-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NpcVY7uYKUHLwYNnd+46Y20Tlb7n0YcZQ+DjsUmS8HSFHirU+SJyFOx2Zk4SChKf HJfTBs9vtwM2RqA4LaasfQ== 0001169232-02-000912.txt : 20020814 0001169232-02-000912.hdr.sgml : 20020814 20020814111530 ACCESSION NUMBER: 0001169232-02-000912 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEWART W P & CO LTD CENTRAL INDEX KEY: 0000750443 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 980201080 STATE OF INCORPORATION: X0 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-16245 FILM NUMBER: 02732500 BUSINESS ADDRESS: STREET 1: TRINITY HALL 43 CEDAR AVE PO BOX 2905 STREET 2: HAMILTON HM LX CITY: BERMUDA STATE: X0 ZIP: 10022 BUSINESS PHONE: 4412958585 MAIL ADDRESS: STREET 1: C/O W P STEWART & CO INC STREET 2: 527 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: STEWART W P & CO INC DATE OF NAME CHANGE: 19980320 6-K 1 d51479_6-k.txt FORM 6-K 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 August, 2002 W.P. STEWART & CO., LTD. (Translation of Registrant's Name Into English) Trinity Hall 43 Cedar Avenue P.O. Box HM 2905 Hamilton, HM LX Bermuda (Address of Principal Executive Offices) (Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.) Form 20-F |X| Form 40-F |_| (Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.) Yes |_| No |X| (If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______.) W.P. STEWART & CO., LTD. Form 6-K: Table of Contents 1. Unaudited Condensed Consolidated Financial Statements of W.P. Stewart & Co., Ltd. as of June 30, 2002 and for the six months ended June 30, 2002 and 2001 2. Interim Financial Report 3. Exhibits: a. Press release dated July 31, 2002 b. Press release dated August 2, 2002 c. Press release dated August 9, 2002 Forward-Looking Statements Certain statements in this Report on Form 6-K are forward-looking statements, including, without limitation, statements concerning our assumptions, expectations, beliefs, intentions, plans or strategies regarding the future. Such forward-looking statements are based on beliefs of our management as well as on estimates and assumptions made by and information currently available to our management. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the risk factors set forth in the Annual Report on Form 20-F of W.P. Stewart & Co., Ltd. as well as the following: o general economic and business conditions; o a challenge to our U.S. tax status; o industry capacity and trends; o competition; o the loss of major clients; o changes in demand for our services; o changes in business strategy or development plans and the ability to implement such strategies and plans; o changes in the laws and/or regulatory circumstances in the United States, Bermuda, Europe or other jurisdictions; o the adverse effect from a decline or volatility in the securities market in general or our products' performance; o quality of management and the ability to attract and retain qualified personnel; o actions taken or omitted to be taken by third parties including our shareholders, clients, competitors and legislative, regulatory, judicial and governmental authorities; and o availability, terms and deployment of capital. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary significantly from those anticipated, believed, estimated, expected, intended or planned. We do not intend to review or revise any particular forward-looking statements made in this Report on Form 6-K in light of future events. You are cautioned not to put undue reliance on any forward-looking statements. W.P. Stewart & Co. Ltd. Condensed Consolidated Statements of Financial Condition
June 30, December 31, 2002 2001 ------------- ------------- (unaudited) Assets: Cash and cash equivalents $ 40,446,817 $ 62,302,344 Fees receivable 3,656,681 2,952,580 Receivable from broker-dealer 1,029,351 582,091 Investments in unconsolidated affiliates (net of accumulated amortization of $123,558 and $82,372 at June 30, 2002 and December 31, 2001, respectively) 3,980,231 3,979,317 Receivables from affiliates, net 729,610 666,192 Investments, available for sale (cost $6,825,821 and $1,012,400 at June 30, 2002 and December 31, 2001, respectively) 6,792,305 879,116 Investment in aircraft (net of accumulated depreciation of $14,035,540 and $12,633,445 at June 30, 2002 and December 31, 2001, respectively) 8,415,936 9,818,030 Goodwill 5,631,797 5,631,797 Intangible assets (net of accumulated amortization of $6,455,843 and $4,464,891 at June 30, 2002 and December 31, 2001, respectively) 58,322,593 44,299,495 Furniture, equipment and leasehold improvements (net of accumulated depreciation and amortization of $2,856,659 and $2,361,376 at June 30, 2002 and December 31, 2001, respectively) 4,612,135 4,789,744 Interest receivable on shareholders' notes 390,258 317,292 Income taxes receivable 3,049,021 4,071,171 Other assets 2,194,916 2,988,942 ------------- ------------- $ 139,251,651 $ 143,278,111 ============= ============= Liabilities and Shareholders' Equity: Liabilities: Loans payable $ 17,809,911 $ 18,098,337 Employee compensation and benefits payable 652,514 983,824 Fees payable 1,243,917 878,334 Income taxes payable -- 1,078,713 Professional fees payable 2,759,098 3,127,077 Dividends payable -- 8,528 Accrued expenses and other liabilities 5,570,612 4,997,670 ------------- ------------- 28,036,052 29,172,483 ------------- ------------- Minority Interest 109,252 65,639 ------------- ------------- Shareholders' Equity: Common shares, $0.001 par value (125,000,000 shares authorized, 46,742,824 and 47,831,864 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively) 46,743 47,832 Additional paid-in-capital 87,436,200 105,472,859 Contingently returnable shares (1,138,566 and 1,788,732 shares at June 30, 2002 and December 31, 2001, respectively) (17,887,086) (24,902,377) Accumulated other comprehensive income (212,043) (471,369) Retained earnings 61,101,487 57,007,661 ------------- ------------- 130,485,301 137,154,606 Less: notes receivable for common shares (19,378,954) (23,114,617) ------------- ------------- 111,106,347 114,039,989 ------------- ------------- $ 139,251,651 $ 143,278,111 ============= =============
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 June 30, For the Six Months Ended June 30, 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Revenue: Fees $29,076,698 $29,068,474 $57,362,961 $61,223,600 Commissions 6,401,280 7,888,557 14,404,094 22,534,800 Interest and other 914,181 1,501,290 1,972,034 3,184,302 ----------- ----------- ----------- ----------- 36,392,159 38,458,321 73,739,089 86,942,702 ----------- ----------- ----------- ----------- Expenses: Employee compensation and benefits 6,941,787 4,923,804 13,597,120 14,543,260 Fees paid out 1,988,284 1,646,865 4,043,744 3,499,564 Commissions, clearance and trading 1,373,519 1,637,915 2,962,659 4,037,534 Research and administration 3,770,916 3,190,086 6,883,951 6,912,160 Marketing 1,275,352 803,693 2,098,440 1,354,767 Depreciation and amortization 1,981,215 1,845,443 3,929,528 3,658,849 Other operating 2,606,406 2,380,215 4,546,553 5,058,889 ----------- ----------- ----------- ----------- 19,937,479 16,428,021 38,061,995 39,065,023 ----------- ----------- ----------- ----------- Income before taxes 16,454,680 22,030,300 35,677,094 47,877,679 Provision for taxes 1,645,468 2,203,030 3,567,709 4,787,768 ----------- ----------- ----------- ----------- Net income $14,809,212 $19,827,270 $32,109,385 $43,089,911 =========== =========== =========== =========== Earnings per share: Basic earnings per share $ 0.34 $ 0.45 $ 0.73 $ 0.99 =========== =========== =========== =========== Diluted earnings per share $ 0.32 $ 0.42 $ 0.69 $ 0.91 =========== =========== =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 W.P. Stewart & Co., Ltd. Unaudited Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2002 and 2001
2002 2001 ------------ ------------ Cash flows from operating activities: Net income $ 32,109,385 $ 43,089,911 Adjustments to reconcile net income to net cash provided by operating activities: Loss/(gain) on sale of available for sale securities 8,522 (525,354) Amortization of bond premium 2,193 -- Depreciation and amortization 3,929,528 3,658,849 Equity in income of unconsolidated affiliates (42,100) (268,845) Non-cash compensation 205,373 -- Minority interest 43,613 -- Changes in operating assets and liabilities: Fees receivable (704,101) 134,432 Receivable from broker-dealer (447,260) 257,679 Receivables from affiliates, net (63,418) 1,223,415 Income taxes receivable 1,022,150 -- Other assets 794,026 (1,087,901) Employee compensation and benefits payable (331,310) 2,207,936 Fees payable 365,583 156,033 Income taxes payable (1,078,713) (808,303) Professional fees payable (367,979) (218,846) Accrued expenses and other liabilities 572,942 405,049 ------------ ------------ Net cash provided by operating activities 36,018,434 48,224,055 ------------ ------------ Cash flows (used in) investing activities: Proceeds from sale of available for sale securities 991,478 1,115,064 Purchase of available for sale securities (6,813,421) (1,009,100) Cash dividends paid on shares subject to repurchase (683,140) (1,170,919) Purchase of furniture, equipment and leasehold improvements (317,682) (516,960) ------------ ------------ Net cash (used in)/from investing activities (6,822,765) (1,581,915) ------------ ------------ Cash flows (used for) financing activities: Payments on loans payable (288,426) (269,227) Repurchase of common shares (26,688,575) (17,473,220) Proceeds from notes receivable for common shares 3,865,494 2,385,096 Interest receivable on shareholders' notes (72,966) (25,087) Dividends to shareholders (28,024,087) (27,671,463) ------------ ------------ Net cash (used for) financing activities (51,208,560) (43,053,901) Effect of exchange rate changes in cash 157,364 (172,902) ------------ ------------ Net (decrease)/increase in cash and cash equivalents (21,855,527) 3,415,337 Cash and cash equivalents, beginning of period 62,302,344 56,764,420 ------------ ------------ Cash and cash equivalents, end of period $ 40,446,817 $ 60,179,757 ============ ============ Supplemental disclosures of cash flows information Cash paid during the period for: Income taxes $ 3,834,394 $ 5,596,071 ============ ============ Interest expense $ 621,022 $ 640,222 ============ ============
Supplemental Schedule of Non-cash Investing and Financing Activities: On January 1, 2002, 20% of the shares originally issued in connection with our acquisitions of NS Money Management (Bermuda) Limited, First Long Island Investors, Inc. and TPRS Services N.V. ceased to be subject to repurchase, and were recorded with a fair value of $4,238,882, $5,659,200 and $5,432,832, respectively (see Note 2). In addition, as discussed in Note 2, on January 1, 2001, 20% of the shares originally issued in connection with our acquisitions of NS Money Management (Bermuda) Limited, First Long Island Investors, Inc. and TPRS Services N.V. ceased to be subject to repurchase, and were recorded with a fair value of $4,001,591, $5,342,400 and $5,128,704, respectively. The Company issued common shares for notes receivable for the six months ended June 30, 2002 and 2001, in the amounts of $189,492 and $4,036,200, respectively, and cancelled outstanding notes of $59,661 and $0 for the six months ended June 30, 2002 and 2001, respectively. At June 30, 2001, the Company had dividends payable to shareholders of $8,528. The accompanying notes are an integral part of these condensed consolidated financial statements. 4 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BASIS OF PRESENTATION The accompanying condensed consolidated 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 ("US") 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 incorporated by reference in the Annual Report on Form 20-F of the Company for the year ended December 31, 2001. The condensed consolidated financial information as of and for the year ended December 31, 2001 has been derived from audited consolidated financial statements not included herein. Certain reclassifications have been made to prior-year amounts to conform to the current-year presentation. All material intercompany transactions and balances have been eliminated. The unaudited condensed financial statements include all adjustments, consisting only of normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of the results in the interim periods presented. Interim period operating results for the six months ended June 30, 2002 are not necessarily indicative of results that may be expected for the entire year or any other period. NOTE 2: BACKGROUND AND ORGANIZATION For the six months ended June 30, 2002 and 2001, the Company consisted of several worldwide affiliated entities under common control, which provide investment advisory and related services including securities brokerage. The Company's revenues will fluctuate based upon the market performance of its clients' investments in US, European and Asian financial markets. Business Acquisitions In 1999 the Company acquired 50% of TPRS Services N.V. ("TPRS") and 100% of NS Money Management (Bermuda) Limited ("NSMM") and First Long Island Investors, Inc. ("FLII"). On December 29, 2000, the Company acquired the remaining 50% of TPRS. The repurchase provisions of the acquisition agreements specify that 80% of the Company's common shares issued in connection therewith can be repurchased ("contingently returnable shares") at par value by the Company up to a maximum of 20% per year as of January 1, 2000, 2001, 2002 and 2003, except in the case of the December 29, 2000 TPRS acquisition where the reference dates are July 1, 2001, 2002, 2003 and 2004, if assets under management which were part of the acquisitions decrease below defined reference amounts at the specified dates and are not replaced. The recorded purchase price for each acquisition is determined by the sum of: 1. the number of shares issued on acquisition not subject to repurchase multiplied by the fair value of each of those shares at acquisition date; 2. the number of shares that cease to be subject to repurchase at each anniversary date multiplied by the fair value of each of those shares at that date; and 3. the cumulative cash dividends paid on shares subject to repurchase. 5 The shares issued in connection with the TPRS, NSMM and FLII acquisitions were initially reported in shareholders' equity (within share capital and as a contra-equity account captioned "contingently returnable shares") at their issuance prices as of the dates the acquisitions were consummated. On the dates on which the contingently returnable shares cease to be subject to repurchase, the contra-equity account is relieved and any difference between the initial issue price and the then current fair value of the shares is charged or credited to additional paid-in capital. Cash dividends on shares no longer subject to repurchase are recorded as a reduction of shareholders' equity. On January 1, 2002, in accordance with the 1999 TPRS, NSMM and FLII acquisition agreements, repurchase provisions on 20% of the initial number of shares issued and recorded as contingently returnable shares lapsed. Accordingly, the shareholders' equity account "contingently returnable shares" was reduced by $7,015,291 and additional paid-in-capital was increased by $8,315,623, being the excess of the shares' fair value over their initial issue price. The respective purchase price allocations were increased accordingly. The following table shows information for each acquisition as of and for the six months ended June 30, 2002.
Cash Dividends Paid on Aggregate Shares Not Contingently Contingently Purchase Intangible Number of Subject to Returnable Returnable Price Amortization Acquisition Shares Repurchase Shares Shares Allocation for the Period - ----------- --------- ---------- ------------ ------------ ---------- -------------- TPRS 1,966,000 1,247,200 718,800 $ 431,280 $27,769,056 $ 843,427 NSMM 898,831 719,065 179,766 107,860 14,600,903 400,821 FLII 1,200,000 960,000 240,000 144,000 19,690,288 643,004 --------- --------- --------- ----------- ----------- ---------- 4,064,831 2,926,265 1,138,566 $ 683,140 $62,060,247 $1,887,252 ========= ========= ========= =========== =========== ==========
The following table shows information for each acquisition as of and for the year ended December 31, 2001.
Cash Dividends Paid on Aggregate Shares Not Contingently Contingently Purchase Intangible Number of Subject to Returnable Returnable Price Amortization Acquisition Shares Repurchase Shares Shares Allocation for the Period - ----------- --------- ---------- ------------ ------------ ---------- -------------- TPRS 1,966,000 1,016,800 949,200 $ 1,236,720 $21,904,944 $1,224,254 NSMM 898,831 539,299 359,532 431,439 10,254,161 545,951 FLII 1,200,000 720,000 480,000 576,000 13,887,088 944,644 --------- --------- --------- ----------- ----------- ---------- 4,064,831 2,276,099 1,788,732 $ 2,244,159 $46,046,193 $2,714,849 ========= ========= ========= =========== =========== ==========
6 NOTE 3: EARNINGS PER SHARE
Three Months Ended June 30, Six Months Ended June 30, --------------------------- --------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Basic Earnings Per Share: Net income $14,809,212 $19,827,270 $32,109,385 $43,089,911 =========== =========== =========== =========== Weighted average basic shares outstanding 43,610,067 43,631,489 43,847,431 43,608,956 ----------- ----------- ----------- ----------- Net income per share $ 0.34 $ 0.45 $ 0.73 $ 0.99 =========== =========== =========== =========== Diluted Earnings Per Share: Net income $14,809,212 $19,827,270 $32,109,385 $43,089,911 =========== =========== =========== =========== Weighted average basic shares outstanding 43,610,067 43,631,489 43,847,431 43,608,956 Add: Unvested shares, contingently returnable shares and unvested options 2,970,435 3,594,608 3,008,099 3,661,406 ----------- ----------- ----------- ----------- Weighted average diluted shares outstanding 46,580,502 47,226,097 46,855,530 47,270,362 ----------- ----------- ----------- ----------- Net income per share $ 0.32 $ 0.42 $ 0.69 $ 0.91 =========== =========== =========== ===========
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 and unvested employee options. Diluted earnings per share is computed using the same method as basic earnings per share, but also reflects the impact of unvested shares issued to employees of the Company or its affiliates, contingently returnable shares and the dilutive effect of unvested options issued to employees of the Company or its affiliates using the treasury stock method. During the second quarter of 2002, the Company repurchased and cancelled an aggregate of 1,093,451 shares in a combination of private and open market transactions for an aggregate purchase price of $26,688,575. On June 30, 2002 and 2001, respectively, 46,742,824 and 47,348,451 shares were issued and outstanding. The shareholders of record are entitled to full voting rights and dividends on these shares; 2,430,866 and 2,538,350 of these shares were unvested and held by the Company's or affiliates' employees on June 30, 2002 and 2001, respectively. 7 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 June 30, Six Months Ended June 30, ----------------------------- ------------------------------ 2002 2001 2002 2001 ------------ ------------ ------------ ------------ Net income $ 14,809,212 $ 19,827,270 $ 32,109,385 $ 43,089,911 Other comprehensive income, net of tax Reclassification adjustment for realized gains on available for sale securities included in interest and other 133,284 -- 133,284 (432,447) Unrealized gains on available for sale securities (143,890) (194,292) (31,322) (42,819) Foreign currency translation adjustment 177,896 (768) 157,364 (172,902) ------------ ------------ ------------ ------------ Comprehensive income $ 14,976,502 $ 19,632,210 $ 32,368,711 $ 42,441,743 ============ ============ ============ ============
NOTE 5: RELATED PARTY TRANSACTIONS Research and administrative expenses include travel expenses of $821,845 and $765,961 for the six months ended June 30, 2002 and 2001, 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 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 $1,341,858 and $1,242,716 for the six months ended June 30, 2002 and 2001, 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 approximated $73,732 and $56,995 for the six months ended June 30, 2002 and 2001, respectively. These amounts are directly affected by the actual space utilized in each of those periods. W.P. Stewart Fund Management Limited ("WPS Dublin") serves as the investment manager to an Irish fund solely advised by WPS Investissements S.A., a Swiss investment management firm. WPS Investissements S.A. is principally owned by a beneficial owner of a minority interest in the Company. The Company has no ownership interest in either the Irish fund or WPS Investissements S.A. WPS Dublin collects and remits to WPS Investissements S.A. all of the advisory fees in respect of such fund. Such fees amounted to $17,433 and $24,866 for the six months ended June 30, 2002 and 2001, respectively. In addition, the Company pays WPS Investissements S.A. solicitation fees in respect of certain accounts and an amount calculated on the basis of a portion of the brokerage commissions paid by such fund and certain accounts, as directed by those clients. Such payments amounted to $13,748 and $20,840 for the six months ended June 30, 2002 and 2001, respectively. 8 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 approximated $379,336 and $273,840 for the six months ended June 30, 2002 and 2001, 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 six months ended June 30, 2002 and 2001 were $13,484 and $10,188, respectively. Prior to our acquisition of a controlling interest in TPR & Partners NV ("TPR"), the Company paid TPR, a principal owner of which is an executive officer of the Company, fees for marketing services. These fees amounted to $259,587 for the six months ended June 30, 2001. The Company pays Carl Spangler Kapitalanlagegesellschaft mbH, which is controlled by one of the Company's directors, fees for solicitation services. These fees amounted to $231,944 and $4,602 for the six months ended June 30, 2002 and 2001, respectively. Certain directors of the Company have served as directors of funds from which the Company has received investment advisory fees and commissions. Such fees and commissions were $2,822,747 and $2,583,345 for the six months ended June 30, 2002 and 2001, respectively. The Company owns a 40% interest in Kirk Management Ltd., a real estate joint venture incorporated in Bermuda. The remaining 60% interest is owned by The Bank of Bermuda, of which one of the Company's directors is the President and Chief Executive Officer. Kirk Management Ltd. also owns and leases to the Company its Hamilton, Bermuda headquarters. Included in research and administration expenses is rent expense of $90,000 for each of the six-month periods ended June 30, 2002 and 2001, respectively. Included in receivables from affiliates, net, at June 30, 2002 and 2001 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 June 30, 2002 is an amount of $856,385, which is an investment in a fund managed by WPS Dublin, a wholly-owned subsidiary of the Company. Included in research and administration expenses for the six months ended June 30, 2002 is rent expense in the amount of $77,103 which is paid to a company owned by the former principals of TPR. NOTE 6: LONG-TERM DEBT Interest expense on long-term debt totaled $621,022 and $640,222 for the six months ended June 30, 2002 and 2001, respectively. NOTE 7: COMMITMENTS AND CONTINGENCIES At June 30, 2002, 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 9 a fixed deposit cash account, which will remain intact over the term of the lease and is reflected in other assets at June 30, 2002 and December 31, 2001. In February 1999, the Company entered into an agreement with Shamrock in which Shamrock agreed to delay the sale of an aircraft owned by Shamrock so that such aircraft will continue to be available for use in the Company's business. At the same time, Shamrock agreed to release WPSI from any and all obligations of approximately $37 million to participate in the purchase of an additional aircraft, delivery of which is scheduled for 2002. In return, the Company agreed to indemnify Shamrock for any loss in value of the aircraft Shamrock has agreed not to sell from the time the agreement was made until the aircraft is sold or replaced. The value of that aircraft as of the date of Shamrock's agreement with the Company was estimated to be $27 million. In May 2002, in exchange for a payment of $100,000, Shamrock released the Company from this indemnity agreement. 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. WPSSL is subject to credit risk to the extent that the clearing broker may be unable to repay amounts owed. NOTE 8: NOTES RECEIVABLE FOR COMMON SHARES During the six months ended June 30, 2002, the Company issued 8,333 common shares to an employee in connection with the Company's 2001 Employee Equity Incentive Plan, for an installment note totaling $189,492. The installment note is full recourse, bears interest at 8.5% per annum, is for a term of seven years and is collateralized by the shares issued. Each principal payment, as defined in the promissory note, is equal to one twenty-eighth of the total face value of the note. Pursuant to employee purchase agreements for common shares, in the event a purchaser is not in the employment of, or does not serve as a director of, the Company or any of its affiliates, the purchaser shall transfer to the Company all rights to 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 six months ended June 30, 2002, 3,922 unvested common shares of former employees were repurchased and their installment notes totaling $59,661, were abated. Future minimum payments, expected to be received, on notes receivable for common shares as of June 30, 2002 are as follows: 2002 (6 months) $ 2,007,099 2003 4,012,446 2004 3,978,927 2005 3,370,515 2006 2,512,822 Thereafter (through 2009) 3,497,145 ----------- $19,378,954 =========== Interest income on all such notes was $958,752 and $680,228 for the six months ended June 30, 2002 and 2001, respectively. 10 NOTE 9: 2001 EMPLOYEE EQUITY INCENTIVE PLAN The Company's Board of Directors adopted the W.P. Stewart & Co., Ltd. 2001 Employee Equity Incentive Plan, as amended (the "Plan"). The Plan provides for awards of up to 2,500,000 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. In addition to the options granted under the 2001 Employee Equity Incentive Plan, during the fourth quarter of 2001 the Company granted options to purchase its common shares to employees and to certain non-employee directors of the Company. 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 vest and are exercisable in equal annual amounts on each of the first seven anniversaries, beginning in 2002, of the respective grant dates. The dilutive effect of these options is included in the weighted average diluted shares outstanding in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share". The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for options granted to employees. No compensation cost has been recognized for options granted as the exercise price of the options is equal to the market value of the Company's shares on the date of grant. On May 1, 2002, the Company granted awards under the Plan that consisted of rights to purchase 8,333 restricted common shares, which vest in equal amounts in each of the 28 calendar quarters following the grant, and options to purchase 192,667 shares which vest in equal amounts on each of the first seven anniversaries of the grant date. The exercise price of the options is equal to the market value of the Company's shares on the date of the grant. NOTE 10: 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 US subsidiaries of the Company is subject to income taxes imposed by US authorities. In addition, the Company's non-US subsidiaries are subject to income taxes imposed by the jurisdictions in which those subsidiaries conduct business. The provision for income taxes detailed below represents the Company's estimate of taxes on income applicable to all jurisdictions and is calculated at rates equal to the statutory income tax rate in each jurisdiction. The income tax provision, all current, for the periods ended June 30, 2002 and 2001 is as follows:
Three Months Ended June 30, Six Months Ended June 30, --------------------------- -------------------------- 2002 2001 2002 2001 ---------- ---------- ---------- ---------- US: Federal $1,519,112 $1,967,656 $2,642,176 $3,766,556 State and local 122,723 235,374 917,899 1,021,212 ---------- ---------- ---------- ---------- 1,641,835 2,203,030 3,560,075 4,787,768 Other: 3,633 -- 7,634 -- ---------- ---------- ---------- ---------- $1,645,468 $2,203,030 $3,567,709 $4,787,768 ========== ========== ========== ==========
11 NOTE 11: PENSION BENEFITS Total employer contributions amounted to $759,915 and $782,651 for the six months ended June 30, 2002 and 2001, respectively. Participants are immediately vested in their account balances. NOTE 12: 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 June 30, Six Months Ended June 30, ---------------------------- ---------------------------- 2002 2001 2002 2001 ---- ---- ---- ---- US $21,801,720 $22,639,194 $43,080,824 $47,907,683 Non-US 7,274,978 6,429,280 14,282,137 13,315,917 ----------- ----------- ----------- ----------- Total $29,076,698 $29,068,474 $57,362,961 $61,223,600 =========== =========== =========== =========== NOTE 13: SUBSEQUENT EVENTS On July 1, 2002, in accordance with the 2000 TPRS acquisition agreement, repurchase provisions on 20% of the initial number of shares issued and recorded as contingently returnable shares lapsed. Accordingly, the shareholders' equity account "contingently returnable shares" was reduced by $3,623,928 and additional paid-in-capital was increased by $271,876, being the excess of the shares' fair value over their initial issue price. The respective purchase price allocations were increased accordingly. On July 3, 2002, the Company declared a dividend of $0.30 per share to shareholders of record as of July 19, 2002, payable on July 31, 2002 in the aggregate amount of $14,022,847. As of July 30, 2002, the Board of Directors replenished the Company's authority to repurchase up to $30 million of the Company's shares at the discretion of the Company's Executive Committee. During the third quarter of 2002 through August 7, 2002, the Company repurchased and cancelled an aggregate of 27,482 shares in a combination of private and open market transactions for an aggregate purchase price of $429,319. 12 INTERIM FINANCIAL REPORT Overview W.P. Stewart & Co., Ltd., together with its subsidiaries, is a research-focused investment counselor that manages assets for high net-worth individuals and institutions located throughout the world. Our principal source of revenues is investment advisory fees and, accordingly, fluctuations in financial markets and client contributions and withdrawals have a direct effect on revenues and net income. Significant components of our expenses are variable in nature and partially offset fluctuations in revenue. Advisory fees are computed quarterly based on account market values and fee rates pursuant to investment advisory contracts with clients. Our policy is to bill clients quarterly, in advance. Commission revenues earned on our brokerage activities, substantially all of which relate to client accounts, vary directly with account trading activity and new account generation. Transaction costs are reviewed quarterly and are competitive. Interest and other revenue primarily consists of interest earned on notes receivable for employee purchases of common shares, interest earned on our cash management activities and equity income relating to our investments in unconsolidated affiliates. We provide competitive rewards to our employees through our compensation and benefits policies, together with our employee equity ownership practices. Employee compensation and benefits comprise our largest operating expense, the most significant component of which is compensation paid to our research analysts/portfolio managers. Compensation for all employees varies with operating profit. At the beginning of each year, each employee is allocated a participation in our compensation pool. Compensation paid depends upon our operating profit, as adjusted for amortization of intangibles and retirement benefits ("adjusted operating profit"). We review from time to time the percentage of operating profit made available for the compensation pool. Under our variable compensation program, which heavily weights compensation against profit performance, compensation expense currently may vary between 20.7% and 24.5% of adjusted operating profit. Compensation expense for the year ended December 31, 2001 was approximately 21.5% of adjusted operating profit, and it is currently anticipated that compensation expense for the year ending December 31, 2002 will be approximately 23%. 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. Commissions, clearance and trading expenses include fees incurred related to brokerage activities. These transaction-related costs vary directly with trading activity. Research and administration expenses include research, travel and entertainment, communications, systems support and occupancy. 13 Marketing expenses represent costs associated with our internal marketing initiatives and client servicing activities, and include client seminars and marketing related travel and operational expenses. Other operating expenses include professional fees consisting of accounting, auditing, tax, legal and consulting fees, charitable contributions and other administration expenses. All of our employees are given the opportunity to become shareholders during their first year of employment with us. As a result, virtually all of our employees are shareholders of W.P. Stewart & Co., Ltd. and all participate in the results of our operations. Operating Results Three Months Ended June 30, 2002 as Compared to Three Months Ended June 30, 2001 Assets Under Management Assets under management were approximately $8.3 billion at June 30, 2002, a decrease of approximately $1.2 billion, or 12.6% from approximately $9.5 billion at March 31, 2002. Assets under management were approximately $9.3 billion at June 30, 2001, essentially unchanged from $9.3 billion at March 31, 2001. The following table sets forth the net flows of assets under management for the three months ended June 30, 2002 and 2001, which include changes in net contributions and net new accounts opened/closed. The table excludes total capital appreciation or depreciation in assets under management with the exception of the amount attributable to withdrawals and closed accounts. Net Flow of Assets Under Management (in millions) Three Months Ended June 30, ------------------ 2002 2001 ----- ----- Existing Accounts: Contributions $ 221 $ 186 Withdrawals (250) (221) ----- ----- Net Flows of Existing Accounts (29) (35) Publicly Available Funds: Contributions 150 60 Withdrawals (86) (33) Direct Accounts Opened 89 170 Direct Accounts Closed (85) (141) ----- ----- Net Flows of Assets Under Management $ 39 $ 21 ===== ===== 14 Revenues Revenues were $36.4 million for the second quarter of 2002, a decrease of $2.1 million or 5.4% from $38.5 million earned for the second quarter of 2001. The changes were due to a $1.5 million or 18.9% decrease in commission revenue and a $0.6 million or 39.1% decrease in interest and other revenues. The average gross fee earned from client accounts was 1.23% for the quarter ended June 30, 2002 as compared to 1.26% for the quarter ended June 30, 2001. The decline in the average gross fee reflects a slight change in account mix. The decrease in commission revenue was primarily due to lower levels of trading volume during the second quarter of 2002 as compared with the higher levels of trading volume experienced in the second quarter of 2001. The lower commission income reflects levels that we would anticipate in relation to the prevailing market environment. Turnover was lower for the quarter ended June 30, 2002 as compared to the second quarter of 2001. Interest and other revenues decreased $0.6 million primarily due to lower interest earned based on the prevailing market rates and lower equity income from our unconsolidated affiliates. Expenses Expenses, excluding income taxes, increased $3.5 million, or 21.4%, to $19.9 million for the second quarter of 2002, from $16.4 million in the same period of the prior year. The increase was primarily due to a change in variable expenses, including an increase of $0.4 million in fees paid out to marketers, which are directly related to assets under management of referred accounts, offset by a decrease of $0.3 million in commissions, clearance and trading costs, which vary with account activity. Research and administration expenses increased $0.6 million, marketing expenses increased $0.5 million, which reflects our additional internal marketing and client servicing initiatives and other operating expenses increased $0.2 million. Employee compensation and benefits increased $2.0 million due to a change in the compensation percentage from 21% for the quarter ended June 30, 2001 to 23% for the quarter ended June 30, 2002. As stated previously, it is currently anticipated that the compensation percentage for 2002 will be 23% of adjusted operating profit. Depreciation and amortization increased $0.1 million. Our income tax expense decreased $0.6 million, to $1.6 million, for the second quarter of 2002, from $2.2 million in the same period of the prior year. The effective tax rate was 10% of income before taxes for both periods. Net Income Net income for the quarter ended June 30, 2002 decreased $5.0 million, or 25.3%, to $14.8 million, from $19.8 million in the second quarter of the prior year as a result of the items described above. Six Months Ended June 30, 2002 as Compared to Six Months Ended June 30, 2001 Assets Under Management Assets under management were approximately $8.3 billion at June 30, 2002, a decrease of approximately $0.9 billion, or 9.8% from approximately $9.2 billion at December 31, 2001. Assets under management were approximately $9.3 billion at June 30, 2001, a decline of approximately $1.0 billion, or 9.7%, from approximately $10.3 billion at December 31, 2000. The following table sets forth the net flows of assets under management for the six months ended June 30, 2002 and 2001, which include changes in net contributions and net new accounts opened/closed. 15 The table excludes total capital appreciation or depreciation in assets under management with the exception of the amount attributable to withdrawals and closed accounts. Net Flow of Assets Under Management (in millions) Six Months Ended June 30, ----------------- 2002 2001 ----- ----- Existing Accounts: Contributions $ 440 $ 366 Withdrawals (438) (543) ----- ----- Net Flows of Existing Accounts 2 (177) Publicly Available Funds: Contributions 201 70 Withdrawals (103) (56) Direct Accounts Opened 162 225 Direct Accounts Closed (302) (333) ----- ----- Net Flows of Assets Under Management $ (40) $(271) ===== ===== Revenues Revenues were $73.7 million for the six months ended June 30, 2002, a decrease of $13.2 million or 15.2% from $86.9 million earned for the six months ended June 30, 2001. The changes were due to a $3.9 million or 6.3% decrease in fee revenue, an $8.1 million or 36.1% decrease in commission revenue and a $1.2 million or 38.1% decrease in interest and other revenues. The average gross fee earned from client accounts was 1.23% for the six months ended June 30, 2002 as compared to 1.25% for the six months ended June 30, 2001. The decline in the average gross fee reflects a slight change in account mix. The decrease in commission revenue was primarily due to lower levels of trading volume during the first six months of 2002 as compared with the higher levels of trading volume experienced in the first six months of 2001. The lower commission income reflects levels that we would anticipate in relation to the prevailing market environment. Turnover was lower for the six months ended June 30, 2002 as compared to the six months ended June 30, 2001. Interest and other revenues decreased primarily due to a gain on the sale of an investment in the first quarter of 2001, lower interest earned based on the prevailing market rates and lower equity income from our unconsolidated affiliates. Expenses Expenses, excluding income taxes, decreased $1.0 million, or 2.6%, to $38.1 million for the six months ended June 30, 2002, from $39.1 million in the same period of the prior year. The decrease was primarily due to a decline in variable expenses, including a decrease of $1.1 million in commissions, clearance and trading costs, which vary with account activity, offset by an increase of $0.5 million in fees paid out to marketers, which are directly related to assets under management of referred accounts. Marketing expenses increased $0.7 million, which reflects our additional internal marketing and client servicing initiatives and other operating expenses decreased $0.5 million due to lower costs. Employee compensation and benefits decreased $0.9 million due to a decrease in adjusted operating profit and a change in the compensation percentage for the six months ended June 30, 2002 as compared to the percentage for the six months ended June 30, 2001. Depreciation and amortization increased $0.3 million. 16 Our income tax expense decreased $1.2 million, to $3.6 million, for the six months ended June 30, 2002, from $4.8 million in the same period of the prior year. The effective tax rate was 10% of income before taxes for both periods. Net Income Net income for the six months ended June 30, 2002 decreased $11.0 million, or 25.5%, to $32.1 million, from $43.1 million in the same period of the prior year as a result of the items described above. Inflation Our assets are largely liquid in nature and, therefore, not significantly affected by inflation. However, the rate of inflation may affect our expenses, such as information technology and occupancy costs, which may not be readily recoverable in the pricing of the services that we provide. To the extent inflation results in rising interest rates and has other negative effects upon the securities markets, it may adversely affect our financial position and results of operations. Contractual Obligations and Contingent Commitments W.P. Stewart & Co., Ltd. has contractual obligations to make future payments under long-term debt and non-cancelable 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 June 30, 2002: Contractual Obligations (in millions)
Remaining 2002 2003-2004 2005-2006 2007-Thereafter Total -------------- --------- --------- --------------- ----- Long-Term Debt $ 0.3 $ 1.3 $ 1.5 $14.7 $17.8 Minimum Rental Commitments $ 1.2 $ 5.3 $ 5.1 $ 8.5 $20.1
Contingent Commitments (in millions)
Amount of Commitment Expiration Per Period ------------------------------------------ 2002 2003-2004 2005-2006 2007-Thereafter Total ---- --------- --------- --------------- ----- Commitments under letters of credit (1) -- $ 1.2 -- $ 0.7 $ 1.9
(1) See Note 7 to the condensed consolidated financial statements for additional information. In February 1999, the Company entered into an agreement with Shamrock Aviation, Inc. in which Shamrock agreed to delay the sale of an aircraft owned by Shamrock so that such aircraft will continue to be available for use in the Company's business. At the same time, Shamrock agreed to release WPSI from any and all obligations of approximately $37 million, to participate in the purchase of an additional aircraft, delivery of which is scheduled for 2002. In return, the Company agreed to indemnify Shamrock for any loss in value of the aircraft Shamrock has agreed not to sell from the time the agreement was made until the aircraft is sold or replaced. The value of that aircraft as of the date of Shamrock's agreement with the Company was estimated to be $27 million. In May 2002, in exchange for a payment of $100,000, Shamrock released the Company from this indemnity agreement (See Note 7). Liquidity and Capital Resources Our financial condition is highly liquid with principal assets including cash and cash equivalents and receivables from clients. Cash equivalents are primarily short-term, highly liquid investments with an 17 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 require us to maintain significant capital balances. However, 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 brokerage and sub-advisory activities. W.P. Stewart Securities Limited and W.P. Stewart & Co. (Europe), Ltd. have consistently maintained net capital in excess of the regulatory requirements prescribed by the U.S. Securities and Exchange Commission and the U.K. Financial Services Authority (and the former Investment Management Regulatory Organisation Limited), respectively, as well as by other regulatory authorities. Historically, we have met our liquidity requirements with cash generated from our operations. In 1998, a limited liability company wholly owned by us acquired, by assignment, the rights and obligations of Shamrock Aviation, Inc., a company controlled by certain shareholders of W.P. Stewart & Co., Ltd., under a purchase agreement to buy a Challenger aircraft for $22.5 million. The aircraft was placed in service on April 8, 1999. General Electric Capital Corporation is financing the aircraft with 10-year, amortizing loans with fixed rates that range from 6.87% to 7.35%. During 1999, we paid $22.5 million under the purchase agreement, of which General Electric Capital Corporation provided $19.6 million under the loans. A company under common control with Shamrock Aviation, Inc., controlled by certain shareholders of W.P. Stewart & Co., Ltd., operates the Challenger aircraft for us. We are charged actual cost of operations for such operating services. We believe that ownership of this aircraft enables us to efficiently manage the heavy travel schedules of our investment and research professionals, at rates more favorable to us than would be charged by an unaffiliated charterer. We believe that our cash flow from operations is sufficient to meet our debt and other obligations as they come due as well as our anticipated capital requirements. EXHIBITS See press release attached hereto dated July 31, 2002 regarding the Company's financial results for the second quarter of 2002. See press release attached hereto dated August 1, 2002 regarding staff changes at the Company. See press release attached hereto dated August 9, 2002 regarding the Company's new legal counsel. 18 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: August 14, 2002 By: /s/ John C. Russell ------------------------------------ Name: John C. Russell Title: Managing Director 19 EX-99.1 3 d51479_ex99-1.txt PRESS RELEASE W.P. STEWART & CO., LTD. Contact: Fred M. Ryan W.P. STEWART & CO., LTD. REPORTS NET INCOME FOR SECOND QUARTER AND FIRST SIX MONTHS OF 2002 OF $14.8 MILLION AND $32.1 MILLION Diluted earnings per share of $0.32 and $0.69 for the second quarter and first six months, respectively 31 July 2002 Hamilton, Bermuda W.P. Stewart & Co., Ltd. today reported net income of $14.8 million, or $0.32 per share (diluted) and $0.34 per share (basic), for the second quarter ended 30 June 2002. This compares with net income in the second quarter of the prior year of $19.8 million or $0.42 per share (diluted) and $0.45 per share (basic). Second Quarter 2002 Highlights For the second quarter of 2002 there were 46,580,502 common shares outstanding on a weighted average diluted basis compared to 47,226,097 common shares outstanding for the second quarter of 2001 on the same weighted average diluted basis. Net income, for the quarter ended 30 June 2002, adjusted to include non-cash expenses such as depreciation, amortization and other non-cash charges on a tax-effected basis ("cash earnings"), was $16.7 million, or $0.36 per share (diluted), compared with $21.5 million, or $0.46 per share (diluted) in the same quarter of the prior year. Assets under management at quarter-end were approximately $8.3 billion, compared to approximately $9.5 billion at the end of the prior quarter, a decline of 12.6% and a decline of 10.8% from the $9.3 billion reported at 30 June 2001. Six Month Results For the six months ended 30 June 2002, net income was down 25.5% to $32.1 million, or $0.69 per share (diluted) and $0.73 per share (basic), on revenues of $73.7 million. Net income for the six months ended 30 June 2001 was $43.1 million, or $0.91 per share (diluted) and $0.99 (basic), on revenues of $86.9 million. Cash earnings for the six months ended 30 June 2002 were $35.8 million, or $0.76 per share (diluted) versus $46.4 million or $0.98 per share (diluted), in the same period of the prior year. For the six months ended 30 June 2002, there were 46,855,530 common shares outstanding on a weighted average diluted basis compared to 47,270,362 common shares outstanding for the same period in 2001 on the same weighted average diluted basis. -1- Trinity Hall, 43 Cedar Avenue, Hamilton HM 12, Bermuda Mailing Address: P.O. Box HM 2905, Hamilton HM LX, Bermuda W.P. STEWART & CO., LTD. Performance Performance in the W.P. Stewart & Co., Ltd. U.S. equity composite for the second quarter of 2002 was -11.8% pre-fee and -12.1% post-fee. For the six months ended 30 June 2002, the Company's performance was -7.7% pre-fee and -8.3% post-fee. W.P. Stewart's five-year performance record for the period ended 30 June 2002 averaged 7.3% pre-fee (6.1% post-fee), compounded annually, compared to an average of 3.7% for the S&P 500 in the period. Assets Under Management Assets under management (AUM) at quarter-end were approximately $8.3 billion, compared with approximately $9.5 billion for the quarter ended 31 March 2002, and approximately $9.3 billion reported at the quarter ended 30 June 2001. Net flows of AUM for the quarter ended 30 June 2002 were +$39 million, compared with +$22 million in the comparable quarter of 2001 and net outflows of $79 million in the first quarter of 2002. Net flows of AUM for the six months ended 30 June 2002 and 2001 were -$40 million and -$271 million, respectively. In the second quarter of 2002, net cash outflows from existing accounts were approximately $29 million compared with outflows of approximately $35 million in the second quarter of 2001. Net cash flows from existing accounts for the six months ended 30 June 2002 were +$2 million compared to net outflows of $177 in the six months ended 30 June 2001. Net new flows (net contributions to our publicly available funds and flows from new accounts minus closed accounts) were approximately +$68 million for the quarter compared to approximately +$56 million for the same quarter of the prior year. Net new flows were approximately -$42 million and approximately -$94 million for the six months ended 30 June 2002 and 2001, 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 27-year history, the growth in earning power behind clients' portfolios has ranged from approximately 11% to 22%, annually. Currently, portfolio earnings growth remains solidly positive and the Company's research analysts expect portfolio earnings growth to be within the historical range over the next few years. -2- Trinity Hall, 43 Cedar Avenue, Hamilton HM 12, Bermuda Mailing Address: P.O. Box HM 2905, Hamilton HM LX, Bermuda W.P. STEWART & CO., LTD. Revenues and Profitability Revenues were $36.4 million for the quarter ended 30 June 2002, down 5.4% from $38.5 million, for the same quarter of 2001. Revenues for the six months ended 30 June 2002 and 2001 were $73.7 million and $86.9 million, respectively. The average gross management fee was 1.23% for the quarter ended 30 June 2002 and 1.23% for the six months ended 30 June 2002, compared to 1.26% and 1.25% in the comparable periods of the prior year. The decline in the average gross fee reflects a slight change in account mix. Total operating expenses increased 21.4% to $19.9 million, for the second quarter 2002, from $16.4 million in the same quarter of the prior year. Total operating expenses were $38.1 million and $39.1 million for the six months ended 30 June 2002 and 2001, respectively. Pre-tax income, at $16.5 million, was 45.2% of gross revenues for the quarter ended 30 June 2002 compared to $22.0 million or 57.3% of gross revenues in the comparable quarter of the prior year. Pre-tax income was $35.7 million (48.4% of gross revenues) for the six months ended 30 June 2002, and $47.9 million (55.1% of gross revenues) for the six months ended 30 June 2001. The Company's provision for taxes for the quarter ended 30 June 2002 was $1.6 million versus $2.2 million in the comparable quarter of the prior year, and was $3.6 million versus $4.8 million for the six months ended 30 June 2002 and 2001, respectively. The tax rate was 10% of income before taxes for all such periods. Other Events During the second quarter of 2002, the Company repurchased an aggregate of 1,093,451 common shares of the Company in private and open market transactions for an aggregate purchase price of approximately $26.7 million. Following these repurchases, the Board of Directors replenished the Company's authority to repurchase up to $30 million of the Company's shares at the discretion of the Company's Executive Committee. Effective 1 January 2003, the Company will adopt provisions for the expensing of stock options. The Company does not currently believe that this will have any material effect on its financial statements. The Company paid a dividend of $0.30 per common share on 30 April 2002 to shareholders of record as of 19 April 2002 and will pay a dividend of $0.30 per share on 31 July 2002 to shareholders of record as of 19 July 2002. -3- Trinity Hall, 43 Cedar Avenue, Hamilton HM 12, Bermuda Mailing Address: P.O. Box HM 2905, Hamilton HM LX, Bermuda W.P. STEWART & CO., LTD. Investor Conference In conjunction with this second quarter 2002 earnings release, W.P. Stewart & Co., Ltd. will host a conference call on Wednesday, 31 July 2002. The conference will commence promptly at 9:15 a.m. (EDT) and conclude at 9:45 a.m. (EDT). Those who are interested in participating in the teleconference should dial 1-800-233-2795 (within the United States) or +785-832-1077 (outside the United States). The conference ID is "W.P. Stewart". To listen to the live broadcast of the conference over the Internet, simply access the following: http://www.firstcallevents.com/service/ajwz362561079gfl2.html. The teleconference will be available for replay from Wednesday, 31 July at 12:00 noon (EDT) through Thursday, 1 August 2002 at 5:00 p.m. (EDT). To access the replay, please dial 1-800-695-2523 (within the United States) or +402-530-9029 (outside the United States). The webcast will be accessible for replay on the Company's website through Wednesday, 7 August 2002. W.P. Stewart & Co., Ltd. is an asset management company that has provided research intensive equity management services to clients throughout the world since 1975. The Company is headquartered in Hamilton, Bermuda and has additional operations or affiliates in the United States, Europe and Asia. The Company's shares are listed for trading on the New York Stock Exchange (symbol: WPL) and on the Bermuda Stock Exchange (symbol: WPS). For more information, please visit the Company's website at http:www.wpstewart.com , or call W.P. Stewart Investor Relations (Fred M. Ryan) at 1-888-695-4092 (toll-free within the United States) or +441-295-8585 (outside the United States) or e-mail to IRINFO@wpstewart.com . 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. (Consolidated Statements of Operations appear on following page) # # # -4- Trinity Hall, 43 Cedar Avenue, Hamilton HM 12, Bermuda Mailing Address: P.O. Box HM 2905, Hamilton HM LX, Bermuda W.P. Stewart & Co., Ltd. Unaudited Condensed Consolidated Statements of Operations
For the Three Months Ended % Change From ------------------------------------------------- ------------------------------ June 30, 2002 March 31, 2002 June 30, 2001 March 31, 2002 June 30, 2001 ------------- -------------- ------------- -------------- ------------- Revenue: Fees $29,076,698 $28,286,263 $29,068,474 2.79% 0.03% Commissions 6,401,280 8,002,814 7,888,557 -20.01% -18.85% Interest and other 914,181 1,057,853 1,501,290 -13.58% -39.11% ----------- ----------- ----------- ------ ------ 36,392,159 37,346,930 38,458,321 -2.56% -5.37% ----------- ----------- ----------- ------ ------ Expenses: Employee compensation and benefits 6,941,787 6,655,333 4,923,804 4.30% 40.98% Fees paid out 1,988,284 2,055,460 1,646,865 -3.27% 20.73% Commissions, clearance and trading 1,373,519 1,589,140 1,637,915 -13.57% -16.14% Research and administration (1) 3,770,916 3,113,035 3,190,086 21.13% 18.21% Marketing (1) 1,275,352 823,088 803,693 54.95% 58.69% Depreciation and amortization 1,981,215 1,948,313 1,845,443 1.69% 7.36% Other operating (1) 2,606,406 1,940,147 2,380,215 34.34% 9.50% ----------- ----------- ----------- ------ ------ 19,937,479 18,124,516 16,428,021 10.00% 21.36% ----------- ----------- ----------- ------ ------ Income before taxes 16,454,680 19,222,414 22,030,300 -14.40% -25.31% Provision for taxes 1,645,468 1,922,241 2,203,030 -14.40% -25.31% ----------- ----------- ----------- ------ ------ Net income $14,809,212 $17,300,173 $19,827,270 -14.40% -25.31% =========== =========== =========== ====== ====== Earnings per share: Basic earnings per share $ 0.34 $ 0.39 $ 0.45 -12.82% -24.44% =========== =========== =========== ====== ====== Diluted earnings per share $ 0.32 $ 0.37 $ 0.42 -13.51% -23.81% =========== =========== =========== ====== ======
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, --------------------------------------- 2002 2001 % ----------- ----------- ------- Revenue: Fees $57,362,961 $61,223,600 -6.31% Commissions 14,404,094 22,534,800 -36.08% Interest and other 1,972,034 3,184,302 -38.07% ----------- ----------- ------ 73,739,089 86,942,702 -15.19% ----------- ----------- ------ Expenses: Employee compensation and benefits 13,597,120 14,543,260 -6.51% Fees paid out 4,043,744 3,499,564 15.55% Commissions, clearance and trading 2,962,659 4,037,534 -26.62% Research and administration (1) 6,883,951 6,912,160 -0.41% Marketing (1) 2,098,440 1,354,767 54.89% Depreciation and amortization 3,929,528 3,658,849 7.40% Other operating (1) 4,546,553 5,058,889 -10.13% ----------- ----------- ------ 38,061,995 39,065,023 -2.57% ----------- ----------- ------ Income before taxes 35,677,094 47,877,679 -25.48% Provision for taxes 3,567,709 4,787,768 -25.48% ----------- ----------- ------ Net income $32,109,385 $43,089,911 -25.48% =========== =========== ====== Earnings per share: Basic earnings per share $ 0.73 $ 0.99 -26.26% =========== =========== ====== Diluted earnings per share $ 0.69 $ 0.91 -24.18% =========== =========== ====== Note (1): Prior period amounts have been revised to reflect presentation consistent with current period reporting. EX-99.2 4 d51479_ex99-2.txt PRESS RELEASE W.P. STEWART & CO., LTD. Contact: Fred M. Ryan W.P. STEWART & CO., LTD. ANNOUNCES STAFF CHANGE 2nd August 2002 Hamilton, Bermuda W.P. Stewart & Co., Ltd. today announced that, after more than five years with the Company, Lisa D. Levey is leaving the Company on 9th August 2002. Ms. Levey, the Company's Deputy Managing Director-General Counsel, joined the Company in April 1997 and has significantly participated in many of the Company's major developments and initiatives, including its global geographic and product expansion and successful initial public offering in December 2000. William P. Stewart, Chairman and Chief Executive Officer of W.P. Stewart & Co., Ltd., said: "the Company has benefited tremendously from Lisa's many contributions. We appreciate Lisa's service with the Company and wish her the best in her future endeavors." Prior to joining the Company, Ms. Levey was General Counsel at Danielson Holding Corporation, a publicly traded financial services firm, and affiliated private investment firms, for five years. Before joining Danielson, Ms. Levey was a partner with Anderson Kill & Olick & Oshinsky, P.C. (now Anderson Kill & Olick, P.C.) from 1981 to 1990. Ms. Levey graduated from New York University School of Law and the University of Pennsylvania. W.P. Stewart & Co., Ltd. is an asset management company that has provided research intensive equity management services to clients throughout the world since 1975. The Company is headquartered in Hamilton, Bermuda and has additional operations or affiliates in the United States, Europe and Asia. The Company's shares are listed for trading on the New York Stock Exchange (symbol: WPL) and on the Bermuda Stock Exchange (symbol: WPS). For more information, please visit the Company's website at http://www.wpstewart.com , or call W.P. Stewart Investor Relations (Fred M. Ryan) at 1-888-695-4092 (toll-free within the United States) or +441-295-8585 (outside the United States) or e-mail to IRINFO@wpstewart.com . # # # Trinity Hall, 43 Cedar Avenue, Hamilton HM 12, Bermuda Mailing Address: P.O. Box HM 2905, Hamilton HM LX, Bermuda EX-99.3 5 d51479_ex99-3.txt PRESS RELEASE W.P. STEWART & CO., LTD. Contact: Fred M. Ryan W.P. STEWART & CO., LTD. NAMES NEW LEGAL COUNSEL 9th August 2002 Hamilton, Bermuda W.P. Stewart & Co., Ltd. today announced that, Michael W. Stamm will join the company as the firm's General Counsel, effective 12th August. Mr. Stamm will be responsible for legal matters covering all of the company's units worldwide. William P. Stewart, Chairman and Chief Executive Officer of W.P. Stewart & Co., Ltd., said: "We are delighted that Mike has decided to join the W.P. Stewart Group. Mike was our outside counsel for many years and has an in depth knowledge of our organization. He played a decisive role in the development of our global organization, and we will benefit greatly from his full-time presence." Prior to joining the Company, Mike was employed by HealthMarket Inc., an innovative and rapidly growing health care company based in Norwalk, Connecticut, were he served as Vice President and General Counsel for two and a half years. During the ten-year period prior to his employment at HealthMarket, Mr. Stamm was a partner at the New York based law firms Kelley, Drye & Warren LLP and Anderson, Kill & Olick P.C. He attended Villanova University and obtained a law degree from Rutgers Law School. W.P. Stewart & Co., Ltd. is an asset management company that has provided research intensive equity management services to clients throughout the world since 1975. The Company is headquartered in Hamilton, Bermuda and has additional operations or affiliates in the United States, Europe and Asia. The Company's shares are listed for trading on the New York Stock Exchange (symbol: WPL) and on the Bermuda Stock Exchange (symbol: WPS). For more information, please visit the Company's website at http://www.wpstewart.com , or call W.P. Stewart Investor Relations (Fred M. Ryan) at 1-888-695-4092 (toll-free within the United States) or +441-295-8585 (outside the United States) or e-mail to IRINFO@wpstewart.com. # # # Trinity Hall, 43 Cedar Avenue, Hamilton HM 12, Bermuda Mailing Address: P.O. Box HM 2905, Hamilton HM LX, Bermuda -----END PRIVACY-ENHANCED MESSAGE-----