Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Oct. 11, 2013 | |
Document Document And Entity Information [Line Items] | ||
Entity Registrant Name | WESTWOOD HOLDINGS GROUP INC | |
Entity Central Index Key | 1165002 | |
Document Type | 10-Q | |
Document Period End Date | 30-Sep-13 | |
Amendment Flag | FALSE | |
Document Fiscal Year Focus | 2013 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | -19 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 8,187,529 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (Unaudited) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Current Assets: | ||
Cash and cash equivalents | $12,009 | $3,817 |
Accounts receivable | 12,097 | 8,920 |
Investments, at fair value | 55,268 | 59,906 |
Deferred income taxes | 2,917 | 3,362 |
Prepaid income taxes | 1,213 | |
Other assets | 1,906 | 1,365 |
Total current assets | 85,410 | 77,370 |
Goodwill | 11,255 | 11,255 |
Deferred income taxes | 2,010 | 1,696 |
Intangible assets, net | 3,879 | 4,149 |
Property and equipment, net of accumulated depreciation of $2,034 and $1,747 | 2,372 | 2,145 |
Total assets | 104,926 | 96,615 |
Current Liabilities: | ||
Accounts payable and accrued liabilities | 2,004 | 1,650 |
Dividends payable | 3,559 | 1,201 |
Compensation and benefits payable | 13,638 | 14,537 |
Income taxes payable | 1,438 | |
Total current liabilities | 19,201 | 18,826 |
Accrued dividends | 1,053 | |
Deferred rent | 1,194 | 1,238 |
Total long-term liabilities | 2,247 | 1,238 |
Total liabilities | 21,448 | 20,064 |
Commitments and contingencies (Note 11) | ||
Stockholders’ Equity: | ||
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 8,789,725 and outstanding 8,187,529 shares at September 30, 2013; issued 8,526,598 and outstanding 8,031,045 shares at December 31, 2012 | 88 | 85 |
Additional paid-in capital | 97,928 | 88,483 |
Treasury stock, at cost – 602,196 shares at September 30, 2013; 495,553 shares at December 31, 2012 | -23,169 | -18,502 |
Accumulated other comprehensive income (loss) | -101 | 30 |
Retained earnings | 8,732 | 6,455 |
Total stockholders’ equity | 83,478 | 76,551 |
Total liabilities and stockholders’ equity | $104,926 | $96,615 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, except Share data, unless otherwise specified | ||
Statement Condensed Consolidated Balance Sheets Unaudited Parenthetical [Line Items] | ||
Property and equipment, accumulated depreciation | $2,034 | $1,747 |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares issued | 8,789,725 | 8,526,598 |
Common stock, shares outstanding | 8,187,529 | 8,031,045 |
Treasury stock, shares | 602,196 | 495,553 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Advisory fees | ||||
Asset based | $17,956 | $14,485 | $49,989 | $42,677 |
Performance based | 26 | 69 | 2,561 | 1,251 |
Trust fees | 4,672 | 3,715 | 13,463 | 10,943 |
Other, net | 344 | 672 | 560 | 2,000 |
Total revenues | 22,998 | 18,941 | 66,573 | 56,871 |
EXPENSES: | ||||
Employee compensation and benefits | 12,480 | 11,397 | 36,230 | 32,196 |
Sales and marketing | 326 | 350 | 947 | 823 |
Westwood mutual funds | 599 | 292 | 1,465 | 776 |
Information technology | 690 | 649 | 2,024 | 1,874 |
Professional services | 887 | 739 | 2,966 | 3,681 |
General and administrative | 1,250 | 1,183 | 3,723 | 3,354 |
Total expenses | 16,232 | 14,610 | 47,355 | 42,704 |
Income before income taxes | 6,766 | 4,331 | 19,218 | 14,167 |
Provision for income taxes | 2,447 | 1,827 | 7,187 | 5,680 |
Net income | 4,319 | 2,504 | 12,031 | 8,487 |
Available-for-sale investments: | ||||
Change in unrealized gain on investment securities | -401 | |||
Less: reclassification adjustment for net gains included in earnings | -908 | |||
Net change (net of income taxes of $0, $0, $0 and $(714), respectively) | -1,309 | |||
Foreign currency translation adjustments | 104 | 78 | -131 | 60 |
Total comprehensive income | $4,423 | $2,582 | $11,900 | $7,238 |
Earnings per share: | ||||
Basic | $0.59 | $0.35 | $1.64 | $1.19 |
Diluted | $0.57 | $0.34 | $1.59 | $1.16 |
Weighted average shares outstanding: | ||||
Basic | 7,374,600 | 7,166,020 | 7,347,376 | 7,138,878 |
Diluted | 7,558,136 | 7,323,245 | 7,586,488 | 7,301,014 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Statement Condensed Consolidated Statements Of Comprehensive Income Unaudited Parenthetical [Line Items] | ||||
Net change, income taxes | $0 | $0 | $0 | ($714) |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (USD $) | Total | Common Stock, Par | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Retained Earnings |
BALANCE at Dec. 31, 2012 | $76,551,000 | $85,000 | $88,483,000 | ($18,502,000) | $30,000 | $6,455,000 |
BALANCE, shares at Dec. 31, 2012 | 8,031,045 | 8,031,045 | ||||
Net income | 12,031,000 | 12,031,000 | ||||
Other comprehensive loss | -131,000 | -131,000 | ||||
Issuance of restricted stock, net | 3,000 | -3,000 | ||||
Issuance of restricted stock, net, shares | 263,127 | |||||
Dividends declared ($1.20 per share) | -9,754,000 | -9,754,000 | ||||
Restricted stock amortization | 8,579,000 | 8,579,000 | ||||
Reclassification of compensation liability to be paid in shares | 124,000 | 124,000 | ||||
Tax benefit related to equity compensation | 745,000 | 745,000 | ||||
Purchase of treasury stock | -4,667,000 | -4,667,000 | ||||
Purchase of treasury stock, shares | -106,643 | |||||
BALANCE at Sep. 30, 2013 | $83,478,000 | $88,000 | $97,928,000 | ($23,169,000) | ($101,000) | $8,732,000 |
BALANCE, shares at Sep. 30, 2013 | 8,187,529 | 8,187,529 |
Condensed_Consolidated_Stateme3
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (Parenthetical) (USD $) | Sep. 30, 2013 |
Dividends declared, per share | $1.20 |
Retained Earnings | |
Dividends declared, per share | $1.20 |
Condensed_Consolidated_Stateme4
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $12,031 | $8,487 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 288 | 257 |
Amortization of intangible assets | 270 | 366 |
Fair value adjustment of liabilities | -96 | |
(Gain) on sale of available for sale investment | -803 | |
Unrealized (gains) losses on trading investments | 430 | -164 |
Restricted stock amortization | 8,579 | 7,635 |
Loss on disposal of property | 1 | |
Deferred income taxes | 51 | 931 |
Excess tax benefits from stock based compensation | -694 | -676 |
Net sales of investments – trading securities | 4,202 | 96 |
Change in operating assets and liabilities: | ||
Accounts receivable | -3,241 | -495 |
Other current assets | -480 | -684 |
Accounts payable and accrued liabilities | 369 | -2,691 |
Compensation and benefits payable | -668 | -1,996 |
Income taxes payable and prepaid income taxes | -1,922 | -961 |
Other liabilities | 20 | -69 |
Net cash provided by operating activities | 19,235 | 9,138 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Sale of available for sale investment | 950 | |
Purchase of property and equipment | -651 | -238 |
Net cash (used in) provided by investing activities | -651 | 712 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Purchase of treasury stock | -4,667 | -3,796 |
Excess tax benefits from stock based compensation | 694 | 676 |
Cash dividends | -6,346 | -5,475 |
Proceeds from exercise of stock options | 210 | |
Net cash used in financing activities | -10,319 | -8,385 |
Effect of currency rate changes on cash | -73 | 48 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 8,192 | 1,513 |
Cash and cash equivalents, beginning of period | 3,817 | 5,264 |
Cash and cash equivalents, end of period | 12,009 | 6,777 |
Supplemental cash flow information: | ||
Cash paid during the period for income taxes | $9,093 | $5,708 |
Description_of_the_Business
Description of the Business | 9 Months Ended |
Sep. 30, 2013 | |
Description of the Business | 1. DESCRIPTION OF THE BUSINESS |
Westwood Holdings Group, Inc. (“Westwood”, “we”, “us” or “our”) was incorporated under the laws of the State of Delaware on December 12, 2001. Westwood manages investment assets and provides services for its clients through its subsidiaries, Westwood Management Corp. (“Westwood Management”), Westwood Trust (“Westwood Trust”) and Westwood International Advisors Inc. (“Westwood International”). Westwood Management provides investment advisory services to corporate retirement plans, public retirement plans, endowments and foundations, mutual funds, individuals and clients of Westwood Trust. Westwood Trust provides institutions and high net worth individuals with trust and custodial services and participation in its sponsored common trust funds. Westwood International provides investment advisory services to institutional investors and to Westwood Investment Funds PLC, an Ireland-based umbrella fund organized pursuant to the European Union’s Undertaking for Collective Investment in Transferable Securities (“UCITS”). | |
Westwood Management is a registered investment adviser under the Investment Advisers Act of 1940. Westwood Trust is chartered and regulated by the Texas Department of Banking. Westwood International is registered as a portfolio manager and exempt market dealer with the Ontario Securities Commission. |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2013 | |
Summary of Significant Accounting Policies | WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | |
(Unaudited) | |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | |
The accompanying condensed consolidated financial statements have been prepared without an audit and reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary to present fairly our interim financial position and results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements are presented using the accrual basis of accounting and have been prepared in accordance with the instructions for the presentation of interim financial information as prescribed by the Securities and Exchange Commission (“SEC”). | |
The accompanying condensed consolidated financial statements should be read in conjunction with our consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2012. Operating results for the periods in these condensed consolidated financial statements are not necessarily indicative of the results for any future period. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of Westwood and its subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. | |
Use of Estimates | |
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |
Revenue Recognition | |
Investment advisory and trust fees are recognized as services are provided and are largely dependent on the total value and composition of assets under management (“AUM”). Accordingly, fluctuations in financial markets and in the composition of AUM impact revenues and results of operations. These fees are determined in accordance with contracts between our subsidiaries and their clients and are generally based on a percentage of AUM. A limited number of our clients have contractual performance-based fee arrangements, which pay us an additional fee when we outperform a specified index over a specific period of time. We record revenue for performance-based fees at the end of the measurement periods. Most advisory and trust fees are payable in advance or in arrears on a calendar quarterly basis. Advance payments are deferred and recognized over the periods services are performed. Since billing periods for most of our advance paying clients coincide with the calendar quarter to which payment relates, revenue is fully recognized within the quarter. Consequently there is not a significant amount of deferred revenue contained in our financial statements. Deferred revenue is included on the balance sheet under the heading of “Accounts payable and accrued liabilities”. | |
Other revenues generally consist of interest and investment income and losses. These revenues are recognized as earned or as the services are performed. | |
16 | |
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES | |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | |
(Unaudited) | |
Consolidation | |
We assess each legal entity that we manage to determine whether consolidation is appropriate at the onset of the relationship. We first determine whether the entity is a voting interest entity (“VOE”), or a variable interest entity (“VIE”), under GAAP and then whether we have a controlling financial interest in the entity. Assessing whether an entity is a VOE or VIE and if it requires consolidation involves judgment and analysis. Factors considered in this assessment include, but are not limited to, the legal organization of the entity, our equity ownership and contractual involvement with the entity and any related party or de facto agent implications of our involvement with the entity. We reconsider whether entities are a VOE or VIE whenever contractual arrangements change, the entity receives additional equity or returns equity to its investors or changes in facts and circumstances occur that change the investors’ ability to direct the activities of the entity. | |
A VIE is an entity in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities without subordinated financial support or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. That is, the at-risk equity holders do not have the obligation to absorb losses, the right to receive residual returns and/or the right to direct the activities of the entity that most significantly impact the entity’s economic performance. An enterprise must consolidate all VIEs of which it is the primary beneficiary. We determine if a sponsored investment meets the definition of a VIE by considering whether the fund’s equity investment at risk is sufficient to finance its activities without additional subordinated financial support and whether the fund’s at-risk equity holders absorb any losses, have the right to receive residual returns and have the right to direct the activities of the entity most responsible for the entity’s economic performance. For VIEs that are investment companies, the primary beneficiary of the VIE is the party that absorbs a majority of the expected losses of the VIE, receives a majority of the expected residual returns of the VIE, or both. For VIEs that are not investment companies, the primary beneficiary of a VIE is defined as the party who, considering the involvement of related parties and de facto agents, has (i) the power to direct the activities of the VIE that most significantly affect its economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. This evaluation is updated continuously. | |
A VOE is an entity that is not within the scope of the guidance for VIEs. Consolidation of a VOE is required when a reporting entity owns a controlling financial interest in a VOE. Ownership of a majority of the voting interests is the usual condition for a controlling financial interest. At September 30, 2013, none of our sponsored investment entities were VOEs subject to this assessment by the Company. | |
The Westwood Investment Funds PLC (the “UCITS Fund”), which was authorized by the Central Bank of Ireland on June 18, 2013 pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011, is an Ireland domiciled umbrella-type open-ended self-managed investment company. The UCITS Fund is established as an umbrella fund with segregated assets and liabilities between sub-funds. Notwithstanding the segregation of assets and liabilities within each sub-fund, the UCITS Fund is a single legal entity and no sub-fund constitutes a legal entity separate from the UCITS Fund itself. The Company’s first UCITS sub-fund is focused on Westwood’s Emerging Markets strategy. Shares of the sub-fund are listed on the Irish Stock Exchange, all of which are owned by the third-party investors. The base currency of the UCITS Fund is Great Britain pound sterling. We determined that the UCITS Fund was a VIE as its at-risk equity holders do not have the ability to direct the activities of the UCITS Fund that most significantly impact the entity’s economic performance. Although the Company does not have an equity investment in the UCITS Fund, through its representatives having a majority control of the UCITS Fund’s Board of Directors its representatives can influence the UCITS Fund’s management and affairs. The UCITS’s Fund Board of Directors maintains this control through its duties which are stated in the UCITS Funds’ Memorandum and Articles of Association which has no expiration date. We concluded that the Company was not the primary beneficiary of the UCITS Fund because even though it has the power to direct the activities of the UCITS Fund (that most significantly impact the fund’s economic performance), it does not absorb a majority of the UCITS Fund’s expected losses and does not receive a majority of the UCITS Fund’s expected residual returns. As a result, the results of the UCITS Fund are not included in the Company’s consolidated financial results. | |
We have also evaluated all of our other advisory relationships and our relationship as sponsor of the common trust funds to determine whether or not we qualify as the primary beneficiary based on whether there is an obligation to absorb the majority of expected losses or a right to receive the majority of residual returns. Since all losses and returns are distributed to the shareholders of the Westwood VIEs, we are not the primary beneficiary and consequently the Westwood VIEs are not included in our condensed consolidated financial statements. We have included the disclosures related to VIEs in Note 8. | |
Cash and Cash Equivalents | |
Cash and cash equivalents consist of short-term, highly liquid investments with maturities of three months or less, other than pooled investment vehicles that are considered investments. | |
Accounts Receivable | |
Our accounts receivable balances generally consist of advisory and trust fees receivable from customers that we believe and have experienced to be fully collectable. Our trade accounts receivable balances do not include any allowance for doubtful accounts nor has any bad debt expense attributable to trade receivables been recorded for the periods presented in these condensed consolidated financial statements. | |
Investments | |
All marketable securities are classified as trading securities and are carried at quoted market value on the accompanying consolidated balance sheet. Net unrealized holding gains or losses on investments classified as trading securities are reflected as a component of other revenues. We measure realized gains and losses on investments using the specific identification method. Investments include shares of Westwood mutual funds awarded to employees pursuant to mutual fund share incentive awards described in Note 9. | |
Goodwill and Other Intangible Assets | |
Goodwill represents the excess of the cost of acquired assets over the fair value of the underlying identifiable assets at the date of acquisition. Goodwill is not amortized but is tested at least annually for impairment. We test more frequently if indicators are present or changes in circumstances suggest that impairment may exist. These indicators include, among others, declines in sales, earnings or cash flows, or the development of a material adverse change in the business climate. We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. We have identified two reporting units, which are consistent with our reporting segments: Advisory and Trust. The Company is not required to calculate the fair value of a reporting unit unless the Company determines that it is more likely than not that its fair value is less than the carrying amount. The Company assesses goodwill for impairment using a qualitative assessment which includes consideration of the current trends in the industry in which the Company operates, macroeconomic conditions, recent financial performance of the Company’s reporting units and a market multiple approach valuation. | |
In performing the annual impairment test, which is performed during the third quarter or more frequently when impairment indicators exist and after assessing the qualitative factors, we may be required to utilize the two-step approach prescribed. The first step requires a comparison of each reporting unit’s carrying value to the fair value of the respective unit. If the carrying value exceeds the fair value, a second step is performed to measure the amount of impairment loss, if any. The fair value of each reporting unit is estimated, entirely or predominantly, using a market multiple approach. During the third quarter of 2013, we completed our annual goodwill impairment assessment and determined that no impairment loss was required. No impairments were recorded during any of the periods presented. | |
Our intangible assets represent the acquisition date fair value of acquired client relationships, trade names and non-compete agreements and are reflected net of amortization. In valuing these assets, we made significant estimates regarding their useful lives, growth rates and potential attrition. We periodically review intangible assets for events or circumstances that would indicate impairment. For a further discussion of our intangible assets see Note 6. | |
Income Taxes | |
We file a United States (U.S.) federal income tax return as a consolidated group for Westwood and its subsidiaries based in the U.S. We separately file a Canadian income tax return for Westwood International. Deferred income tax assets and liabilities are determined based on temporary differences between the financial statement and income tax bases of assets and liabilities as measured at enacted income tax rates. Deferred income tax expense is generally the result of changes in deferred tax assets and liabilities. Deferred taxes relate primarily to stock-based compensation expense and net operating losses at Westwood International. | |
We would record a valuation allowance, when necessary, to reduce deferred tax assets to an amount that more likely than not would be realized. No valuation allowance has been recorded in our financial statements. | |
Currency Translation | |
Assets and liabilities of Westwood International, our non-U.S. dollar functional currency subsidiary, are translated at exchange rates as of the applicable reporting dates. Revenues and expenses are translated at average exchange rates during the periods indicated. The gains and losses resulting from translating non-U.S. dollar functional currency into U.S. dollars are recorded through other comprehensive income. | |
Long-term Compensation Agreements | |
We entered into employment agreements with certain employees of Westwood International that provide for specified payments over four years. In certain circumstances, these payments would be forfeited to us if the employment of these individuals is terminated before completion of the contractual earning period. Payments made in advance under these agreements are included in “Other current assets” on our Condensed Consolidated Balance Sheet, net of amounts already amortized. | |
Stock Based Compensation | |
We account for stock-based compensation in accordance with Financial Accounting Standards Board Accounting Standards Codification No. 718, Compensation-Stock Compensation (“ASC 718”). Under ASC 718, stock-based compensation expense reflects the fair value of stock-based awards measured at grant date, is recognized over the relevant service period, and is adjusted each period for anticipated forfeitures. The compensation cost recorded for these awards is based on their grant-date fair value as required by ASC 718. | |
We have issued restricted stock and granted stock options in accordance with our Third Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan, as amended (the “Plan”). We apply judgment in developing an expectation of awards of restricted stock and stock options that may be forfeited. If actual experience differs significantly from these estimates, our stock-based compensation expense and results of operations could be materially affected. | |
We have compensation arrangements with certain employees of Westwood International pursuant to which these employees are able to earn cash awards based on the performance of certain investment products. A portion of such awards may be paid in shares of our stock that vest over a multi-year period. We accrue a liability for these awards over both the annual period in which we determine it is probable that the award will be earned and, for the portion to be settled in shares, over the following three-year vesting period. For the nine months ended September 30, 2013 and 2012, the expense recorded for these awards was $337,000 and $79,000, respectively. Cash awards expected to be settled in shares are funded into a trust pursuant to an established Canadian employee benefit plan. Generally, the Canadian trust subsequently acquires Westwood common shares in market transactions and holds such shares until the shares are vested and distributed, or forfeited. Shares held in the trust are shown on our balance sheet as treasury shares. During the second quarter of 2013, the trust purchased 20,251 Westwood common shares in the open market for approximately $878,000. Until shares are acquired by the trust, we measure the liability as a cash based award, which is included in the “Compensation and benefits payable” on our Condensed Consolidated Balance Sheets. When the number of shares related to an award is determinable, the award becomes an equity award accounted for similar to restricted stock, which is described in Note 9. | |
Recent Accounting Pronouncements | |
In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The ASU requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The ASU also requires presentation, either on the face of the statement where net income is presented or in the notes to the financial statements, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. However, such disclosure is only required if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required to be reclassified in their entirety to net income, an entity should cross-reference to other disclosures that provide additional detail about those amounts. For public entities, the ASU is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU 2013-02 did not have an impact on our financial statements. | |
In March 2013, the FASB issued ASU 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. The ASU clarifies the interaction between ASC 810-10, Consolidation – Overall, and ASC 830-30, Foreign Currency Matters – Translation of Financial Statement, when releasing the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. The ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. We do not currently expect the adoption of this ASU to have an impact on our financial statements. | |
In June 2013, the FASB issued ASU 2013-08, Financial Services - Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU changes the approach to the investment company assessment in Topic 946, clarifying the characteristics of an investment company and provides comprehensive guidance for assessing whether an entity is an investment company. This update would also require an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting and to include additional disclosures. The ASU is effective for reporting periods beginning after December 15, 2013. Although this update is relevant to our VIE analysis, we do not currently expect the adoption of this ASU to have a significant impact on our financial statements. | |
16 |
Earnings_Per_Share
Earnings Per Share | 9 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||||||||||
Earnings Per Share | 3. EARNINGS PER SHARE | ||||||||||||||||||||||||||||||||
Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding for the periods ended September 30, 2013 and 2012, respectively. Diluted earnings per share for these periods is computed based on the weighted average number of shares outstanding plus the effect of any dilutive shares of restricted stock and stock options granted to employees and non-employee directors. There were no anti-dilutive restricted shares or options as of September 30, 2013 or 2012. | |||||||||||||||||||||||||||||||||
The following table sets forth the computation of basic and diluted shares (in thousands, except per share and share amounts): | |||||||||||||||||||||||||||||||||
Three months | Nine months ended | ||||||||||||||||||||||||||||||||
ended September 30, | September 30, | ||||||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||||||||||||
Net income | $ | 4,319 | $ | 2,504 | $ | 12,031 | $ | 8,487 | |||||||||||||||||||||||||
Weighted average shares outstanding – basic | 7,374,600 | 7,166,020 | 7,347,376 | 7,138,878 | |||||||||||||||||||||||||||||
Dilutive potential shares from unvested restricted shares | 183,536 | 157,225 | 239,112 | 157,966 | |||||||||||||||||||||||||||||
Dilutive potential shares from stock options | — | — | — | 4,170 | |||||||||||||||||||||||||||||
Weighted average shares outstanding – diluted | 7,558,136 | 7,323,245 | 7,586,488 | 7,301,014 | |||||||||||||||||||||||||||||
Earnings per share: | |||||||||||||||||||||||||||||||||
Basic | $ | 0.59 | $ | 0.35 | $ | 1.64 | $ | 1.19 | |||||||||||||||||||||||||
Diluted | $ | 0.57 | $ | 0.34 | $ | 1.59 | $ | 1.16 | |||||||||||||||||||||||||
Investments
Investments | 9 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||||||||||
Investments | 4. INVESTMENTS | ||||||||||||||||||||||||||||||||
Investment balances are presented in the table below (in thousands). All investments are carried at fair value, and all investments are accounted for as trading securities. | |||||||||||||||||||||||||||||||||
Cost | Gross | Gross | Estimated | ||||||||||||||||||||||||||||||
Unrealized | Unrealized | Market | |||||||||||||||||||||||||||||||
Gains | Losses | Value | |||||||||||||||||||||||||||||||
September 30, 2013: | |||||||||||||||||||||||||||||||||
U.S. Government obligations | $ | 28,995 | $ | 16 | $ | — | $ | 29,011 | |||||||||||||||||||||||||
Money market funds | 13,180 | — | — | 13,180 | |||||||||||||||||||||||||||||
Equity funds | 400 | — | (46 | ) | 354 | ||||||||||||||||||||||||||||
Mutual funds | 1,679 | 160 | — | 1,839 | |||||||||||||||||||||||||||||
Fixed income funds | 10,850 | 34 | — | 10,884 | |||||||||||||||||||||||||||||
Marketable securities | $ | 55,104 | $ | 210 | $ | (46 | ) | $ | 55,268 | ||||||||||||||||||||||||
December 31, 2012: | |||||||||||||||||||||||||||||||||
U.S. Government obligations | $ | 42,588 | $ | 1 | $ | — | $ | 42,589 | |||||||||||||||||||||||||
Money market funds | 1,856 | — | — | 1,856 | |||||||||||||||||||||||||||||
Equity funds | 4,401 | 519 | — | 4,920 | |||||||||||||||||||||||||||||
Fixed income funds | 10,468 | 73 | — | 10,541 | |||||||||||||||||||||||||||||
Marketable securities | $ | 59,313 | $ | 593 | $ | — | $ | 59,906 | |||||||||||||||||||||||||
Fair_Value_Measurements
Fair Value Measurements | 9 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||||||||||
Fair Value Measurements | 5. FAIR VALUE MEASUREMENTS | ||||||||||||||||||||||||||||||||
We determine estimated fair values of our financial instruments using available information. The fair value amounts discussed in the condensed consolidated financial statements are not necessarily indicative of either the amounts realizable upon disposition of these instruments or our intent or ability to dispose of these assets. The estimated fair value of cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable, dividends payable, income taxes payable and accrued liabilities, approximates their carrying value due to their short-term maturities and are classified as level 1 fair value measurements. The carrying amount of investments designated as “trading” securities, primarily U.S. Government and Government agency obligations, money market funds, Westwood FundsTM mutual funds and Westwood Trust common trust fund shares, equals their fair value, which is equal to prices quoted in active markets and, with respect to funds, the net asset value of the shares held as reported by the fund. Market values of our money market holdings generally do not fluctuate. | |||||||||||||||||||||||||||||||||
Effective January 1, 2008, we adopted the provisions of FASB ASC No. 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value and requires additional disclosures regarding certain fair value measurements. ASC 820 establishes a three-tier hierarchy for measuring fair value as follows: | |||||||||||||||||||||||||||||||||
level 1 – quoted market prices in active markets for identical assets, | |||||||||||||||||||||||||||||||||
level 2 – inputs other than quoted prices that are directly or indirectly observable, and | |||||||||||||||||||||||||||||||||
level 3 – unobservable inputs where there is little or no market activity. | |||||||||||||||||||||||||||||||||
The following table summarizes the values of our assets within the fair value hierarchy (in thousands). | |||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||
As of September 30, 2013: | |||||||||||||||||||||||||||||||||
Investments in securities: | |||||||||||||||||||||||||||||||||
Trading | $ | 55,268 | $ | — | $ | — | $ | 55,268 | |||||||||||||||||||||||||
Total financial instruments | $ | 55,268 | $ | — | $ | — | $ | 55,268 | |||||||||||||||||||||||||
As of December 31, 2012: | |||||||||||||||||||||||||||||||||
Investments in securities: | |||||||||||||||||||||||||||||||||
Trading | $ | 55,389 | $ | 4,517 | $ | — | $ | 59,906 | |||||||||||||||||||||||||
Total financial instruments | $ | 55,389 | $ | 4,517 | $ | — | $ | 59,906 | |||||||||||||||||||||||||
Investments categorized as level 2 assets consist of investments in common trust funds sponsored by Westwood Trust. Common trust funds are private investment vehicles comprised of commingled investments held in trusts that are valued using the Net Asset Value (“NAV”) calculated by us as administrator of the funds. The NAV is quoted on an inactive private market; however, the unit price is based on the market value of the underlying investments that are traded on an active market. |
Intangible_Assets
Intangible Assets | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||
Intangible Assets | 6. INTANGIBLE ASSETS | ||||||||||||||||||||||||
The following is a summary of our intangible assets at September 30, 2013 and December 31, 2012 (in thousands): | |||||||||||||||||||||||||
Weighted | Gross | Accumu- | Net | ||||||||||||||||||||||
Average | Carrying | lated | Carrying | ||||||||||||||||||||||
Amortization | Amount | Amortiz- | Amount | ||||||||||||||||||||||
Period | ation | ||||||||||||||||||||||||
(years) | |||||||||||||||||||||||||
September 30, 2013: | |||||||||||||||||||||||||
Client relationships | 14.2 | $ | 5,005 | $ | (1,126 | ) | $ | 3,879 | |||||||||||||||||
Non-compete agreements | 2.3 | 26 | (26 | ) | — | ||||||||||||||||||||
Total | $ | 5,031 | $ | (1,152 | ) | $ | 3,879 | ||||||||||||||||||
December 31, 2012: | |||||||||||||||||||||||||
Client relationships | 14.2 | $ | 5,005 | $ | (857 | ) | $ | 4,148 | |||||||||||||||||
Non-compete agreements | 2.3 | 26 | (25 | ) | 1 | ||||||||||||||||||||
Total | $ | 5,031 | $ | (882 | ) | $ | 4,149 | ||||||||||||||||||
Amortization expense was $270,000 and $366,000 for the nine months ended September 30, 2013 and 2012, respectively. | |||||||||||||||||||||||||
Estimated amortization expense for intangible assets for the next five years follows (in thousands): | |||||||||||||||||||||||||
For the Year ending December 31, | Estimated | ||||||||||||||||||||||||
Amortization | |||||||||||||||||||||||||
Expense | |||||||||||||||||||||||||
2013 | $ | 359 | |||||||||||||||||||||||
2014 | 359 | ||||||||||||||||||||||||
2015 | 359 | ||||||||||||||||||||||||
2016 | 359 | ||||||||||||||||||||||||
2017 | 359 | ||||||||||||||||||||||||
Balance_Sheet_Components
Balance Sheet Components | 9 Months Ended | |||||||||
Sep. 30, 2013 | ||||||||||
Balance Sheet Components | 7. BALANCE SHEET COMPONENTS | |||||||||
Accumulated Other Comprehensive Income (Loss) | ||||||||||
The components of accumulated other comprehensive income (loss) were as follows (in thousands): | ||||||||||
As of | As of | |||||||||
September 30, | December 31, | |||||||||
2013 | 2012 | |||||||||
Foreign currency translation adjustment | $ | (101 | ) | $ | 30 | |||||
Accumulated other comprehensive income (loss) | $ | (101 | ) | $ | 30 | |||||
Accrued Dividends | ||||||||||
Accrued dividends of $1,053,000 at September 30, 2013 are dividends accrued on unvested restricted shares that are expected to vest after one year. When those unvested restricted shares vest, the dividends accrued on those shares will be paid. |
Variable_Interest_Entities
Variable Interest Entities | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||
Variable Interest Entities | 8. VARIABLE INTEREST ENTITIES | ||||||||||||||||||||||||
Westwood Trust sponsors common trust funds (“CTFs”) for its clients. These funds allow clients to commingle assets to achieve economies of scale. Westwood Management provides investment advisory services to the Westwood Funds™, a family of mutual funds, and to two collective investment trusts (“CITs”). Some clients of Westwood Management hold their investments in ten limited liability companies (“LLCs”) that were formed and sponsored by McCarthy Group Advisors, L.L.C. The CTFs, Westwood Funds™, CITs and LLCs are considered VIEs because our clients, who hold the equity at risk, do not have direct or indirect ability through voting or similar rights to make decisions about the funds that have a significant effect on their success. We receive fees for managing assets in these entities commensurate with market rates. | |||||||||||||||||||||||||
We evaluate all of our advisory relationships and CTFs to determine whether or not we qualify as the primary beneficiary based on whether there is an obligation to absorb the majority of expected losses or a right to receive the majority of expected residual returns. Since all losses and returns are distributed to the shareholders of the Company’s VIEs, we are not the primary beneficiary and consequently the Company’s VIEs are not included in our condensed consolidated financial statements. | |||||||||||||||||||||||||
In June 2013, the Company provided €300,000 (or approximately $405,750) to the UCITS Fund for the sole purpose of meeting the minimum capital requirements (and showing economic substance) needed to complete the application process to establish the fund. In August 2013, the UCITS Fund refunded this amount in full. Otherwise, we have not provided any financial support that we were not previously contractually obligated to provide and there are no arrangements that would require us to provide additional financial support to any of the Company’s VIEs. Our investments in the Westwood Funds™ and the CTFs are accounted for as investments in accordance with our other investments described in Note 4. | |||||||||||||||||||||||||
The following table displays assets under management, corporate money invested and risk of loss in each vehicle (in millions). | |||||||||||||||||||||||||
As of September 30, 2013 | |||||||||||||||||||||||||
Assets | Corporate | Risk | |||||||||||||||||||||||
Under | Investment | of | |||||||||||||||||||||||
Management | Loss | ||||||||||||||||||||||||
Westwood Funds™ | $ | 2,372 | $ | 13.1 | $ | 13.1 | |||||||||||||||||||
Common Trust Funds | 2,516 | — | — | ||||||||||||||||||||||
Collective Investment Trusts | 449 | — | — | ||||||||||||||||||||||
LLCs | 148 | — | — | ||||||||||||||||||||||
UCITS Fund | 381 | — | — | ||||||||||||||||||||||
As of December 31, 2012 | |||||||||||||||||||||||||
Assets | Corporate | Risk | |||||||||||||||||||||||
Under | Investment | of | |||||||||||||||||||||||
Management | Loss | ||||||||||||||||||||||||
Westwood Funds™ | $ | 1,603 | $ | 10.9 | $ | 10.9 | |||||||||||||||||||
Common Trust Funds | 2,091 | 4.5 | 4.5 | ||||||||||||||||||||||
Collective Investment Trusts | 366 | — | — | ||||||||||||||||||||||
LLCs | 255 | — | — | ||||||||||||||||||||||
Employee_Benefits
Employee Benefits | 9 Months Ended | ||||||||||||||
Sep. 30, 2013 | |||||||||||||||
Employee Benefits | 9. EMPLOYEE BENEFITS | ||||||||||||||
Stock Based Compensation | |||||||||||||||
The Plan reserves shares of Westwood common stock for issuance to eligible employees, directors and consultants of Westwood or its subsidiaries in the form of restricted stock and stock options. As of September 30, 2013, the total number of shares that may be issued under the Plan (including predecessor plans) may not exceed 3,898,100 shares and approximately 705,000 shares remained available for issuance under the Plan. | |||||||||||||||
The Share Award Plan of Westwood Holdings Group, Inc. for Service provided in Canada to its Subsidiaries (the “Canada EB Plan”) provides compensation in the form of common stock for services performed by persons to Westwood International. As described in Note 2, the trust formed pursuant to the Canada EB Plan holds 20,251 shares of Westwood common stock. | |||||||||||||||
The following table presents the total expense recorded for stock based compensation (in thousands): | |||||||||||||||
Nine months | |||||||||||||||
ended | |||||||||||||||
September 30, | |||||||||||||||
2013 | 2012 | ||||||||||||||
Service condition restricted stock expense | $ | 5,859 | $ | 5,656 | |||||||||||
Performance-based restricted stock expense | 2,720 | 1,979 | |||||||||||||
Total stock based compensation expense | $ | 8,579 | $ | 7,635 | |||||||||||
Restricted Stock | |||||||||||||||
Under the Plan, we have granted to employees and non-employee directors restricted stock that is subject to a service condition, and to certain key employees restricted stock that is subject to both a service condition and a performance condition. As of September 30, 2013, approximately $25.0 million of remaining unrecognized compensation cost is expected to be recognized over a remaining weighted-average period of 2.75 years. Our two types of restricted stock grants are discussed below. | |||||||||||||||
Employee and non-employee director restricted share grants | |||||||||||||||
Restricted shares granted to employees vest over four years and non-employee directors’ shares vest over one year. | |||||||||||||||
The following table details the status and changes in our restricted stock grants that are subject only to a service condition for the nine months ended September 30, 2013: | |||||||||||||||
Restricted shares subject only to a service condition: | Shares | Weighted Average | |||||||||||||
Grant Date Fair | |||||||||||||||
Value | |||||||||||||||
Non-vested, January 1, 2013 | 560,025 | $ | 37.52 | ||||||||||||
Granted | 205,624 | 43.68 | |||||||||||||
Vested | (210,980 | ) | 35.87 | ||||||||||||
Forfeited | (32,497 | ) | 39.60 | ||||||||||||
Non-vested, September 30, 2013 | 522,172 | 40.49 | |||||||||||||
Performance-based restricted share grants | |||||||||||||||
Under the Plan, we granted to certain key employees restricted shares that vest over five years, provided that annual performance goals established by Westwood’s Compensation Committee are met. In February 2013, the Compensation Committee established the 2013 goal as adjusted pre-tax income of at least $27.0 million, representing a five-year compound annual growth rate in excess of 10% over annual adjusted pre-tax income recorded in 2008 (excluding a 2008 non-recurring performance fee of $8.7 million). Our adjusted pre-tax income is determined based on our audited financial statements and is equal to income before income taxes increased by expenses incurred for the year for (i) incentive compensation for all officers and employees and (ii) performance-based restricted stock awards, and excluding start up, non-recurring, and similar expense items. In the first quarter of 2013, we concluded that it was probable that we would meet the performance goals required to vest the applicable percentage of the performance-based restricted shares this year and began recording expense related to those shares. | |||||||||||||||
The following table details the status and changes in our restricted stock grants that are subject to service and performance conditions for the nine months ended September 30, 2013: | |||||||||||||||
Restricted shares subject to service and performance conditions: | Shares | Weighted Average | |||||||||||||
Grant Date Fair | |||||||||||||||
Value | |||||||||||||||
Non-vested, January 1, 2013 | 230,000 | $ | 39.49 | ||||||||||||
Granted | 90,000 | 43.85 | |||||||||||||
Vested | — | — | |||||||||||||
Forfeited | — | — | |||||||||||||
Non-vested, September 30, 2013 | 320,000 | 40.72 | |||||||||||||
Deferred Share Units | |||||||||||||||
We established a deferred share unit (“DSU”) plan for employees and directors of Westwood International. A DSU is an award linked to the value of Westwood’s common stock, and represented by a notional credit to a participant account. The value of a DSU is initially equal to the value of a share of our common stock. DSUs vest 20%, 40%, 60%, and 80% after two, three, four and five years of service, respectively. DSUs become fully vested after six years of service by the participant and the liability for these units is settled in cash upon termination of the participant’s service. We record expense for DSUs based on the number of units vested on a straight line basis, which may increase or decrease based on changes in the price of our common shares, and will increase for additional units received from dividends declared on our shares. In the nine months ended September 30, 2013, we issued and have outstanding 2,710 deferred share units at a weighted average grant date fair value of $40.83 per unit. | |||||||||||||||
Mutual Fund Share Incentive Awards | |||||||||||||||
We annually grant mutual fund incentive awards to certain employees which are annual performance bonus awards based on our mutual funds achieving certain performance goals. Awards granted are notionally credited to a participant account maintained by the Company representing a number of mutual fund shares equal to the award amount divided by the net closing value of a fund share on the date the amount is credited to the account. | |||||||||||||||
These awards vest after approximately one year of service following the year the award is earned by the participant. We begin accruing a liability for mutual fund incentive awards when we determine it is probable that the award will be earned and record expense for these awards over the service period of the award, which is approximately two years. During the year in which the amount of the award is determined, we record expense based on the expected value of the award. After the award is earned, we record expense based on the value of the shares awarded and the percentage of the vesting period that has transpired. Our liability under these awards may increase or decrease based on changes in the value of the mutual fund shares awarded, including reinvested income from the mutual funds during the vesting period. Upon vesting, participants receive the value of the mutual fund share awards adjusted for earnings or losses attributable to the underlying mutual funds. For the nine months ended September 30, 2013, we recorded expense of $1.8 million related to mutual fund share incentive awards. As of September 30, 2013, we had an accrued liability of $1.9 million related to mutual fund incentive awards. |
Related_Party_Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2013 | |
Related Party Transactions | 10. RELATED PARTY TRANSACTIONS |
The Company engages in transactions with its affiliates in the ordinary course of business. Westwood International provides investment advisory services to the UCITS Fund. Certain members of the Company’s management and board of directors serve on the board of directors of the UCITS Fund, which began operations in August 2013. Under the terms of the investment advisory agreements, the Company earns quarterly fees that are paid by clients of the UCITS Fund. The fees are based on negotiated fee schedules applied to AUM. These fees are commensurate with market rates and are negotiated and contracted at arm’s length. As of September 30, 2013, the Company did not receive any fees from the UCITS Fund. |
Commitments_and_Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2013 | |
Commitments and Contingencies | 11. COMMITMENTS AND CONTINGENCIES |
On August 3, 2012, AGF Management Limited and AGF Investments Inc. (“AGF”) filed a lawsuit in the Ontario Superior Court of Justice against Westwood, certain Westwood employees and executive recruiting firm Warren International, LLC. The action relates to the hiring of certain members of Westwood’s global and emerging markets investment team who were previously employed by AGF. AGF is alleging that the former employees breached certain obligations when they resigned from AGF, and that Westwood and Warren induced such breaches. AGF is seeking an unspecified amount of damages and punitive damages of $10 million (CAD) in the lawsuit. On November 5, 2012, Westwood issued a response to AGF’s lawsuit with a counterclaim against AGF for defamation. Westwood is seeking $1 million (CAD) in general damages, $10 million (CAD) in special damages, $1 million (CAD) in punitive damages and costs. On November 6, 2012, AGF filed a second lawsuit against Westwood, Westwood Management and an employee of a Westwood subsidiary, alleging that the employee made defamatory statements about AGF. In this second lawsuit, AGF is seeking $5 million (CAD) in general damages, $1 million (CAD) per defendant in punitive damages, unspecified special damages, interest and costs. The pleadings phase for both claims and the counterclaim was closed in late January and we are currently in the discovery phase. During this phase, the parties will exchange documents and depositions will be taken. It is currently anticipated that discovery will be completed in the first quarter of 2014. No assurances can be given that delays will not occur. | |
While we intend to vigorously defend both actions and pursue the counterclaims, we are currently unable to estimate the ultimate aggregate amount of monetary gain, loss or financial impact of these actions and counterclaims. Defending these actions and pursuing these counterclaims may be expensive for us and time consuming for our personnel. While we do not currently believe these proceedings will have a material impact, adverse resolution of these actions and counterclaims could have a material adverse effect on our business, financial condition or results of operations. | |
Our policy is to not accrue estimated legal fees and directly related costs as part of potential loss contingencies. We have agreed with our directors & officers insurance provider that 50% of the defense costs related to both AGF claims, but not including Westwood’s counterclaim against AGF, will be covered by insurance. We expense legal fees and directly-related costs as they are incurred. We have recorded a receivable of $356,000 as of September 30, 2013 which is our current estimate of the expenses incurred related to this lawsuit that we expect to recover under our insurance policies. This receivable is part of “Other current assets” on our condensed consolidated balance sheet. |
Segment_Reporting
Segment Reporting | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||||||||
Segment Reporting | 12. SEGMENT REPORTING | |||||||||||||||||||||||||
We operate two segments: Advisory and Trust. These segments are managed separately based on the types of products and services offered and their related client bases. We evaluate the performance of our segments based primarily on income before income taxes. Westwood Holdings Group, Inc. (“Westwood Holdings”), the parent company of our Advisory and Trust segments, does not have revenues or employees and is the entity in which we record stock-based compensation expense. | ||||||||||||||||||||||||||
Advisory | ||||||||||||||||||||||||||
Our Advisory segment provides investment advisory services to corporate retirement plans, public retirement plans, endowments, foundations, individuals and the Westwood Funds™, as well as investment subadvisory services to mutual funds and our Trust segment. Westwood Management and Westwood International, which provide investment advisory services to clients of similar type, are included in our Advisory segment. | ||||||||||||||||||||||||||
Trust | ||||||||||||||||||||||||||
Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals. Westwood Trust is included in our Trust segment. | ||||||||||||||||||||||||||
There are no separate segment accounting policies. Intersegment balances that eliminate in consolidation have been applied to the appropriate segment. | ||||||||||||||||||||||||||
Advisory | Trust | Westwood | Eliminations | Consolidated | ||||||||||||||||||||||
Holdings | ||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Three months ended September 30, 2013 | ||||||||||||||||||||||||||
Net revenues from external sources | $ | 18,325 | $ | 4,673 | $ | — | $ | — | $ | 22,998 | ||||||||||||||||
Net intersegment revenues | 2,937 | — | — | (2,937 | ) | — | ||||||||||||||||||||
Income before income taxes | 8,701 | 771 | (2,706 | ) | — | 6,766 | ||||||||||||||||||||
Segment assets | 103,526 | 13,849 | (12,449 | ) | — | 104,926 | ||||||||||||||||||||
Segment goodwill | 5,219 | 6,036 | — | — | 11,255 | |||||||||||||||||||||
Three months ended September 30, 2012 | ||||||||||||||||||||||||||
Net revenues from external sources | $ | 15,226 | $ | 3,715 | $ | — | $ | — | $ | 18,941 | ||||||||||||||||
Net intersegment revenues | 1,564 | 3 | — | (1,567 | ) | — | ||||||||||||||||||||
Income before income taxes | 6,666 | 551 | (2,886 | ) | — | 4,331 | ||||||||||||||||||||
Segment assets | 83,744 | 13,932 | (5,733 | ) | — | 91,943 | ||||||||||||||||||||
Segment goodwill | 5,219 | 6,036 | — | — | 11,255 | |||||||||||||||||||||
Nine months ended September 30, 2013 | ||||||||||||||||||||||||||
Net revenues from external sources | $ | 53,108 | $ | 13,465 | $ | — | $ | — | $ | 66,573 | ||||||||||||||||
Net intersegment revenues | 7,194 | 9 | — | (7,203 | ) | — | ||||||||||||||||||||
Income before income taxes | 25,203 | 2,072 | (8,057 | ) | — | 19,218 | ||||||||||||||||||||
Nine months ended September 30, 2012 | ||||||||||||||||||||||||||
Net revenues from external sources | $ | 45,927 | $ | 10,944 | $ | — | $ | — | $ | 56,871 | ||||||||||||||||
Net intersegment revenues | 4,020 | 12 | — | (4,032 | ) | — | ||||||||||||||||||||
Income before income taxes | 20,091 | 1,712 | (7,636 | ) | — | 14,167 | ||||||||||||||||||||
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2013 | |
Basis of Presentation | Basis of Presentation |
The accompanying condensed consolidated financial statements have been prepared without an audit and reflect all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary to present fairly our interim financial position and results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements are presented using the accrual basis of accounting and have been prepared in accordance with the instructions for the presentation of interim financial information as prescribed by the Securities and Exchange Commission (“SEC”). | |
The accompanying condensed consolidated financial statements should be read in conjunction with our consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2012. Operating results for the periods in these condensed consolidated financial statements are not necessarily indicative of the results for any future period. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of Westwood and its subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. | |
Use of Estimates | Use of Estimates |
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |
Revenue Recognition | Revenue Recognition |
Investment advisory and trust fees are recognized as services are provided and are largely dependent on the total value and composition of assets under management (“AUM”). Accordingly, fluctuations in financial markets and in the composition of AUM impact revenues and results of operations. These fees are determined in accordance with contracts between our subsidiaries and their clients and are generally based on a percentage of AUM. A limited number of our clients have contractual performance-based fee arrangements, which pay us an additional fee when we outperform a specified index over a specific period of time. We record revenue for performance-based fees at the end of the measurement periods. Most advisory and trust fees are payable in advance or in arrears on a calendar quarterly basis. Advance payments are deferred and recognized over the periods services are performed. Since billing periods for most of our advance paying clients coincide with the calendar quarter to which payment relates, revenue is fully recognized within the quarter. Consequently there is not a significant amount of deferred revenue contained in our financial statements. Deferred revenue is included on the balance sheet under the heading of “Accounts payable and accrued liabilities”. | |
Other revenues generally consist of interest and investment income and losses. These revenues are recognized as earned or as the services are performed. | |
Consolidation | Consolidation |
We assess each legal entity that we manage to determine whether consolidation is appropriate at the onset of the relationship. We first determine whether the entity is a voting interest entity (“VOE”), or a variable interest entity (“VIE”), under GAAP and then whether we have a controlling financial interest in the entity. Assessing whether an entity is a VOE or VIE and if it requires consolidation involves judgment and analysis. Factors considered in this assessment include, but are not limited to, the legal organization of the entity, our equity ownership and contractual involvement with the entity and any related party or de facto agent implications of our involvement with the entity. We reconsider whether entities are a VOE or VIE whenever contractual arrangements change, the entity receives additional equity or returns equity to its investors or changes in facts and circumstances occur that change the investors’ ability to direct the activities of the entity. | |
A VIE is an entity in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities without subordinated financial support or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. That is, the at-risk equity holders do not have the obligation to absorb losses, the right to receive residual returns and/or the right to direct the activities of the entity that most significantly impact the entity’s economic performance. An enterprise must consolidate all VIEs of which it is the primary beneficiary. We determine if a sponsored investment meets the definition of a VIE by considering whether the fund’s equity investment at risk is sufficient to finance its activities without additional subordinated financial support and whether the fund’s at-risk equity holders absorb any losses, have the right to receive residual returns and have the right to direct the activities of the entity most responsible for the entity’s economic performance. For VIEs that are investment companies, the primary beneficiary of the VIE is the party that absorbs a majority of the expected losses of the VIE, receives a majority of the expected residual returns of the VIE, or both. For VIEs that are not investment companies, the primary beneficiary of a VIE is defined as the party who, considering the involvement of related parties and de facto agents, has (i) the power to direct the activities of the VIE that most significantly affect its economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. This evaluation is updated continuously. | |
A VOE is an entity that is not within the scope of the guidance for VIEs. Consolidation of a VOE is required when a reporting entity owns a controlling financial interest in a VOE. Ownership of a majority of the voting interests is the usual condition for a controlling financial interest. At September 30, 2013, none of our sponsored investment entities were VOEs subject to this assessment by the Company. | |
The Westwood Investment Funds PLC (the “UCITS Fund”), which was authorized by the Central Bank of Ireland on June 18, 2013 pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011, is an Ireland domiciled umbrella-type open-ended self-managed investment company. The UCITS Fund is established as an umbrella fund with segregated assets and liabilities between sub-funds. Notwithstanding the segregation of assets and liabilities within each sub-fund, the UCITS Fund is a single legal entity and no sub-fund constitutes a legal entity separate from the UCITS Fund itself. The Company’s first UCITS sub-fund is focused on Westwood’s Emerging Markets strategy. Shares of the sub-fund are listed on the Irish Stock Exchange, all of which are owned by the third-party investors. The base currency of the UCITS Fund is Great Britain pound sterling. We determined that the UCITS Fund was a VIE as its at-risk equity holders do not have the ability to direct the activities of the UCITS Fund that most significantly impact the entity’s economic performance. Although the Company does not have an equity investment in the UCITS Fund, through its representatives having a majority control of the UCITS Fund’s Board of Directors its representatives can influence the UCITS Fund’s management and affairs. The UCITS’s Fund Board of Directors maintains this control through its duties which are stated in the UCITS Funds’ Memorandum and Articles of Association which has no expiration date. We concluded that the Company was not the primary beneficiary of the UCITS Fund because even though it has the power to direct the activities of the UCITS Fund (that most significantly impact the fund’s economic performance), it does not absorb a majority of the UCITS Fund’s expected losses and does not receive a majority of the UCITS Fund’s expected residual returns. As a result, the results of the UCITS Fund are not included in the Company’s consolidated financial results. | |
We have also evaluated all of our other advisory relationships and our relationship as sponsor of the common trust funds to determine whether or not we qualify as the primary beneficiary based on whether there is an obligation to absorb the majority of expected losses or a right to receive the majority of residual returns. Since all losses and returns are distributed to the shareholders of the Westwood VIEs, we are not the primary beneficiary and consequently the Westwood VIEs are not included in our condensed consolidated financial statements. We have included the disclosures related to VIEs in Note 8. | |
Cash and Cash Equivalents | Cash and Cash Equivalents |
Cash and cash equivalents consist of short-term, highly liquid investments with maturities of three months or less, other than pooled investment vehicles that are considered investments. | |
Accounts Receivable | Accounts Receivable |
Our accounts receivable balances generally consist of advisory and trust fees receivable from customers that we believe and have experienced to be fully collectable. Our trade accounts receivable balances do not include any allowance for doubtful accounts nor has any bad debt expense attributable to trade receivables been recorded for the periods presented in these condensed consolidated financial statements. | |
Investments | Investments |
All marketable securities are classified as trading securities and are carried at quoted market value on the accompanying consolidated balance sheet. Net unrealized holding gains or losses on investments classified as trading securities are reflected as a component of other revenues. We measure realized gains and losses on investments using the specific identification method. Investments include shares of Westwood mutual funds awarded to employees pursuant to mutual fund share incentive awards described in Note 9. | |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets |
Goodwill represents the excess of the cost of acquired assets over the fair value of the underlying identifiable assets at the date of acquisition. Goodwill is not amortized but is tested at least annually for impairment. We test more frequently if indicators are present or changes in circumstances suggest that impairment may exist. These indicators include, among others, declines in sales, earnings or cash flows, or the development of a material adverse change in the business climate. We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. We have identified two reporting units, which are consistent with our reporting segments: Advisory and Trust. The Company is not required to calculate the fair value of a reporting unit unless the Company determines that it is more likely than not that its fair value is less than the carrying amount. The Company assesses goodwill for impairment using a qualitative assessment which includes consideration of the current trends in the industry in which the Company operates, macroeconomic conditions, recent financial performance of the Company’s reporting units and a market multiple approach valuation. | |
In performing the annual impairment test, which is performed during the third quarter or more frequently when impairment indicators exist and after assessing the qualitative factors, we may be required to utilize the two-step approach prescribed. The first step requires a comparison of each reporting unit’s carrying value to the fair value of the respective unit. If the carrying value exceeds the fair value, a second step is performed to measure the amount of impairment loss, if any. The fair value of each reporting unit is estimated, entirely or predominantly, using a market multiple approach. During the third quarter of 2013, we completed our annual goodwill impairment assessment and determined that no impairment loss was required. No impairments were recorded during any of the periods presented. | |
Our intangible assets represent the acquisition date fair value of acquired client relationships, trade names and non-compete agreements and are reflected net of amortization. In valuing these assets, we made significant estimates regarding their useful lives, growth rates and potential attrition. We periodically review intangible assets for events or circumstances that would indicate impairment. For a further discussion of our intangible assets see Note 6. | |
Income Taxes | Income Taxes |
We file a United States (U.S.) federal income tax return as a consolidated group for Westwood and its subsidiaries based in the U.S. We separately file a Canadian income tax return for Westwood International. Deferred income tax assets and liabilities are determined based on temporary differences between the financial statement and income tax bases of assets and liabilities as measured at enacted income tax rates. Deferred income tax expense is generally the result of changes in deferred tax assets and liabilities. Deferred taxes relate primarily to stock-based compensation expense and net operating losses at Westwood International. | |
We would record a valuation allowance, when necessary, to reduce deferred tax assets to an amount that more likely than not would be realized. No valuation allowance has been recorded in our financial statements. | |
Currency Translation | Currency Translation |
Assets and liabilities of Westwood International, our non-U.S. dollar functional currency subsidiary, are translated at exchange rates as of the applicable reporting dates. Revenues and expenses are translated at average exchange rates during the periods indicated. The gains and losses resulting from translating non-U.S. dollar functional currency into U.S. dollars are recorded through other comprehensive income. | |
Long-term Compensation Agreements | Long-term Compensation Agreements |
We entered into employment agreements with certain employees of Westwood International that provide for specified payments over four years. In certain circumstances, these payments would be forfeited to us if the employment of these individuals is terminated before completion of the contractual earning period. Payments made in advance under these agreements are included in “Other current assets” on our Condensed Consolidated Balance Sheet, net of amounts already amortized. | |
Stock Based Compensation | Stock Based Compensation |
We account for stock-based compensation in accordance with Financial Accounting Standards Board Accounting Standards Codification No. 718, Compensation-Stock Compensation (“ASC 718”). Under ASC 718, stock-based compensation expense reflects the fair value of stock-based awards measured at grant date, is recognized over the relevant service period, and is adjusted each period for anticipated forfeitures. The compensation cost recorded for these awards is based on their grant-date fair value as required by ASC 718. | |
We have issued restricted stock and granted stock options in accordance with our Third Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan, as amended (the “Plan”). We apply judgment in developing an expectation of awards of restricted stock and stock options that may be forfeited. If actual experience differs significantly from these estimates, our stock-based compensation expense and results of operations could be materially affected. | |
We have compensation arrangements with certain employees of Westwood International pursuant to which these employees are able to earn cash awards based on the performance of certain investment products. A portion of such awards may be paid in shares of our stock that vest over a multi-year period. We accrue a liability for these awards over both the annual period in which we determine it is probable that the award will be earned and, for the portion to be settled in shares, over the following three-year vesting period. For the nine months ended September 30, 2013 and 2012, the expense recorded for these awards was $337,000 and $79,000, respectively. Cash awards expected to be settled in shares are funded into a trust pursuant to an established Canadian employee benefit plan. Generally, the Canadian trust subsequently acquires Westwood common shares in market transactions and holds such shares until the shares are vested and distributed, or forfeited. Shares held in the trust are shown on our balance sheet as treasury shares. During the second quarter of 2013, the trust purchased 20,251 Westwood common shares in the open market for approximately $878,000. Until shares are acquired by the trust, we measure the liability as a cash based award, which is included in the “Compensation and benefits payable” on our Condensed Consolidated Balance Sheets. When the number of shares related to an award is determinable, the award becomes an equity award accounted for similar to restricted stock, which is described in Note 9. | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements |
In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The ASU requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The ASU also requires presentation, either on the face of the statement where net income is presented or in the notes to the financial statements, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. However, such disclosure is only required if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required to be reclassified in their entirety to net income, an entity should cross-reference to other disclosures that provide additional detail about those amounts. For public entities, the ASU is effective prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU 2013-02 did not have an impact on our financial statements. | |
In March 2013, the FASB issued ASU 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. The ASU clarifies the interaction between ASC 810-10, Consolidation – Overall, and ASC 830-30, Foreign Currency Matters – Translation of Financial Statement, when releasing the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. The ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. We do not currently expect the adoption of this ASU to have an impact on our financial statements. | |
In June 2013, the FASB issued ASU 2013-08, Financial Services - Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The ASU changes the approach to the investment company assessment in Topic 946, clarifying the characteristics of an investment company and provides comprehensive guidance for assessing whether an entity is an investment company. This update would also require an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting and to include additional disclosures. The ASU is effective for reporting periods beginning after December 15, 2013. Although this update is relevant to our VIE analysis, we do not currently expect the adoption of this ASU to have a significant impact on our financial statements. |
Earnings_Per_Share_Tables
Earnings Per Share (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Shares | The following table sets forth the computation of basic and diluted shares (in thousands, except per share and share amounts): | ||||||||||||||||||||||||||||||||
Three months | Nine months ended | ||||||||||||||||||||||||||||||||
ended September 30, | September 30, | ||||||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||||||||||||
Net income | $ | 4,319 | $ | 2,504 | $ | 12,031 | $ | 8,487 | |||||||||||||||||||||||||
Weighted average shares outstanding – basic | 7,374,600 | 7,166,020 | 7,347,376 | 7,138,878 | |||||||||||||||||||||||||||||
Dilutive potential shares from unvested restricted shares | 183,536 | 157,225 | 239,112 | 157,966 | |||||||||||||||||||||||||||||
Dilutive potential shares from stock options | — | — | — | 4,170 | |||||||||||||||||||||||||||||
Weighted average shares outstanding – diluted | 7,558,136 | 7,323,245 | 7,586,488 | 7,301,014 | |||||||||||||||||||||||||||||
Earnings per share: | |||||||||||||||||||||||||||||||||
Basic | $ | 0.59 | $ | 0.35 | $ | 1.64 | $ | 1.19 | |||||||||||||||||||||||||
Diluted | $ | 0.57 | $ | 0.34 | $ | 1.59 | $ | 1.16 | |||||||||||||||||||||||||
Investments_Tables
Investments (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||||||||||
Investment Balances | Investment balances are presented in the table below (in thousands). All investments are carried at fair value, and all investments are accounted for as trading securities. | ||||||||||||||||||||||||||||||||
Cost | Gross | Gross | Estimated | ||||||||||||||||||||||||||||||
Unrealized | Unrealized | Market | |||||||||||||||||||||||||||||||
Gains | Losses | Value | |||||||||||||||||||||||||||||||
September 30, 2013: | |||||||||||||||||||||||||||||||||
U.S. Government obligations | $ | 28,995 | $ | 16 | $ | — | $ | 29,011 | |||||||||||||||||||||||||
Money market funds | 13,180 | — | — | 13,180 | |||||||||||||||||||||||||||||
Equity funds | 400 | — | (46 | ) | 354 | ||||||||||||||||||||||||||||
Mutual funds | 1,679 | 160 | — | 1,839 | |||||||||||||||||||||||||||||
Fixed income funds | 10,850 | 34 | — | 10,884 | |||||||||||||||||||||||||||||
Marketable securities | $ | 55,104 | $ | 210 | $ | (46 | ) | $ | 55,268 | ||||||||||||||||||||||||
December 31, 2012: | |||||||||||||||||||||||||||||||||
U.S. Government obligations | $ | 42,588 | $ | 1 | $ | — | $ | 42,589 | |||||||||||||||||||||||||
Money market funds | 1,856 | — | — | 1,856 | |||||||||||||||||||||||||||||
Equity funds | 4,401 | 519 | — | 4,920 | |||||||||||||||||||||||||||||
Fixed income funds | 10,468 | 73 | — | 10,541 | |||||||||||||||||||||||||||||
Marketable securities | $ | 59,313 | $ | 593 | $ | — | $ | 59,906 | |||||||||||||||||||||||||
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||||||||||
Values of Assets Within Fair Value Hierarchy | The following table summarizes the values of our assets within the fair value hierarchy (in thousands). | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||
As of September 30, 2013: | |||||||||||||||||||||||||||||||||
Investments in securities: | |||||||||||||||||||||||||||||||||
Trading | $ | 55,268 | $ | — | $ | — | $ | 55,268 | |||||||||||||||||||||||||
Total financial instruments | $ | 55,268 | $ | — | $ | — | $ | 55,268 | |||||||||||||||||||||||||
As of December 31, 2012: | |||||||||||||||||||||||||||||||||
Investments in securities: | |||||||||||||||||||||||||||||||||
Trading | $ | 55,389 | $ | 4,517 | $ | — | $ | 59,906 | |||||||||||||||||||||||||
Total financial instruments | $ | 55,389 | $ | 4,517 | $ | — | $ | 59,906 | |||||||||||||||||||||||||
Intangible_Assets_Tables
Intangible Assets (Tables) | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||
Summary of Intangible Assets | The following is a summary of our intangible assets at September 30, 2013 and December 31, 2012 (in thousands): | ||||||||||||||||||||||||
Weighted | Gross | Accumu- | Net | ||||||||||||||||||||||
Average | Carrying | lated | Carrying | ||||||||||||||||||||||
Amortization | Amount | Amortiz- | Amount | ||||||||||||||||||||||
Period | ation | ||||||||||||||||||||||||
(years) | |||||||||||||||||||||||||
September 30, 2013: | |||||||||||||||||||||||||
Client relationships | 14.2 | $ | 5,005 | $ | (1,126 | ) | $ | 3,879 | |||||||||||||||||
Non-compete agreements | 2.3 | 26 | (26 | ) | — | ||||||||||||||||||||
Total | $ | 5,031 | $ | (1,152 | ) | $ | 3,879 | ||||||||||||||||||
December 31, 2012: | |||||||||||||||||||||||||
Client relationships | 14.2 | $ | 5,005 | $ | (857 | ) | $ | 4,148 | |||||||||||||||||
Non-compete agreements | 2.3 | 26 | (25 | ) | 1 | ||||||||||||||||||||
Total | $ | 5,031 | $ | (882 | ) | $ | 4,149 | ||||||||||||||||||
Estimated Amortization Expense for Intangible Assets for the Next Five Years | Estimated amortization expense for intangible assets for the next five years follows (in thousands): | ||||||||||||||||||||||||
For the Year ending December 31, | Estimated | ||||||||||||||||||||||||
Amortization | |||||||||||||||||||||||||
Expense | |||||||||||||||||||||||||
2013 | $ | 359 | |||||||||||||||||||||||
2014 | 359 | ||||||||||||||||||||||||
2015 | 359 | ||||||||||||||||||||||||
2016 | 359 | ||||||||||||||||||||||||
2017 | 359 | ||||||||||||||||||||||||
Balance_Sheet_Components_Table
Balance Sheet Components (Tables) | 9 Months Ended | |||||||||
Sep. 30, 2013 | ||||||||||
Components of Accumulated Other Comprehensive Income (Loss) | The components of accumulated other comprehensive income (loss) were as follows (in thousands): | |||||||||
As of | As of | |||||||||
September 30, | December 31, | |||||||||
2013 | 2012 | |||||||||
Foreign currency translation adjustment | $ | (101 | ) | $ | 30 | |||||
Accumulated other comprehensive income (loss) | $ | (101 | ) | $ | 30 | |||||
Variable_Interest_Entities_Tab
Variable Interest Entities (Tables) | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||
Variable Interest Entities | The following table displays assets under management, corporate money invested and risk of loss in each vehicle (in millions). | ||||||||||||||||||||||||
As of September 30, 2013 | |||||||||||||||||||||||||
Assets | Corporate | Risk | |||||||||||||||||||||||
Under | Investment | of | |||||||||||||||||||||||
Management | Loss | ||||||||||||||||||||||||
Westwood Funds™ | $ | 2,372 | $ | 13.1 | $ | 13.1 | |||||||||||||||||||
Common Trust Funds | 2,516 | — | — | ||||||||||||||||||||||
Collective Investment Trusts | 449 | — | — | ||||||||||||||||||||||
LLCs | 148 | — | — | ||||||||||||||||||||||
UCITS Fund | 381 | — | — | ||||||||||||||||||||||
As of December 31, 2012 | |||||||||||||||||||||||||
Assets | Corporate | Risk | |||||||||||||||||||||||
Under | Investment | of | |||||||||||||||||||||||
Management | Loss | ||||||||||||||||||||||||
Westwood Funds™ | $ | 1,603 | $ | 10.9 | $ | 10.9 | |||||||||||||||||||
Common Trust Funds | 2,091 | 4.5 | 4.5 | ||||||||||||||||||||||
Collective Investment Trusts | 366 | — | — | ||||||||||||||||||||||
LLCs | 255 | — | — | ||||||||||||||||||||||
Employee_Benefits_Tables
Employee Benefits (Tables) | 9 Months Ended | ||||||||||||||
Sep. 30, 2013 | |||||||||||||||
Total Expense Recorded for Stock Based Compensation | The following table presents the total expense recorded for stock based compensation (in thousands): | ||||||||||||||
Nine months | |||||||||||||||
ended | |||||||||||||||
September 30, | |||||||||||||||
2013 | 2012 | ||||||||||||||
Service condition restricted stock expense | $ | 5,859 | $ | 5,656 | |||||||||||
Performance-based restricted stock expense | 2,720 | 1,979 | |||||||||||||
Total stock based compensation expense | $ | 8,579 | $ | 7,635 | |||||||||||
Service condition restricted stock expense | |||||||||||||||
Status and Changes in Restricted Stock Grants that are Subject to a Service Condition | The following table details the status and changes in our restricted stock grants that are subject only to a service condition for the nine months ended September 30, 2013: | ||||||||||||||
Restricted shares subject only to a service condition: | Shares | Weighted Average | |||||||||||||
Grant Date Fair | |||||||||||||||
Value | |||||||||||||||
Non-vested, January 1, 2013 | 560,025 | $ | 37.52 | ||||||||||||
Granted | 205,624 | 43.68 | |||||||||||||
Vested | (210,980 | ) | 35.87 | ||||||||||||
Forfeited | (32,497 | ) | 39.60 | ||||||||||||
Non-vested, September 30, 2013 | 522,172 | 40.49 | |||||||||||||
Performance - based restricted stock expense | |||||||||||||||
Status and Changes in Restricted Stock Grants that are Subject to a Service Condition | The following table details the status and changes in our restricted stock grants that are subject to service and performance conditions for the nine months ended September 30, 2013: | ||||||||||||||
Restricted shares subject to service and performance conditions: | Shares | Weighted Average | |||||||||||||
Grant Date Fair | |||||||||||||||
Value | |||||||||||||||
Non-vested, January 1, 2013 | 230,000 | $ | 39.49 | ||||||||||||
Granted | 90,000 | 43.85 | |||||||||||||
Vested | — | — | |||||||||||||
Forfeited | — | — | |||||||||||||
Non-vested, September 30, 2013 | 320,000 | 40.72 | |||||||||||||
Segment_Reporting_Tables
Segment Reporting (Tables) | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||||||||
Intersegment balances | There are no separate segment accounting policies. Intersegment balances that eliminate in consolidation have been applied to the appropriate segment. | |||||||||||||||||||||||||
Advisory | Trust | Westwood | Eliminations | Consolidated | ||||||||||||||||||||||
Holdings | ||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
Three months ended September 30, 2013 | ||||||||||||||||||||||||||
Net revenues from external sources | $ | 18,325 | $ | 4,673 | $ | — | $ | — | $ | 22,998 | ||||||||||||||||
Net intersegment revenues | 2,937 | — | — | (2,937 | ) | — | ||||||||||||||||||||
Income before income taxes | 8,701 | 771 | (2,706 | ) | — | 6,766 | ||||||||||||||||||||
Segment assets | 103,526 | 13,849 | (12,449 | ) | — | 104,926 | ||||||||||||||||||||
Segment goodwill | 5,219 | 6,036 | — | — | 11,255 | |||||||||||||||||||||
Three months ended September 30, 2012 | ||||||||||||||||||||||||||
Net revenues from external sources | $ | 15,226 | $ | 3,715 | $ | — | $ | — | $ | 18,941 | ||||||||||||||||
Net intersegment revenues | 1,564 | 3 | — | (1,567 | ) | — | ||||||||||||||||||||
Income before income taxes | 6,666 | 551 | (2,886 | ) | — | 4,331 | ||||||||||||||||||||
Segment assets | 83,744 | 13,932 | (5,733 | ) | — | 91,943 | ||||||||||||||||||||
Segment goodwill | 5,219 | 6,036 | — | — | 11,255 | |||||||||||||||||||||
Nine months ended September 30, 2013 | ||||||||||||||||||||||||||
Net revenues from external sources | $ | 53,108 | $ | 13,465 | $ | — | $ | — | $ | 66,573 | ||||||||||||||||
Net intersegment revenues | 7,194 | 9 | — | (7,203 | ) | — | ||||||||||||||||||||
Income before income taxes | 25,203 | 2,072 | (8,057 | ) | — | 19,218 | ||||||||||||||||||||
Nine months ended September 30, 2012 | ||||||||||||||||||||||||||
Net revenues from external sources | $ | 45,927 | $ | 10,944 | $ | — | $ | — | $ | 56,871 | ||||||||||||||||
Net intersegment revenues | 4,020 | 12 | — | (4,032 | ) | — | ||||||||||||||||||||
Income before income taxes | 20,091 | 1,712 | (7,636 | ) | — | 14,167 | ||||||||||||||||||||
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Details) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Summary of Significant Accounting Policies (Textual) [Abstract] | ||
Cash and cash equivalents maturity period, maximum | three months or less | |
Impairments recorded | $0 | |
Valuation allowance | 0 | |
Vesting period | 4 years | |
Accrued liability | 337,000 | 79,000 |
Purchase of treasury stock | 4,667,000 | |
Westwood International Advisors Inc | ||
Summary of Significant Accounting Policies (Textual) [Abstract] | ||
Vesting period | 3 years | |
Purchase of treasury stock, shares | 20,251 | |
Purchase of treasury stock | $878,000 |
Earnings_Per_Share_Details
Earnings Per Share (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Computation of Basic and Diluted Shares | ||||
Net income | $4,319 | $2,504 | $12,031 | $8,487 |
Weighted average shares outstanding – basic | 7,374,600 | 7,166,020 | 7,347,376 | 7,138,878 |
Dilutive potential shares from unvested restricted shares | 183,536 | 157,225 | 239,112 | 157,966 |
Dilutive potential shares from stock options | 4,170 | |||
Weighted average shares outstanding – diluted | 7,558,136 | 7,323,245 | 7,586,488 | 7,301,014 |
Earnings per share: | ||||
Basic | $0.59 | $0.35 | $1.64 | $1.19 |
Diluted | $0.57 | $0.34 | $1.59 | $1.16 |
Earnings_Per_Share_Details_Tex
Earnings Per Share (Details Textual) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Earnings per share (Textual) [Abstract] | ||
Anti-dilutive restricted shares or options | 0 | 0 |
Investments_Details
Investments (Details) (USD $) | 9 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2012 |
Investment balances | ||
Cost | $55,104 | $59,313 |
Gross Unrealized Gains | 210 | 593 |
Gross Unrealized Losses | -46 | |
Estimated Market Value | 55,268 | 59,906 |
U.S. Government obligations | ||
Investment balances | ||
Cost | 28,995 | 42,588 |
Gross Unrealized Gains | 16 | 1 |
Estimated Market Value | 29,011 | 42,589 |
Money market funds | ||
Investment balances | ||
Cost | 13,180 | 1,856 |
Estimated Market Value | 13,180 | 1,856 |
Equity funds | ||
Investment balances | ||
Cost | 400 | 4,401 |
Gross Unrealized Gains | 519 | |
Gross Unrealized Losses | -46 | |
Estimated Market Value | 354 | 4,920 |
Mutual funds | ||
Investment balances | ||
Cost | 1,679 | |
Gross Unrealized Gains | 160 | |
Estimated Market Value | 1,839 | |
Fixed income funds | ||
Investment balances | ||
Cost | 10,850 | 10,468 |
Gross Unrealized Gains | 34 | 73 |
Estimated Market Value | $10,884 | $10,541 |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Investments in securities: | ||
Trading | $55,268 | $59,906 |
Fair Value, Measurements, Recurring | ||
Investments in securities: | ||
Trading | 55,268 | 59,906 |
Total financial instruments | 55,268 | 59,906 |
Level 1 | Fair Value, Measurements, Recurring | ||
Investments in securities: | ||
Trading | 55,268 | 55,389 |
Total financial instruments | 55,268 | 55,389 |
Level 2 | Fair Value, Measurements, Recurring | ||
Investments in securities: | ||
Trading | 4,517 | |
Total financial instruments | 4,517 | |
Level 3 | Fair Value, Measurements, Recurring | ||
Investments in securities: | ||
Trading | ||
Total financial instruments |
Intangible_Assets_Details
Intangible Assets (Details) (USD $) | 9 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2012 |
Summary of intangible assets | ||
Gross Carrying Amount | $5,031 | $5,031 |
Accumulated Amortization | -1,152 | -882 |
Net Carrying Amount | 3,879 | 4,149 |
Client relationships | ||
Summary of intangible assets | ||
Weighted Average Amortization Period(years) | 14 years 2 months 12 days | 14 years 2 months 12 days |
Gross Carrying Amount | 5,005 | 5,005 |
Accumulated Amortization | -1,126 | -857 |
Net Carrying Amount | 3,879 | 4,148 |
Non-compete agreements | ||
Summary of intangible assets | ||
Weighted Average Amortization Period(years) | 2 years 3 months 18 days | 2 years 3 months 18 days |
Gross Carrying Amount | 26 | 26 |
Accumulated Amortization | -26 | -25 |
Net Carrying Amount | $1 |
Intangible_Assets_Details_1
Intangible Assets (Details 1) (USD $) | Sep. 30, 2013 |
In Thousands, unless otherwise specified | |
Estimated amortization expense for intangible assets for the next five years | |
2013 | $359 |
2014 | 359 |
2015 | 359 |
2016 | 359 |
2017 | $359 |
Intangible_Assets_Details_Text
Intangible Assets (Details Textual) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Intangible Assets (Textual) [Abstract] | ||
Amortization expense | $270 | $366 |
Balance_Sheet_Components_Detai
Balance Sheet Components (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Components of accumulated other comprehensive income | ||
Foreign currency translation adjustment | ($101) | $30 |
Accumulated other comprehensive income (loss) | ($101) | $30 |
Balance_Sheet_Components_Detai1
Balance Sheet Components (Details Textual) (USD $) | Sep. 30, 2013 |
In Thousands, unless otherwise specified | |
Balance Sheet Components (Textual) [Abstract] | |
Accrued dividends | $1,053 |
Variable_Interest_Entities_Det
Variable Interest Entities (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Westwood Funds | ||
Variable Interest Entities | ||
Assets Under Management | $2,372 | $1,603 |
Corporate Investment | 13.1 | 10.9 |
Risk of Loss | 13.1 | 10.9 |
Common Trust Funds | ||
Variable Interest Entities | ||
Assets Under Management | 2,516 | 2,091 |
Corporate Investment | 4.5 | |
Risk of Loss | 4.5 | |
Collective Investment Trusts | ||
Variable Interest Entities | ||
Assets Under Management | 449 | 366 |
Corporate Investment | ||
Risk of Loss | ||
LLCs | ||
Variable Interest Entities | ||
Assets Under Management | 148 | 255 |
Corporate Investment | ||
Risk of Loss | ||
UCITS Fund | ||
Variable Interest Entities | ||
Assets Under Management | 381 | |
Corporate Investment | ||
Risk of Loss |
Variable_Interest_Entities_Det1
Variable Interest Entities (Details Textual) | 1 Months Ended | 9 Months Ended | |
Jun. 30, 2013 | Jun. 30, 2013 | Sep. 30, 2013 | |
USD ($) | EUR (€) | Number_of_Limited_Liability_Companies | |
Number_of_Limited_Partnership | |||
Variable Interest Entities (Textual) [Abstract] | |||
Number of limited liability companies in which some clients hold their investments | 10 | ||
Number of clients in which investment advisory services are provided | 2 | ||
Amount provided to the UCITS Fund for the sole purpose of meeting the minimum capital requirements | $405,750 | € 300,000 |
Employee_Benefits_Details
Employee Benefits (Details) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Total expense recorded for stock based compensation | ||
Total stock based compensation expense | $8,579 | $7,635 |
Service condition restricted stock expense | ||
Total expense recorded for stock based compensation | ||
Total stock based compensation expense | 5,859 | 5,656 |
Performance - based restricted stock expense | ||
Total expense recorded for stock based compensation | ||
Total stock based compensation expense | $2,720 | $1,979 |
Employee_Benefits_Details_1
Employee Benefits (Details 1) (Service condition restricted stock expense, USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Service condition restricted stock expense | |
Restricted shares subject only to a service condition: | |
Non-vested, January 1, 2013 | 560,025 |
Granted | 205,624 |
Vested | -210,980 |
Forfeited | -32,497 |
Non-vested, September 30, 2013 | 522,172 |
Non-vested, January 1, 2013 | $37.52 |
Granted | $43.68 |
Vested | $35.87 |
Forfeited | $39.60 |
Non-vested, September 30, 2013 | $40.49 |
Employee_Benefits_Details_2
Employee Benefits (Details 2) (Restricted shares subject to service and performance conditions, USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Restricted shares subject to service and performance conditions | |
Restricted shares subject only to a service condition: | |
Non-vested, January 1, 2013 | 230,000 |
Granted | 90,000 |
Vested | |
Forfeited | |
Non-vested, September 30, 2013 | 320,000 |
Non-vested, January 1, 2013 | $39.49 |
Granted | $43.85 |
Vested | |
Forfeited | |
Non-vested, September 30, 2013 | $40.72 |
Employee_Benefits_Details_Text
Employee Benefits (Details Textual) (USD $) | 1 Months Ended | 9 Months Ended | 12 Months Ended | |
Feb. 28, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2008 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Maximum total number of shares issued | 3,898,100 | |||
Shares remain available for issuance | 705,000 | |||
Remaining unrecognized compensation cost | $25,000,000 | |||
Restricted shares granted to employees vesting period | 4 years | |||
Non-employee directors' shares vesting period | 1 year | |||
Adjusted pre-tax income | 27,000,000 | |||
Annual growth rate period | 5 years | |||
Compound annual growth | 10.00% | |||
Non Recurring Performance Fee | 8,700,000 | |||
Percentage of deferred share units vesting after two years of service | 20.00% | |||
Percentage of deferred share units vesting after three years of service | 40.00% | |||
Percentage of deferred share units vesting after four years of service | 60.00% | |||
Percentage of deferred share units vesting after five years of service | 80.00% | |||
Expense related to mutual fund share incentive awards | 8,579,000 | 7,635,000 | ||
Accrued Liability | 1,900,000 | |||
Restricted Stock | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Remaining unrecognized compensation cost recognized over a remaining weighted average period | 2 years 9 months | |||
Performance Based Restricted Share Grants | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Restricted shares granted to employees vesting period | 4 years | |||
Deferred Compensation, Share-based Payments | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Restricted shares granted to employees vesting period | 6 years | |||
Deferred share units, issued and outstanding | 2,710 | |||
Weighted average grant date fair value of deferred share units | $40.83 | |||
Mutual funds | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Expense related to mutual fund share incentive awards | $1,800,000 | |||
Service period of mutual fund share incentive award | 2 years | |||
Mutual fund vesting period | 1 year | |||
Westwood International Advisors Inc | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Restricted shares granted to employees vesting period | 3 years | |||
Purchase of treasury stock, shares | 20,251 |
Commitments_and_Contingencies_
Commitments and Contingencies (Details) | 9 Months Ended | 9 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2013 | Nov. 05, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | |
CAD | USD ($) | CAD | First Lawsuit by AGF | Second Lawsuit by AGF | |
CAD | |||||
Loss Contingencies [Line Items] | |||||
Lawsuit Filing Date | On August 3, 2012, AGF Management Limited and AGF Investments Inc. (“AGFâ€) filed a lawsuit in the Ontario Superior Court of Justice against Westwood, certain Westwood employees and executive recruiting firm Warren International, LLC. | On November 6, 2012, AGF filed a second lawsuit against Westwood, Westwood Management and an employee of a Westwood subsidiary | |||
General damages | 10,000,000 | 5,000,000 | |||
Punitive damages, unspecified special damages, interest and costs | 1,000,000 | ||||
Contingencies (Textual) [Abstract] | |||||
Litigation counter claim for general damages | 1,000,000 | ||||
Litigation counter claim for special damages | 10,000,000 | ||||
Litigation counter claim for punitive damages | 1,000,000 | ||||
Percentage of defense costs which will be covered by by insurance | 50.00% | ||||
Loss contingency, Receivables | $356,000 |
Segment_Reporting_Details
Segment Reporting (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 |
Segment | |||||
Intersegment balances | |||||
Net revenues from external sources | $22,998 | $18,941 | $66,573 | $56,871 | |
Net intersegment revenues | |||||
Income before income taxes | 6,766 | 4,331 | 19,218 | 14,167 | |
Segment assets | 104,926 | 91,943 | 104,926 | 91,943 | 96,615 |
Segment goodwill | 11,255 | 11,255 | 11,255 | 11,255 | 11,255 |
Segment Reporting Information (Textual) [Abstract] | |||||
Number of operating segment | 2 | ||||
Operating Segments | Advisory [Member] | |||||
Intersegment balances | |||||
Net revenues from external sources | 18,325 | 15,226 | 53,108 | 45,927 | |
Net intersegment revenues | 2,937 | 1,564 | 7,194 | 4,020 | |
Income before income taxes | 8,701 | 6,666 | 25,203 | 20,091 | |
Segment assets | 103,526 | 83,744 | 103,526 | 83,744 | |
Segment goodwill | 5,219 | 5,219 | 5,219 | 5,219 | |
Operating Segments | Trust [Member] | |||||
Intersegment balances | |||||
Net revenues from external sources | 4,673 | 3,715 | 13,465 | 10,944 | |
Net intersegment revenues | 3 | 9 | 12 | ||
Income before income taxes | 771 | 551 | 2,072 | 1,712 | |
Segment assets | 13,849 | 13,932 | 13,849 | 13,932 | |
Segment goodwill | 6,036 | 6,036 | 6,036 | 6,036 | |
Corporate, Non-Segment | Westwood Holdings [Member] | |||||
Intersegment balances | |||||
Net revenues from external sources | |||||
Net intersegment revenues | |||||
Income before income taxes | -2,706 | -2,886 | -8,057 | -7,636 | |
Segment assets | -12,449 | -5,733 | -12,449 | -5,733 | |
Segment goodwill | |||||
Intersegment Eliminations | |||||
Intersegment balances | |||||
Net revenues from external sources | |||||
Net intersegment revenues | -2,937 | -1,567 | -7,203 | -4,032 | |
Income before income taxes | |||||
Segment assets | |||||
Segment goodwill |