Exhibit 99.1
[LETTERHEAD OF W.P. STEWART & CO., LTD.]
2 August, 2007
Hamilton, Bermuda
Contact: Fred M. Ryan
telephone: 441-295-8585
W.P. Stewart & Co., Ltd. Announces Second Quarter
and Six months 2007 Financial Results
Provides Update on Business Reorganization and Turnaround Initiatives
o Second quarter GAAP loss of $0.39 per share (diluted) after non-recurring,
non-cash charge of $18.0 million, or $0.39 per share, diluted; GAAP
earnings of $0.21 per share (diluted) in second quarter, 2006
o Six months GAAP loss of $0.43 per share (diluted); GAAP earnings of $0.49
per share (diluted) for the six months ended 30 June 2006
o Cash earnings of $0.11 per share (diluted) for the second quarter ($0.29
per share, diluted, in second quarter 2006) and $0.26 per share (diluted)
for the six months ended 30 June 2007 ($0.60 per share, diluted, for the
six months ended 30 June 2006) - see GAAP reconciliation statement below
W.P. Stewart & Co., Ltd. today reported a net loss of $17.8 million, or
$0.39 per share (diluted) and $0.39 per share (basic) for the second quarter
ended 30 June 2007. This loss reflects a second quarter non-recurring, non-cash
charge of approximately $18.0 million, or $0.39 per share, diluted, related to
an impairment of intangible assets. This impairment reflects a decrease in
assets under management, the fees from which were supporting intangible assets
per the Financial Accounting Standards Board (SFAS No. 142). Excluding this
non-recurring, non-cash charge, second quarter 2007 net income was $173,000,
less than one cent per share. These results compare with net income in the
second quarter of the prior year of $9.6 million, or $0.21 per share (diluted)
and $0.21 per share (basic).
Cash earnings for the quarter ended 30 June 2007 were $5.0 million (net
loss of $17.8 million adjusted to include $22.8 million representing non-cash
income and expenses consisting of unrealized gains and losses, non-cash
compensation, depreciation, amortization and other non-cash charges, including
the non-recurring impairment charges on a tax-effected basis), or $0.11 per
share (diluted). In the same quarter of the prior year, cash earnings were $13.3
million (net income of $9.6 million adjusted for the inclusion of $3.7 million
representing expenses of non-cash compensation, depreciation, amortization and
other non-cash charges on a tax-effected basis), or $0.29 per share (diluted).
Assets under management (AUM) at quarter-end were approximately $5.3
billion, compared to approximately $6.4 billion at the end of the prior quarter,
a decrease of approximately 17.2% and a decrease of approximately 36.9% from
$8.4 billion at 30 June 2006.
For the second quarter of 2007 there were 46,060,247 common shares
outstanding on a weighted average diluted basis compared to 45,915,096 common
shares outstanding for the second quarter of 2006 on the same weighted average
diluted basis.
Management Review & Comment
In announcing the results, William P. Stewart, Chairman & Chief Executive
Officer, said "Overall, while our financial results in the second quarter
reflect the disruptions of the past and the preference of investors for other
strategies than US quality growth companies, looking forward we believe we have
begun to see a change in investor mood coupled with a strengthening of our own
business and investment performance."
The Company continues on the reorganization and turnaround which began in
February of this year. The following highlights are noted:
1. Strengthening and widening the employee talent pool is a key factor
in the Company's turnaround efforts. As previously announced, James
D. Awad recently joined the firm as Chairman of W.P. Stewart Asset
Management (NA), Inc. Also, during the second quarter, the Company
added another experienced professional to the New York investment
team, one senior professional to our London based research group and
one senior client service professional in New York. The Company
expects to add more senior people to our U.S investment and
corporate development areas over the next few weeks.
2. A review of the Company's advisory fees and brokerage commissions
has been completed. A range of fixed and performance oriented fee
choices is being offered to clients. In addition to the changes
announced last year, an advisory fee option combining a lower fixed
fee with a performance fee has been introduced for account
relationships greater than $10 million. Brokerage commissions for
account relationships totaling $10 million are being eliminated. We
also now offer a fixed fee alternative for all standard fee
relationships under that limit.
3. As part of an ongoing initiative to enhance operational efficiency
and improve our cost structure, a thorough review of expenses was
completed during the second quarter. The Company's corporate
aircraft was sold last month for $18.8 million. As the aircraft was
fully depreciated, the sale is a taxable event. Additionally,
certain other expenses have been identified for reduction and there
has been a further reduction in employee count.
2
Accordingly, there will be additional one-time charges related to
employee terminations in the third quarter of 2007.
4. During the second quarter, the Company streamlined the framework for
offering the W.P. Stewart global and international (ex-US)
investment services to clients. The demand for international
exposure among the Company's clients is strong. A large group of
clients, related to a third party solicitor asked us to include some
high quality international companies in their existing US
portfolios. This conversion is expected to be completed by the end
of August.
5. At a recent meeting the Company's Board of Directors confirmed the
policy that dividend declarations include a consideration of the
Company's cash earnings as well as future requirements for building
out our global franchise.
Six Month Results
For the six months ended 30 June 2007, the net loss was $19.6 million or
$0.43 per share (diluted), and $0.43 per share (basic), on revenues of $48.1
million. This includes the non-recurring charges of approximately $18 million
noted above and approximately $5.8 million relating to agreements with certain
employees, reached in the first quarter of 2007, whose employment with the
Company terminated in that quarter. As noted, the second quarter non-recurring,
non-cash charge of approximately $18.0 million or $0.39 per share (diluted)
related to an impairment of intangible assets. This impairment reflects a
decrease in assets under management, the fees from which were supporting
intangible assets per the Financial Accounting Standards Board (SFAS No. 142).
Net income for the six months ended 30 June 2006 was $22.3 million or $0.49 per
share (diluted) and $0.49 per share (basic), on revenues of $74.8 million.
Cash earnings for the six months ended 30 June 2007 were $11.9 million
(net loss of $19.7 million adjusted to include $31.6 million, representing
non-cash income and expenses consisting of unrealized gains and losses, non-cash
compensation, depreciation, amortization and other non-cash charges, including
the non-recurring impairment charges on a tax-effected basis), or $0.26 per
share (diluted). In the same period of the prior year, cash earnings were $27.7
million (net income of $22.3 million adjusted for the inclusion of $5.4 million
representing expenses of non-cash compensation, depreciation, amortization and
other non-cash charges on a tax-effected basis), or $0.60 per share (diluted).
For the six months ended 30 June 2007, there were 46,023,754 common shares
outstanding on a weighted average diluted basis compared to 45,928,110 common
shares outstanding for the same period in 2006 on the same weighted average
diluted basis.
Performance
Performance in the W.P. Stewart & Co., Ltd. U.S. Equity Composite (the
"Composite") for the second quarter of 2007 was +2.8%, pre-fee, and +2.5%,
post-fee. This compares to +6.3% for the S&P 500.
3
For the six months ended 30 June 2007, performance in the Composite was
+2.1%, pre-fee, and +1.5%, post-fee. This compares to +7.0% for the S&P 500.
For the twelve month period ending 30 June 2007, performance in the
Composite was +14.1%, pre-fee, and 13.0%, post-fee. This compares to 20.6% for
the S&P 500.
Performance in the W.P. Stewart International portfolio (ex United States)
for the second quarter of 2007 was 6.0%, pre-fee, and 5.9%, post-fee, compared
to 6.4% for the MSCI EAFE Index. Performance in the Global portfolio was 5.5%,
pre-fee, and 5.3%, post-fee, compared to 6.5% the MSCI World Index. For the six
months ended 30 June 2007, performance in the W.P. Stewart International
portfolio was 8.3%, pre-fee, and 8.0%, post-fee, compared to 10.7% for the MSCI
EAFE Index. In the Global portfolio, performance for the six moths ended 30 June
2007 was 5.4%, pre-fee, and 5.0%, post-fee, compared to 9.2% for the MSCI World
Index.
Monthly Performance Reporting
Beginning with July 2007, the Company will be releasing composite
portfolio investment returns on a monthly basis. These returns will be posted on
our website at www.wpstewart.com.
Preliminary indications are that performance in July 2007 for the U.S.
Equity Composite was -1.2%, pre-fee, and -1.3%, post-fee. This compares with
- -3.2% for the S&P 500. The year-to-date performance for the Composite, as of 31
July 2007 was 0.9%, pre-fee, and 0.2%, post-fee, compared with 3.6% for the S&P
500. For the twelve months ended 31 July 2007, the Composite was up 17.5%,
pre-fee, and 16.3%, post-fee, compared with 16.1% for the S&P 500 Index.
The Company's international performance remains strong. Performance in the
International portfolios on a year-to-date basis as of 31 July 2007 was 9.9%,
pre-fee, and 9.6%, post-fee, compared to 9.1% for the MSCI EAFE Index. For the
Global portfolios performance was 5.5%, pre-fee and 5.0%, post-fee, year-to-date
as of 31 July 2007, compared to 6.7% for the MSCI World Index.
The Stewart Asia Fund, managed by our affiliate, Bowen Asia and which we
will be including in our monthly reporting, posted returns of 16.9%,
year-to-date as of 31 July 2007, compared to 12.9% for its benchmark, the Dow
Jones Asia Pac.
Assets Under Management
Assets under management (AUM) for the quarter ended 30 June 2007 were
approximately $5.3 billion, compared with approximately $6.4 billion for the
quarter ended 31 March 2007 and $8.4 billion reported at the quarter ended 30
June 2006.
Total net flows of AUM for the quarter ended 30 June 2007 were -$1,156
million, compared with -$510 million in the comparable quarter of 2006 and
- -$1,663 million in the first quarter of 2007.
Total net flows of AUM for the six months ended 30 June 2007 and 2006 were
- -$2,819 million and -$747 million, respectively.
4
In the second quarter of 2007, net cash flows of existing accounts were
approximately -$251 million compared with net cash flows of approximately -$207
million in the second quarter of 2006. Net cash flows of existing accounts for
the six months ended 30 June 2007 were -$490 million compared to -$238 million
for the six months ended 30 June 2006.
Net new flows (net contributions to our publicly-available funds and flows
from new accounts minus closed accounts) were approximately -$905 million for
the quarter compared to approximately -$303 million for the same quarter of the
prior year. Net new flows were approximately -$2,329 million and approximately
- -$509 million for the six months ended 30 June 2007 and 2006, respectively.
Net flows in July 2007 were negative approximately $190 million.
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.
Currently the "look-through" earnings power behind our clients' portfolios
remains solidly positive with portfolio earnings per share growth on a trailing
four quarter basis as at 30 June 2007 expected to have advanced at the high end
of the historical range. The Company's research analysts expect "look-through"
portfolio earnings growth to be within the 12-15% range over the next few years,
about twice the growth expected for the S&P 500 Index earning power.
Revenues and Profitability
Revenues were $22.2 million for the quarter ended 30 June 2007, compared
to $38.5 million for the same quarter 2006. Revenues for the six months ended 30
June 2007 and 2006 were $48.1 million and $74.8 million, respectively.
The average gross management fee was 1.06%, annualized, for the quarter
ended 30 June 2007 and 1.07%, annualized, for the six months ended 30 June 2007,
compared to 1.13% and 1.13%, annualized, for each of the comparable periods of
the prior year.
Excluding performance fee based accounts, the average gross management fee
was 1.23%, annualized, for the quarter ended 30 June 2007 and 1.22%, annualized,
for the six months ended 30 June 2007, compared to 1.25%, and 1.26%, annualized,
for each of the comparable periods of the prior year.
Total operating expenses for the second quarter 2007 increased 39.1% to
$38.7 million, and include the non-cash, non-recurring impairment charge of
approximately $18 million, from $27.8 million in the same quarter of the prior
year. Total operating expenses were $66.6 million, including the non-cash,
non-recurring charges, and $49.1 million for the six months ended 30 June 2007
and 2006, respectively.
5
The increase in employee compensation and benefits substantially reflects
non-cash compensation expense related to the Company's restricted share
issuances to employees of approximately $9.3 million for the six months ended 30
June 2007, which includes $4.2 million related to employees whose employment
terminated in February 2007. In the comparable period of 2006 these non-cash
compensation expenses were $2.6 million.
We expect non-cash compensation expense related to restricted share grants
to be at least $14.5 million for 2007 versus $7.9 in 2006.
The Company's provision for taxes for the quarter ended 30 June 2007 was
$1.3 million versus $1.1 million in the comparable quarter of the prior year,
and was $1.2 million versus $3.4 million for the six months ended 30 June 2007
and 2006, respectively.
Other Events
The Company paid a dividend of $0.15 per common share on 27 April 2007 to
shareholders of record as of 13 April 2007, and will pay a dividend of $0.15 per
common share on 3 August 2007 to shareholders of record as of 23 July 2007.
Conference Call
In conjunction with this second quarter 2007 earnings release, W.P.
Stewart & Co., Ltd. will host a conference call on Thursday, 2 August 2007. The
conference call will commence promptly at 9:15am (EDT). Those who are interested
in participating in the teleconference should dial 1-800-289-0544 (within the
United States) or +913-981-5533 (outside the United States). The conference ID
number is 4704671. To listen to the live broadcast of the conference over the
Internet, simply visit our website at www.wpstewart.com and click on the
Investor Relations tab for a link to the webcast.
The teleconference will be available for replay from Thursday, 2 August
2007 at 12:00 noon (EDT) through Friday, 3 August 2007 at 5:00 p.m. (EDT). To
access the replay, please dial 1-888-203-1112 (within the United States) or
+719-457-0820 (outside the United States). The pass code for accessing this
replay is 4704671.
You will be able to access a replay of the Internet broadcast through
Thursday, 9 August 2007, 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.
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
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.
7
W.P. Stewart & Co., Ltd.
Unaudited Condensed Consolidated Statements of Operations
For the Three Months Ended
-------------------------------------------
June 30, 2007 Mar. 31, 2007 June 30, 2006
------------- ------------- -------------
Revenue:
Fees $ 16,019,572 $ 21,061,944 $ 25,788,508
Commissions 4,256,289 4,459,454 11,916,558
Realized and unrealized gains/(losses) on investments (1) 1,300,243 (21,201) 79,255
Interest and other (1) 580,435 440,328 753,017
------------ ------------ ------------
22,156,539 25,940,525 38,537,338
------------ ------------ ------------
22,156,539 419,127
Expenses:
Employee compensation and benefits 9,487,651 16,149,555 11,228,135
Fees paid out 1,846,777 1,781,660 1,949,680
Performance fee charge -- -- 2,625,642
Commissions, clearance and trading 726,948 787,965 2,245,933
Research and administration 3,070,359 3,392,907 3,330,257
Marketing 1,280,031 1,564,158 1,488,922
Depreciation and amortization 1,448,278 1,438,229 1,648,745
Impairment of intangible asset 17,985,000 -- --
Other operating 2,860,020 2,737,124 3,318,203
------------ ------------ ------------
38,705,064 27,851,598 27,835,517
------------ ------------ ------------
Income before taxes (16,548,525) (1,911,073) 10,701,821
Provision for taxes 1,263,722 (74,295) 1,053,940
------------ ------------ ------------
Net income $(17,812,247) $ (1,836,778) $ 9,647,881
============ ============ ============
Earnings per share:
Basic earnings per share $ (0.39) $ (0.04) $ 0.21
============ ============ ============
Diluted earnings per share $ (0.39) $ (0.04) $ 0.21
============ ============ ============
% Change From
----------------------------
Mar. 31, 2007 June 30, 2006
------------- -------------
Revenue:
Fees -23.94% -37.88%
Commissions -4.56% -64.28%
Realized and unrealized gains/(losses) on investments (1) -6232.93% 1540.58%
Interest and other (1) 31.82% -22.92%
------------ ------------
-14.59% -42.51%
------------ ------------
Expenses:
Employee compensation and benefits -41.25% -15.50%
Fees paid out 3.65% -5.28%
Performance fee charge -- --
Commissions, clearance and trading -7.74% -67.63%
Research and administration -9.51% -7.80%
Marketing -18.16% -14.03%
Depreciation and amortization 0.70% -12.16%
Impairment of intangible asset -- --
Other operating 4.49% -13.81%
------------ ------------
38.97% 39.05%
------------ ------------
Income before taxes 765.93% -254.63%
Provision for taxes -1800.95% 19.90%
------------ ------------
Net income 869.76% -284.62%
============ ============
Earnings per share:
Basic earnings per share 875.00% -285.71%
============ ============
Diluted earnings per share 875.00% -285.71%
============ ============
Note (1) : Prior period amounts have been revised to reflect presentation
consistent with current period reporting.
W.P. Stewart & Co., Ltd.
Unaudited Condensed Consolidated Statements of Operations
For the Six Months Ended June 30,
-----------------------------------------------------
2007 2006 %
------------- ------------- -------------
Revenue:
Fees $ 37,081,516 $ 52,975,816 -30.00%
Commissions 8,715,743 20,177,352 -56.80%
Realized and unrealized gains/(losses) on investments (1) 1,279,042 121,007 957.00%
Interest and other (1) 1,020,763 1,509,342 -32.37%
------------- ------------- -------------
48,097,064 74,783,517 -35.68%
------------- ------------- -------------
Expenses:
Employee compensation and benefits 25,637,206 18,966,972 35.17%
Fees paid out 3,628,437 4,124,588 -12.03%
Performance fee charge -- 2,625,642 --
Commissions, clearance and trading 1,514,913 3,888,012 -61.04%
Research and administration 6,463,266 6,959,801 -7.13%
Marketing 2,844,189 3,200,016 -11.12%
Depreciation and amortization 2,886,507 3,224,539 -10.48%
Impairment of intangible asset 17,985,000 -- --
Other operating 5,597,144 6,080,340 -7.95%
------------- ------------- -------------
66,556,662 49,069,910 35.64%
------------- ------------- -------------
Income before taxes (18,459,598) 25,713,607 -171.79%
Provision for taxes 1,189,427 3,401,615 -65.03%
------------- ------------- -------------
Net income $ (19,649,025) $ 22,311,992 -188.06%
============= ============= =============
Earnings per share:
Basic earnings per share $ (0.43) $ 0.49 -187.76%
============= ============= =============
Diluted earnings per share $ (0.43) $ 0.49 -187.76%
============= ============= =============
Note (1) : Prior period amounts have been revised to reflect presentation
consistent with current period reporting.
W.P. Stewart & Co., Ltd.
Net Flows of Assets Under Management*
(in millions)
-------------
For the Three Months Ended For the Six Months Ended
------------------------------------------------- -------------------------------
Jun. 30, 2007 Mar. 31, 2007 Jun. 30, 2006 Jun. 30, 2007 Jun. 30, 2006
------------- ------------- ------------- ------------- -------------
Existing Accounts:
Contributions $ 56 $ 83 $ 168 $ 139 $ 497
Withdrawals (307) (322) (375) (629) (735)
------------- ------------- ------------- ------------- -------------
Net Flows of Existing Accounts (251) (239) (207) (490) (238)
------------- ------------- ------------- ------------- -------------
Publicly Available Funds:
Contributions 19 75 78 94 112
Withdrawals (190) (119) (93) (309) (162)
Direct Accounts Opened 28 115 27 143 84
Direct Accounts Closed (762) (1,495) (315) (2,257) (543)
------------- ------------- ------------- ------------- -------------
Net New Flows (905) (1,424) (303) (2,329) (509)
------------- ------------- ------------- ------------- -------------
Net Flows of Assets Under Management $ (1,156) $ (1,663) $ (510) $ (2,819) $ (747)
============= ============= ============= ============= =============
* The table above sets forth the total net flows of assets under management for
the three months ended June 30, 2007, March 31, 2007 and June 30, 2006,
respectively, and for the six months ended June 30, 2007 and 2006, 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.