SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of May, 2004
W.P. STEWART & CO., LTD.
(Translation of Registrant's Name Into
English)
Trinity Hall
43 Cedar Avenue
P.O. Box HM 2905
Hamilton, HM LX
Bermuda
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F |X| Form 40-F |_|
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes |_| No |X|
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-______.)
W.P. STEWART & CO., LTD.
Form 6-K: Table of Contents
1. Unaudited Condensed Consolidated Financial Statements of W.P. Stewart &
Co., Ltd. as of March 31, 2004 and for the three months ended March 31,
2004 and 2003
2. Interim Financial Report
3. Exhibit - Press release dated April 29, 2004
4. Exhibit - Press release dated May 7, 2004
Forward-Looking Statements
Certain statements in this Report on Form 6-K are forward-looking
statements, including, without limitation, statements concerning our
assumptions, expectations, beliefs, intentions, plans or strategies regarding
the future. Such forward-looking statements are based on beliefs of our
management as well as on estimates and assumptions made by and information
currently available to our management. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause our
actual results, performance or achievements, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the risk factors set forth in the Annual Report on Form 20-F of
W.P. Stewart & Co., Ltd. as well as the following:
o general economic and business conditions;
o a challenge to our U.S. tax status;
o industry capacity and trends;
o competition;
o the loss of major clients;
o changes in demand for our services;
o changes in business strategy or development plans and the ability to
implement such strategies and plans;
o changes in the laws and/or regulatory circumstances in the United
States, Bermuda, Europe or other jurisdictions;
o the adverse effect from a decline or volatility in the securities
market in general or our products' performance;
o quality of management and the ability to attract and retain
qualified personnel;
o actions taken or omitted to be taken by third parties including our
shareholders, clients, competitors and legislative, regulatory,
judicial and governmental authorities; and
o availability, terms and deployment of capital.
Should one or more of these risks or uncertainties materialize, or should
the underlying assumptions prove incorrect, actual results may vary
significantly from those anticipated, believed, estimated, expected, intended or
planned. We do not intend to review or revise any particular forward-looking
statements made in this Report on Form 6-K in light of future events. You are
cautioned not to put undue reliance on any forward-looking statements.
W.P. Stewart & Co., Ltd.
Condensed Consolidated Statements of Financial Condition
March 31, December 31,
2004 2003
------------ ------------
(unaudited)
Assets:
Cash and cash equivalents $ 40,885,861 $ 36,824,614
Fees receivable 1,852,073 1,895,426
Receivable from broker-dealer 1,772,420 395,617
Investments in unconsolidated affiliates (net of accumulated amortization
of $267,709 and $247,116 at March 31, 2004 and December 31, 2003, respectively) 3,793,054 3,855,406
Receivables from affiliates, net 841,339 903,029
Investments, available for sale [primarily municipal securities] (cost $9,484,764 and $9,469,688
at Macrh 31, 2004 and December 31, 2003, respectively) 9,367,006 9,291,201
Investment in aircraft (net of accumulated depreciation of $17,943,301 and $17,442,551 at
March 31, 2004 and December 31, 2003, respectively) 4,508,174 5,008,924
Goodwill 5,631,797 5,631,797
Intangible assets (net of accumulated amortization of $14,845,362 and $13,572,643 at
March 31, 2004 and December 31, 2003, respectively) 67,936,854 69,160,735
Furniture, equipment and leasehold improvements (net of accumulated depreciation and
amortization of $4,367,223 and $4,264,880 at March 31, 2004 and December 31, 2003, respectively) 3,247,801 3,320,096
Interest receivable on shareholders' notes 156,702 146,158
Income taxes receivable 1,377,252 1,510,692
Other assets 2,678,880 3,064,215
------------ ------------
$144,049,213 $141,007,910
============ ============
Liabilities and Shareholders' Equity:
Liabilities:
Loans payable $ 16,778,490 $ 16,968,114
Employee compensation and benefits payable 1,911,004 1,075,306
Fees payable 1,079,383 678,937
Professional fees payable 3,503,637 3,280,871
Accrued expenses and other liabilities 4,138,416 3,919,361
------------ ------------
27,410,930 25,922,589
------------ ------------
Minority Interest 324,703 416,731
------------ ------------
Shareholders' Equity:
Common shares, $0.001 par value (125,000,000 shares authorized 45,995,526 and 46,035,726
shares issued and outstanding at March 31, 2004 and December 31, 2003, respectively) 45,995 46,036
Additional paid-in-capital 80,312,761 80,419,304
Contingently returnable shares (162,800 shares at March 31, 2004 and December 31, 2003) (3,623,928) (3,623,928)
Accumulated other comprehensive income 864,267 573,284
Retained earnings 45,347,192 45,217,876
------------ ------------
122,946,287 122,632,572
Less: notes receivable for common shares (6,632,707) (7,963,982)
------------ ------------
116,313,580 114,668,590
------------ ------------
$144,049,213 $141,007,910
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
W.P. Stewart & Co., Ltd.
Unaudited Condensed
Consolidated Statements of Operations
For the Three Months Ended March 31, 2004 and 2003
2004 2003
------------ ------------
Revenue:
Fees $ 25,769,394 $ 23,275,148
Commissions 9,411,293 5,901,074
Interest and other 333,707 565,359
------------ ------------
35,514,394 29,741,581
------------ ------------
Expenses:
Employee compensation and benefits 6,813,270 6,354,285
Fees paid out 1,730,524 1,368,899
Commissions, clearance and trading 1,974,840 1,201,559
Research and administration 3,736,397 3,724,619
Marketing 1,446,483 1,169,107
Depreciation and amortization 2,008,208 1,964,067
Other operating 2,363,217 2,581,671
------------ ------------
20,072,939 18,364,207
------------ ------------
Income before taxes 15,441,455 11,377,374
Provision for taxes 1,544,146 1,137,737
------------ ------------
Net income $ 13,897,309 $ 10,239,637
============ ============
Earnings per share:
Basic earnings per share $ 0.31 $ 0.23
============ ============
Diluted earnings per share $ 0.31 $ 0.23
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
W.P. Stewart & Co., Ltd.
Unaudited Condensed Consolidated Statement of Changes in Shareholders' Equity
For the Three Months Ended March 31, 2004 and 2003
Common Shares Additional Contingently
----------------------- Paid-In Returnable
Shares Amount Capital Shares
----------- --------- ------------ ------------
Balance @ December 31, 2003 46,035,726 $ 46,036 $ 80,419,304 $ (3,623,928)
Issuance of common shares, @ $0.001 par value
Cash 13,245 13 230,261
Notes receivable 7,858 7 148,366
Contingently returnable shares, no longer
subject to repurchase
Repurchase and cancellation of common
shares, @ $0.001 par value (40,124) (40) (231,593)
Cancellation of common shares, @ $0.001
par value (21,179) (21) (346,762)
Non-cash compensation 93,185
Net income
Dividends
Other comprehensive income
Proceeds from notes receivable
for common shares
----------- --------- ------------ ------------
Balance @ March 31, 2004 45,995,526 $ 45,995 $ 80,312,761 $ (3,623,928)
=========== ========= ============ ============
Balance @ December 31, 2002 46,179,822 $ 46,180 $ 78,673,127 $(14,263,158)
Issuance of common shares, @ $0.001 par value
Cash
Notes receivable
Contingently returnable shares, no longer
subject to repurchase 3,278,840 6,637,652
Repurchase and cancellation of common
shares, @ $0.001 par value (5,606) (6) (100,454)
Cancellation of common shares, @ $0.001
par value (35,000) (35) (377,615) 377,650
Non-cash compensation 100,983
Net income
Dividends
Other comprehensive income
Proceeds from notes receivable
for common shares
----------- --------- ------------ ------------
Balance @ March 31, 2003 46,139,216 $ 46,139 $ 81,574,881 $ (7,247,856)
=========== ========= ============ ============
Accumulated
Other
Comprehensive Retained Notes
Income Earnings Receivable Total
------------- ------------ ------------- -------------
Balance @ December 31, 2003 $ 573,284 $ 45,217,876 $ (7,963,982) $ 114,668,590
Issuance of common shares, @ $0.001 par value
Cash 230,274
Notes receivable (148,373) --
Contingently returnable shares, no longer
subject to repurchase --
Repurchase and cancellation of common
shares, @ $0.001 par value (231,633)
Cancellation of common shares, @ $0.001
par value 346,783 --
Non-cash compensation 93,185
Net income 13,897,309 13,897,309
Dividends (13,767,993) (13,767,993)
Other comprehensive income 290,983 290,983
Proceeds from notes receivable
for common shares 1,132,865 1,132,865
---------- ------------ ------------- -------------
Balance @ March 31, 2004 $ 864,267 $ 45,347,192 $ (6,632,707) $ 116,313,580
========== ============ ============= =============
Balance @ December 31, 2002 $ 34,576 $ 57,129,989 $ (13,555,499) $ 108,065,215
Issuance of common shares, @ $0.001 par value
Cash
Notes receivable
Contingently returnable shares, no longer
subject to repurchase 9,916,492
Repurchase and cancellation of common
shares, @ $0.001 par value (100,460)
Cancellation of common shares, @ $0.001
par value --
Non-cash compensation 100,983
Net income 10,239,637 10,239,637
Dividends (13,745,770) (13,745,770)
Other comprehensive income (176,605) (176,605)
Proceeds from notes receivable
for common shares 1,541,284 1,541,284
---------- ------------ ------------- -------------
Balance @ March 31, 2003 $ (142,029) $ 53,623,856 $ (12,014,215) $ 115,840,776
========== ============ ============= =============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
W.P. Stewart & Co., Ltd.
Unaudited Condensed Consolidated
Statements of Cash Flows
For the Three Months Ended March 31, 2004 and 2003
2004 2003
------------ ------------
Cash flows from operating activities:
Net income $ 13,897,309 $ 10,239,637
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain)/loss on sale of available for sale securities -- (64,413)
Amortization of bond premium 27,187 79,645
Depreciation and amortization 2,008,208 1,964,067
Equity in income of unconsolidated affiliates 41,759 (4,509)
Non-cash compensation 93,185 100,983
Minority interest (92,029) (9,133)
Changes in operating assets and liabilities:
Fees receivable 43,353 (324,872)
Receivable from broker-dealer (1,376,803) 158,415
Receivables from affiliates, net 61,690 (118,710)
Income taxes receivable 133,440 453,397
Interest receivable on shareholders' notes (10,544) 38,213
Other assets 385,335 431,166
Employee compensation and benefits payable 835,698 499
Fees payable 400,446 120,482
Professional fees payable 222,766 611,483
Accrued expenses and other liabilities 219,055 247,553
------------ ------------
Net cash provided by operating activities 16,890,055 13,923,903
------------ ------------
Cash flows (used for) / provided by investing activities:
Proceeds from sale of available for sale securities 850,000 869,413
Purchase of available for sale securities (880,688) (719,738)
Cash dividends paid on shares subject to repurchase (48,840) (97,680)
Purchase of furniture, equipment and leasehold improvements (141,847) (2,253)
------------ ------------
Net cash (used for) / provided by investing activities (221,375) 49,742
------------ ------------
Cash flows (used for) financing activities:
Payments on loans payable (189,624) (155,167)
Proceeds from issuance of common shares 230,274 --
Repurchase of common shares (231,633) (100,460)
Proceeds from notes receivable for common shares 1,132,865 1,541,284
Dividends to shareholders (13,767,993) (13,745,770)
------------ ------------
Net cash (used for) financing activities (12,826,111) (12,460,113)
Effect of exchange rate changes in cash 218,678 (108,729)
------------ ------------
Net increase in cash and cash equivalents 4,061,247 1,404,803
Cash and cash equivalents, beginning of period 36,824,614 34,426,192
------------ ------------
Cash and cash equivalents, end of period $ 40,885,861 $ 35,830,995
============ ============
Supplemental disclosures of cash flows information
Cash paid during the period for:
Income taxes $ 1,417,863 $ 675,374
============ ============
Interest $ 137,072 $ 299,557
============ ============
Supplemental Schedule of Non-Cash Investing and Financing Activities:
On January 1, 2003, 20% of the shares originally issued in connection with our
acquisitions of NS Money Management (Bermuda) Limited, First Long Island
Investors, Inc. and TPRS Services N.V. in 1999, ceased to be subject to
repurchase, and were recorded with a fair value of $2,333,644, $3,868,800 and
$3,714,048, respectively. Additionally, in accordance with the provisions of the
acquisition agreements, the Company reacquired 35,000 shares which were recorded
with a value of $377,650 representing the initial issue price of the shares (see
Note 2).
As discussed in Note 8, the Company cancelled outstanding notes of $346,783 for
the three months ended March 31, 2004.
As discussed in Note 9, the Company issued common shares for notes receivable
for the three months ended March 31, 2004 in the amount of $148,373.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying financial statements of W.P. Stewart & Co., Ltd., a Bermuda
exempt company incorporated on August 16, 1996 and a registered investment
adviser under the United States of America ("U.S.") Investment Advisers Act of
1940, as amended, ("WPS & Co., Ltd." and, together with its subsidiaries, the
"Company") are presented on a condensed consolidated basis.
These condensed consolidated financial statements are unaudited and should be
read in conjunction with the audited consolidated financial statements in the
Annual Report on Form 20-F of the Company for the year ended December 31, 2003.
The condensed consolidated financial information as of and for the year ended
December 31, 2003 has been derived from audited consolidated financial
statements not included herein. Certain reclassifications have been made to
prior-year amounts to conform to the current-year presentation. All material
intercompany transactions and balances have been eliminated.
The unaudited condensed financial statements include all adjustments, consisting
only of normal recurring adjustments that are, in the opinion of management,
necessary for a fair presentation of the results in the interim periods. Interim
period operating results for the three months ended March 31, 2004 are not
necessarily indicative of results that may be expected for the entire year or
any other period.
NOTE 2: BACKGROUND AND ORGANIZATION
For the three months ended March 31, 2004 and 2003, the consolidated Company
consisted of several worldwide affiliated entities under common control, which
provide investment advisory and related services including securities brokerage.
Business Acquisitions
In 1999 the Company acquired 50% of TPRS Services N.V. ("TPRS") and 100% of NS
Money Management (Bermuda) Limited ("NSMM") and First Long Island Investors,
Inc. ("FLII"). On December 29, 2000, the Company acquired the remaining 50% of
TPRS. The repurchase provisions of the acquisition agreements specify that 80%
of the Company's common shares issued in connection therewith can be repurchased
("contingently returnable shares") at par value by the Company up to a maximum
of 20% per year as of January 1, 2000, 2001, 2002 and 2003, except in the case
of the December 29, 2000 TPRS acquisition where the reference dates are July 1,
2001, 2002, 2003 and 2004, if assets under management which were part of the
acquisitions decrease below defined reference amounts at the specified dates and
are not replaced.
The recorded purchase price for each acquisition is determined by the sum of:
1. the number of shares issued on acquisition not subject to repurchase
multiplied by the fair value of each of those shares at acquisition
date;
2. the number of shares that cease to be subject to repurchase at each
anniversary date multiplied by the fair value of each of those
shares at that date; and
3. the cumulative cash dividends paid on shares subject to repurchase.
6
The shares issued in connection with the TPRS, NSMM and FLII acquisitions were
initially reported in shareholders' equity (within share capital and as a
contra-equity account captioned "contingently returnable shares") at their
issuance prices as of the dates the acquisitions were consummated. On the dates
on which the contingently returnable shares cease to be subject to repurchase,
the contra-equity account is relieved and any difference between the initial
issue price and the then current fair value of the shares is charged or credited
to additional paid-in capital, and the purchase price is adjusted for the fair
value of the shares. Cash dividends on shares no longer subject to repurchase
are recorded as a reduction of shareholders' equity.
The following table shows information for each acquisition as of and for the
three months ended March 31, 2004.
Cash
Dividends
Paid on
Aggregate Shares Not Contingently Contingently Purchase Intangible
Number of Subject to Returnable Returnable Price Amortization
Acquisition Shares Repurchase Shares Shares Allocation for the Period
- ----------- ------ ---------- ------ ------ ---------- --------------
TPRS 1,966,000 1,803,200 162,800 $ 48,840 $39,318,528 $ 598,337
NSMM 863,831 863,831 -- -- 17,042,406 238,460
FLII 1,200,000 1,200,000 -- -- 23,703,088 384,070
----------- ----------- ----------- ----------- ----------- -----------
4,029,831 3,867,031 162,800 $ 48,840 $80,064,022 $ 1,220,867
=========== =========== =========== =========== =========== ===========
The following table shows information for each acquisition as of and for the
year ended December 31, 2003.
Cash
Dividends
Paid on
Aggregate Shares Not Contingently Contingently Purchase Intangible
Number of Subject to Returnable Returnable Price Amortization
Acquisition Shares Repurchase Shares Shares Allocation for the Year
- ----------- ------ ---------- ------ ------ ---------- ------------
TPRS 1,966,000 1,803,200 162,800 $ 293,040 $39,269,688 $ 2,285,037
NSMM 863,831 863,831 -- -- 17,042,406 953,839
FLII 1,200,000 1,200,000 -- -- 23,703,088 1,536,279
----------- ----------- ----------- ----------- ----------- -----------
4,029,831 3,867,031 162,800 $ 293,040 $80,015,182 $ 4,775,155
=========== =========== =========== =========== =========== ===========
7
NOTE 3: EARNINGS PER SHARE
Three Months Ended March 31,
----------------------------
2004 2003
------------ ------------
Basic Earnings Per Share:
Net income $ 13,897,309 $ 10,239,637
============ ============
Weighted average basic shares outstanding 44,817,042 43,986,968
------------ ------------
Net income per share $ 0.31 $ 0.23
============ ============
Diluted Earnings Per Share:
Net income $ 13,897,309 $ 10,239,637
============ ============
Weighted average basic shares outstanding 44,817,042 43,986,968
============ ============
Add: Unvested shares, contingently returnable shares,
unvested options and vested unexercised options 605,129 953,184
------------ ------------
Weighted average diluted shares outstanding 45,422,171 44,940,152
------------ ------------
Net income per share $ 0.31 $ 0.23
============ ============
Basic earnings per share is computed by dividing the net income applicable to
common shares outstanding by the weighted average number of shares outstanding,
excluding unvested shares issued to employees of the Company or its affiliates,
contingently returnable shares, unvested options and vested unexercised options.
Diluted earnings per share is computed using the same method as basic earnings
per share, but also reflects the impact of unvested shares issued to employees
of the Company or its affiliates, contingently returnable shares and the
dilutive effect of unvested options and vested unexercised options issued to
employees of the Company or its affiliates using the treasury stock method.
On March 31, 2004 and 2003, respectively, 45,995,526 and 46,139,216 shares were
issued and outstanding. The shareholders of record are entitled to full voting
rights and dividends on these shares; 1,013,900 and 1,829,402 of these shares
were unvested and held by the Company's or affiliates' employees on March 31,
2004 and 2003, respectively.
8
NOTE 4: COMPREHENSIVE INCOME
The following table details the components of comprehensive income as described
in Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income".
Three Months Ended March 31,
----------------------------
2004 2003
------------ ------------
Net income $ 13,897,309 $ 10,239,637
Other comprehensive income, net of tax
Reclassification adjustment for unrealized gains/(losses) on
available for sale securities included in interest and other (383) 10,908
Unrealized gains/(losses) on available for sale securities 72,688 (78,784)
Foreign currency translation adjustment 218,678 (108,729)
------------ ------------
Comprehensive income $ 14,188,292 $ 10,063,032
============ ============
NOTE 5: RELATED PARTY TRANSACTIONS
Research and administrative expenses include travel expenses of $832,433 and
$733,639 for the three months ended March 31, 2004 and 2003, respectively, which
were paid to Shamrock Aviation, Inc. ("Shamrock"), a company owned by principal
shareholders of the Company.
The Company has entered into an agreement pursuant to which either Shamrock or
an entity affiliated with Shamrock has agreed to provide operational and
maintenance services at cost for the Challenger aircraft owned by the Company.
These costs, reflected in research and administration expenses, include $593,259
and $657,060 for the three months ended March 31, 2004 and 2003, respectively.
A portion of the office space located in New York includes space occupied by
Stewart family interests. W.P. Stewart & Co., Inc. ("WPSI") is reimbursed on a
monthly basis for rent and other costs associated with the space, which amounted
to $47,200 and $46,192 for the three months ended March 31, 2004 and 2003,
respectively. These amounts are based upon the actual space utilized in each of
those periods.
W.P. Stewart Fund Management Limited ("WPS Dublin") serves as the investment
manager to an Irish fund solely advised by WPS Investissements S.A., a Swiss
investment management firm, principally owned by a beneficial owner of a
minority interest in the Company. In 2004, the fund entered into liquidation
proceedings. The Company had no ownership interest in either the Irish fund or
WPS Investissements S.A. WPS Dublin collected and remitted to WPS
Investissements S.A. all of the advisory fees in respect of such fund. There
were no fees received in respect of such fund during the three months ended
March 31, 2004 and such fees amounted to $6,522 for the three months ended March
31, 2003. In addition, the Company pays WPS Investissements S.A. solicitation
fees in respect of certain accounts and an amount calculated on the basis of a
portion of the brokerage commissions paid by such fund and certain accounts, as
directed by those clients. Such payments amounted to $1,446 and $4,162 for the
three months ended March 31, 2004 and 2003, respectively.
9
The Company pays Bowen Asia Limited ("Bowen"), an unconsolidated affiliate of
the Company, the principal owners of which are an executive officer and a
beneficial owner of a minority interest in the Company, fees for solicitation,
sub-advisory, and research services. Such costs amounted to $271,099 and
$217,757 for the three months ended March 31, 2004 and 2003, respectively. The
Company receives solicitation fees from Bowen Capital Management ("BCM"), a
subsidiary of Bowen, for client referrals to BCM. Total solicitation fees
received from BCM for the three months ended March 31, 2004 and 2003 were $1,479
and $5,250 respectively.
The Company pays Carl Spangler Kapitalanlageges. m.b.H., which is controlled by
Bankhaus Carl Spangler & Co. AG, the Chief Executive Officer of which is one of
the Company's directors, fees for solicitation services. These fees amounted to
$173,258 and $193,396 for the three months ended March 31, 2004 and 2003,
respectively.
The Company pays Appleby, Spurling & Kempe and A.S. & K. Services Ltd., a senior
partner of which is a director of the Company, fees for various legal, corporate
administrative and secretarial services. Such fees for services amounted to
$21,344 and $25,062 for the three months ended March 31, 2004 and 2003,
respectively.
Certain directors of the Company serve as directors of funds from which the
Company receives investment advisory fees, fund management fees, subscription
fees and commissions. Such fees and commissions were $1,813,065 and $1,155,568
for the three months ended March 31, 2004 and 2003, respectively.
The Company owns a 40% interest in Kirk Management Ltd., a real estate joint
venture incorporated in Bermuda. The remaining 60% interest is owned by The Bank
of Bermuda, of which one of the Company's directors is an Executive Officer.
Kirk Management Ltd. also owns and leases to the Company its Hamilton, Bermuda
headquarters. Included in research and administration expenses is rent expense
of $45,000 for each of the three-month periods ended March 31, 2004 and 2003,
respectively.
Included in receivables from affiliates, net, at March 31, 2004 and 2003 is a
subordinated loan of $212,526 and accrued interest on such loan in the amount of
$34,132 due from Kirk Management Ltd. The loan has no fixed repayment date.
Included in investments available for sale at March 31, 2004 and 2003 are
amounts of $852,921 and $626,895, respectively, which were investments in
various funds managed by WPS Dublin, a wholly-owned subsidiary of the Company.
Included in research and administration expenses for the three months ended
March 31, 2004 and 2003 is rent expense in the amounts of $47,595 and $41,402,
respectively, which is paid to a company owned by the former principals of W.P.
Stewart Asset Management (Europe) N.V., one of whom is an executive officer of
the Company.
Included in other operating expenses for the three months ended March 31, 2004
and 2003, are contributions in the amounts of $95,000 and $25,000, respectively,
paid to the W.P. Stewart & Co. Foundation, Inc., a private charitable
foundation.
NOTE 6: LONG-TERM DEBT
On July 10, 2003, WPS Aviation Holdings LLC entered into a 10-year amortizing
loan agreement with General Electric Capital Corporation ("GECC") to continue to
finance its obligations under the purchase agreement relating to the purchase of
a Challenger aircraft. The purpose of this new agreement was solely
10
to consolidate all prior obligations to GECC and to reduce the fixed interest
rates under the previous obligations. This new loan was for the principal sum of
$17,278,264 at a floating per annum simple interest rate, as defined in the loan
agreement as the contract rate, to be paid in 120 monthly installments and a
final installment of $8,608,913 plus any outstanding interest. The contract rate
of interest is equal to the sum of (i) two and 25/100 percent (2.25%) per annum
plus (ii) a variable per annum interest rate equal to the rate listed for one
month commercial paper (non-financial). The first monthly periodic installment
was due and paid on August 10, 2003 with installments due and payable on the
same day of each succeeding month. The loan is collateralized by the Challenger
aircraft.
The loan documents require the Company to maintain certain financial ratios and
a minimum level of $15 million of tangible net worth (as defined in the loan
documents).
Interest expense on long-term debt totaled $137,072 and $299,557 for the three
months ended March 31, 2004 and 2003, respectively.
NOTE 7: COMMITMENTS AND CONTINGENCIES
At March 31, 2004, the Company was contingently liable on three irrevocable
standby letters of credit. One letter of credit is in the amount of $1,000,000
in favor of Wachovia Corporate Services Inc. ("Wachovia") and collateralizes
amounts received from the Company's clients that Wachovia wires daily to the
Company's account at The Bank of Bermuda. The second letter of credit is in the
amount of $200,000, in favor of WPSI's landlord. The third letter of credit is
in the amount of $699,033 in favor of W.P. Stewart & Co. (Europe) Ltd.'s
landlord. The latter amount is guaranteed by the Company, and is collateralized
by a fixed deposit cash account in the same amount, which will remain intact
over the term of the lease and is reflected in other assets at March 31, 2004
and 2003.
W.P. Stewart Securities Limited ("WPSSL") conducts business with a clearing
broker on behalf of its customers subject to a clearing agreement. WPSSL earns
commissions as an introducing broker for the transactions of its customers,
which are normally settled on a delivery-against-settlement basis. Under the
clearing agreement, WPSSL has agreed to indemnify the clearing broker for
non-performance by any customers introduced by WPSSL. As the right to charge
WPSSL has no maximum amount, and applies to all trades executed through the
clearing broker, WPSSL believes there is no maximum amount assignable to this
right. At March 31, 2004, WPSSL has recorded no liability with respect to this
right. WPSSL is subject to credit risk to the extent that the clearing broker
may be unable to repay amounts owed.
The Company is involved in several legal actions and claims arising in the
normal course of business. Management believes, based on currently available
information, that the results of such proceedings, in the aggregate, will not
have a material adverse effect on the financial condition or results of
operations of the Company.
NOTE 8: NOTES RECEIVABLE FOR COMMON SHARES
Pursuant to employee purchase agreements for common shares, in the event a
purchaser is no longer in the employment of, or no longer serves as a director
of, the Company or any of its affiliates, the purchaser shall transfer to the
Company all rights to the shares that have not vested at the time of such
termination. The remaining balance of the outstanding notes receivable related
to the unvested shares shall be abated.
Pursuant to the terms of the purchase agreements, during the three months ended
March 31, 2004, 21,179 unvested common shares of former employees were
repurchased and their installment notes totaling $346,783 were abated.
11
Future minimum payments, expected to be received, on notes receivable for common
shares as of March 31, 2004 are as follows:
2004 (9 months) $ 1,747,057
2005 1,861,158
2006 1,212,934
2007 791,657
2008 705,305
Thereafter (through 2011) 314,596
------------
$ 6,632,707
============
Interest income on all such notes was $154,615 and $171,763 for the three months
ended March 31, 2004 and 2003, respectively.
NOTE 9: EMPLOYEE EQUITY INCENTIVE PLAN
The W.P. Stewart & Co., Ltd. 2001 Employee Equity Incentive Plan, as amended
(the "Plan") provides for awards of common shares of the Company, to be granted
to eligible employees of the Company and its affiliates in the form of
restricted common shares and/or options. The exercise price of the options was
equal to the market value of the Company's shares on the date of the grant. All
awards that vest are exercisable in equal annual amounts on each of the first
seven anniversaries of the grant dates. The dilutive effect of unvested options
and vested unexercised options is included in the weighted average diluted
shares outstanding in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
On May 12, 2003, the Board of Directors approved an amendment to the Plan that
(i) increased the total number of common shares available for awards under the
Plan from 2,500,000 to a total of 3,000,000, inclusive of awards previously
granted, and (ii) increased the duration of the period during which vested
options may be exercised from one year to two years with respect to any option
grants made in the future.
During the three months ended March 31, 2004, pursuant to the terms of the Plan,
2,529 and 10,716 vested employee share options granted in 2001 and 2002,
respectively, were exercised for an aggregate amount of $230,274. Also, during
the same period, 4,286 and 3,572 vested employee share options granted in 2001
and 2002, respectively, were exercised for installment notes in the amount of
$148,373. The installment notes bear interest at 8.5% per annum, are for a term
of two years and are collateralized by the shares issued.
During the three months ended March 31, 2004 and 2003, pursuant to the terms of
the Plan, 6,042 and 105,447 unexercised options granted in 2001 and 5,714 and
2,500 unexercised options granted in 2002, were forfeited by former employees of
the Company.
NOTE 10: SHARE OPTIONS
On January 1, 2003, the Company began to account for share-based employee
compensation in accordance with the fair value method prescribed by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), as amended by Statement of Financial Accounting
Standards No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure" ("SFAS No. 148"), using the prospective adoption method. Under this
method of adoption, compensation expense is recognized based on the fair value
of the share options granted in 2003 and
12
future years over the related vesting periods. The amount of share-based
compensation recognized under SFAS No. 123 for the three months ended March 31,
2004, for share options granted in 2003, was $1,410. There were no share options
granted during the three months ended March 31, 2004.
The options outstanding as of March 31, 2004 for grants awarded during the year
ended December 31, 2003, are set forth below:
Weighted Average
Options Remaining Contractual Weighted Average
Exercise Prices Outstanding Life (Years) Exercise Price
- --------------- ----------- ------------ --------------
$20.20 65,250 7 $20.20
Prior to January 1, 2003, the Company had elected to account for its share-based
employee compensation plan in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). In
accordance with APB No. 25, compensation expense is not recognized for employee
options that have no intrinsic value on the date of grant.
Share options granted for all periods prior to January 1, 2003 were accounted
for, and will continue to be accounted for, under the intrinsic value-based
method as prescribed by APB No. 25. Therefore, no compensation expense was
recognized for those share options that had no intrinsic value on the date of
grant. The dilutive effect of these options is included in the weighted average
diluted shares outstanding in accordance with SFAS No. 128.
The options outstanding as of March 31, 2004 and 2003 for grants made prior to
January 1, 2003 are set forth below:
Weighted Average
Options Remaining Contractual Weighted Average
March 31, Exercise Prices Outstanding Life (Years) Exercise Price
- ---------- --------------- ----------- ------------ --------------
$20.80 - $25.65 823,794 5 $20.90
$16.58 - $28.42 483,927 6 $21.96
---------
2004 1,307,721
=========
$20.80 - $25.65 1,081,072 6 $20.89
$16.58 - $28.42 557,001 7 $22.11
---------
2003 1,638,073
=========
Options exercisable at March 31, 2004 and 2003 were 191,663 and 166,757,
respectively.
Had compensation cost for the Company's options been determined based on fair
value at the grant dates for awards granted prior to January 1, 2003 under the
Plan consistent with the fair value method prescribed by SFAS No. 123, the
Company's net income and net income per share diluted for the periods ended
March 31, 2004 and 2003, would have been the following pro forma amounts:
13
Three Months Ended March 31,
------------------------------
2004 2003
------------ ------------
Net income, as reported $ 13,897,309 $ 10,239,637
Pro forma net income $ 13,786,165 $ 9,733,970
Earnings Per Share, as reported:
Basic $ 0.31 $ 0.23
Diluted $ 0.31 $ 0.23
Pro forma Earnings Per Share:
Basic $ 0.31 $ 0.22
Diluted $ 0.30 $ 0.22
In the preceding table, pro forma compensation expense associated with option
grants is recognized over the relevant vesting periods.
NOTE 11: INCOME TAXES
Under current Bermuda law, the Company and its Bermuda subsidiaries are not
required to pay any Bermuda taxes on their income or capital gains. The Company
and its Bermuda subsidiaries will be exempt from such forms of taxation in
Bermuda until at least March 2016.
Income from the Company's operations in the United States and from U.S.
subsidiaries of the Company is subject to income taxes imposed by U.S.
authorities. In addition, the Company's non-U.S. subsidiaries are subject to
income taxes imposed by the jurisdictions in which those subsidiaries conduct
business.
The provision for income taxes detailed below represents the Company's estimate
of taxes on income applicable to all jurisdictions and is calculated at rates
equal to the statutory income tax rate in each jurisdiction.
The income tax provision, all current, for the periods ended March 31, 2004 and
2003 is as follows:
Three Months Ended March 31,
----------------------------
2004 2003
----------- -----------
US:
Federal $ 1,105,743 $ 790,698
State and local 435,975 345,346
----------- -----------
1,541,718 1,136,044
Other: 2,428 1,693
----------- -----------
$ 1,544,146 $ 1,137,737
=========== ===========
NOTE 12: PENSION BENEFITS
Total employer contributions amounted to $555,272 and $610,572 for the three
months ended March 31, 2004 and 2003, respectively. Participants are immediately
vested in their account balances.
14
NOTE 13: GEOGRAPHIC AREA DATA
The Company's primary business is the provision of investment advisory services
to clients located throughout the world, in primarily two geographic areas, as
follows:
Fee Revenue
-------------------------------
Three months ended March 31,
-------------------------------
2004 2003
------------ ------------
U.S. $ 20,079,755 $ 17,503,549
Non-U.S 5,689,639 5,771,599
------------ ------------
Total $ 25,769,394 $ 23,275,148
============ ============
NOTE 14: SUBSEQUENT EVENTS
On April 2, 2004, the Company declared a dividend of $0.30 per share to
shareholders of record as of April 16, 2004, payable on April 30, 2004 in the
aggregate amount of $13,798,658.
15
Operating and Financial Review and Prospects
Overview
W.P. Stewart & Co., Ltd., together with its subsidiaries, is a
research-focused investment counselor that manages assets for high net-worth
individuals and institutions located throughout the world. Our principal source
of revenues is investment advisory fees and, accordingly, fluctuations in
financial markets and client contributions and withdrawals have a direct effect
on revenues and net income. Additionally, significant components of our expenses
are variable in nature and tend to partially offset fluctuations in revenue.
Our advisory fees are computed quarterly based on account market values
and fee rates pursuant to investment advisory contracts with clients. Our policy
is to bill clients quarterly, in advance.
Another component of our revenues is brokerage commissions. Commission
revenues earned on our brokerage activities, substantially all of which relate
to client accounts, vary directly with account trading activity and new account
generation. Therefore, commission revenue is also affected by market conditions.
Interest and other revenue primarily consists of interest earned on notes
receivable for employee purchases of common shares, interest earned on our cash
management activities and equity income relating to our investments in
unconsolidated affiliates.
We provide competitive rewards to our employees through our compensation
and benefits policies, together with our employee equity ownership practices.
Employee compensation and benefits are our largest operating expense, the most
significant component of which is compensation paid to our research
analysts/portfolio managers. Compensation for all employees varies with
operating profit. At the beginning of each year, each employee is allocated a
participation in our compensation pool. Compensation paid depends upon our
actual operating profit, as adjusted for amortization of intangibles and
retirement benefits ("adjusted operating profit"). We review from time to time
the percentage of operating profit made available for the compensation pool.
Under our variable compensation program, which heavily weights compensation
against profit performance, compensation expense currently may vary between
20.7% and 24.5% of adjusted operating profit. Compensation expense was
approximately 24.8% of adjusted operating profit for the year ended December 31,
2003. It is currently anticipated that compensation expense for the year ending
December 31, 2004 will be approximately 24%.
Fees paid out are paid to select banks, investment firms and individuals
in at least 10 countries, with whom we have formal marketing arrangements that
make up our network of symbiotic marketers. We consider the banks, investment
firms and individuals who gather assets for us to be symbiotic marketers of our
services because of the mutual benefits that flow from the relationship - they
are able to offer premier equity investment management services to their clients
and we are able to extend the reach of our asset-gathering efforts. These fees
are based on the market value of referred accounts and vary based on new account
generation and fluctuations in the market value of referred accounts.
Commissions, clearance and trading expenses include fees incurred related
to brokerage activities. These transaction-related costs vary directly with
trading activity. Transaction costs are reviewed quarterly and are competitive.
Research and administration expenses include research, travel and
entertainment, communications, information technology systems support and
occupancy.
16
Marketing expenses represent costs associated with our internal marketing
initiatives and client servicing activities, and include client seminars and
marketing related travel and operational expenses.
Other operating expenses include professional fees consisting of auditing,
tax, legal and consulting fees, charitable contributions and other
administration expenses.
All of our employees are given the opportunity to become shareholders
during their first year of employment with us. As a result, virtually all of our
employees are shareholders of W.P. Stewart & Co., Ltd. and participate in the
results of our operations.
Operating Results
Three Months Ended March 31, 2004 as Compared to Three Months Ended March 31,
2003
Assets Under Management
Assets under management were in excess of $8.5 billion at March 31, 2004,
essentially unchanged from approximately $8.6 billion at December 31, 2003.
Assets under management were approximately $7.3 billion at March 31, 2003, a
decrease of approximately $0.4 billion or 5.2%, from approximately $7.7 billion
at December 31, 2002.
The following table sets forth the total net flows of assets under
management for the three months ended March 31, 2004 and 2003, which include
changes in net flows of existing accounts and net new flows (net contributions
to our publicly available funds and flows from new accounts minus closed
accounts). The table excludes total capital appreciation or depreciation in
assets under management with the exception of the amounts attributable to
withdrawals and closed accounts.
Net Flows of Assets Under Management
(in millions)
Three Months Ended
March 31,
-----------------------
2004 2003
-------- --------
Existing Accounts:
Contributions $ 195 $ 171
Withdrawals (205) (176)
-------- --------
Net Flows of Existing Accounts (10) (5)
-------- --------
Publicly Available Funds:
Contributions 51 49
Withdrawals (34) (46)
Direct Accounts Opened 69 103
Direct Accounts Closed (215) (190)
-------- --------
Net New Flows (129) (84)
-------- --------
Net Flows of Assets Under Management $ (139) $ (89)
======== ========
17
Revenues
Revenues were $35.5 million for the first quarter of 2004, an increase of
$5.8 million or 19.4% from $29.7 million earned for the first quarter of 2003.
The changes were due to a $2.5 million or 10.7% increase in fee revenue, a $3.5
million or 59.5% increase in commission revenue and a $0.2 million or 41.0%
decrease in interest and other revenues. The average gross fee earned from
client accounts was 1.21% for the quarter ended March 31, 2004 as compared to
1.22% for the quarter ended March 31, 2003, due to a slight change in client
account mix due to larger accounts subject to our fee break. The increase in fee
revenue was attributable to the increase in assets under management. Because we
bill our fees quarterly, in advance, the strong fourth quarter 2003 increase in
assets under management had a direct impact on our first quarter 2004 fee
revenue. Commission revenue was significantly higher in the quarter, compared to
recent quarters, and reflects among other factors, that five new companies were
added to most clients' portfolios in the quarter, resulting in corresponding
buys and sells. Interest and other revenues decreased primarily due to a gain
realized on the sales of municipal bonds during the first quarter of 2003 and
the foreign currency effect incurred in the first quarter of 2004 in our
European operations due to the weaker U.S. dollar as compared to the British
Pound Sterling and the Euro.
Expenses
Expenses, excluding income taxes, increased approximately $1.7 million or
9.3% to $20.1 million for the first quarter 2004 from $18.4 million in the same
period of the prior year. The increase was due to changes in operating expenses,
including an increase in variable expenses of $0.4 million in fees paid out,
which are directly related to assets under management of referred accounts, an
increase in commissions, clearance and trading of $0.8 million, which vary with
account activity, an increase in employee compensation and benefits of $0.5
million due to an increase in adjusted operating profit, on which that
compensation is based. Additionally, marketing expenses increased $0.3 million
due to slightly higher costs related to marketing travel and seminars and other
operating expenses decreased $0.2 million primarily due to lower costs incurred
in the first quarter of 2004.
Our income tax expense increased $0.4 million to $1.5 million for the
first quarter of 2004 from $1.1 million in the same period of the prior year.
The effective tax rate is 10% for both periods.
Net Income
Net income for the quarter ended March 31, 2004 increased $3.7 million or
35.7% to $13.9 million from $10.2 million in the first quarter of the prior year
as a result of the items described above.
Inflation
Our assets are largely liquid in nature and, therefore, not significantly
affected by inflation. However, the rate of inflation may affect our expenses,
such as information technology and occupancy costs, which may not be readily
recoverable in the pricing of the services that we provide. To the extent
inflation results in rising interest rates and has other negative effects upon
the securities markets, it may adversely affect our financial position and
results of operations.
18
Contractual Obligations and Contingent Commitments
W.P. Stewart & Co., Ltd. has contractual obligations to make future
payments under long-term debt and non-cancelable operating lease agreements and
has contingent commitments as disclosed in the notes to the consolidated
financial statements. The following tables set forth these contractual
obligations and contingent commitments as of March 31, 2004:
Contractual Obligations
(in millions)
Remaining 2004 2005-2006 2007-2008 2009-Thereafter Total
-------------- --------- --------- --------------- -----
Long-Term Debt (1) $0.6 $1.6 $1.7 $12.9 $16.8
Minimum Rental Commitments $2.2 $5.7 $3.7 $ 6.2 $17.8
(1) See Note 6 to the condensed consolidated financial statements for
additional information.
Contingent Commitments
(in millions)
Amount of Commitment Expiration Per Period
2004 2005-2006 2007-2008 2009-Thereafter Total
---- --------- --------- --------------- -----
Commitments under letters of credit (2) -- $1.2 -- $0.7 $1.9
(2) See Note 7 to the condensed consolidated financial statements for
additional information.
Liquidity and Capital Resources
Our financial condition is highly liquid with principal assets including
cash and cash equivalents, investments available for sale and receivables from
clients. Cash equivalents are primarily short-term, highly liquid investments
with an original maturity of three months or less at the date of purchase.
Liabilities include operating payables and accrued compensation. Our investment
advisory activities do not in general require us to maintain significant capital
balances. However, our advisory activities for clients in The Netherlands, the
activities of W.P. Stewart Securities Limited, our Bermuda-based broker-dealer,
and the sub-advisory activities of W.P. Stewart & Co. (Europe), Ltd., our
London-based research affiliate, require us to maintain certain minimum levels
of capital.
We continually monitor and evaluate the adequacy of the capital maintained
for those activities and have consistently maintained net capital in excess of
the prescribed amounts. Historically, we have met our liquidity requirements
with cash generated from our operations.
We anticipate that our cash flow from operations will be sufficient to
meet our debt and other obligations as they come due as well as our anticipated
capital requirements. Our liquidity, facilities and overall financial condition
remain strong. We have maintained our customary quarterly dividend and have
funded that dividend essentially out of operating cash flow. Our board of
directors carefully scrutinizes our earnings and cash position
quarter-by-quarter to ascertain the prudence of our dividend. Although there can
be no guarantee that the dividend will remain at historic levels indefinitely,
there currently are no plans for reducing it. Consistent with this focus, our
board of directors will continue to monitor our liquidity and our ability to pay
dividends and will also consider opportunities for share repurchases with a view
toward increasing long-term shareholder value.
19
EXHIBITS
See press release attached hereto dated April 29, 2004 regarding the
Company's financial results for the first quarter of 2004.
See press release attached hereto dated May 7, 2004 regarding the
Company's Annual General Meeting of shareholders and meeting of it's Board of
Directors.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
W.P. STEWART & CO., LTD.
Date: May 10, 2004 By: /s/ Rocco Macri
------------------------------------
Name: Rocco Macri
Title: Deputy Managing Director -
Chief Financial Officer
21
W.P. STEWART & Co., Ltd.
Contact: Fred M. Ryan
W.P. Stewart & Co., Ltd. Reports Net Income for First Quarter 2004 of
$13.9 Million
Diluted Earnings Per Share of $0.31 for the First Quarter
29 April 2004
Hamilton, Bermuda
W.P. Stewart & Co., Ltd. today reported net income of $13.9 million, or $0.31
per share (diluted) and $0.31 per share (basic), for the first quarter ended 31
March 2004. This compares with net income in the first quarter of the prior year
of $10.2 million or $0.23 per share (diluted) and $0.23 per share (basic).
For the first quarter of 2004 there were 45,422,171 common shares outstanding on
a weighted average diluted basis compared to 44,940,152 common shares
outstanding for the first quarter of 2003 on the same weighted average diluted
basis.
Net income for the quarter ended 31 March 2004 of $13.9 million, adjusted for
the add-back of $1.9 million, representing non-cash expenses of depreciation,
amortization and other non-cash charges on a tax-effected basis ("cash
earnings"), was $15.8 million, or $0.35 per share (diluted). In the same quarter
of the prior year, cash earnings were $12.1 million (net income of $10.2 million
adjusted for the add-back of $1.9 million representing non-cash expenses of
depreciation, amortization and other non-cash charges on a tax effected basis),
or $0.27 per share (diluted).
Performance
Performance in the W.P. Stewart & Co., Ltd. U.S. Equity Composite (the
"Composite") for the first quarter of 2004 was +2.1% pre-fee and +1.8% post-fee.
For the twelve month period ending 31 March 2004, performance in the Composite
was +25.7%, pre-fee and +24.5% post-fee.
W.P. STEWART & CO., LTD.
W.P. Stewart's five-year performance for the period ended 31 March 2004 averaged
+0.1% pre-fee (-1.1% post-fee), compounded annually, compared to an average of
- -1.2% for the S&P 500 in the same period.
In each of the three, five and ten-year periods ended 31 March 2004, performance
of the W.P. Stewart U.S. equity composite has exceeded the performance of the
S&P 500.
Assets Under Management
Assets under management (AUM) at quarter-end were slightly above $8.5 billion,
compared with approximately $8.6 billion at 31 December 2003, and approximately
$7.3 billion at 31 March 2003.
Total net flows of AUM for the quarter ended 31 March 2004 were approximately
- -$139 million, compared with total net flows of approximately -$187 million and
approximately -$89 million in the fourth quarter and in the first quarter of
2003, respectively.
In the quarter, net cash flows of existing accounts were approximately -$10
million, compared with approximately -$43 million and approximately -$5 million
in the fourth quarter and in the first quarter of 2003, respectively.
Net new flows (net contributions to our publicly-available funds and flows from
new accounts minus closed accounts) were approximately -$129 million for the
quarter compared to approximately -$144 million and approximately -$84 million
in the fourth quarter and in the first quarter of 2003, respectively.
Look-Through Earning Power
W.P. Stewart & Co., Ltd. concentrates its investments in large, generally less
cyclical, growing businesses. Throughout most of the Company's 29-year history,
the growth
Trinity Hall, 43 Cedar Avenue, Hamilton HM 12, Bermuda
Mailing Address: P.O. Box HM 2905, Hamilton HM LX, Bermuda
2
W.P. STEWART & CO., LTD.
in earning power behind clients' portfolios has ranged from approximately 11% to
22%, annually.
Currently, portfolio earnings growth remains solidly positive and the Company's
research analysts expect portfolio earnings growth to be within the historical
range over the next few years.
Revenues and Profitability
Revenues were $35.5 million for the quarter ended 31 March 2004, up 19.4% from
$29.7 million for the same quarter 2003.
The average gross management fee was 1.21% for the quarter ended 31 March 2004,
compared to 1.22% in the same quarter of the prior year.
Total operating expenses increased 9.3%, to $20.1 million, for the first quarter
2004, from $18.4 million in the same quarter of the prior year.
Pre-tax income, of $15.4 million, was 43.5% of gross revenues for the quarter
ended 31 March 2004 compared to $11.4 million or 38.3% of gross revenues in the
comparable quarter of the prior year.
The Company's provision for taxes for the quarter ended 31 March 2004 was $1.5
million versus $1.1 million in the comparable quarter of the prior year. The tax
rate is 10% of income before taxes for both periods.
Other Events
The Company paid a dividend of $0.30 per common share on 30 January 2004 to
shareholders of record as of 15 January 2004, and will pay a dividend of $0.30
per common share on 30 April 2004 to shareholders of record as of 16 April 2004.
Trinity Hall, 43 Cedar Avenue, Hamilton HM 12, Bermuda
Mailing Address: P.O. Box HM 2905, Hamilton HM LX, Bermuda
3
W.P. STEWART & CO., LTD.
Conference Call
In conjunction with this first quarter 2004 earnings release, W.P. Stewart &
Co., Ltd. will host a conference call on Thursday, 29 April 2004. The conference
call will commence promptly at 9:15am (EDT). Those who are interested in
participating in the teleconference should dial 1-800-922-0755 (within the
United States) or +973-935-2405 (outside the United States). The conference ID
is "W.P. Stewart". To listen to the live broadcast of the conference over the
Internet, simply log on to the web at the following address:
http://www.firstcallevents.com/service/ajwz403936824gf12.html
The teleconference will be available for replay from Thursday, 29 April 2004 at
12:00 noon (EDT) through Friday, 30 April 2004 at 5:00 p.m. (EDT). To access the
replay, please dial 1-877-519-4471 (within the United States) or +973-341-3080
(outside the United States). The PIN number for accessing this replay is
4682562.
You will be able to access a replay of the Internet broadcast through Thursday,
6 May 2004, on the Company's website at http://www.wpstewart.com . The Company
will respond to questions submitted by e-mail, following the conference.
W.P. Stewart & Co., Ltd. is an asset management company that has provided
research-intensive equity management services to clients throughout the world
since 1975. The Company is headquartered in Hamilton, Bermuda and has additional
operations or affiliates in the United States, Europe and Asia.
The Company's shares are listed for trading on the New York Stock Exchange
(symbol: WPL) and on the Bermuda Stock Exchange (symbol: WPS).
Trinity Hall, 43 Cedar Avenue, Hamilton HM 12, Bermuda
Mailing Address: P.O. Box HM 2905, Hamilton HM LX, Bermuda
4
W.P. STEWART & CO., LTD.
For more information, please visit the Company's website at
http://www.wpstewart.com , or call W.P. Stewart Investor Relations (Fred M.
Ryan) at 1-888-695-4092 (toll-free within the United States) or + 441-295-8585
(outside the United States) or e-mail to IRINFO@wpstewart.com .
Statements made in this release concerning our assumptions, expectations,
beliefs, intentions, plans or strategies are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties that may cause actual results to
differ from those expressed or implied in these statements. Such risks and
uncertainties include, without limitation, the adverse effect from a decline or
volatility in the securities markets, a general downturn in the economy, the
effects of economic, financial or political events, a loss of client accounts,
inability of the Company to attract or retain qualified personnel, a challenge
to our U.S. tax status, competition from other companies, changes in government
policy or regulation, a decline in the Company's products' performance,
inability of the Company to implement its operating strategy, inability of the
Company to manage unforeseen costs and other effects related to legal
proceedings or investigations of governmental and self-regulatory organizations,
industry capacity and trends, changes in demand for the Company's services,
changes in the Company's business strategy or development plans and contingent
liabilities. The information in this release is as of the date of this release,
and will not be updated as a result of new information or future events or
developments.
# # #
Trinity Hall, 43 Cedar Avenue, Hamilton HM 12, Bermuda
Mailing Address: P.O. Box HM 2905, Hamilton HM LX, Bermuda
5
W.P. Stewart & Co., Ltd.
Net Flows of Assets Under Management*
(in millions)
For the Three Months Ended
----------------------------------------------
Mar. 31, 2004 Dec. 31, 2003 Mar. 31, 2003
------------- ------------- -------------
Existing Accounts:
Contributions $ 195 $ 185 $ 171
Withdrawals (205) (228) (176)
---------- ---------- ----------
Net Flows of Existing Accounts (10) (43) (5)
---------- ---------- ----------
Publicly Available Funds:
Contributions 51 32 49
Withdrawals (34) (54) (46)
Direct Accounts Opened 69 85 103
Direct Accounts Closed (215) (207) (190)
---------- ---------- ----------
Net New Flows (129) (144) (84)
---------- ---------- ----------
Net Flows of Assets Under Management $ (139) $ (187) $ (89)
========== ========== ==========
* The table above sets forth the total net flows of assets under management for
the three months ended March 31, 2004, December 31, 2003 and March 31, 2003,
respectively, which include changes in net flows of existing accounts and net
new flows (net contributions to our publicly available funds and flows from new
accounts minus closed accounts). The table excludes total capital appreciation
or depreciation in assets under management with the exception of the amount
attributable to withdrawals and closed accounts.
W.P. Stewart & Co., Ltd.
Unaudited Condensed Consolidated Statements of Operations
For the Three Months Ended % Change From
---------------------------------------------- -------------------------------
Mar. 31, 2004 Dec. 31, 2003 Mar. 31, 2003 Dec. 31, 2003 Mar. 31, 2003
------------- ------------- ------------- ------------- -------------
Revenue:
Fees $ 25,769,394 $ 24,064,692 $ 23,275,148 7.08% 10.72%
Commissions 9,411,293 4,935,532 5,901,074 90.68% 59.48%
Interest and other 333,707 328,407 565,359 1.61% -40.97%
------------ ------------ ------------ ------------ ------------
35,514,394 29,328,631 29,741,581 21.09% 19.41%
------------ ------------ ------------ ------------ ------------
Expenses:
Employee compensation and benefits 6,813,270 5,372,710 6,354,285 26.81% 7.22%
Fees paid out 1,730,524 1,540,182 1,368,899 12.36% 26.42%
Commissions, clearance and trading 1,974,840 1,066,542 1,201,559 85.16% 64.36%
Research and administration 3,736,397 3,646,302 3,724,619 2.47% 0.32%
Marketing 1,446,483 1,297,621 1,169,107 11.47% 23.73%
Depreciation and amortization 2,008,208 2,001,262 1,964,067 0.35% 2.25%
Other operating 2,363,217 1,988,878 2,581,671 18.82% -8.46%
------------ ------------ ------------ ------------ ------------
20,072,939 16,913,497 18,364,207 18.68% 9.30%
------------ ------------ ------------ ------------ ------------
Income before taxes 15,441,455 12,415,134 11,377,374 24.38% 35.72%
Provision for taxes 1,544,146 2,187,437 1,137,737 -29.41% 35.72%
------------ ------------ ------------ ------------ ------------
Net income $ 13,897,309 $ 10,227,697 $ 10,239,637 35.88% 35.72%
============ ============ ============ ============ ============
Earnings per share:
Basic earnings per share $ 0.31 $ 0.23 $ 0.23 34.78% 34.78%
============ ============ ============ ============ ============
Diluted earnings per share $ 0.31 $ 0.23 $ 0.23 34.78% 34.78%
============ ============ ============ ============ ============
W.P. STEWART & CO. LTD.
Contact: Fred M. Ryan
W.P. STEWART & CO., LTD. HOLDS
ANNUAL GENERAL MEETING OF SHAREHOLDERS
AND A
MEETING OF THE BOARD OF DIRECTORS
7 May 2004
Hamilton, Bermuda
W.P. Stewart & Co., Ltd. today held its Annual General Meeting of shareholders
in Hamilton, Bermuda.
A slate of six directors composed of William P. Stewart, John C. Russell, Angus
S. King, Jr., Henry B. Smith, Heinrich Spangler and Richard D. Spurling was
elected to the Board of Directors. A proposal that the maximum number of
directors be maintained at ten, and that the directors of the Company be
authorized to appoint new directors either to fill vacancies occurring in the
Board of Directors or to act as additional directors (up to the maximum of ten),
was also approved.
In commenting on the meeting, William P. Stewart, the Chairman and Chief
Executive Officer of the Company, thanked retiring Board members, Dr. Edgar
Brunner and Richard Breeden, who have been directors since June 1998, for their
service to the Company.
Mr. Stewart commented, "I am grateful to Dr. Brunner and Mr. Breeden for their
objective guidance and support. Their depth of experience, both with private and
public companies, has been of great assistance to us over the years and I wish
each of them every success in the future."
In other action, the shareholders also re-appointed PricewaterhouseCoopers LLP
as the Company's independent auditors for the fiscal year ended 31 December 2004
and until the close of the Annual General Meeting of the Company for 2005.
Following the Annual General Meeting, at a regular meeting of the Board of
Directors, Dominik M.F. Brunner was appointed to the Board, effectively
immediately.
Mr. Brunner is currently the Principal of FIRST CAPITAL INVESTMENTS LTD., a
private company he founded in 1997, providing investment-banking services to
European mid-sized enterprises. Also, in 1997, Mr. Brunner founded and operated
DOMINIK BRUNNER - SERVICOS FINANCEIROS, LDA (DBSF). DBSF provided financial
consulting in Portugal and acted as a representative of CLARIDEN BANK, a Credit
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W.P. STEWART & CO., LTD.
Suisse Group company. The operations of DBSF were sold to CLARIDEN BANK AG at
the end of 2003. From 1993 to 1997 Mr. Brunner was the Co-Managing Partner of
ESPIRITO SANTO DEVELOPMENT CAPITAL INVESTORS. LTD., a $100 million private
equity fund, sponsored by the Espirito Santo Group of Portugal and whose
investors included financial institutions from Europe, the Middle East and the
United States. Previously, Mr. Brunner was involved in the European chemicals
industry and the international trading industry as an executive and management
board member of several companies.
W.P. Stewart & Co., Ltd. is an asset management company that has provided
research- intensive equity management services to clients throughout the world
since 1975. The Company is headquartered in Hamilton, Bermuda and has additional
operations or affiliates in the United States, Europe and Asia.
The Company's shares are listed for trading on the New York Stock Exchange
(symbol: WPL) and on the Bermuda Stock Exchange (symbol: WPS).
For more information, please visit the Company's website at
http://www.wpstewart.com, or call W.P. Stewart Investor Relations (Fred M. Ryan)
at 1-888-695-4092 (toll-free within the United States) or +441-295-8585 (outside
the United States) or e-mail to IRINFO@wpstewart.com.
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