UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 3, 2015
WADDELL & REED FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
|
Delaware |
|
001-13913 |
|
51-0261715 |
|
(State or Other
Jurisdiction of
Incorporation) |
|
(Commission
File Number) |
|
(IRS Employer
Identification No.) |
6300 Lamar Avenue
Overland Park, Kansas 66202
(Address of Principal Executive Offices) (Zip Code)
(913) 236-2000
(Registrant’s Telephone Number, including Area Code)
(Registrant’s Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On February 3, 2015, Waddell & Reed Financial, Inc. (the “Company”) issued a press release announcing the Company’s financial results for the fiscal quarter ended December 31, 2014. A copy of the Company’s press release is furnished as Exhibit 99.1 and incorporated herein by reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
99.1 Press Release dated February 3, 2015
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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WADDELL & REED FINANCIAL, INC. |
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|
|
|
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|
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Date: February 3, 2015 |
By: |
/s/ Brent K. Bloss |
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Brent K. Bloss |
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Senior Vice President, Chief Financial Officer |
|
|
|
and Treasurer |
3
EXHIBIT INDEX
|
Exhibit No. |
|
Description |
|
|
|
|
|
99.1 |
|
Press Release dated February 3, 2015 |
4
Exhibit 99.1
News Release
Waddell & Reed Financial, Inc. Reports Fourth Quarter Results
Overland Park, KS, Feb. 3, 2015 — Waddell & Reed Financial, Inc. (NYSE: WDR) today reported fourth quarter 2014 net income of $80.9 million, or $0.97 per diluted share, compared to net income of $74.6 million, or $0.89 per diluted share, during the previous quarter and net income of $78.8 million, or $0.92 per diluted share, during the fourth quarter of 2013. The third quarter of 2014 included a charge of $7.9 million ($5.0 million net of taxes, or $0.06 per diluted share) to recognize the impairment of an intangible asset.
Operating revenues of $397.2 million declined 3% sequentially, driven by lower management fee revenues as average assets under management declined during the fourth quarter. When compared to the same period last year, operating revenues rose 6%. The increase was due to higher average assets under management during the current quarter compared to the same quarter in 2013, which resulted in higher underwriting and distribution fees and management fee revenues. The operating margin during the quarter was 30.0% compared to 30.6% during the previous quarter and 30.2% during the same period last year.
On December 31, 2014, assets under management were $123.7 billion, down 4% during the quarter due to outflows, which were partially offset by positive market action. Compared to December 31, 2013, assets under management declined 2%. Average assets under management were $126.9 billion in the quarter.
Business Discussion
“The second half of 2014 was unusually challenging for Waddell & Reed,” said Hank Herrmann, Chairman and Chief Executive Officer of Waddell & Reed Financial, Inc. “Sales momentum meaningfully decelerated while redemptions rose. Much of this reversal in trends can be attributed to weakness in performance in one of our key funds and the loss of investors’ appetite for high yield products.”
“The investment team is working to address performance issues while the distribution staff is focused on keeping clients alert to the attractiveness of our products and their superior long-term performance records.”
The fourth quarter of 2014 included $8.9 billion in capital gain and dividend distributions by our funds, approximately $1.0 billion of which were not reinvested by clients. The net capital gain not reinvested in our funds was recorded as a reduction to sales. We reported fourth quarter sales of $4.0 billion; however, adjusting for the impact of the un-reinvested portion of capital gains, sales were $5.0 billion.
1
Capital gain distributions during the quarter in the Wholesale channel were $5.9 billion, $912 million of which was not reinvested in our funds. Sales during the quarter were $2.4 billion, or $3.3 billion adjusted for the net capital gains not reinvested in our funds, which was 23% lower than the previous quarter. Annual sales were $18.5 billion, a decline of 13% compared to the year ended December 31, 2013, or 9% adjusted for the capital gains not reinvested in our funds. Outflows for the quarter and year ended December 31, 2014 were $6.1 billion and $5.1 billion, respectively, or outflows of $5.2 billion and $4.2 billion for the same periods adjusted for the capital gains not reinvested in our funds.
Sales in our Advisors channel were $1.3 billion during the current quarter, or 1% higher compared to the previous quarter. Sales increased 6% year over year, for an annual total of $5.5 billion. Net inflows were $34 million during the quarter and $586 million for the full year. Capital gain distributions during the quarter in our Advisors channel were $3.0 billion, $77 million of which was not reinvested in our funds.
Sales in our Institutional channel were $317 million, or 3% lower than the previous quarter. Annual sales were $3.4 billion, or 9% higher than the previous year. We experienced $346 million of outflows during the quarter; however, this channel had annual net inflows of $957 million.
Management Fee Revenue Analysis
Management fees declined 5% sequentially, in line with the 5% decline in average assets under management. The effective fee rate remained unchanged at 59.0 basis points.
Compared to the fourth quarter of 2013, management fees rose 5% while average assets under management rose 6%. A mix-shift in the asset base caused the effective fee rate to decline to 59.0 basis points compared to 59.5 basis points last year.
Underwriting and Distribution Analysis
Wholesale channel
Revenues fell sequentially as assets under management and related Rule 12b-1 fees declined. Direct expenses also declined on lower Rule 12b-1 fees and lower wholesaler commissions. Indirect costs rose slightly due to higher IT costs.
Compared to the same period last year, revenues and direct expenses fell slightly due to lower asset-based Rule 12b-1 fees. Indirect costs rose due to higher IT costs and to a lesser degree, higher compensation costs.
Advisors channel
Sequentially, revenues rose due to a combination of higher asset-based advisory fees and commissions on variable annuity sales and insurance products. Direct costs rose with revenues and indirect costs rose slightly.
Compared to the fourth quarter of 2013, the increase in revenues was primarily due to higher advisory fees. Higher asset-based Rule 12b-1 fees and, to a lesser degree, higher commissions on insurance products also contributed to the increase in revenues. Direct costs rose with revenues, while indirect costs rose slightly.
2
Compensation and Related Expense Analysis
The sequential decline in compensation costs was mainly due to lower incentive compensation costs and was partly offset by higher payroll taxes associated with the vesting of restricted stock, higher equity compensation and higher base salaries.
Compared to the same quarter in 2013, costs declined due to lower incentive compensation costs and, to a lesser degree, a decline in pension costs. An increase in base compensation costs partially offset these items.
General and Administrative Expense Analysis
Costs rose sequentially due to higher IT, consulting and advertising costs. Compared to the fourth quarter of 2013, higher consulting was primarily responsible for the increase in costs.
Unaudited Balance Sheet Information
Schedule of Selected Items
|
(Amounts in millions) |
|
Dec. 31, 2014 |
|
|
Cash & cash equivalents (unrestricted) |
|
$566.6 |
|
|
|
|
Investment securities |
|
243.3 |
|
|
|
|
Total assets |
|
1,511.9 |
|
|
|
|
Long-term debt |
|
190.0 |
|
|
|
|
Total liabilities |
|
725.8 |
|
|
|
|
Stockholders’ equity |
|
786.1 |
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding |
|
83.7 |
|
million shares |
|
|
|
|
Quarter ended |
|
Year-to-Date |
|
|
($ in thousands) |
|
Dec. 31, 2014 |
|
Dec. 31, 2014 |
|
|
Shares repurchased |
|
|
|
|
|
|
Number of shares |
|
729,882 |
|
2,252,152 |
|
|
Total cost |
|
$ |
34,885 |
|
$ |
131,030 |
|
|
|
|
|
|
|
|
|
Dividend paid |
|
|
|
|
|
|
Rate per share |
|
$ |
0.34 |
|
$ |
1.36 |
|
|
Total paid |
|
$ |
28,509 |
|
$ |
115,263 |
|
|
|
|
|
|
|
|
|
Capital returned to stockholders |
|
$ |
63,394 |
|
$ |
246,293 |
|
On December 31 2014, we granted 323,000 shares of restricted stock in accordance with our executive compensation program.
3
Unaudited Consolidated Statement of Income
(Amounts in thousands, except for per share data)
|
|
|
2013 |
|
2014 |
|
|
|
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
|
Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees |
|
$ |
148,445 |
|
$ |
156,219 |
|
$ |
165,559 |
|
$ |
180,219 |
|
$ |
188,037 |
|
$ |
193,624 |
|
$ |
197,783 |
|
$ |
188,658 |
|
|
Underwriting and distribution fees |
|
135,419 |
|
141,597 |
|
146,863 |
|
158,940 |
|
165,267 |
|
169,001 |
|
173,047 |
|
171,363 |
|
|
Shareholder service fees |
|
32,691 |
|
33,890 |
|
34,667 |
|
35,845 |
|
37,112 |
|
38,009 |
|
38,728 |
|
37,130 |
|
|
Total operating revenues |
|
316,555 |
|
331,706 |
|
347,089 |
|
375,004 |
|
390,416 |
|
400,634 |
|
409,558 |
|
397,151 |
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting and distribution |
|
161,571 |
|
164,844 |
|
169,046 |
|
181,252 |
|
194,951 |
|
195,608 |
|
197,246 |
|
195,522 |
|
|
Compensation and related costs |
|
48,155 |
|
47,376 |
|
49,472 |
|
52,594 |
|
50,009 |
|
48,589 |
|
48,375 |
|
47,437 |
|
|
General and administrative |
|
16,208 |
|
26,938 |
|
20,462 |
|
22,811 |
|
23,756 |
|
27,183 |
|
24,924 |
|
28,774 |
|
|
Subadvisory fees |
|
4,484 |
|
4,291 |
|
1,667 |
|
1,778 |
|
1,877 |
|
2,069 |
|
2,203 |
|
2,287 |
|
|
Depreciation |
|
3,227 |
|
3,222 |
|
3,172 |
|
3,213 |
|
3,249 |
|
3,541 |
|
3,786 |
|
4,058 |
|
|
Intangible asset impairment |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
7,900 |
|
— |
|
|
Total operating expenses |
|
233,645 |
|
246,671 |
|
243,819 |
|
261,648 |
|
273,842 |
|
276,990 |
|
284,434 |
|
278,078 |
|
|
Operating Income |
|
82,910 |
|
85,035 |
|
103,270 |
|
113,356 |
|
116,574 |
|
123,644 |
|
125,124 |
|
119,073 |
|
|
Investment and other income/(loss) |
|
4,377 |
|
1,002 |
|
5,212 |
|
9,313 |
|
3,900 |
|
6,100 |
|
(1,205 |
) |
7,995 |
|
|
Interest expense |
|
(2,854 |
) |
(2,858 |
) |
(2,832 |
) |
(2,700 |
) |
(2,755 |
) |
(2,755 |
) |
(2,769 |
) |
(2,763 |
) |
|
Income before taxes |
|
84,433 |
|
83,179 |
|
105,650 |
|
119,969 |
|
117,719 |
|
126,989 |
|
121,150 |
|
124,305 |
|
|
Provision for taxes |
|
30,570 |
|
31,222 |
|
37,231 |
|
41,210 |
|
42,855 |
|
44,001 |
|
46,564 |
|
43,412 |
|
|
Net Income |
|
$ |
53,863 |
|
$ |
51,957 |
|
$ |
68,419 |
|
$ |
78,759 |
|
$ |
74,864 |
|
$ |
82,988 |
|
$ |
74,586 |
|
$ |
80,893 |
|
|
Net income per share, basic and diluted: |
|
0.63 |
|
0.61 |
|
0.80 |
|
0.92 |
|
0.88 |
|
0.98 |
|
0.89 |
|
0.97 |
|
|
Weighted average shares outstanding - basic and diluted |
|
85,593 |
|
85,869 |
|
85,603 |
|
85,294 |
|
85,019 |
|
85,073 |
|
84,242 |
|
83,623 |
|
|
Operating margin |
|
26.2 |
% |
25.6 |
% |
29.8 |
% |
30.2 |
% |
29.9 |
% |
30.9 |
% |
30.6 |
% |
30.0 |
% |
Net Distribution Cost Analysis
(Amounts in thousands)
|
|
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
|
Wholesale Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U&D Revenues |
|
$ |
48,175 |
|
$ |
49,846 |
|
$ |
52,472 |
|
$ |
56,926 |
|
$ |
59,564 |
|
$ |
60,237 |
|
$ |
59,807 |
|
$ |
55,331 |
|
|
U&D Expenses - Direct |
|
(63,548 |
) |
(64,694 |
) |
(67,107 |
) |
(72,698 |
) |
(79,700 |
) |
(76,834 |
) |
(75,775 |
) |
(70,150 |
) |
|
U&D Expenses - Indirect |
|
(11,000 |
) |
(11,229 |
) |
(10,409 |
) |
(11,285 |
) |
(11,535 |
) |
(12,791 |
) |
(13,317 |
) |
(14,032 |
) |
|
Net Distribution (Costs) |
|
$ |
(26,373 |
) |
$ |
(26,077 |
) |
$ |
(25,044 |
) |
$ |
(27,057 |
) |
$ |
(31,671 |
) |
$ |
(29,388 |
) |
$ |
(29,285 |
) |
$ |
(28,851 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisors Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U&D Revenues |
|
$ |
87,244 |
|
$ |
91,751 |
|
$ |
94,391 |
|
$ |
102,014 |
|
$ |
105,703 |
|
$ |
108,764 |
|
$ |
113,240 |
|
$ |
116,032 |
|
|
U&D Expenses - Direct |
|
(59,657 |
) |
(62,794 |
) |
(64,550 |
) |
(69,023 |
) |
(74,697 |
) |
(76,867 |
) |
(79,700 |
) |
(82,231 |
) |
|
U&D Expenses - Indirect |
|
(27,366 |
) |
(26,127 |
) |
(26,980 |
) |
(28,246 |
) |
(29,019 |
) |
(29,116 |
) |
(28,454 |
) |
(29,109 |
) |
|
Net Distribution Excess |
|
$ |
221 |
|
$ |
2,830 |
|
$ |
2,861 |
|
$ |
4,745 |
|
$ |
1,987 |
|
$ |
2,781 |
|
$ |
5,086 |
|
$ |
4,692 |
|
4
Changes in Assets Under Management
(Amounts in millions)
|
|
|
2013 |
|
2014 |
|
|
|
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
|
Wholesale Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets |
|
$ |
48,930 |
|
$ |
53,254 |
|
$ |
53,860 |
|
$ |
59,661 |
|
$ |
67,055 |
|
$ |
70,467 |
|
$ |
71,671 |
|
$ |
66,375 |
|
|
Sales* |
|
5,042 |
|
5,030 |
|
5,191 |
|
6,148 |
|
7,017 |
|
4,864 |
|
4,269 |
|
2,383 |
|
|
Redemptions |
|
(3,157 |
) |
(3,983 |
) |
(3,723 |
) |
(3,449 |
) |
(3,562 |
) |
(4,363 |
) |
(7,008 |
) |
(8,592 |
) |
|
Net Exchanges |
|
66 |
|
61 |
|
83 |
|
91 |
|
112 |
|
(397 |
) |
112 |
|
74 |
|
|
Net flows |
|
1,951 |
|
1,108 |
|
1,551 |
|
2,790 |
|
3,567 |
|
104 |
|
(2,627 |
) |
(6,135 |
) |
|
Market action |
|
2,373 |
|
(502 |
) |
4,250 |
|
4,604 |
|
(155 |
) |
1,100 |
|
(2,669 |
) |
95 |
|
|
Ending assets |
|
$ |
53,254 |
|
$ |
53,860 |
|
$ |
59,661 |
|
$ |
67,055 |
|
$ |
70,467 |
|
$ |
71,671 |
|
$ |
66,375 |
|
$ |
60,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advisors Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets |
|
$ |
35,660 |
|
$ |
37,915 |
|
$ |
38,172 |
|
$ |
40,767 |
|
$ |
43,667 |
|
$ |
44,224 |
|
$ |
45,797 |
|
$ |
44,908 |
|
|
Sales* |
|
1,303 |
|
1,404 |
|
1,242 |
|
1,283 |
|
1,435 |
|
1,457 |
|
1,322 |
|
1,332 |
|
|
Redemptions |
|
(1,047 |
) |
(1,083 |
) |
(1,071 |
) |
(1,104 |
) |
(1,106 |
) |
(1,098 |
) |
(1,146 |
) |
(1,224 |
) |
|
Net Exchanges |
|
(66 |
) |
(62 |
) |
(83 |
) |
(92 |
) |
(112 |
) |
(88 |
) |
(112 |
) |
(74 |
) |
|
Net flows |
|
190 |
|
259 |
|
88 |
|
87 |
|
217 |
|
271 |
|
64 |
|
34 |
|
|
Market action |
|
2,065 |
|
(2 |
) |
2,507 |
|
2,813 |
|
340 |
|
1,302 |
|
(953 |
) |
575 |
|
|
Ending assets |
|
$ |
37,915 |
|
$ |
38,172 |
|
$ |
40,767 |
|
$ |
43,667 |
|
$ |
44,224 |
|
$ |
45,797 |
|
$ |
44,908 |
|
$ |
45,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets |
|
$ |
11,775 |
|
$ |
12,626 |
|
$ |
12,312 |
|
$ |
13,316 |
|
$ |
15,821 |
|
$ |
16,692 |
|
$ |
18,165 |
|
$ |
17,603 |
|
|
Sales* |
|
430 |
|
379 |
|
386 |
|
1,913 |
|
1,554 |
|
1,193 |
|
328 |
|
317 |
|
|
Redemptions |
|
(469 |
) |
(811 |
) |
(550 |
) |
(792 |
) |
(679 |
) |
(851 |
) |
(727 |
) |
(663 |
) |
|
Net Exchanges |
|
— |
|
— |
|
— |
|
— |
|
— |
|
485 |
|
— |
|
— |
|
|
Net flows |
|
(39 |
) |
(432 |
) |
(164 |
) |
1,121 |
|
875 |
|
827 |
|
(399 |
) |
(346 |
) |
|
Market action |
|
890 |
|
118 |
|
1,168 |
|
1,384 |
|
(4 |
) |
646 |
|
(163 |
) |
541 |
|
|
Ending assets |
|
$ |
12,626 |
|
$ |
12,312 |
|
$ |
13,316 |
|
$ |
15,821 |
|
$ |
16,692 |
|
$ |
18,165 |
|
$ |
17,603 |
|
$ |
17,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets |
|
$ |
96,365 |
|
$ |
103,795 |
|
$ |
104,344 |
|
$ |
113,744 |
|
$ |
126,543 |
|
$ |
131,383 |
|
$ |
135,633 |
|
$ |
128,886 |
|
|
Sales* |
|
6,775 |
|
6,813 |
|
6,819 |
|
9,344 |
|
10,006 |
|
7,514 |
|
5,919 |
|
4,032 |
|
|
Redemptions |
|
(4,673 |
) |
(5,877 |
) |
(5,344 |
) |
(5,345 |
) |
(5,347 |
) |
(6,312 |
) |
(8,881 |
) |
(10,479 |
) |
|
Net Exchanges |
|
— |
|
(1 |
) |
— |
|
(1 |
) |
— |
|
— |
|
— |
|
— |
|
|
Net flows |
|
2,102 |
|
935 |
|
1,475 |
|
3,998 |
|
4,659 |
|
1,202 |
|
(2,962 |
) |
(6,447 |
) |
|
Market action |
|
5,328 |
|
(386 |
) |
7,925 |
|
8,801 |
|
181 |
|
3,048 |
|
(3,785 |
) |
1,211 |
|
|
Ending assets |
|
$ |
103,795 |
|
$ |
104,344 |
|
$ |
113,744 |
|
$ |
126,543 |
|
$ |
131,383 |
|
$ |
135,633 |
|
$ |
128,886 |
|
$ |
123,650 |
|
* Sales is primarily gross sales (net of sales commissions). This amount also includes net reinvested dividends & capital gains and investment income.
5
Supplemental Information
|
|
|
2013 |
|
2014 |
|
|
|
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
1st Qtr. |
|
2nd Qtr. |
|
3rd Qtr. |
|
4th Qtr. |
|
|
Channel highlights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Wholesalers |
|
50 |
|
50 |
|
49 |
|
50 |
|
60 |
|
60 |
|
59 |
|
59 |
|
|
Number of Advisors |
|
1,717 |
|
1,734 |
|
1,784 |
|
1,746 |
|
1,737 |
|
1,740 |
|
1,759 |
|
1,766 |
|
|
Advisors’ Productivity * |
|
50.5 |
|
53.1 |
|
53.7 |
|
57.4 |
|
60.9 |
|
62.4 |
|
64.6 |
|
65.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption rates - long term assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
24.6 |
% |
29.4 |
% |
25.7 |
% |
21.7 |
% |
21.1 |
% |
25.1 |
% |
40.3 |
% |
53.8 |
% |
|
Advisors |
|
9.4 |
% |
9.1 |
% |
8.7 |
% |
8.5 |
% |
8.2 |
% |
7.9 |
% |
8.2 |
% |
8.9 |
% |
|
Institutional |
|
15.5 |
% |
25.5 |
% |
17.0 |
% |
21.6 |
% |
17.0 |
% |
19.9 |
% |
16.1 |
% |
14.7 |
% |
|
Total |
|
18.0 |
% |
21.7 |
% |
18.6 |
% |
17.1 |
% |
16.2 |
% |
18.7 |
% |
26.1 |
% |
32.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating highlights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic growth/(decay) annualized |
|
8.7 |
% |
3.6 |
% |
5.7 |
% |
14.1 |
% |
14.7 |
% |
3.7 |
% |
-8.7 |
% |
-20.0 |
% |
|
Total assets under management (in millions) |
|
103,795 |
|
104,344 |
|
113,744 |
|
126,543 |
|
131,383 |
|
135,633 |
|
128,886 |
|
123,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diversification (Company Total) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As % of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Strategy |
|
33.6 |
% |
28.5 |
% |
25.9 |
% |
27.6 |
% |
33.4 |
% |
26.3 |
% |
24.9 |
% |
4.2 |
% |
|
Fixed Income |
|
30.7 |
% |
30.4 |
% |
31.8 |
% |
24.4 |
% |
23.3 |
% |
25.4 |
% |
28.8 |
% |
28.1 |
% |
|
Other |
|
35.7 |
% |
41.1 |
% |
42.3 |
% |
48.0 |
% |
43.3 |
% |
48.3 |
% |
46.3 |
% |
67.7 |
% |
|
As % of Assets Under Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Strategy |
|
33.7 |
% |
33.4 |
% |
33.8 |
% |
34.3 |
% |
33.9 |
% |
32.9 |
% |
32.0 |
% |
28.8 |
% |
|
Fixed Income |
|
20.7 |
% |
19.9 |
% |
19.0 |
% |
18.1 |
% |
18.6 |
% |
18.7 |
% |
18.2 |
% |
17.8 |
% |
|
Other |
|
45.6 |
% |
46.7 |
% |
47.2 |
% |
47.6 |
% |
47.5 |
% |
48.4 |
% |
49.8 |
% |
53.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin |
|
26.2 |
% |
25.6 |
% |
29.8 |
% |
30.2 |
% |
29.9 |
% |
30.9 |
% |
30.6 |
% |
30.0 |
% |
Lipper Fund Rankings
|
|
|
1 Year |
|
3 Years |
|
5 Years |
|
|
Funds ranked in top quartile |
|
18 |
% |
32 |
% |
37 |
% |
|
Funds ranked in top half |
|
56 |
% |
65 |
% |
63 |
% |
|
|
|
|
|
|
|
|
|
|
Assets ranked in top quartile |
|
9 |
% |
62 |
% |
68 |
% |
|
Assets ranked in top half |
|
40 |
% |
78 |
% |
86 |
% |
* Advisors’ productivity is calculated by dividing U&D revenues for the Advisors channel by the average number of advisors during the period.
6
Unaudited Consolidated Statement of Income
(Amounts in thousands, except for per share data)
|
|
|
Year to Date |
|
|
|
|
Dec-14 |
|
Dec-13 |
|
% Change |
|
|
Operating Revenues: |
|
|
|
|
|
|
|
|
Investment management fees |
|
$ |
768,102 |
|
$ |
650,442 |
|
18.1 |
% |
|
Underwriting and distribution fees |
|
678,678 |
|
582,819 |
|
16.4 |
% |
|
Shareholder service fees |
|
150,979 |
|
137,093 |
|
10.1 |
% |
|
Total operating revenues |
|
1,597,759 |
|
1,370,354 |
|
16.6 |
% |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
Underwriting and distribution |
|
783,327 |
|
676,713 |
|
15.8 |
% |
|
Compensation and related costs |
|
194,410 |
|
197,597 |
|
-1.6 |
% |
|
General and administrative |
|
104,637 |
|
86,419 |
|
21.1 |
% |
|
Subadvisory fees |
|
8,436 |
|
12,220 |
|
-31.0 |
% |
|
Depreciation |
|
14,634 |
|
12,834 |
|
14.0 |
% |
|
Intangible asset impairment |
|
7,900 |
|
— |
|
N/M |
|
|
Total operating expenses |
|
1,113,344 |
|
985,783 |
|
12.9 |
% |
|
Operating Income |
|
484,415 |
|
384,571 |
|
26.0 |
% |
|
Investment and other income |
|
16,790 |
|
19,904 |
|
-15.6 |
% |
|
Interest expense |
|
(11,042 |
) |
(11,244 |
) |
-1.8 |
% |
|
Income before taxes |
|
490,163 |
|
393,231 |
|
24.7 |
% |
|
Provision for taxes |
|
176,832 |
|
140,233 |
|
26.1 |
% |
|
Net Income |
|
$ |
313,331 |
|
$ |
252,998 |
|
23.8 |
% |
|
Net income per share, basic and diluted |
|
3.71 |
|
2.96 |
|
25.5 |
% |
|
Weighted average shares outstanding - basic and diluted |
|
84,485 |
|
85,589 |
|
-1.3 |
% |
|
Operating margin |
|
30.3 |
% |
28.1 |
% |
8.0 |
% |
Net Distribution Cost Analysis
(Amounts in thousands)
|
|
|
Year to Date |
|
|
|
|
Dec-14 |
|
Dec-13 |
|
% Change |
|
|
Wholesale Channel |
|
|
|
|
|
|
|
|
U&D Revenues |
|
$ |
234,939 |
|
$ |
207,419 |
|
13.3 |
% |
|
U&D Expenses - Direct |
|
(302,459 |
) |
(268,047 |
) |
12.8 |
% |
|
U&D Expenses - Indirect |
|
(51,675 |
) |
(43,923 |
) |
17.6 |
% |
|
Net Distribution (Costs) |
|
$ |
(119,195 |
) |
$ |
(104,551 |
) |
14.0 |
% |
|
|
|
|
|
|
|
|
|
|
Advisors Channel |
|
|
|
|
|
|
|
|
U&D Revenues |
|
$ |
443,739 |
|
$ |
375,400 |
|
18.2 |
% |
|
U&D Expenses - Direct |
|
(313,495 |
) |
(256,024 |
) |
22.4 |
% |
|
U&D Expenses - Indirect |
|
(115,698 |
) |
(108,719 |
) |
6.4 |
% |
|
Net Distribution Excess |
|
$ |
14,546 |
|
$ |
10,657 |
|
36.5 |
% |
7
Changes in Assets Under Management
(Amounts in millions)
|
|
|
Year to Date |
|
|
|
|
Dec-14 |
|
Dec-13 |
|
% Change |
|
|
Wholesale Channel |
|
|
|
|
|
|
|
|
Beginning assets |
|
$ |
67,055 |
|
$ |
48,930 |
|
37.0 |
% |
|
Sales* |
|
18,534 |
|
21,411 |
|
-13.4 |
% |
|
Redemptions |
|
(23,524 |
) |
(14,313 |
) |
64.4 |
% |
|
Net Exchanges |
|
(101 |
) |
303 |
|
N/M |
|
|
Net flows |
|
(5,091 |
) |
7,401 |
|
-168.8 |
% |
|
Market action |
|
(1,629 |
) |
10,724 |
|
-115.2 |
% |
|
Ending assets |
|
$ |
60,335 |
|
$ |
67,055 |
|
-10.0 |
% |
|
|
|
|
|
|
|
|
|
|
Advisors Channel |
|
|
|
|
|
|
|
|
Beginning assets |
|
$ |
43,667 |
|
$ |
35,660 |
|
22.5 |
% |
|
Sales* |
|
5,545 |
|
5,232 |
|
6.0 |
% |
|
Redemptions |
|
(4,575 |
) |
(4,304 |
) |
6.3 |
% |
|
Net Exchanges |
|
(384 |
) |
(306 |
) |
N/M |
|
|
Net flows |
|
586 |
|
622 |
|
-5.8 |
% |
|
Market action |
|
1,264 |
|
7,385 |
|
-82.9 |
% |
|
Ending assets |
|
$ |
45,517 |
|
$ |
43,667 |
|
4.2 |
% |
|
|
|
|
|
|
|
|
|
|
Institutional Channel |
|
|
|
|
|
|
|
|
Beginning assets |
|
$ |
15,821 |
|
$ |
11,775 |
|
34.4 |
% |
|
Sales* |
|
3,392 |
|
3,108 |
|
9.1 |
% |
|
Redemptions |
|
(2,920 |
) |
(2,622 |
) |
11.4 |
% |
|
Net Exchanges |
|
485 |
|
— |
|
N/M |
|
|
Net flows |
|
957 |
|
486 |
|
-96.9 |
% |
|
Market action |
|
1,020 |
|
3,560 |
|
-71.3 |
% |
|
Ending assets |
|
$ |
17,798 |
|
$ |
15,821 |
|
12.5 |
% |
|
|
|
|
|
|
|
|
|
|
Consolidated Total |
|
|
|
|
|
|
|
|
Beginning assets |
|
$ |
126,543 |
|
$ |
96,365 |
|
31.3 |
% |
|
Sales* |
|
27,471 |
|
29,751 |
|
-7.7 |
% |
|
Redemptions |
|
(31,019 |
) |
(21,239 |
) |
46.0 |
% |
|
Net Exchanges |
|
— |
|
(3 |
) |
N/M |
|
|
Net flows |
|
(3,548 |
) |
8,509 |
|
-141.7 |
% |
|
Market action |
|
655 |
|
21,669 |
|
-97.0 |
% |
|
Ending assets |
|
$ |
123,650 |
|
$ |
126,543 |
|
-2.3 |
% |
* Sales is primarily gross sales (net of sales commissions). This amount also includes net reinvested dividends & capital gains and investment income.
8
Earnings Conference Call
Stockholders, members of the investment community and the general public are invited to listen to a live Web cast of our earnings release conference call today at 10:00 a.m. Eastern. During this call, Henry J. Herrmann, Chairman and CEO, will review our quarterly results. Live access to the teleconference will be available on the “Investor Relations” section of our Web site at www.waddell.com. A Web cast replay will be made available shortly after the conclusion of the call and accessible for seven days.
Web Site Resources
We invite you to visit the “Investor Relations” section of our Web site at www.waddell.com under the caption “Data Tables” to review supplemental information schedules.
Contacts
Investor Contact:
Nicole Russell, VP, Investor Relations, (913) 236-1880, nrussell@waddell.com
Mutual Fund Investor Contact:
Call (888) WADDELL, or visit www.waddell.com or www.ivyfunds.com.
Past performance is no guarantee of future results. Please invest carefully.
About the Company
Waddell & Reed, Inc., founded in 1937, is one of the oldest mutual fund complexes in the United States, having introduced the Waddell & Reed Advisors Group of Mutual Funds in 1940. Today, we distribute our investment products through the Waddell & Reed Wholesale channel (encompassing broker/dealer, retirement, and registered investment advisors), our Advisors channel (our network of financial advisors), and our Institutional channel (including defined benefit plans, pension plans and endowments, and our subadvisory partnership with Mackenzie in Canada).
Through its subsidiaries, Waddell & Reed Financial, Inc. provides investment management and financial planning services to clients throughout the United States and internationally. Waddell & Reed Investment Management Company serves as investment advisor to the Waddell & Reed Advisors Group of Mutual Funds, Ivy Funds Variable Insurance Portfolios and Waddell & Reed InvestEd Portfolios, while Ivy Investment Management Company serves as investment advisor to Ivy Funds and the Selector Management Fund SICAV, an umbrella UCITS fund range domiciled in Luxembourg. Waddell & Reed, Inc. serves as principal underwriter and distributor to the Waddell & Reed Advisors Group of Mutual Funds, Ivy Funds Variable Insurance Portfolios and Waddell & Reed InvestEd Portfolios, while Ivy Funds Distributor, Inc. serves as principal underwriter and distributor to Ivy Funds and global distributor to Selector Management Fund SICAV.
9
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the current views and assumptions of management with respect to future events regarding our business and industry in general. These forward-looking statements include all statements, other than statements of historical fact, regarding our financial position, business strategy and other plans and objectives for future operations, including statements with respect to revenues and earnings, the amount and composition of assets under management, distribution sources, expense levels, redemption rates and the financial markets and other conditions. These statements are generally identified by the use of such words as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “forecast,” “estimate,” “expect,” “intend,” “plan,” “project,” “outlook,” “will,” “potential” and similar statements of a future or forward-looking nature. Readers are cautioned that any forward-looking information provided by us or on our behalf is not a guarantee of future performance. Actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including but not limited to those discussed below. If one or more events related to these or other risks, contingencies or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from those forecasted or expected. Certain important factors that could cause actual results to differ materially from our expectations are disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2013, which include, without limitation:
· The loss of existing distribution channels or inability to access new distribution channels;
· A reduction in assets under our management on short notice, through increased redemptions in our distribution channels or our Funds, particularly those Funds with a high concentration of assets, or investors terminating their relationship with us or shifting their funds to other types of accounts with different rate structures;
· The adverse ruling or resolution of any litigation, regulatory investigations and proceedings, or securities arbitrations by a federal or state court or regulatory body;
· The introduction of legislative or regulatory proposals or judicial rulings that change the independent contractor classification of our financial advisors at the federal or state level for employment tax or other employee benefit purposes;
· Our inability to provide sufficient capital to support new investment products;
· The ability of mutual fund and other investors to redeem their investments without prior notice or on short notice;
· Our inability to implement new information technology and systems, or our inability to complete such implementation in a timely or cost effective manner;
· Non-compliance with applicable laws or regulations and changes in current legal, regulatory, accounting, tax or compliance requirements or governmental policies;
· A decline in the securities markets or in the relative investment performance of our Funds and other investment portfolios and products as compared to competing funds; and
· Our inability to attract and retain senior executive management and other key personnel to conduct our broker/dealer, fund management and investment advisory business.
The foregoing factors should not be construed as exhaustive and should be read together with other cautionary statements included in this and other reports and filings we make with the Securities and Exchange Commission, including the information in Item 1 “Business” and Item 1A “Risk Factors” of Part I and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II to our Annual Report on Form 10-K for the year ended December 31, 2013 and as updated in our quarterly reports on Form 10-Q for the year ending December 31, 2014. All forward-looking statements speak only as of the date on which they are made and we undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.
10
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