REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of June, 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.
Form 6-K: Table of Contents
1. Unaudited Condensed Consolidated Financial Statements of W.P. Stewart &
Co., Ltd. as of March 31, 2006 and for the three months ended March 31,
2006 and 2005
2. Interim Financial Report
3. Exhibit - Press release dated April 27, 2006
4. Exhibit - Press release dated May 10, 2006
5. Exhibit - Press release dated June 15, 2006
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, or inability to implement, business strategy or
development plans;
o changes in the laws and/or regulatory circumstances in Bermuda, the
United States, the United Kingdom, Ireland, The Netherlands or other
jurisdictions;
o the adverse effect from a decline or volatility in the securities
market in general or our products' performance;
o changes in contingent liabilities;
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.
Unaudited Condensed Consolidated Statements of Financial Condition
March 31, December 31,
2006 2005
--------------- ---------------
(unaudited)
Assets:
Cash and cash equivalents $ 67,625,934 $ 64,566,799
Fees receivable 5,339,016 4,530,566
Receivable from clearing broker 884,591 975,603
Investments in unconsolidated affiliates (net of accumulated amortization
of $432,453 and $411,860 at March 31, 2006 and December 31, 2005, respectively) 3,861,043 3,829,391
Receivables from affiliates, net 416,942 6,006,088
Investments, available for sale (cost $9,012,995 and $8,861,345 [primarily municipal
securities] at March 31, 2006 and December 31, 2005, respectively) 8,850,986 8,756,877
Investment in aircraft (net of accumulated depreciation of $21,700,474 and $21,450,140
at March 31, 2006 and December 31, 2005, respectively) 751,001 1,001,335
Goodwill 5,631,797 5,631,797
Intangible assets (net of accumulated amortization of $37,599,004 and $36,513,924
at March 31, 2006 and December 31, 2005, respectively) 48,232,456 49,317,537
Furniture, equipment, software and leasehold improvements (net of accumulated
depreciation and amortization of $5,832,436 and $5,621,096 at March 31, 2006
and December 31, 2005, respectively) 3,414,427 3,432,340
Interest receivable on shareholders' notes 39,680 40,700
Income taxes receivable 1,989,846 1,464,058
Other assets 2,685,891 3,027,281
--------------- ---------------
$ 149,723,610 $ 152,580,372
=============== ===============
Liabilities and Shareholders' Equity:
Liabilities:
Loans payable $ 15,208,962 $ 15,412,341
Employee compensation and benefits payable 1,574,408 4,213,626
Fees payable 3,095,476 3,097,377
Vendor payables 4,220,463 3,057,694
Accrued expenses and other liabilities 4,900,000 4,900,000
-------------- ---------------
28,999,309 30,681,038
-------------- ---------------
Minority Interest 281,063 254,348
-------------- ---------------
Shareholders' Equity:
Common shares, $0.001 par value (125,000,000 shares authorized; 47,338,407 and
46,837,855 shares issued and outstanding at March 31, 2006 and December 31,
2005, respectively) 47,338 46,838
Additional paid-in-capital 110,129,427 99,302,120
Unearned compensation (24,848,129) (13,856,472)
Accumulated other comprehensive income 397,944 429,924
Retained earnings 36,259,086 37,519,609
--------------- ---------------
121,985,666 123,442,019
Less: notes receivable for common shares (1,542,428) (1,797,033)
--------------- ---------------
120,443,238 121,644,986
--------------- ---------------
$ 149,723,610 $ 152,580,372
=============== ===============
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, 2006 and 2005
2006 2005
-------------- --------------
Revenue:
Fees (includes fees from affiliates of $1,424,799 and $1,191,351
for 2006 and 2005, respectively) $ 27,187,308 $ 27,235,901
Commissions 8,260,794 7,189,398
Interest and other 798,077 408,497
-------------- --------------
36,246,179 34,833,796
-------------- --------------
Expenses:
Employee compensation and benefits 7,738,837 7,227,596
Fees paid out 2,174,908 1,887,350
Commissions, clearance and trading 1,642,079 1,486,802
Research and administration 3,629,544 3,736,034
Marketing 1,711,094 1,539,959
Depreciation and amortization 1,575,794 2,043,389
Other operating 2,762,137 2,678,969
-------------- --------------
21,234,393 20,600,099
-------------- --------------
Income before taxes 15,011,786 14,233,697
Provision for taxes 2,347,675 1,423,370
-------------- --------------
Net income $ 12,664,111 $ 12,810,327
============== ==============
Earnings per share:
Basic earnings per share $ 0.28 $ 0.28
============== ==============
Diluted earnings per share $ 0.28 $ 0.28
============== ==============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
W.P. Stewart & Co., Ltd.
Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity
For the Three Months Ended March 31, 2006 and 2005
Common Shares Additional
--------------------------- Paid-In Unearned
Shares Amount Capital Compensation
------------ ------------ -------------- --------------
Balance @ December 31, 2005 46,837,855 $ 46,838 $ 99,302,120 $ (13,856,472)
Issuance of common shares, @ $0.001 par value
Cash
Notes receivable
Restricted shares 667,500 667 14,070,233 (14,070,900)
Repurchase and cancellation of common
shares, @ $0.001 par value (33,786) (34) (557,435)
Cancellation of common shares, @ $0.001
par value (6,010) (6) (77,612)
Forfeiture of common shares, @ $0.001
par value (127,152) (127) (2,800,610) 2,800,737
Non-cash compensation 192,731 278,506
Net income
Dividends ($0.30 per share)
Other comprehensive income
Proceeds from notes receivable
for common shares
------------ ------------ -------------- --------------
Balance @ March 31, 2006 47,338,407 $ 47,338 $ 110,129,427 $ (24,848,129)
============ ============ ============== ==============
Balance @ December 31, 2004 46,113,462 $ 46,113 $ 82,344,878 $ (2,084,325)
Issuance of common shares, @ $0.001 par value
Cash 5,150 5 106,271
Notes receivable
Restricted shares 282,035 282 6,319,820 (6,320,102)
Cancellation of common shares, @ $0.001
par value (161) -- (2,651)
Non-cash compensation 153,779 606,250
Net income
Dividends ($0.30 per share)
Other comprehensive income
Proceeds from notes receivable
for common shares
------------ ------------ -------------- --------------
Balance @ March 31, 2005 46,400,486 $ 46,400 $ 88,922,097 $ (7,798,177)
============ ============ ============== ==============
Accumulated
Other
Comprehensive Retained Notes
Income Earnings Receivable Total
-------------- ------------- ------------- --------------
Balance @ December 31, 2005 $ 429,924 $ 37,519,609 $ (1,797,033) $ 121,644,986
Issuance of common shares, @ $0.001 par value
Cash --
Notes receivable --
Restricted shares --
Repurchase and cancellation of common
shares, @ $0.001 par value (557,469)
Cancellation of common shares, @ $0.001
par value 77,618 --
Forfeiture of common shares, @ $0.001
par value --
Non-cash compensation 77,582 548,819
Net income 12,664,111 12,664,111
Dividends ($0.30 per share) (14,002,216) (14,002,216)
Other comprehensive income (31,980) (31,980)
Proceeds from notes receivable
for common shares 176,987 176,987
-------------- ------------- ------------- --------------
Balance @ March 31, 2006 $ 397,944 $ 36,259,086 $ (1,542,428) $ 120,443,238
============== ============= ============= ==============
Balance @ December 31, 2004 $ 984,626 $ 53,204,705 $ (3,066,716) $ 131,429,281
Issuance of common shares, @ $0.001 par value
Cash 106,276
Notes receivable --
Restricted shares --
Cancellation of common shares, @ $0.001
par value 2,651 --
Non-cash compensation 760,029
Net income 12,810,327 12,810,327
Dividends ($0.30 per share) (13,839,601) (13,839,601)
Other comprehensive income (155,801) (155,801)
Proceeds from notes receivable
for common shares 440,400 440,400
-------------- ------------- ------------- --------------
Balance @ March 31, 2005 $ 828,825 $ 52,175,431 $ (2,623,665) $ 131,550,911
============== ============= ============= ==============
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, 2006 and 2005
2006 2005
------------- -------------
Cash flows from operating activities:
Net income $ 12,664,111 $ 12,810,327
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain)/loss on sale of available for sale securities (35,665) (9,556)
Unrealized (gain)/loss on available for sale securities (4,860) --
Amortization of bond premium 108,316 64,875
Depreciation and amortization 1,575,794 2,043,389
Equity in income of unconsolidated affiliates (52,245) 116,438
Non-cash compensation 548,819 760,029
Minority interest 26,715 --
Changes in operating assets and liabilities:
Fees receivable (808,450) 557,183
Receivable from clearing broker 91,012 (979,599)
Receivables from affiliates, net 5,589,146 13,505,940
Income taxes receivable (525,788) (1,325,653)
Interest receivable on shareholders' notes 1,020 3,917
Other assets 341,390 1,002,300
Employee compensation and benefits payable (2,639,218) (4,534,452)
Fees payable (1,901) (839,294)
Vendor payables 1,162,769 (70,450)
------------- -------------
Net cash provided by operating activities 18,040,965 23,105,394
------------- -------------
Cash flows (used for) investing activities:
Proceeds from sale of available for sale securities 1,720,664 1,684,557
Purchase of available for sale securities (1,955,484) (2,342,392)
Investment in unconsolidated affiliate -- --
Cash dividends paid on shares subject to repurchase -- --
Purchase of furniture, equipment, software and leasehold improvements (201,872) (208,742)
------------- -------------
Net cash (used for) investing activities (436,692) (866,577)
------------- -------------
Cash flows (used for) financing activities:
Payments on loans payable (203,379) (197,090)
Proceeds from issuance of common shares -- 106,276
Repurchase of common shares (557,469) --
Proceeds from notes receivable for common shares 176,987 440,400
Dividends to shareholders (14,002,216) (13,839,601)
------------- -------------
Net cash (used for) financing activities (14,586,077) (13,490,015)
Effect of exchange rate changes in cash 40,939 (89,038)
------------- -------------
Net increase in cash and cash equivalents 3,059,135 8,659,764
Cash and cash equivalents, beginning of period 64,566,799 51,859,146
------------- -------------
Cash and cash equivalents, end of period $ 67,625,934 $ 60,518,910
============= =============
Supplemental disclosures of cash flows information
Cash paid during the period for:
Income taxes $ 3,080,767 $ 2,747,128
============= =============
Interest $ 246,789 $ 192,121
============= =============
Supplemental Schedule of Non-Cash Investing and Financing Activities:
The Company cancelled outstanding notes of $77,618 and $2,651 for the three
months ended March 31, 2006 and 2005, respectively (see Note 8).
The Company issued 667,500 and 282,035 common shares for the three months ended
March 31, 2006 and 2005, recorded with a fair value of $14,070,900 and
$6,320,102, respectively, and cancelled 127,152 forfeited restricted common
shares for the three months ended March 31, 2006 recorded with a fair value of
$2,800,737 (see Note 11).
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, 2005.
The condensed consolidated financial information as of and for the year ended
December 31, 2005 has been derived from audited consolidated financial
statements not included herein. Certain reclassifications have been made to
prior-period amounts to conform to the current-year presentation. All material
inter-company 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, 2006 are not
necessarily indicative of results that may be expected for the entire year or
any other period.
For the three months ended March 31, 2006 and 2005, the consolidated Company
consisted of several worldwide affiliated entities under common control, which
provide investment advisory and related services including securities brokerage.
NOTE 2: 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 specified that 80%
of the Company's common shares issued in connection therewith could 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
were July 1, 2001, 2002, 2003 and 2004, if assets under management which were
part of the acquisitions decreased below defined reference amounts at the
specified dates and were not replaced.
The recorded purchase price for each acquisition was 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.
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
6
dates on which the contingently returnable shares ceased to be subject to
repurchase, the contra-equity account was relieved and any difference between
the initial issue price and the then current fair value of the shares was
charged or credited to additional paid-in capital, and the purchase price was
adjusted for the fair value of the shares. Cash dividends on shares no longer
subject to repurchase were recorded as a reduction of shareholders' equity.
Intangible assets arising from the Company's business acquisitions are comprised
primarily of customer relationships.
The following table shows information for each acquisition as of and for the
three months ended March 31, 2006.
Aggregate Shares Not Purchase Intangible
Number of Subject to Price Amortization
Acquisition Shares Repurchase Allocation for the Period
----------- ----------- ----------- ------------ --------------
TPRS 1,966,000 1,966,000 $ 42,367,772 $ 649,158
NSMM 863,831 863,831 17,042,406 --
FLII 1,200,000 1,200,000 23,703,088 384,070
----------- ----------- ------------ --------------
4,029,831 4,029,831 $ 83,113,266 $ 1,033,228
=========== =========== ============ ==============
The following table shows information for each acquisition as of and for the
year ended December 31, 2005.
Aggregate Shares Not Purchase Intangible
Number of Subject to Price Amortization
Acquisition Shares Repurchase Allocation for the Year
----------- ----------- ----------- ------------ --------------
TPRS 1,966,000 1,966,000 $ 42,367,772 $ 2,596,633
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 4,029,831 $ 83,113,266 $ 5,086,751
=========== =========== ============ ==============
7
NOTE 3: EARNINGS PER SHARE
Three Months Ended March 31,
-----------------------------
2006 2005
------------- -----------
Basic Earnings Per Share:
Net income $ 12,664,111 $12,810,327
============= ===========
Weighted average basic shares outstanding 45,844,791 45,491,565
------------- -----------
Net income per share $ 0.28 $ 0.28
============= ===========
Diluted Earnings Per Share:
Net income $ 12,664,111 $12,810,327
============= ===========
Weighted average basic shares outstanding 45,844,791 45,491,565
============= ===========
Add: Unvested shares, contingently returnable shares,
unvested options, vested unexercised options and
dilutive potentially issuable common shares 96,478 369,699
------------- -----------
Weighted average diluted shares outstanding 45,941,269 45,861,264
------------- -----------
Net income per share $ 0.28 $ 0.28
============= ===========
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, vested unexercised options and
potentially issuable common shares. 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,
vested unexercised options issued to employees of the Company or its affiliates
and potentially issuable common shares using the treasury stock method.
On March 31, 2006 and 2005, respectively, 47,338,407 and 46,400,486 shares were
issued and outstanding. The shareholders of record are entitled to full voting
rights and dividends on these shares; 1,493,615 and 906,947 of these shares were
unvested and held by the Company's or affiliates' employees on March 31, 2006
and 2005, 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,
-------------------------------
2006 2005
-------------- --------------
Net income $ 12,664,111 $ 12,810,327
Other comprehensive income, net of tax:
Reclassification adjustment for unrealized gains / (losses) on
available for sale securities included in interest and other 19,867 15,731
Unrealized (losses) / gains on available for sale securities (92,786) (82,494)
Foreign currency translation adjustment 40,939 (89,038)
-------------- --------------
Comprehensive income $ 12,632,131 $ 12,654,526
============== ==============
NOTE 5: RELATED PARTY TRANSACTIONS
Research and administrative expenses include travel expenses of $439,464 and
$600,505 for the three months ended March 31, 2006 and 2005, 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 $752,514
and $787,008 for the three months ended March 31, 2006 and 2005, 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 $40,419 and $37,132 for the three months ended March 31, 2006 and 2005,
respectively. These amounts are based upon the actual space utilized in each of
those periods.
The Company pays solicitation fees in respect of certain accounts and an amount
calculated on the basis of a portion of the brokerage commissions paid by
certain accounts, as directed by those clients to a beneficial owner of a
minority interest of the Company. Such payments amounted to $2,019 and $1,595
for the three months ended March 31, 2006 and 2005, respectively.
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 $426,766 and
$281,441 for the three months ended March 31, 2006 and 2005, 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, 2006 and 2005 were $1,711
and $1,507, respectively.
9
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
$212,312 and $173,107 for the three months ended March 31, 2006 and 2005,
respectively.
The Company paid Appleby Spurling Hunter & Appleby Corporate Services (formerly
Appleby, Spurling & Kempe and A.S. & K. Services Ltd.), of which, prior to March
31, 2005 one of the Company's directors was a senior partner, fees for various
legal, corporate administrative and secretarial services. Such fees for services
amounted to $3,552 for the three months ended March 31, 2005.
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 $2,257,229 and $3,006,395
for the three months ended March 31, 2006 and 2005, 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, prior to 2004 one of the Company's directors was the Chief
Executive Officer. Such director remains a non-executive director of The Bank of
Bermuda and during the period from May 2005 through March 31, 2006 was as an
executive officer of the Company. 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, 2006 and 2005.
Included in receivables from affiliates, net, at March 31, 2006 and 2005 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, 2005 is the amount of
$879,001, which was an investment 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, 2006 and 2005 is rent expense in the amounts of $45,703 and $49,815,
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, 2006
and 2005, are contributions in the amounts of $125,000 and $102,500,
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 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
10
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 $246,580 and $180,436 for the three
months ended March 31, 2006 and 2005, respectively.
NOTE 7: COMMITMENTS AND CONTINGENCIES
At March 31, 2006, 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, 2006
and 2005.
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, 2006, 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.
W.P. Stewart Asset Management Ltd. ("WPSAM") serves as investment adviser to
W.P. Stewart Holdings N.V. ("WPSH NV"), our mutual fund listed on Euronext
Amsterdam. This fund pays WPSAM a fixed fee of 25 basis points per annum and a
10% performance fee. As per the terms of the investment advisory agreement, the
performance fee is payable annually in arrears and is calculated as 10% of the
change in WPSH NV's net asset value per share from valuation date to valuation
date, multiplied by the number of shares outstanding as of the earlier of the
two dates. However, if the calculation were to produce a negative figure, that
amount would be treated as a credit against future performance fees. If the
advisory agreement were to be terminated by the investment adviser, the
remaining negative balance, if any, would have to be paid back to WPSH NV by the
investment adviser. At March 31, 2006, there is no intention by WPSAM, the
investment adviser, to terminate the investment advisory agreement nor is there
any negative balance.
The Company has committed to make future issuances of 800,000 common shares as
non-cash incentive employee compensation. The commitments made by the Company to
issue such shares are conditioned upon the satisfaction of certain individual
employee performance conditions relating to Company profitability, investment
performance or both. Any shares that may be issued by the Company in the future
in satisfaction of those commitments will be restricted shares. When issued,
these restricted shares will remain subject to vesting requirements over time,
with limited exceptions permitting accelerated or immediate vesting. The
dilutive effect of these potentially issuable common shares 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").
11
The Company is involved in a legal action with a vendor arising in the ordinary
course of business. Management believes, based on currently available
information, that the results of such proceedings 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 or director 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, 2006, 6,010 unvested common shares of former employees were
repurchased and their installment notes totaling $77,618 were abated.
Future minimum payments, expected to be received, on notes receivable for common
shares as of March 31, 2006 are as follows:
2006 (9 months) $ 447,007
2007 454,181
2008 382,477
2009 193,851
2010 52,238
Thereafter (through 2011) 12,674
------------
$ 1,542,428
============
Interest income on all such notes was $34,497 and $56,915 for the three months
ended March 31, 2006 and 2005, respectively.
NOTE 9: 2001 EMPLOYEE EQUITY INCENTIVE PLAN
The W.P. Stewart & Co., Ltd. 2001 Employee Equity Incentive Plan, as amended
(the "Plan") provided 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 is
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 SFAS No. 128.
As provided in the Plan, as of July 24, 2004 no further grants may be awarded
under the Plan. However, all previously issued grants will extend beyond that
date as expressly provided for in the Plan documents.
During the three months ended March 31, 2005, pursuant to the terms of the Plan,
4,950 and 200 vested employee share options granted in 2001 and 2002,
respectively, were exercised for an aggregate amount of $106,276.
During the three months ended March 31, 2006, pursuant to the terms of the Plan,
105,851 and 9,285 unexercised options granted in 2001 and 2002, respectively,
were forfeited by former employees of the Company. For the three months ended
March 31, 2005, pursuant to the terms of the Plan, 342 unexercised options
granted in 2001 were forfeited by former employees of the Company.
12
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 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, 2006 and 2005, for share options granted in
2003, was $961 and $1,118, respectively. There were no share options granted
during 2004, 2005 or during the three months ended March 31, 2006.
The options outstanding as of March 31, 2006 and 2005 for grants awarded during
the year ended December 31, 2003, are set forth below:
Weighted Average
Options Remaining Contractual Weighted Average
March 31, Exercise Prices Outstanding Life (Years) Exercise Price
- --------- --------------- ----------- --------------------- ----------------
2006 $20.20 65,250 5 $20.20
2005 $20.20 65,250 6 $20.20
Share options granted for all periods prior to January 1, 2003 were 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.
In December 2004, the Financial Accounting Standards Board ("FASB") published
Statement of Financial Accounting Standards No. 123 (Revised 2004), "Share-Based
Payment" ("SFAS No. 123R"). SFAS No. 123R requires that compensation cost
related to share-based payment transactions be recognized in the financial
statements. Share-based payment transactions within the scope of SFAS No. 123R
include stock options, restricted share awards, certain performance-based
awards, share appreciation rights, and employee share purchase plans. The
Company has adopted the revised standard as of January 1, 2005 (See Note 11).
The effect of adopting SFAS No. 123R resulted in an increase in compensation
expense for the three months ended March 31, 2006 and 2005 of $122,092 and
$53,039, respectively.
13
The options outstanding as of March 31, 2006 and 2005 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 - $25.65 332,845 3 $20.84
$16.58 - $28.42 338,308 4 $22.08
-----------
2006 671,153
===========
$20.80 - $25.65 667,248 4 $20.90
$16.58 - $28.42 422,724 5 $21.86
-----------
2005 1,089,972
===========
Options exercisable at March 31, 2006 and 2005 were 175,568 and 203,169,
respectively.
NOTE 11: RESTRICTED SHARES
During the three months ended March 31, 2006, 22,500 restricted shares were
granted to certain non-employee directors of the Company and 645,000 restricted
shares were granted as employee non-cash compensation.
During the three months ended March 31, 2006, 127,152 restricted shares were
forfeited by former employees of the Company. Non-cash compensation of $616,835
relating to the forfeited shares that had been charged to compensation expense
prior to January 1, 2006, was reversed during the three months ended March 31,
2006 and dividends of $77,582 paid on those forfeited shares prior to January 1,
2006, was charged to compensation expense during the three months ended March
31, 2006.
During the three months ended March 31, 2005, 19,500 restricted shares were
granted to certain non-employee directors of the Company and 262,535 restricted
shares were granted as employee non-cash compensation.
These shares are subject to vesting schedules and resale restrictions set forth
in the associated Restricted Share Agreements. Unearned compensation equivalent
to the market value of the shares at the date of grant was charged to
shareholder's equity as of that date and is being amortized over the one through
five year vesting periods as specified in the terms of the individual Restricted
Share Agreements. Compensation expense resulting from the amortization of the
unearned compensation for the three months ended March 31, 2006 and 2005 was
$278,505 and $606,250, respectively.
NOTE 12: 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.
14
The Company's effective tax rate is driven by the tax jurisdictions in which it
conducts business and to the extent the jurisdictions in which it conducts
activities changes, the effective tax rate will change accordingly.
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/(benefit), all current, for the periods ended March 31,
2006 and 2005 is as follows:
Three Months Ended March 31,
----------------------------
2006 2005
------------ -----------
US:
Federal $ 1,932,955 $ 1,135,446
State and local 619,049 284,993
------------ -----------
2,552,004 1,420,439
Other: (204,329) 2,931
------------ -----------
$ 2,347,675 $ 1,423,370
============ ===========
NOTE 13: PENSION BENEFITS
Total employer contributions amounted to $770,822 and $762,773 for the three
months ended March 31, 2006 and 2005, respectively. Participants are immediately
vested in their account balances.
NOTE 14: 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,
----------------------------
2006 2005
----------- -----------
U.S. $19,302,116 $19,537,828
Non-U.S 7,885,192 7,698,073
----------- -----------
Total $27,187,308 $27,235,901
=========== ===========
NOTE 15: SUBSEQUENT EVENTS
On April 3, 2006, the Company declared a dividend of $0.30 per share to
shareholders of record as of April 13, 2006, payable on April 28, 2006 in the
aggregate amount of $14,260,022.
On April 12, 2006, 70,000 restricted shares were granted to an employee at a
value of $20.59 per share.
15
Operating and Financial Review and Prospects
Overview
W.P. Stewart & Co., Ltd., together with its subsidiaries, is a
research-focused investment adviser 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
general policy is to bill clients quarterly, in advance. Under certain client
contracts, we are entitled to receive performance fees when the return on assets
under management exceeds specified benchmark returns or other performance
targets. Performance fees are recorded as of the date on which the performance
period ends.
Another component of our revenues is brokerage commissions. Commission
revenues earned on our brokerage activities, substantially all of which relate
to client accounts, vary with account trading activity, account market value and
new account generation. Therefore, commission revenue is also affected by market
conditions.
Interest and other revenue primarily consists of interest earned on our
cash management activities, interest earned on notes receivable for employee
purchases of common shares, investment and foreign currency gains and losses,
subscription fees earned from our mutual funds 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 substantially all employees varies
with operating profit. At the beginning of each year, any such employee is
allocated a participation in our compensation pool. Certain employees may also
be eligible for other cash or non-cash incentive compensation. Compensation paid
depends upon our actual operating profit, as adjusted for amortization of
intangibles, non-cash compensation 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 within a targeted range of adjusted operating profit.
Compensation expense for employees participating in the compensation pool was
approximately 26% of adjusted operating profit for the year ended December 31,
2005. It is currently anticipated that compensation expense for the year ending
December 31, 2006 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 and
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.
16
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.
Marketing expenses represent costs associated with our internal marketing
initiatives and client servicing activities, and include client seminars,
marketing related travel, marketing related compensation and other operational
expenses.
Other operating expenses include professional fees consisting of auditing,
tax, legal and consulting fees, charitable contributions and other
administration expenses.
Our effective tax rate is driven by the tax jurisdictions in which we
conduct business activity, and to the extent that these activities may change,
our tax rate may vary accordingly.
Substantially 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.
Critical Accounting Policies
Goodwill and Intangible Assets Our condensed consolidated statement of financial
condition includes substantial assets in the form of goodwill and intangible
assets. We account for those assets in accordance with Statement of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." The
intangible assets were among the assets that we acquired in the business
acquisitions described in Note 2 of our condensed consolidated financial
statements included with this report. We amortize the intangible assets on a
straight-line basis over their estimated useful lives, which range from five to
20 years. We test the carrying values of these assets for impairment annually
and whenever events or changes in circumstances indicate that such values may
not be recoverable. There would be an impairment loss if and to the extent that
the sum of the assets' expected future undiscounted cash flows were to be less
than their carrying values. We acquired goodwill in our acquisition of TPR &
Partners N.V. Goodwill is the excess of the total acquisition cost over the fair
value of the net assets on the date of the acquisition. We do not amortize
goodwill, but we test it annually for impairment. If we were to experience a
significant reduction in revenues from the acquired businesses or from our
reporting units, the carrying values of our goodwill or intangible assets could
be materially impaired and the resulting impairment losses could have a material
adverse effect on our earnings.
Operating Results
Three Months Ended March 31, 2006 as Compared to Three Months Ended March 31,
2005
Assets Under Management
Assets under management were approximately $9.4 billion at March 31, 2006,
a decrease of approximately $0.1 billion or 1.0% from approximately $9.5 billion
at December 31, 2005. Assets under management were approximately $8.9 billion at
March 31, 2005, a decrease of approximately $0.4 billion or 4.3% from
approximately $9.3 billion at December 31, 2004.
17
The following table sets forth the total net flows of assets under
management for the three months ended March 31, 2006 and 2005, 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
March 31,
--------------------
2006 2005
--------- --------
Existing Accounts:
Contributions $ 329 $ 312
Withdrawals (360) (281)
--------- --------
Net Flows of Existing Accounts (31) 31
--------- --------
Publicly Available Funds:
Contributions 34 54
Withdrawals (69) (75)
Direct Accounts Opened 57 71
Direct Accounts Closed (228) (124)
--------- --------
Net New Flows (206) (74)
--------- --------
Net Flows of Assets Under Management $ (237) $ (43)
========= ========
Revenues
Revenues were $36.2 million for the first quarter of 2006, an increase of
$1.4 million or 4.1% from $34.8 million earned for the first quarter of 2005.
While fee revenue for the quarter ended March 31, 2006 was essentially the same
as the first quarter of 2005, the change was due to a $1.0 million or 14.9%
increase in commission revenue and a $0.4 million increase in interest and other
revenues. The average gross fee earned from client accounts, was 1.14%
annualized for the quarter ended March 31, 2006 as compared to 1.17% annualized
for the quarter ended March 31, 2005. The change in the average gross fee rate
was due to a slight change in client account mix in favor of larger accounts
subject to our fee break, a greater percentage of our accounts having been with
us for a longer period of time and having lower fee rates which have been
grandfathered under our current fee structure and the fact that several of our
large accounts are performance fee based accounts. These accounts have a reduced
quarterly base advisory fee and pay a performance fee, if applicable, generally
at calendar year-end. Adjusted to exclude the effect of performance fee based
accounts, the average gross management fee was 1.27% annualized for the quarter
ended March 31, 2006 as compared to 1.28% annualized for the quarter ended March
31, 2005. Because we bill our fees quarterly, in advance, the strong fourth
quarter 2004 increase in assets under management had a direct impact on our
first quarter 2005 fee revenue. Commission revenue was higher in the quarter due
to higher trading volume based upon the investment decisions made by our
portfolio managers. Interest and other revenues increased primarily due to an
increase in interest income earned on our cash management activities, an
increase in investment and foreign currency gains and higher income earned from
our unconsolidated affiliates.
Expenses
Expenses, excluding income taxes, increased approximately $0.6 million or
3.1% to $21.2 million for the first quarter of 2006 from $20.6 million in the
same period of the prior year. The increase was due
18
to changes in operating expenses, including an increase in variable expenses of
$0.3 million in fees paid out, which are directly related to assets under
management of referred accounts, an increase in commissions, clearance and
trading of $0.2 million, which vary with account activity, and an increase in
employee compensation and benefits of $0.5 million. During 2004, 2005 and
through the first quarter of 2006, the Company issued restricted shares to
various employees. The non-cash compensation expense related to these restricted
share grants for the first quarter of 2006, which is included in employee
compensation and benefits was approximately $280,000 after adjusting for a
reversal of approximately $500,000 related to the forfeiture of previously
issued restricted shares. We expect non-cash compensation expense related to
these restricted share grants to be at least $6.7 million for 2006. We expect
that there will be additional issuances of restricted share grants during the
second quarter of 2006. Additionally, marketing expenses increased $0.2 million
due to increased travel costs related to marketing activities and higher
marketing compensation, other operating expenses increased $0.1 million,
research and administration expense decreased $0.1 million and depreciation and
amortization expense decreased $0.5 million.
Our income tax expense increased $0.9 million to $2.3 million for the
first quarter of 2006 from $1.4 million in the same period of the prior year.
The effective tax rate was 15.6% and 10% for the three months ended March 31,
2006 and 2005, respectively. The increase in our tax rate relates to changes in
the allocation of our portfolio management activities among various
jurisdictions reflecting recent portfolio manager departures and other
management changes. The proportion of our various activities based in high-tax
jurisdictions has increased somewhat relative to the activity based in lower-tax
jurisdictions. We are currently taking steps to restore our historical
geographic mix.
Net Income
Net income for the quarter ended March 31, 2006 decreased $0.1 million or
1.1% to $12.7 million from $12.8 million in the first quarter of the prior year
due to the increase in our effective tax rate, as discussed 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.
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 condensed
consolidated financial statements. The following tables set forth these
contractual obligations and contingent commitments as of March 31, 2006:
Contractual Obligations
(in millions)
--------------------------
Remaining 2006 2007-2008 2009-2010 2011-Thereafter Total
-------------- --------- --------- --------------- -----
Long-Term Debt (1) $0.6 $1.7 $1.8 $11.1 $15.2
Minimum Rental Commitments $2.2 $5.8 $6.8 $22.7 $37.5
(1) See Note 6 to the condensed consolidated financial statements for
additional information
19
Contingent Commitments
(in millions)
----------------------
Amount of Commitment Expiration Per Period
------------------------------------------
2006 2007-2008 2009-2010 2011-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.
20
EXHIBITS
See press release attached hereto dated April 27, 2006 regarding the
Company's financial results for the first quarter of 2006.
See press release attached hereto dated May 10, 2006 regarding the
Company's Annual General Meeting of shareholders.
See press release attached hereto dated June 15, 2006 regarding the
Company's announcement of the appointment of a Deputy Managing Director of the
Company.
21
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: June 22, 2006 By: /s/ Susan G. Leber
---------------------------------
Name: Susan G. Leber
Title: Managing Director -
Chief Financial Officer
22