Attached files
Exhibit 99.2
WESTWOOD HOLDINGS GROUP, INC.
Proforma Condensed Combined Balance Sheets
As of September 30, 2010
(Unaudited)
(In thousands, except par value and share amounts)
| Westwood | McCarthy | Proforma Adjustments |
Proforma Combined |
|||||||||||||||
| Assets | ||||||||||||||||||
| Current assets: |
||||||||||||||||||
| Cash and cash equivalents |
$ | 3,839 | $ | 781 | $ | (5,048 | ) | A | $ | (428 | ) | |||||||
| Accounts receivable |
6,587 | 212 | — | 6,799 | ||||||||||||||
| Investments, at fair value |
46,001 | — | — | 46,001 | ||||||||||||||
| Deferred income taxes |
2,169 | — | — | 2,169 | ||||||||||||||
| Prepaid income taxes |
1,013 | — | — | 1,013 | ||||||||||||||
| Other current assets |
538 | 49 | — | 587 | ||||||||||||||
| Total current assets |
60,147 | 1,042 | (5,048 | ) | 56,141 | |||||||||||||
| Goodwill |
3,915 | — | 7,318 | B | 11,233 | |||||||||||||
| Intangible assets, net |
971 | — | 4,224 | C | 5,195 | |||||||||||||
| Property and equipment, net |
335 | 87 | — | 422 | ||||||||||||||
| Total assets |
$ | 65,368 | $ | 1,129 | $ | 6,494 | $ | 72,991 | ||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||
| Current liabilities: |
||||||||||||||||||
| Accounts payable and accrued liabilities |
$ | 1,348 | $ | 45 | $ | — | $ | 1,393 | ||||||||||
| Dividends payable |
2,463 | — | — | 2,463 | ||||||||||||||
| Compensation and benefits payable |
6,751 | 637 | — | 7,388 | ||||||||||||||
| Deferred acquisition liability |
924 | — | — | 924 | ||||||||||||||
| Other current liabilities |
11 | — | — | 11 | ||||||||||||||
| Total current liabilities |
11,497 | 682 | — | 12,179 | ||||||||||||||
| Deferred acquisition liability |
818 | — | — | 818 | ||||||||||||||
| Deferred income taxes |
58 | — | — | 58 | ||||||||||||||
| Deferred rent |
133 | 7 | — | 140 | ||||||||||||||
| Total long-term liabilities |
1,009 | 7 | — | 1,016 | ||||||||||||||
| Total liabilities |
12,506 | 689 | — | 13,195 | ||||||||||||||
| Stockholders’ Equity: |
||||||||||||||||||
| Common stock, $0.01 par value, authorized 25,000,000 shares |
77 | — | 2 | D | 79 | |||||||||||||
| Additional paid-in capital |
56,095 | — | 6,932 | E | 63,027 | |||||||||||||
| Treasury stock, at cost - 229,195 shares |
(8,749 | ) | — | — | (8,749 | ) | ||||||||||||
| Accumulated other comprehensive income |
877 | — | — | 877 | ||||||||||||||
| Members’ equity |
— | 440 | (440 | ) | F | — | ||||||||||||
| Retained earnings |
4,562 | — | — | 4,562 | ||||||||||||||
| Total stockholders’ equity |
52,862 | 440 | 6,494 | 59,796 | ||||||||||||||
| Total liabilities and members’ equity |
$ | 65,368 | $ | 1,129 | $ | 6,494 | $ | 72,991 | ||||||||||
See accompanying notes
WESTWOOD HOLDINGS GROUP, INC.
Proforma Condensed Combined Statements of Income
Nine Months Ended September 30, 2010
(Unaudited)
(In thousands, except per share data)
| Westwood | McCarthy | Proforma Adjustments |
Proforma Combined |
|||||||||||||||
| REVENUES: |
||||||||||||||||||
| Advisory fees Asset-based |
$ | 30,457 | $ | 3,145 | $ | — | $ | 33,602 | ||||||||||
| Trust fees |
8,950 | — | — | 8,950 | ||||||||||||||
| Other revenues, net |
476 | — | — | 476 | ||||||||||||||
| Total revenues |
39,883 | 3,145 | — | 43,028 | ||||||||||||||
| EXPENSES: |
||||||||||||||||||
| Employee compensation and benefits |
21,447 | 1,842 | — | 23,289 | ||||||||||||||
| Sales and marketing |
569 | — | — | 569 | ||||||||||||||
| WHG mutual funds |
344 | — | — | 344 | ||||||||||||||
| Information technology |
977 | — | — | 977 | ||||||||||||||
| Professional services |
1,916 | — | — | 1,916 | ||||||||||||||
| General and administrative |
2,026 | 698 | 282 | G | 3,006 | |||||||||||||
| Total expenses |
27,279 | 2,540 | 282 | 30,101 | ||||||||||||||
| Income before income taxes |
12,604 | 605 | (282 | ) | 12,927 | |||||||||||||
| Provision for income taxes |
4,579 | — | 117 | H | 4,696 | |||||||||||||
| Net income |
$ | 8,025 | $ | 605 | $ | (399 | ) | $ | 8,231 | |||||||||
| Earnings per share: |
||||||||||||||||||
| Basic |
$ | 1.13 | $ | 1.13 | ||||||||||||||
| Diluted |
$ | 1.11 | $ | 1.11 | ||||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||||
| Basic |
6,567,429 | 181,461 | I | 6,748,890 | ||||||||||||||
| Diluted |
6,710,716 | 181,461 | I | 6,892,177 | ||||||||||||||
See accompanying notes
WESTWOOD HOLDINGS GROUP, INC.
Proforma Condensed Combined Statements of Income
Year Ended December 31, 2009
(Unaudited)
(In thousands, except per share data)
| Westwood | McCarthy | Proforma Adjustments |
Proforma Combined |
|||||||||||||||
| REVENUES: |
||||||||||||||||||
| Advisory fees Asset-based |
$ | 31,794 | $ | 3,678 | $ | — | $ | 35,472 | ||||||||||
| Trust fees |
10,304 | — | — | 10,304 | ||||||||||||||
| Other revenues, net |
455 | — | — | 455 | ||||||||||||||
| Total revenues |
42,553 | 3,678 | — | 46,231 | ||||||||||||||
| EXPENSES: |
||||||||||||||||||
| Employee compensation and benefits |
23,730 | 2,119 | — | 25,849 | ||||||||||||||
| Sales and marketing |
576 | — | — | 576 | ||||||||||||||
| WHG mutual funds |
600 | — | — | 600 | ||||||||||||||
| Information technology |
1,221 | — | — | 1,221 | ||||||||||||||
| Professional services |
1,531 | — | — | 1,531 | ||||||||||||||
| General and administrative |
2,577 | 911 | 397 | G | 3,885 | |||||||||||||
| Total expenses |
30,235 | 3,030 | 397 | 33,662 | ||||||||||||||
| Income before income taxes |
12,318 | 648 | (397 | ) | 12,569 | |||||||||||||
| Provision for income taxes |
4,423 | — | 90 | H | 4,513 | |||||||||||||
| Net income |
$ | 7,895 | $ | 648 | $ | (487 | ) | $ | 8,056 | |||||||||
| Earnings per share: |
||||||||||||||||||
| Basic |
$ | 1.10 | $ | 1.09 | ||||||||||||||
| Diluted |
$ | 1.09 | $ | 1.09 | ||||||||||||||
| Weighted average shares outstanding: |
||||||||||||||||||
| Basic |
6,339,791 | 181,461 | I | 6,521,252 | ||||||||||||||
| Diluted |
6,366,988 | 181,461 | I | 6,548,449 | ||||||||||||||
See accompanying notes
Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
Basis of Presentation
On November 18, 2010, Westwood Group Holdings, L.L.C. (“Westwood”) completed the acquisition of all of the outstanding membership interests of McCarthy Group Advisors, L.L.C (“McCarthy”), a Nebraska limited liability company. The registered investment advisory firm based out of Omaha, Nebraska manages private wealth and institutional client assets and was purchased from MGA Holdings, L.L.C., also a Nebraska limited liability company. The aggregate consideration for the purchase consisted of $5.0 million in cash and the issuance of 181,461 shares of Westwood’s common stock.
The acquisition of McCarthy will be accounted for using the purchase method of accounting pursuant to ASC 805, Business Combinations. Accordingly, the purchase price will be allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date.
The accompanying pro forma financial information and related notes should be read in conjunction with Westwood’s Annual Report on Form 10-K for the year ended December 31, 2009 and its Quarterly Report on Form 10-Q for the nine months ended September 30, 2010.
The pro forma unaudited condensed statements of income may not represent what the actual results would have been had the transaction occurred at the beginning of the applicable periods.
The pro forma unaudited condensed balance sheets at September 30, 2010 were presented as if the transaction occurred on September 30, 2010.
The pro forma unaudited condensed statements of income for the nine months ended September 30, 2010 were presented as if the transaction occurred on January 1, 2010.
The pro forma unaudited condensed statements of income for the year ended December 31, 2009 were presented as if the transaction occurred on January 1, 2009.
The columns labeled Westwood represent the unaudited balance sheet of Westwood Holdings Group, Inc. as of September 30, 2010 and its respective statements of income for the nine months ended September 30, 2010 and the year ended December 31, 2009. The columns labeled McCarthy represent the unaudited balance sheet of McCarthy Group Advisors, L.L.C. as of September 30, 2010 and its respective unaudited statements of income for the nine months ended September 30, 2010 and the year ended December 31, 2009.
The pro forma unaudited combined balance sheet and statements of income of Westwood are prepared to give effect to the following:
| A. | Cash expended as part of the purchase consideration. |
| B. | Goodwill on acquisition, arrived at as follows (in thousands): |
| Purchase consideration: |
||||
| Cash |
$ | 5,048 | ||
| Common stock |
6,934 | |||
| 11,982 | ||||
| Tangible net assets acquired |
440 | |||
| Identifiable intangible assets |
4,224 | |||
| 4,664 | ||||
| Goodwill acquired |
$ | 7,318 | ||
| C. | The following identifiable intangible assets (in thousands): |
| Estimated | ||||||||
| useful lives | ||||||||
| Customer Accounts |
$ | 3,965 | 15 years | |||||
| Non-compete agreements |
24 | 2 years | ||||||
| Trade-name |
235 | 2 years | ||||||
| $ | 4,224 | |||||||
| D. | Par value of 181,461 shares of Westwood Holdings Group, Inc.’s common stock issued as part of the purchase consideration. |
| E. | Estimated value over par of the 181,461 shares of Westwood Holdings Group, Inc.’s common stock issued as part of the purchase consideration. |
| F. | Elimination of McCarthy’s equity, which was fully acquired by Westwood. |
| G. | Depreciation adjustments, based on the estimated fair value of property and equipment acquired, and amortization adjustments based on the estimated fair value of definite-lived intangible assets acquired. |
| H. | Income tax adjustment, using the effective tax rate for the respective fiscal periods. |
| I. | Shares of Westwood Holdings Group, Inc.’s common stock issued as part of the consideration for the business combination. |