December 31, 2012.

Investment Performance and Assets Under Management Update

The performance for the W.P. Stewart U.S. Concentrated Growth Composite (the "Composite") for the year ended December 31, 2012, was 18.1%, gross, and 16.6%, net, compared with 16.0% for the S&P 500. For the three years ending December 31, 2012, annualized performance for the Composite was 11.4%, gross, and 10.2%, net, which compared with the S&P 500 up 10.9% for the same period. For the five years ending December 31, 2012, annualized performance for the Composite was 5.4%, gross, and 4.2%, net, which compared with the S&P 500 up 1.7% for the same period.

As of March 31, 2013, year-to-date performance for the Composite was 12.8%, gross, and 12.6%, net, compared with 10.6% for the S&P 500. For the one year period ending March 31, 2013, performance for the Composite was 13.2%, gross, and 11.7%, net, compared with 14.0% for the S&P 500. For the three years ending March 31, 2013, annualized performance for the Composite was 15.2%, gross, and 14.1%, net, compared with 12.7% for the S&P 500 for the same period. For the five years ending March 31, 2013, annualized performance for the Composite was 9.3%, gross, and 8.1%, net, which compared with the S&P 500 up 5.8% for the same period.

The W.P. Stewart Global Growth Composite performance for the year ended December 31, 2012, was 20.1%, gross, and 18.9%, net, which compared to the MSCI World Index up 15.8%. For the three years ending December 31, 2012, annualized performance for the W.P. Stewart Global Growth Composite was 10.2%, gross, and 9.2%, net, which compared with the MSCI World Index up 6.9% for the same period. For the five years ending December 31, 2012, annualized performance for the W.P. Stewart Global Growth Composite was 3.6%, gross, and 2.7%, net, which compared with the MSCI World Index down -1.2% for the same period.

As of March 31, 2013, year-to-date performance for the W.P. Stewart Global Growth Composite was 6.7%, gross, and 6.4%, net, compared with 7.7% for the MSCI World Index. For the one year period ending March 31, 2013, performance for the W.P. Stewart Global Growth Composite was 9.4%, gross, and 8.3%, net, compared to the MSCI World Index up 11.8% For the three year period ending March 31, 2013, annualized performance for the W.P. Stewart Global Growth Composite was 11.8%, gross, and 10.8%, net, compared to the MSCI World Index up 8.5%. For the five year period ending March 31, 2013, annualized performance for the W.P. Stewart Global Growth Composite was 7.3%, gross, and 6.3%, net, compared to the MSCI World Index up 2.2%.

Assets under management ("AUM") at April 30, 2013 were approximately $1.9 billion (preliminary), compared with approximately $1.6 billion at December 31, 2012 and $1.4 billion at December 31, 2011. In the attached tables a complete breakdown of AUM flows for the year ended December 31, 2012 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.

Other Items

The Company had cash and marketable securities at December 31, 2012 of $17.7 million (excluding investment in Kirk Management Ltd.). The Company has no debt. As of April 30, 2013, the Company had cash and marketable securities balances of approximately $26.5 million.

For the six months and year ended December 31, 2012 non-cash compensation expense related to the Company's restricted share issuances to employees was approximately $300,000 and $2.0 million, respectively. For the same periods of the prior year, these non-cash compensation charges were approximately $2.1 million and $4.2 million, respectively. These non-cash compensation expenses are included in "employee compensation and benefits".

The Company's provision/(benefit) for taxes for the six months ended December 31, 2012 was -$3.8 million versus $65,796 in the comparable period of the previous year, and was -$4.8 million versus $114,507 for the years ended December 31, 2012 and 2011, respectively. The Company is currently engaged in one audit with a taxing authority for one of its subsidiaries.

Shareholders' equity at December 31, 2012 was approximately $23 million.

During the year ended December 31, 2012, the Company repurchased an aggregate of 137,177 shares of common stock from a fund managed by Arrow Capital Management and employees for a total of $626,078.

We are pleased to announce that during the first quarter of 2013, Andrew Black joined the Company's U.S. investment team. Andrew will focus his research efforts on companies in the industrial sector, an area he has covered for almost a decade. We hope many of you will get a chance to meet Andrew at our upcoming U.S. investment seminar in November.

Mark Bergen, the Company's Chief Financial Officer and Chief Operating Officer, has announced that he plans to resign at the end of May 2013 to pursue another opportunity. The Company will be considering candidates both within and outside the firm to assume Mr. Bergen's responsibilities following his departure. Mark Phelps, the Company's Chief Executive Officer, commented: "On behalf of the firm, we would like to thank Mark Bergen for all his dedication over the past few years; we greatly appreciate his efforts on a series of important initiatives and wish him luck on his next endeavor."

Please see the tables included in this release for further detail on revenue and expenses for the six months and full years ended December 31, 2012 and 2011.

Included in this press release are certain "non-GAAP financial measures," which are measures of the Company's historical or future financial performance that are different from measures calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP. These include: Cash Basis Net Income and Cash Basis EPS. The Company believes these terms can be useful measures of its performance, which are further defined following the tables below.

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 2010 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.

SUMMARY of KEY COMPARATIVE STATISTICS
For the Six Months Ending
December 31
For the Year Ending
December 31
2012 2011 2012 2011
Revenue (in millions) $ 14.3 $ 7.7 86% $ 22.6 $ 16.0 42%
Total Operating Expenses (in millions) $ 14.0 $ 12.6 11% $ 25.2 $ 23.8 6%
AUM (in billions) $ 1.64 $ 1.38 19% $ 1.64 $ 1.38 19%
Average Gross Management Fee - Annualized
Including Performance Fee accounts1 0.98% 0.98% 0.99% 1.00%
Excluding Performance Fee accounts1 1.20% 1.21% 1.21% 1.24%
Common shares outstanding 4,820,938 4,752,763 4,799,623 4,845,922
(weighted adv. basic basis)
Common shares outstanding 5,015,315 na 5,017,436 na
(weighted adv. diluted basis)
GAAP BASIS
Net Income (in millions) $ 4.2 $ (5.0) 183% $ 2.2 $ (8.0) 127%
Earnings per Share (Basic) $ 0.86 $ (1.05) 182% $ 0.45 $ (1.64) 127%
Earnings per Share (Diluted) $ 0.83 $ (1.05) 179% $ 0.43 $ (1.64) 126%
CASH BASIS
Net Income (in millions)
As Reported $ 4.2 $ (5.0) 183% $ 2.2 $ (8.0) 127%
Excluded Non-cash Income & Expenses2 $ (3.6) $ 2.1 269% $ (3.4) $ 4.6 175%
Net of Non-cash Income & Expenses2 $ 0.5 $ (2.8) 118% $ (1.3) $ (3.4) 63%
Earnings per Share (Basic & Diluted)
As Reported $ 0.86 $ (1.05) 182% $ 0.45 $ (1.64) 127%
Excluded Non-cash Income & Expenses2 $ (0.75) $ 0.45 267% $ (0.71) $ 0.94 176%
Net of Non-cash Income & Expenses2 $ 0.11 $ (0.60) 118% $ (0.26) $ (0.70) 63%
1 Performance fee based accounts, pay a lower quarterly base fee plus an annual performance fee at year-end if earned
2 Non-cash Income & Expenses: Consisting of unrealized gains and losses, non-cash compensation, depreciation, amortization, and other non-cash charges on a tax-effected basis
NOTE: In prior years operating results net of Non-cash Income & Expenses were reported on a tax-effected basis. The 2012 results are reported on a gross basis that does not consider the tax-effect. For comparison purposes, the 2011 operating results net of Non-cash Income & Expenses presented here are also reported on a gross basis that does not consider the tax-effect.
W.P. Stewart & Co., Ltd.
Condensed Consolidated Statements of Financial Condition
December 31, December 31,
2012 2011
Assets:
Cash and cash equivalents $ 13,611,843 $ 18,176,603
Fees receivable 81,666 119,443
Investment in unconsolidated affiliates 2,017,832 2,017,832
Investment in W.P. Stewart Global Quality Growth Fund 876,600 --
Receivables from affiliates 6,578,283 1,423,414
Investments, trading (cost $2,535,426 and $2,843,907 for 2012 and 2011, respectively) 3,182,694 3,031,548
Investments, available for sale (cost $12,400 and $12,400 for 2012 and 2011, respectively) 24,990 24,510
Furniture, equipment, software and leasehold improvements (net of accumulated depreciation and amortization of $2,035,476 and $3,686,174 for 2012 and 2011, respectively) 418,625 463,866
Income taxes receivable 796,358 1,338,184
Deferred income taxes receivable 323,430 413,176
Other assets 1,190,702 2,640,134
$ 29,103,023 $ 29,648,710
Liabilities and Shareholders' Equity:
Liabilities:
Employee compensation and benefits payable $ 3,114,183 $ 1,935,628
Fees payable 738,344 356,613
Vendor payables 1,751,492 2,291,320
Accrued expenses and other liabilities 435,850 5,424,914
6,039,869 10,008,475
Shareholders' Equity:
Non-controlling interest -- 99,989
Common shares, $0.01 par value (12,500,000 shares authorized; 4,882,674 and 5,019,219 shares issued, and 4,880,142 and 5,016,719 shares outstanding at December 31, 2012 and December 31, 2011, respectively) 48,826 50,192
Additional paid-in-capital 141,101,311 139,711,939
Accumulated other comprehensive income 546,366 584,196
Retained earnings/(deficit) (118,628,024) (120,800,756)
Common shares held in treasury, at cost, $0.01 par value (2,500 shares at December 31, 2012 and December 31, 2011) (5,325) (5,325)
23,063,154 19,640,235
$ 29,103,023 $ 29,648,710
W.P. Stewart & Co., Ltd.
Condensed Consolidated Statements of Operations
For the Year Ended December 31,
2012 2011 %
Revenue:
Fees $ 21,158,138 $ 15,846,034 33.52%
Realized and change in unrealized gains/(losses) on investments 671,778 (61,086) na
Interest and other 781,294 179,049 336.36%
22,611,210 15,963,997 41.64%
Expenses:
Employee compensation and benefits 12,886,108 13,396,944 -3.81%
Fees paid out 3,980,634 2,023,905 96.68%
Research and administration 4,796,016 4,595,484 4.36%
Marketing 507,552 726,721 -30.16%
Depreciation and amortization 102,829 115,997 -11.35%
Other operating 2,960,829 2,941,297 0.66%
25,233,968 23,800,348 6.02%
Loss before taxes and before loss attributable to non-controlling interest (2,622,758) (7,836,351) 66.53%
Provision/(benefit) for taxes (4,795,490) 114,507 na
Income/(loss) before loss attributable to non-controlling interest 2,172,732 (7,950,858) na
Loss attributable to non-controlling interest -- (11) na
Net income/(loss) $ 2,172,732 $ (7,950,847) na
Earnings/(loss) per share:
Basic earnings/(loss) per share $ 0.45 $ (1.64) 127.44%
Diluted earnings/(loss) per share $ 0.43 $ (1.64) 126.22%
W.P. Stewart & Co., Ltd.
Unaudited Condensed Consolidated Statements of Operations
For the Six Months Ended December 31,
2012 2011 %
Revenue:
Fees $ 13,595,988 $ 7,753,913 75.34%
Realized and change in unrealized gains/(losses) on investments 400,575 (142,201) 381.70%
Interest and other 291,157 45,253 543.40%
14,287,720 7,656,965 86.60%
Expenses:
Employee compensation and benefits 6,846,002 6,722,771 1.83%
Fees paid out 3,208,636 1,212,983 164.52%
Research and administration 2,408,795 2,341,726 2.86%
Marketing (186,988) 815,805 -122.92%
Depreciation and amortization 59,961 42,542 40.95%
Other operating 1,644,761 1,446,693 13.69%
13,981,167 12,582,520 11.12%
Income/(loss) before taxes 306,553 (4,925,555) 106.22%
Provision/(benefit) for taxes (3,851,123) 65,796 -5953.13%
Net income/(loss) $ 4,157,676 $ (4,991,351) 183.30%
Earnings/(loss) per share:
Basic earnings/(loss) per share $ 0.86 $ (1.05) 181.90%
Diluted earnings/(loss) per share $ 0.86 $ (1.05) 181.90%
W.P. Stewart & Co., Ltd.
Net Flows of Assets Under Management*
(in millions)
For the Six Months Ended For the Year Ended
Dec. 31, 2012 Jun. 30, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011
Existing Accounts:
Contributions $ 58 $ 102 $ 30 $ 160 $ 90
Withdrawals (65) (143) (97) (208) (183)
Net Flows of Existing Accounts (7) (41) (67) (48) (93)
Publicly Available Funds:
Contributions 62 26 12 88 31
Withdrawals (18) (15) (49) (33) (70)
Direct Accounts Opened 39 53 11 92 19
Direct Accounts Closed (26) (22) (30) (48) (132)
Net New Flows 57 42 (56) 99 (152)
Net Flows of Assets Under Management $ 50 $ 1 $ (123) $ 51 $ (245)
* The table above sets forth the total net flows of assets under management for the six months ended December 31, 2012, June 30, 2012 and December 31, 2011, respectively, and for the years ended December 31, 2012 and 2011, 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.

CONTACT: IRINFO@wpstewart.com telephone: 888-695-4092 (toll-free within the U.S.) 212-750-8585 (outside the U.S.)Source:W.P. Stewart & Co., Ltd.