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Westwood Holdings Group Inc. Reports Operating Results (10-Q)

October 22, 2009 | About:
10qk

10qk

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Westwood Holdings Group Inc. (WHG) filed Quarterly Report for the period ended 2009-09-30.

Westwood is a well-established investment management company that has built a strong reputation of providing superior investment results with the highest level of client service. Westwood Holdings Group Inc. has a market cap of $232.2 million; its shares were traded at around $36.85 with a P/E ratio of 21.8 and P/S ratio of 5. The dividend yield of Westwood Holdings Group Inc. stocks is 3.7%.

Highlight of Business Operations:

Assets under management increased $1.2 billion to $9.5 billion at September 30, 2009, compared with $8.3 billion at September 30, 2008. The average of beginning and ending assets under management for the third quarter of 2009 was $8.9 billion compared to $8.0 billion for the third quarter of 2008, an increase of 11%. The increase in period ending assets under management was principally due to asset inflows from new and existing clients and was partially offset by market depreciation of assets under management and the withdrawal of assets by certain clients. The following table sets forth Westwood Managements and Westwood Trusts assets under management as of September 30, 2009 and 2008:

Total Revenues. Our total revenues increased by 15% to $11.6 million for the three months ended September 30, 2009 compared with $10.1 million for the three months ended September 30, 2008. Asset-based advisory fees increased by 19% to $8.8 million for the three months ended September 30, 2009 compared with $7.4 million for the three months ended September 30, 2008, as a result of increased average assets under management by Westwood Management due to inflows from new and existing clients, partially offset by market depreciation of assets and the withdrawal of assets by certain clients, as well as higher average fee realization. Trust fees decreased by 7% to $2.6 million for the three months ended September 30, 2009 compared with $2.8 million for the three months ended September 30, 2008 as a result of lower assets under management by Westwood Trust at the

beginning of the quarter due to market depreciation of assets. Net asset inflows partially offset this decrease. Other revenues, which generally consist of interest and investment income, increased by 269% to $226,000 for the three months ended September 30, 2009 compared with $(134,000) for the three months ended September 30, 2008. Other revenues are presented net and increased primarily due to an increase of $436,000 in net realized and unrealized gains on investments, partially offset by a decrease of $63,000 in interest and dividend income due to lower interest rates and a shift into lower yielding U.S. Treasury Bills.

Employee Compensation and Benefits. Employee compensation and benefits costs generally consist of salaries, incentive compensation, equity based compensation expense and benefits. Employee compensation and benefits costs increased by 16% to $6.4 million for the three months ended September 30, 2009 compared with $5.5 million for the three months ended September 30, 2008. The increase was primarily due to increases of $572,000 in incentive compensation expense as a result of higher pretax income, $196,000 in restricted stock expense due to additional employee restricted stock grants in February 2009 as well as the higher price at which these shares were granted compared to prior grants and $92,000 in salary expense due primarily to increased average headcount. In the second quarters of 2009 and 2008, we concluded that it was probable that we would meet the performance goals required in order for the applicable percentage of the performance-based restricted shares awarded to our Chief Executive Officer and Chief Investment Officer to vest in each year. As a result, we recognized expense of approximately $470,000 in both the current and prior year second and third quarters related to these performance-based restricted stock grants. We expect to recognize a similar amount in the fourth quarter of 2009 related to these performance-based restricted stock grants. We had 63 full-time employees as of September 30, 2009 and September 30, 2008.

Total Revenues. Our total revenues increased by 3% to $29.8 million for the nine months ended September 30, 2009 compared with $28.9 million for the nine months ended September 30, 2008. Asset-based advisory fees increased by 9% to $22.1 million for the nine months ended September 30, 2009 compared with $20.4 million for the nine months ended September 30, 2008, as a result of increased average assets under management by Westwood Management due to inflows from new and existing clients, partially offset by market depreciation of assets and the withdrawal of assets by certain clients. Trust fees decreased by 11% to $7.4 million for the nine months ended September 30, 2009 compared with $8.3 million for the nine months ended September 30, 2008, as a result of decreased average assets under management by Westwood Trust due to market depreciation of assets and the withdrawal of assets by certain clients. Inflows from new clients partially offset these decreases. Other revenues increased by 142% to $346,000 for the nine months ended September 30, 2009 compared with $143,000 for the nine months ended September 30, 2008. Other revenues increased primarily due to an increase of $531,000 in net unrealized and realized gains on investments, partially offset by a decrease in interest and dividend income due to lower interest rates, a shift into lower yielding U.S. Treasury Bills and lower dividends from Teton Advisors, Inc. (Teton). Westwood Management owns shares of Class A Common Stock representing a 15.3% economic interest in Teton, the adviser to the Westwood Funds. Westwood is the subadvisor to three of the six Westwood Funds.

Employee Compensation and Benefits. Employee compensation and benefits costs increased by 9% to $17.0 million for the nine months ended September 30, 2009 compared with $15.5 million for the nine months ended September 30, 2008. The increase is primarily due to increases of $768,000 in restricted stock expense due to additional employee restricted stock grants in February 2009 as well as the higher price at which these shares were granted compared to prior grants, $449,000 in salary expense due primarily to increased average headcount, $243,000 in incentive compensation expense and $36,000 in health insurance expense. These increases were offset by decreased profit sharing expense. We had 63 full-time employees as of September 30, 2009 and September 30, 2008.

Read the The complete ReportWHG is in the portfolios of Third Avenue Management, John Keeley of Keeley Fund Management.

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