A primary factor contributing to the lower earnings was the reduced level of commission income in comparison with annualized commission income in 2001.
For the first quarter of 2002 there were 47,133,614 common shares outstanding on a weighted average diluted basis compared to 47,315,118 common shares outstanding for the first quarter of 2001 on the same weighted average
diluted basis.
Cash earnings for the quarter ended 31 March 2002, which exclude non-cash expenses such as depreciation and amortization, on a tax-effected basis, were $19.1 million, or $0.41 per share (diluted), compared with $24.9 million, or
$0.53 per share (diluted) in the same quarter of the prior year.
Performance
Performance in the W.P. Stewart & Co., Ltd. US Equity Composite for the first quarter of 2002 was substantially better than the S&P 500, at 4.7%
pre-fee and 4.4% post-fee, compared with 0.3% for the broad market average.
W.P. Stewart's five-year performance record for the period ended 31 March 2002 averaged 14.1% pre-fee (12.9% post-fee), compounded annually, compared to an average of 10.2% for the S&P 500 in the period.
Assets Under Management
Assets under management at quarter-end were approximately $9.5 billion, compared with approximately $9.2 billion at 31 December 2001, and approximately $9.3 billion at 31 March 2001.
Net flows for the quarter ended 31 March 2002 were -$79 million, compared with -$140 million in the fourth quarter of 2001 and -$291 million in the comparable quarter of 2001.
In the quarter, net cash inflows to existing accounts were approximately $31 million, compared with -$142 million in the comparable quarter of 2001.
Net new flows (net contributions to our publicly available funds and flows from new accounts minus closed accounts) were -$110 million for the quarter compared to -$150 million for the same quarter of the prior year.
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 significantly better than that of the S&P Industrials. The Company's research analysts expect portfolio earnings growth to be within the historical range
over the next few years
Revenues and Profitability
Revenues were $37.3 million for the quarter ended 31 March 2002, down 23% from $48.5 million for the same quarter 2001.
The average gross management fee was 1.23% for the quarter ended 31 March 2002, compared to 1.25% in the same quarter of the prior year. The decline in the average gross fee reflects a slight change in account mix.
Total operating expenses decreased 19.9%, to $18.1 million, for the first quarter 2002, from $22.6 million in the same quarter of the prior year.
Pre-tax income, at $19.2 million, was 51.5% of gross revenues for the quarter ended 31 March 2002 compared to $25.8 million or 53.3% of gross
revenues in the comparable quarter of the prior year.
The Company's provision for taxes for the quarter ended 31 March 2002 was $1.9 million versus $2.6 million in the comparable quarter of the prior year. The tax rate is 10% of income before taxes for both periods.
Other Events
As of 26 April 2002, the Company increased its authority to repurchase its
shares to $30 million, at the discretion of the Company's Executive Committee.
The Company paid a dividend of $0.30 per common share on 31 January 2002
to shareholders of record as of 18 January 2002, and will pay a dividend of
$0.30 per common share on 30 April 2002 to shareholders of record as of 19
April 2002.