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 February, 2006
Commission File Number: 011-16245
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 if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)1: _______
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)7: _______
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.
See press release attached hereto dated January 31, 2006 regarding the Company's
fourth quarter and year end 2005 earnings.
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: February 1, 2006 By: /s/ Rocco Macri
---------------------------------
Name: Rocco Macri
Title: Managing Director &
Chief Operating Officer
2
[LETTERHEAD OF W.P. STEWART & CO., LTD.]
PRESS RELEASE
31 January, 2006
Hamilton, Bermuda
Contact: Fred Ryan
telephone: 441-295-8585
W.P. Stewart & Co., Ltd. Announces Fourth Quarter
and Year-End 2005 Financial Results
o Fourth quarter GAAP earnings of $0.06 per share (diluted) after
non-recurring, non-cash charge of $12.5 million ($0.27 per share,
diluted); GAAP earnings of $0.48 per share (diluted) in fourth quarter,
2004
o Full year GAAP earnings of $0.87 per share (diluted); GAAP earnings of
$1.39 per share (diluted) in 2004
o Cash earnings of $0.39 per share (diluted) for the fourth quarter ($0.52
per share, diluted, in fourth quarter 2004) and $1.38 per share (diluted)
for the full year ($1.56 per share, diluted, in 2004) - see GAAP
reconciliation statement below
o Investment performance continued strong in 2005; W.P. Stewart Holdings
N.V. receives top S&P award
o Flows impacted by third party business transaction, as previously
announced
W.P. Stewart & Co., Ltd. today reported earnings of $2.8 million, or $0.06
per share (diluted) and $0.06 per share (basic) for the fourth quarter ended 31
December 2005. These earnings reflect a fourth quarter non-recurring, non-cash
charge of approximately $12.5 million ($0.27 per share, diluted) reflecting an
impairment of customer-related intangible assets (see "Fourth Quarter 2005
Highlights" below). Excluding this charge, fourth quarter 2005 net income was
$15.2 million or $0.33 per share (diluted) and $0.33 per share (basic). These
results compare with net income in the
fourth quarter of the prior year of $21.8 million, or $0.48 per share (diluted)
and $0.48 per share (basic).
Fourth Quarter 2005 Highlights
As noted above, fourth quarter earnings included a non-recurring, non-cash
charge of approximately $12.5 million or $0.27 per share (diluted) related to an
impairment of customer-related intangible assets. This impairment reflects the
liquidation of certain customer accounts of a subsidiary company, wholly owned
by W.P. Stewart, as a result of a third party business transaction impacting the
related clients. The liquidation resulted in an outflow of approximately $200
million in assets under management the fees from which were supporting
customer-related intangible assets per the Financial Accounting Standards Board
(SFAS No. 142).
Subsequent to the notice leading to the liquidation of these related
accounts, one of the parties to the third party transaction opened a new account
and has begun to fund the account. As of 31 December 2005, assets totaling
approximately $50 million had been received in this new account.
Excluding this item, fourth quarter 2005 adjusted net income totaled $15.2
million or $0.33 per share (diluted).
Cash earnings for the quarter ended 31 December 2005 were $18.0 million
(net income of $2.8 million adjusted to include $15.2 million representing
non-cash expenses of depreciation, amortization and other non-cash charges,
including certain non-recurring charges, on a tax-effected basis), or $0.39 per
share (diluted). In the same quarter of the prior year, cash earnings were $23.9
million (net income of $21.8 million adjusted for the inclusion of $2.1 million
representing non-cash expenses of depreciation, amortization and other non-cash
charges on a tax-effected basis), or $0.52 per share (diluted).
Results for the fourth quarter include performance fees of approximately
$6.7 million ($14.5 million in 2004) of which approximately $5.4 million related
to the performance during 2005 ($13.5 million in 2004) of W.P. Stewart Holdings
N.V., our mutual fund listed on Euronext Amsterdam. Performance fees on other
accounts were approximately $1.3 million for 2005 ($1.0 million in 2004).
Assets under management at 31 December 2005 were approximately $9.5
billion, compared to approximately $9.6 billion at the end of the prior quarter,
a decrease of 1.1%, and an increase of 2.2% from approximately $9.3 billion
reported at 31 December 2004.
2
For the fourth quarter of 2005 there were 46,117,189 common shares
outstanding on a weighted-average diluted basis compared to 45,676,651 common
shares outstanding for the fourth quarter of 2004 on the same weighted-average
diluted basis.
Full Year Results
For the full year ended 31 December 2005, net income was down 37.4%,
compared to the prior year, to $40.1 million, or $0.87 per share (diluted) and
$0.88 per share (basic), on revenues of $147.9 million. Net income for the full
year ended 31 December 2004 was $63.1 million, or $1.39 per share (diluted) and
$1.40 per share (basic), on revenues of $152.3 million.
Net income and earnings per share for the full year 2005 include the
non-recurring, non cash charges detailed above. Net income for the full year
2005 on an adjusted basis to exclude this item was $52.5 million or $1.14 per
share (diluted).
Cash earnings for the full year ended 31 December 2005 were $63.4 million
(net income of $40.1 million adjusted to include $23.3 million, representing
non-cash expenses of depreciation, amortization and other non-cash charges,
including certain non-recurring charges, on a tax-effected basis), or $1.38 per
share (diluted). For the full year ended 31 December 2004, cash earnings were
$71.2 million (net income of $63.1 million adjusted for the inclusion of $8.1
million, representing non-cash expenses of depreciation, amortization and other
non-cash charges on a tax-effected basis), or $1.56 per share (diluted).
For the full year ended 31 December 2005, there were 45,951,546 common
shares outstanding on a weighted-average diluted basis compared to 45,524,043
common shares outstanding for the same period in 2004 on the same
weighted-average diluted basis.
Performance
Performance in the W.P. Stewart & Co., Ltd. U.S. Equity Composite (the
"Composite") for the fourth quarter of 2005 was 1.5%, pre-fee, and 1.2%,
post-fee. This compares with 2.1% for the S&P 500 For the full year ended 31
December 2005, performance in the Composite was 7.3%, pre-fee, and 6.2%,
post-fee. This compares with 4.9% for the S&P 500. In each of the one, three,
five and ten-year periods, ended 31 December 2005, performance of the Composite
has exceeded the performance of the S&P 500 on a pre-fee and a post-fee basis.
3
As previously announced, W.P. Stewart Holdings N.V. ("WPSH") received an
AAA Fund Management rating from Standard & Poor's ("S&P"), the highest rating
possible. The S&P review process, in advance of granting the AAA rating, is
based on an analysis of fund performance, the investment philosophy and process
and management's consistency of approach.
WPSH is an open-ended investment fund quoted and traded on Euronext
Amsterdam. As of 31 December 2005, net assets of the fund were US$926 million.
Assets Under Management
Assets under management ("AUM") at year-end were approximately $9.5
billion, compared with approximately $9.6 billion at 30 September 2005, and
approximately $9.3 billion reported at 31 December 2004.
Total net flows of AUM for the quarter ended 31 December 2005 were
approximately -$232 million, compared with total net flows of approximately
- -$346 million in the comparable quarter of 2004 and +$28 million in the third
quarter of 2005. Total net flows of AUM for the year ended 31 December 2005 and
31 December 2004 were approximately -$362 million and approximately -$621
million, respectively.
In the fourth quarter of 2005, net cash flows to existing accounts were
approximately +$17 million, compared with net cash flows of +$94 million in the
fourth quarter of 2004. Net cash flows to existing accounts were approximately
- -$48million and approximately +$60 million for the full years ended 30 December
2005 and 31 December 2004, respectively.
Net new flows (net contributions to our publicly-available funds and flows
from new accounts minus closed accounts) were approximately -$249 million for
the quarter, compared to approximately -$440 million for the same quarter of the
prior year. Net new flows were approximately -$314 million and approximately
- -$681 million for the full years ended 31 December 2005 and 31 December 2004,
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 history, the
growth in earning power behind clients' portfolios has ranged from approximately
11% to 22%, annually, and currently our
4
research analysts expect portfolio earnings growth to be within this historical
range over the next few years.
Revenues and Profitability
Revenues were $45.5 million for the quarter ended 31 December 2005, down
6.1% from $48.4 million, for the same quarter of 2004. Revenues for the full
years ended 31 December 2005 and 31 December 2004 were $147.9 million and $152.3
million, respectively.
The average gross management fee, excluding performance fees, was 1.15%
for the quarter ended 31 December 2005 and 1.17% for the year ended 31 December
2005, compared to 1.18% and 1.19% in each of the comparable periods of the prior
year.
Total operating expenses were $39.8 million for the fourth quarter 2005,
an increase of 70.4% from $23.4 million in the same quarter of the prior year.
Total operating expenses were $100.8 million and $81.3 million for the full
years ended 31 December 2005 and 31 December 2004, respectively. Total operating
expenses in the fourth quarter and for the full year 2005 include the $12.5
million non-recurring, non-cash charge detailed above.
During 2004 and 2005, the Company issued restricted stock to various
employees. The non-cash compensation expense related to these restricted stock
grants was approximately $1.0 million for the fourth quarter of 2005 ($350,000
for the fourth quarter of 2004) and approximately $3.3 million for the full-year
ended 31 December 2005 ($625,000 for the full year 2004). This non-cash
compensation expense is included in "employee compensation and benefits".
Pre-tax income, at $5.6 million, was 12.4% of gross revenues for the
quarter ended 31 December 2005, compared to $25.1 million or 51.7% of gross
revenues in the comparable quarter of the prior year. Pre-tax income was $47.1
million (31.9% of gross revenues) for the full year ended 31 December 2005, and
$71.0 million (46.6% of gross revenues) for the full year ended 31 December
2004. Excluding the non-recurring, non-cash charge, pre-tax income would have
been $18.1 million or 39.8% of gross revenues and $59.5 million or 40.3% of
gross revenues for each of the fourth quarter and full year of 2005,
respectively.
The Company's provision for taxes for the quarter ended 31 December 2005
was $2.9 million versus $3.3 million in the comparable quarter of the prior
year, and was $7.0 and $7.9 million for the years ended 31 December, 2005 and 31
December 2004, respectively.
5
On a GAAP basis, the tax rate in the fourth quarter of 2005 was 50.9% of
income before taxes and 15% for the full year ended 31 December 2005. Adjusted
for the non-cash, non-recurring impairment charge noted above, the tax rate was
15.9% and 11.8% in the fourth quarter and full year of 2005, respectively.
Other Events
The Company paid a dividend of $0.30 per common share on 27 January, 2006
to shareholders of record as of 13 January, 2006.
Conference Call
In conjunction with this fourth quarter and full year 2005 earnings
release, W.P. Stewart & Co., Ltd. will host a conference call on Tuesday, 31
January 2006. The conference call will commence promptly at 9:15am (EST) and
will conclude at 10:00am (EST). Those who are interested in participating in the
teleconference should dial 1-800-370-0898 (within the United States) or
+973-409-9260 (outside the United States). The conference ID is "W.P. Stewart".
To listen to the live broadcast of the conference over the Internet,
simply visit our website at http://www.wpstewart.com and click on the Investor
Relations tab for a link to the web-cast.
The teleconference will be available for replay from Tuesday 31 January,
2006 at 12:00 noon (EST) through Wednesday, 1 February, 2006 at 5:00 p.m. (EST).
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 6898586.
You will be able to access a replay of the Internet broadcast through
Tuesday, 7 February, 2006, on the Company's website at www.wpstewart.com. The
Company will respond to questions submitted by e-mail, following the conference.
The Company
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.
6
The Company's shares are listed for trading on the New York Stock Exchange
(NYSE: WPL) and on the Bermuda Stock Exchange (BSX: WPS).
For more information, please visit the Company's website at
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.
7
W.P. Stewart & Co., Ltd.
Unaudited Condensed Consolidated Statements of Operations
For the Three Months Ended % Change From
----------------------------------------------- ------------------------------
Dec. 31, 2005 Sept. 30, 2005 Dec. 31, 2004 Sept. 30, 2005 Dec. 31, 2004
------------- -------------- ------------- -------------- -------------
Revenue:
Fees $ 34,339,458 $ 25,716,931 $ 38,917,688 33.53% -11.76%
Commissions 10,087,334 7,278,100 8,908,412 38.60% 13.23%
Interest and other 1,035,520 690,266 605,813 50.02% 70.93%
------------- ------------- ------------- ------------- -------------
45,462,312 33,685,297 48,431,913 34.96% -6.13%
------------- ------------- ------------- ------------- -------------
Expenses:
Employee compensation and benefits 12,575,819 7,118,277 9,686,277 76.67% 29.83%
Fees paid out 2,973,947 2,056,673 2,488,725 44.60% 19.50%
Commissions, clearance and trading 2,103,729 1,779,427 1,800,255 18.23% 16.86%
Research and administration 3,517,898 3,587,671 3,712,891 -1.94% -5.25%
Marketing 1,600,230 1,216,257 1,835,205 31.57% -12.80%
Depreciation and amortization 14,504,288 2,058,776 2,009,392 604.51% 621.82%
Other operating 2,545,850 2,269,163 1,836,197 12.19% 38.65%
------------- ------------- ------------- ------------- -------------
39,821,761 20,086,244 23,368,942 98.25% 70.40%
------------- ------------- ------------- ------------- -------------
Income before taxes 5,640,551 13,599,053 25,062,971 -58.52% -77.49%
Provision for taxes 2,868,987 1,384,429 3,258,026 107.23% -11.94%
------------- ------------- ------------- ------------- -------------
Net income $ 2,771,564 $ 12,214,624 $ 21,804,945 -77.31% -87.29%
============= ============= ============= ============= =============
Earnings per share:
Basic earnings per share $ 0.06 $ 0.27 $ 0.48 -77.78% -87.50%
============= ============= ============= ============= =============
Diluted earnings per share $ 0.06 $ 0.27 $ 0.48 -77.78% -87.50%
============= ============= ============= ============= =============
W.P. Stewart & Co., Ltd.
Unaudited Condensed Consolidated Statements of Operations
For the Year Ended December 31,
----------------------------------------------
2005 2004 %
------------- ------------- -------------
Revenue:
Fees $ 113,197,833 $ 116,005,500 -2.42%
Commissions 31,889,805 34,819,726 -8.41%
Interest and other 2,767,217 1,496,179 84.95%
------------- ------------- -------------
147,854,855 152,321,405 -2.93%
------------- ------------- -------------
Expenses:
Employee compensation and benefits 34,152,799 29,102,102 17.36%
Fees paid out 9,058,834 7,760,372 16.73%
Commissions, clearance and trading 6,993,204 7,371,412 -5.13%
Research and administration 14,399,422 14,781,318 -2.58%
Marketing 5,540,294 5,617,923 -1.38%
Depreciation and amortization 20,659,198 8,038,837 156.99%
Other operating 9,959,838 8,648,979 15.16%
------------- ------------- -------------
100,763,589 81,320,943 23.91%
------------- ------------- -------------
Income before taxes 47,091,266 71,000,462 -33.67%
Provision for taxes 7,038,582 7,851,775 -10.36%
------------- ------------- -------------
Net income $ 40,052,684 $ 63,148,687 -36.57%
============= ============= =============
Earnings per share:
Basic earnings per share $ 0.88 $ 1.40 -37.14%
============= ============= =============
Diluted earnings per share $ 0.87 $ 1.39 -37.41%
============= ============= =============
W.P. Stewart & Co., Ltd.
Net Flows of Assets Under Management*
(in millions)
For the Three Months Ended For the Year Ended
----------------------------------------------- ------------------------------
Dec. 31, 2005 Sept. 30, 2005 Dec. 31, 2004 Dec. 31, 2005 Dec. 31, 2004
------------- -------------- ------------- ------------- -------------
Existing Accounts:
Contributions $ 260 $ 245 $ 377 $ 988 $ 912
Withdrawals (243) (222) (283) (1,036) (852)
------------ ------------ ------------ ------------ ------------
Net Flows of Existing Accounts 17 23 94 (48) 60
------------ ------------ ------------ ------------ ------------
Publicly Available Funds:
Contributions 85 55 44 256 203
Withdrawals (38) (18) (72) (149) (172)
Direct Accounts Opened 114 23 75 312 228
Direct Accounts Closed (410) (55) (487) (733) (940)
------------ ------------ ------------ ------------ ------------
Net New Flows (249) 5 (440) (314) (681)
------------ ------------ ------------ ------------ ------------
Net Flows of Assets Under Management $ (232) $ 28 $ (346) $ (362) $ (621)
============ ============ ============ ============ ============
* The table above sets forth the total net flows of assets under management
for the three months ended December 31, 2005, September 30, 2005 and
December 31, 2004, respectively, and for the years ended December 31, 2005
and 2004, 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.