Waddell & Reed Financial (WDR) 8-K Waddell & Reed Financial, Inc. Reports Fourth Quarter Results

Exhibit 99.2

Subsequent to the freeze of the pension plan in the third quarter, we elected in the fourth quarter of 2017 to change our method of accounting to mark-to-market for the pension plan. Under the new pension accounting method, actuarial gains and losses are recognized in the year incurred rather than amortizing them over future periods. The impact of this change in accounting policy has been retrospectively applied to the financial results for all periods presented. These adjustments are non-cash and do not affect our pension liability. This change is intended to improve the transparency of underlying operating performance by recognizing the effect of current economic and interest rate trends on plan assets and assumptions.

The tables below provide pro-forma application of mark-to-market accounting by quarter for all periods retrospectively presented.

Impact of Pension Accounting Change
Unaudited Schedule of Operating Data

(Amounts in thousands, except for per share data)	Three Months Ended Mar. 31, 2017						Three Months Ended Jun 30, 2017						Three Months Ended Sep. 30, 2017						Twelve Months Ended Dec. 31, 2017
	Previously				Effect of		Previously				Effect of		Previously				Effect of		Previously				Effect of
	Reported		Revision		Change		Reported		Revision		Change		Reported		Revision		Change		Reported		Revision		Change
Total Operating Revenues	286,564		0		286,564		286,657		0		286,657		289,447		0		289,447		1,157,144		0		1,157,144
Operating Expenses
U&D Direct Costs
Retail Unaffiliated	33,908		0		33,908		32,998		0		32,998		31,779		0		31,779		130,077		0		130,077
Retail Broker-Dealer	70,402		0		70,402		72,110		0		72,110		71,119		0		71,119		286,306		0		286,306
U&D Indirect Costs
Retail Unaffiliated	9,605		(15)		9,590		10,123		(35)		10,088		9,648		(1,067)		8,581		39,295		(1,117)		38,178
Retail Broker-Dealer	36,409		(446)		35,963		35,888		(391)		35,497		36,854		(6,503)		30,351		146,203		(7,340)		138,863
Total Underwriting & Distribution Costs	150,324		(461)		149,863		151,119		(426)		150,693		149,400		(7,570)		141,830		601,881		(8,457)		593,424
Compensation and Related Costs	49,406		(836)		48,570		47,224		(775)		46,449		48,340		(17,264)		31,076		200,251		(18,875)		181,376
Other Operating Costs	34,242		0		34,242		37,422		0		37,422		36,628		0		36,628		141,177		0		141,177
Total Operating Expenses	233,972		(1,297)		232,675		235,765		(1,201)		234,564		234,368		(24,834)		209,534		943,309		(27,332)		915,977
Operating Income	52,592		1,297		53,889		50,892		1,201		52,093		55,079		24,834		79,913		213,835		27,332		241,167
Investment and other income	2,129		0		2,129		2,021		0		2,021		7,236		0		7,236		15,689		0		15,689
Interest expense	(2,786)		0		(2,786)		(2,788)		0		(2,788)		(2,796)		0		(2,796)		(11,279)		0		(11,279)
Income before taxes	51,935		1,297		53,232		50,125		1,201		51,326		59,519		24,834		84,353		218,245		27,332		245,577
Provision for taxes	18,399		482		18,881		26,162		446		26,608		20,296		9,203		29,499		91,237		10,131		101,368
Net income	$	33,536	$	815	$	34,351	$	23,963	$	755	$	24,718	$	39,223	$	15,631	$	54,854	$	127,008	$	17,201	$	144,209
Noncontrolling Interests	480		0		480		656		0		656		1,272		0		1,272		2,930		0		2,930
Net income attributable to WDR	$	33,056	$	815	$	33,871	$	23,307	$	755	$	24,062	$	37,951	$	15,631	$	53,582	$	124,078	$	17,201	$	141,279
Net income per share	0.39		0.01		0.40		0.28		0.01		0.29		0.45		0.19		0.64		1.48		0.21		1.69
Weighted average shares outstanding - diluted	84,077		84,077		84,077		83,611		83,661		83,611		83,476		83,476		83,476		83,573		83,573		83,573
Operating margin	18.4%				18.8%		17.8%				18.2%		19.0%				27.6%		18.5%				20.8%

Subsequent to the freeze of the pension plan in the third quarter, we elected in the fourth quarter of 2017 to change our method of accounting to mark-to-market for the pension plan. Under the new pension accounting method, actuarial gains and losses are recognized in the year incurred rather than amortizing them over future periods. The impact of this change in accounting policy has been retrospectively applied to the financial results for all periods presented. These adjustments are non-cash and do not affect our pension liability. This change is intended to improve the transparency of underlying operating performance by recognizing the effect of current economic and interest rate trends on plan assets and assumptions.

The tables below provide pro-forma application of mark-to-market accounting by quarter for all periods retrospectively presented.

Impact of Pension Accounting Change
Unaudited Schedule of Operating Data

(Amounts in thousands, except for per share data)	Three Months Ended Mar. 31, 2016						Three Months Ended Jun 30, 2016						Three Months Ended Sep. 30, 2016						Three Months Ended Dec 31, 2016						Twelve Months Ended Dec. 31, 2016
	Previously				Effect of		Previously				Effect of		Previously				Effect of		Previously				Effect of		Previously				Effect of
	Reported		Revision		Change		Reported		Revision		Change		Reported		Revision		Change		Reported		Revision		Change		Reported		Revision		Change
Total Operating Revenues	323,816		0		323,816		319,208		0		319,208		303,086		0		303,086		292,913		0		292,913		1,239,023		0		1,239,023
Operating Expenses
U&D Direct Costs
Retail Unaffiliated	46,846		0		46,846		42,452		0		42,452		39,489		0		39,489		35,854		0		35,854		164,641		0		164,641
Retail Broker-Dealer	80,277		0		80,277		87,740		0		87,740		72,276		0		72,276		72,380		0		72,380		312,673		0		312,673
U&D Indirect Costs
Retail Unaffiliated	13,349		(47)		13,302		14,939		(42)		14,897		10,643		(44)		10,599		13,916		(504)		13,412		52,847		(637)		52,210
Retail Broker-Dealer	33,364		(592)		32,772		36,114		(534)		35,580		30,591		(563)		30,028		40,875		(4,131)		36,744		140,944		(5,820)		135,124
Total Underwriting & Distribution Costs	173,836		(639)		173,197		181,245		(576)		180,669		152,999		(607)		152,392		163,025		(4,635)		158,390		671,105		(6,457)		664,648
Compensation and Related Costs	52,940		(1,092)		51,848		58,341		(990)		57,351		40,214		(1,041)		39,173		58,354		(5,904)		52,450		209,849		(9,027)		200,822
Other Operating Costs	25,607		0		25,607		25,861		0		25,861		36,087		0		36,087		34,121		0		34,121		121,676		0		121,676
Total Operating Expenses	252,383		(1,731)		250,652		265,447		(1,566)		263,881		229,300		(1,648)		227,652		255,500		(10,539)		244,961		1,002,630		(15,484)		987,146
Operating Income	71,433		1,731		73,164		53,761		1,566		55,327		73,786		1,648		75,434		37,413		10,539		47,952		236,393		15,484		251,877
Investment and other income	(10,218)		0		(10,218)		687		0		687		7,878		0		7,878		890		0		890		(763)		0		(763)
Interest expense	(2,768)		0		(2,768)		(2,776)		0		(2,776)		(2,792)		0		(2,792)		(2,786)		0		(2,786)		(11,122)		0		(11,122)
Income before taxes	58,447		1,731		60,178		51,672		1,566		53,238		78,872		1,648		80,520		35,517		10,539		46,056		224,508		15,484		239,992
Provision for taxes	20,978		632		21,610		18,101		581		18,682		24,067		567		24,634		13,041		3,917		16,958		76,187		5,697		81,884
Net income	$	37,469	$	1,099	$	38,568	$	33,571	$	985	$	34,556	$	54,805	$	1,081	$	55,886	$	22,476	$	6,622	$	29,098	$	148,321	$	9,787	$	158,108
Noncontrolling Interests	501		0		501		(124)		0		(124)		978		0		978		59		0		59		1,414		0		1,414
Net income attributable to WDR	$	36,968	$	1,099	$	38,067	$	33,695	$	985	$	34,680	$	53,827	$	1,081	$	54,908	$	22,417	$	6,622	$	29,039	$	146,907	$	9,787	$	156,694
Net income per share	0.45		0.01		0.46		0.41		0.01		0.42		0.65		0.01		0.66		0.27		0.08		0.35		1.78		0.12		1.90
Weighted average shares outstanding - diluted	82,104		82,104		82,104		82,947		82,947		82,947		82,834		82,834		82,834		82,783		82,783		82,783		82,668		82,668		82,668
Operating margin	22.1%				22.6%		16.8%				17.3%		24.3%				24.9%		12.8%				16.4%		19.1%				20.3%