Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Oct. 26, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | WADDELL & REED FINANCIAL INC | |
Entity Central Index Key | 1,052,100 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 78,318,708 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Assets: | ||
Cash and cash equivalents | $ 270,478 | $ 207,829 |
Cash and cash equivalents - restricted | 29,175 | 28,156 |
Investment securities | 588,407 | 700,492 |
Receivables: | ||
Funds and separate accounts | 22,319 | 25,664 |
Customers and other | 121,822 | 131,108 |
Prepaid expenses and other current assets | 27,762 | 25,593 |
Total current assets | 1,059,963 | 1,118,842 |
Property and equipment, net | 69,340 | 87,667 |
Goodwill and identifiable intangible assets | 145,869 | 147,069 |
Deferred income taxes | 8,241 | 13,308 |
Other non-current assets | 9,382 | 17,476 |
Total assets | 1,292,795 | 1,384,362 |
Liabilities: | ||
Accounts payable | 40,479 | 38,998 |
Payable to investment companies for securities | 37,941 | 43,422 |
Payable to third party brokers | 22,284 | 25,153 |
Payable to customers | 57,917 | 66,830 |
Short-term notes payable | 94,996 | |
Accrued compensation | 58,467 | 47,643 |
Other current liabilities | 45,556 | 44,797 |
Total current liabilities | 262,644 | 361,839 |
Long-term debt | 94,836 | 94,783 |
Accrued pension and postretirement costs | 9,472 | 15,137 |
Other non-current liabilities | 16,200 | 25,210 |
Total liabilities | 383,152 | 496,969 |
Commitments and contingencies | ||
Redeemable noncontrolling interests | 16,133 | 14,509 |
Stockholders' equity: | ||
Preferred stock—$1.00 par value: 5,000 shares authorized; none issued | ||
Class A Common stock—$0.01 par value: 250,000 shares authorized; 99,701 shares issued; 78,904 shares outstanding (82,687 at December 31, 2017) | 997 | 997 |
Additional paid-in capital | 312,213 | 301,410 |
Retained earnings | 1,170,785 | 1,092,394 |
Cost of 20,797 common shares in treasury (17,014 at December 31, 2017) | (589,391) | (522,441) |
Accumulated other comprehensive (loss) income | (1,094) | 524 |
Total stockholders' equity | 893,510 | 872,884 |
Total liabilities, redeemable noncontrolling interests and stockholders' equity | $ 1,292,795 | $ 1,384,362 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Consolidated Balance Sheets | ||
Preferred stock-par value (in dollars per share) | $ 1 | $ 1 |
Preferred stock-shares authorized | 5,000 | 5,000 |
Preferred stock-shares issued | 0 | 0 |
Class A Common stock-par value (in dollars per share) | $ 0.01 | $ 0.01 |
Class A Common stock-shares authorized | 250,000 | 250,000 |
Class A Common stock-shares issued | 99,701 | 99,701 |
Class A Common stock-shares outstanding | 78,904 | 82,687 |
Common shares in treasury | 20,797 | 17,014 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenues: | ||||
Total Revenues | $ 295,118 | $ 289,447 | $ 888,071 | $ 862,668 |
Operating expenses: | ||||
Distribution | 116,591 | 106,878 | 345,376 | 324,375 |
Compensation and benefits (including share-based compensation of $12,856, $14,180, $42,526 and $42,419, respectively) | 64,561 | 69,636 | 199,174 | 202,003 |
General and administrative | 17,559 | 23,400 | 56,240 | 68,882 |
Technology | 15,414 | 16,039 | 49,293 | 50,796 |
Occupancy | 7,148 | 7,645 | 21,081 | 22,978 |
Marketing and advertising | 2,461 | 3,197 | 7,638 | 9,072 |
Depreciation | 8,141 | 5,230 | 19,262 | 15,626 |
Subadvisory fees | 3,767 | 3,566 | 11,158 | 9,457 |
Intangible asset impairment | 1,200 | 1,500 | ||
Total | 235,642 | 235,591 | 710,422 | 704,689 |
Operating income | 59,476 | 53,856 | 177,649 | 157,979 |
Investment and other income | 1,697 | 33,293 | 5,354 | 39,302 |
Interest expense | (1,555) | (2,796) | (4,908) | (8,370) |
Income before provision for income taxes | 59,618 | 84,353 | 178,095 | 188,911 |
Provision for income taxes | 13,105 | 29,499 | 41,355 | 74,988 |
Net income | 46,513 | 54,854 | 136,740 | 113,923 |
Net income (loss) attributable to redeemable noncontrolling interests | 208 | 1,272 | (380) | 2,408 |
Net income attributable to Waddell & Reed Financial, Inc. | $ 46,305 | $ 53,582 | $ 137,120 | $ 111,515 |
Net income per share attributable to Waddell and Reed Financial, Inc. common shareholders, basic and diluted (in dollars per share) | $ 0.58 | $ 0.64 | $ 1.69 | $ 1.33 |
Weighted average shares outstanding, basic and diluted (in shares) | 79,595 | 83,476 | 81,372 | 83,719 |
Investment management fees | ||||
Revenues: | ||||
Total Revenues | $ 129,302 | $ 134,149 | $ 393,385 | $ 395,463 |
Underwriting and distribution fees | ||||
Revenues: | ||||
Total Revenues | 140,308 | 128,892 | 416,222 | 386,499 |
Shareholder service fees | ||||
Revenues: | ||||
Total Revenues | $ 25,508 | $ 26,406 | $ 78,464 | $ 80,706 |
Consolidated Statements of In_2
Consolidated Statements of Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Consolidated Statements of Income | ||||
Compensation and Benefits, share-based compensation | $ 12,856 | $ 14,180 | $ 42,526 | $ 42,419 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Consolidated Statements of Comprehensive Income | ||||
Net income | $ 46,513 | $ 54,854 | $ 136,740 | $ 113,923 |
Other comprehensive income: | ||||
Unrealized appreciation (depreciation) of available for sale investment securities during the period, net of income tax expense (benefit) of $80, $364, $(218) and $(1,310), respectively | 262 | 2,070 | (700) | 6,904 |
Postretirement benefit, net of income tax benefit of $(7), $(16), $(22) and $(51), respectively | (24) | (30) | (70) | (87) |
Comprehensive income | 46,751 | 56,894 | 135,970 | 120,740 |
Comprehensive income (loss) attributable to redeemable noncontrolling interests | 208 | 1,272 | (380) | 2,408 |
Comprehensive income attributable to Waddell & Reed Financial, Inc. | $ 46,543 | $ 55,622 | $ 136,350 | $ 118,332 |
Consolidated Statements of Co_2
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Consolidated Statements of Comprehensive Income | ||||
Unrealized appreciation (depreciation) of available for sale investment securities during the period, net of income tax expense (benefit) | $ 80 | $ 364 | $ (218) | $ (1,310) |
Postretirement benefit, net of income tax benefit | $ (7) | $ (16) | $ (22) | $ (51) |
Consolidated Statement of Stock
Consolidated Statement of Stockholders’ Equity - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total |
Balance at the beginning of the period at Dec. 31, 2016 | $ (6,757) | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | $ 111,515 | |||||
Balance at the end of the period at Sep. 30, 2017 | 60 | |||||
Balance at the beginning of the period at Jun. 30, 2017 | (1,980) | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | 53,582 | |||||
Balance at the end of the period at Sep. 30, 2017 | 60 | |||||
Balance at the beginning of the period at Dec. 31, 2017 | $ 997 | $ 301,410 | $ 1,092,394 | $ (522,441) | 524 | 872,884 |
Balance (in shares) at Dec. 31, 2017 | 99,701 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Adoption of new accounting principle guidance | ASU 2016-01 | 812 | (812) | ||||
Adoption of new accounting principle guidance | ASU 2018-02 | 36 | (36) | ||||
Net income (loss) | 137,120 | 137,120 | ||||
Recognition of equity compensation | 32,871 | 991 | 33,862 | |||
Net issuance/forfeiture of nonvested shares | (22,068) | 22,068 | ||||
Dividends accrued, $0.75 per share | (60,568) | (60,568) | ||||
Repurchase of common stock | (89,018) | (89,018) | ||||
Other comprehensive loss | (770) | (770) | ||||
Balance at the end of the period at Sep. 30, 2018 | $ 997 | 312,213 | 1,170,785 | (589,391) | (1,094) | 893,510 |
Balance (in shares) at Sep. 30, 2018 | 99,701 | |||||
Balance at the beginning of the period at Dec. 31, 2017 | 14,509 | |||||
Increase (Decrease) in Redeemable Noncontrolling Interest | ||||||
Net income (loss) | (380) | |||||
Net subscription of redeemable noncontrolling interests in sponsored funds | 2,004 | |||||
Balance at the end of the period at Sep. 30, 2018 | 16,133 | |||||
Balance at the beginning of the period at Jun. 30, 2018 | (1,332) | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | 46,305 | |||||
Balance at the end of the period at Sep. 30, 2018 | $ 997 | $ 312,213 | $ 1,170,785 | $ (589,391) | $ (1,094) | 893,510 |
Balance (in shares) at Sep. 30, 2018 | 99,701 | |||||
Balance at the end of the period at Sep. 30, 2018 | $ 16,133 |
Consolidated Statement of Sto_2
Consolidated Statement of Stockholders’ Equity (Parenthetical) - $ / shares | Jul. 24, 2018 | Sep. 30, 2018 |
Consolidated Statement of Stockholders’ Equity | ||
Dividends accrued, per share (in dollars per share) | $ 0.25 | $ 0.75 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities: | ||
Net income | $ 136,740 | $ 113,923 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 19,262 | 15,626 |
Write-down of impaired assets | 1,200 | 1,500 |
Amortization of deferred sales commissions | 2,682 | 3,799 |
Share-based compensation | 42,526 | 42,419 |
Investments loss (gain), net | 2,521 | (9,157) |
Net purchases of trading securities | (4,387) | (36,643) |
Deferred income taxes | 5,307 | 13,638 |
Net change in equity securities and trading debt securities held by consolidated sponsored funds | 71,452 | (123,865) |
Other | 2,973 | (30,793) |
Changes in assets and liabilities: | ||
Customer and other receivables | 9,286 | 13,372 |
Payable to investment companies for securities and payable to customers | (14,394) | (26,171) |
Receivables from funds and separate accounts | 3,345 | 4,671 |
Other assets | 7,650 | 5,050 |
Accounts payable and payable to third party brokers | (1,388) | (3,510) |
Other liabilities | (21,042) | 3,975 |
Net cash provided by (used in) operating activities | 263,733 | (12,166) |
Cash flows from investing activities: | ||
Purchases of available for sale and equity method securities | (56,840) | (291,539) |
Proceeds from sales of available for sale and equity method securities | 1,157 | 92,936 |
Proceeds from maturities of available for sale securities | 100,085 | 4,981 |
Additions to property and equipment | (1,831) | (5,358) |
Net cash provided by (used in) investing activities | 42,571 | (198,980) |
Cash flows from financing activities: | ||
Dividends paid | (61,531) | (115,691) |
Repurchase of common stock | (88,166) | (15,635) |
Repayment of short-term debt, net of debt issuance costs | (94,943) | |
Net subscriptions, (redemptions, distributions and deconsolidations) of redeemable noncontrolling interests in sponsored funds | 2,004 | 17,575 |
Other | 131 | |
Net cash used in financing activities | (242,636) | (113,620) |
Net increase (decrease) in cash and cash equivalents | 63,668 | (324,766) |
Cash, cash equivalents, and restricted cash at beginning of period | 235,985 | 586,239 |
Cash, cash equivalents, and restricted cash at end of period | $ 299,653 | $ 261,473 |
Description of Business and Sig
Description of Business and Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Description of Business and Significant Accounting Policies | |
Description of Business and Significant Accounting Policies | WADDELL & REED FINANCIAL, INC. NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. Waddell & Reed Financial, Inc. and Subsidiaries Waddell & Reed Financial, Inc. (hereinafter referred to as the “Company,” “we,” “our” or “us”) is a holding company, incorporated in the state of Delaware in 1981, that conducts business through its subsidiaries. Founded in 1937, we are one of the oldest mutual fund complexes in the United States, having introduced the Waddell & Reed Advisors group of mutual funds (the “Advisors Funds”) in 1940. Over time, we added additional mutual funds: Ivy Funds (the “Ivy Funds”); Ivy Variable Insurance Portfolios, our variable product offering (“Ivy VIP”); InvestEd Portfolios, our 529 college savings plan (“InvestEd”); and the Ivy High Income Opportunities Fund, a closed-end mutual fund (“IVH”). In 2016, we introduced the Ivy NextShares ® exchange-traded managed funds (“Ivy NextShares”) (collectively, Ivy Funds, Ivy VIP, InvestEd, IVH, and Ivy NextShares are referred to as the “Funds”). On February 26, 2018, we completed the merger of Advisor Funds into Ivy Funds with substantially similar objectives and strategies. As of September 30, 2018, we had $79.5 billion in assets under management. We derive our revenues from providing investment management and advisory services, investment product underwriting and distribution, and shareholder services administration to the Funds and institutional and separately managed accounts. Investment management and/or advisory fees are based on the amount of average assets under management and are affected by sales levels, financial market conditions, redemptions and the composition of assets. Our underwriting and distribution revenues consist of fees earned on fee‑based asset allocation programs and related advisory services, asset‑based service and distribution fees promulgated under the 1940 Act (“Rule 12b-1”), distribution fees on certain variable products, and commissions derived from sales of investment and insurance products. The products sold have various commission structures and the revenues received from those sales vary based on the type and dollar amount sold. Shareholder service fee revenue includes transfer agency fees, custodian fees from retirement plan accounts, portfolio accounting and administration fees, and is earned based on assets under management or number of client accounts. Our major expenses are for commissions, employee compensation, field services, dealer services, information technology, occupancy and marketing and advertising. Basis of Presentation We have prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to enable a reasonable understanding of the information presented. The information in this Quarterly Report on Form 10-Q should be read in conjunction with Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Form 10-K”). Certain amounts in the prior year’s financial statements have been reclassified for consistent presentation. The accompanying unaudited consolidated financial statements are prepared consistent with the accounting policies described in Note 1 to the consolidated financial statements included in our 2017 Form 10-K with the exception of the adoption of Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts from Customers, ” ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” ASU 2016-18, “Statement of Cash Flows: Restricted Cash,” ASU 2017-07, “Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” and ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which all became effective January 1, 2018. The implementation of ASU 2014-09 did not have a material impact on the measurement or recognition of revenue from prior periods. See Note 3 – Revenue Recognition, for additional accounting policy information and the additional disclosures required by this ASU. Upon adoption of ASU 2016-01, we reclassified net unrealized holding gains, net of taxes, related to our available for sale investment portfolio from accumulated other comprehensive income to retained earnings. See consolidated statement of stockholders’ equity and redeemable noncontrolling interests for the financial statement reclassification impact of adopting this ASU. Upon adoption of ASU 2016-18, the Cash and cash equivalents – restricted financial statement line item was included as a component of cash and cash equivalents on the Company’s consolidated statements of cash flows for all periods presented. The adoption of ASU 2017-07 changed the income statement presentation of our noncontributory retirement plan that covers substantially all employees and certain vested employees of our former parent company (the “Pension Plan”) by requiring separation between operating expense (service cost component) and non-operating expense (all other components, including interest cost, amortization of prior service cost, mark-to-market gains and losses, curtailments and settlements, etc.). In addition, only the service cost component is eligible for capitalization as part of an asset. The adoption of this ASU had no effect on our net income because it only impacted the classification of certain information on the consolidated statements of income. An amendment to freeze the Pension Plan was approved effective September 30, 2017; therefore, after September 30, 2017, we no longer incur service costs. The service cost component of net periodic benefit cost was recognized in compensation and related costs through September 30, 2017. The other components of net periodic cost were reclassified to investment and other income (loss) on a retrospective basis. Upon early adoption of ASU 2018-02 tax effects that were stranded in other comprehensive income due to the Tax Reform Act were reclassified from accumulated other comprehensive income to retained earnings. The adoption of this ASU did not have a material impact on our consolidated financial statements and related disclosures. See consolidated statement of stockholders’ equity and redeemable noncontrolling interests for the financial statement reclassification impact of adopting this ASU. Additionally, during the first quarter of 2018, we changed the presentation of certain line items in the consolidated statements of income that were intended to improve the transparency of the Company’s financial statements through clearer alignment of operating expenses with financial statement captions. Specifically, the Company revised its accounting policy related to the reporting of indirect underwriting and distribution expenses in the former underwriting and distribution caption and certain expenses historically reported as general and administrative. Expenses previously recorded as Underwriting and distribution expenses were retrospectively reclassified into (a) the following existing operating expense captions: Compensation and benefits and General and administrative, and (b) the following newly created operating expense captions: Distribution, Technology, Occupancy, and Marketing and advertising. Certain expenses historically reported as general and administrative were retrospectively reclassified into the following newly created operating expense captions: Technology, Occupancy, and Marketing and advertising. The Company considered the change in policy to be preferable and did not consider the change to be material to its consolidated financial statements. These changes were applied retrospectively to all periods presented and did not affect net income attributable to the Company. In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only a normal and recurring nature) necessary to present fairly our financial position at September 30, 2018 and the results of operations and cash flows for the nine months ended September 30, 2018 and 2017 in conformity with accounting principles generally accepted in the United States. |
New Accounting Guidance
New Accounting Guidance | 9 Months Ended |
Sep. 30, 2018 | |
New Accounting Guidance | |
New Accounting Guidance | 2. In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases , which increases transparency and comparability among organizations by establishing a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet with additional disclosures of key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted and certain practical expedients are available. The Company will adopt the provisions of this guidance on January 1, 2019. We expect to elect the ‘package of practical expedients’, which allows us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We also expect to elect a practical expedient to use hindsight in determining the lease term and in assessing impairment of the entity’s right-of-use assets. Additionally, we currently expect to elect the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize right-of-use assets or lease liabilities, and this includes not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition. The Company has identified its population of impacted leases and continues to evaluate the impact that the ASU will have on its consolidated financial statements and related disclosures. While we continue to assess all of the effects of adoption, we currently believe the most significant effects on our financial statements relate to the recognition of new right-of-use assets and lease liabilities on our balance sheet for our real estate operating leases and providing new disclosures about our leasing activities. In June 2018, FASB issued ASU 2018-07, Compensation – Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting , which simplifies the accounting for share–based payments granted to nonemployees by aligning the accounting with the requirements for employee share–based compensation. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company will adopt the provisions of this guidance on January 1, 2019. We have concluded that the adoption of this ASU will have an immaterial impact on our consolidated financial statements and related disclosures. In August 2018, FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement , which eliminates certain disclosure requirements for fair value measurements, requires entities to disclose new information, and modifies existing disclosure requirements. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We are evaluating the impact the adoption of this ASU will have on our consolidated financial statements and related disclosures. In August 2018, FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans, which removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. We are evaluating the impact the adoption of this ASU will have on our consolidated financial statements and related disclosures. In August 2018, FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract , which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We are evaluating the impact the adoption of this ASU will have on our consolidated financial statements and related disclosures. |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2018 | |
Revenue Recognition | |
Revenue Recognition | 3. As of January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers ” and all subsequent ASUs that modified Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers.” The Company elected to apply the standard utilizing the cumulative effect approach. The implementation of the new standard did not have a material impact on the measurement or recognition of revenue. Investment Management and Advisory Fees We recognize investment management fees as earned over the period in which investment management services are provided. While our investment management contracts are long-term in nature, the performance obligations are generally satisfied daily or monthly based on assets under management. We calculate investment management fees from the Funds daily based upon average daily net assets under management in accordance with investment management agreements between the Funds and the Company. The majority of investment and/or advisory fees earned from institutional and separate accounts are calculated either monthly or quarterly based upon an average of net assets under management in accordance with such investment management agreements. The Company may waive certain fees for investment management services at its discretion, or in accordance with contractual expense limitations, and these waivers are reflected as a reduction to investment management fees on the consolidated statements of income. The Company has contractual arrangements with third parties to provide subadvisory services. Investment advisory fees are recorded gross of any subadvisory payments and are included in investment management fees based on management’s determination that the Company is acting in the capacity of principal service provider with respect to its relationship with the Funds. Any corresponding fees paid to subadvisors are included in operating expenses. Underwriting, Distribution and Shareholder Service Fees Fee‑based asset allocation revenues are calculated monthly based upon average daily net assets under management. For certain types of investment products, primarily variable annuities, distribution revenues are generally calculated based upon average daily net assets under management. Fees collected from independent financial advisors associated with Waddell & Reed, Inc. for various services are recorded in underwriting and distribution fees on a gross basis, as the Company is the principal in these arrangements. Under a Rule 12b-1 service plan, the Funds may charge a maximum fee of 0.25% of the average daily net assets under management for Ivy Funds Class C, E and Y shares for expenses paid to broker-dealers and other sales professionals in connection with providing ongoing services to the Funds’ shareholders and/or maintaining the Funds’ shareholder accounts, with the exception of the Funds’ Class R shares, for which the maximum fee is 0.50%. The Funds’ Class C shares may charge a maximum of 0.75% of the average daily net assets under management under a Rule 12b-1 distribution plan to broker-dealers and other sales professionals for their services in connection with distributing shares of that class. The Funds’ Class A shares may charge a maximum fee of 0.25% of the average daily net assets under management under a Rule 12b-1 service and distribution plan for expenses detailed previously. The Rule 12b-1 plans are subject to annual approval by the Funds’ board of trustees, including a majority of the disinterested members, by votes cast in person at a meeting called for the purpose of voting on such approval. All Funds may terminate the service and distribution plans at any time with approval of fund trustees or portfolio shareholders (a majority of either) without penalty. Underwriting and distribution commission revenues resulting from the sale of investment products are recorded upon satisfaction of performance obligations, which occurs on the trade date. When a client purchases Class A or Class E shares (front-end load), the client pays an initial sales charge of up to 5.75% of the amount invested. The sales charge for Class A or Class E shares typically declines as the investment amount increases. In addition, investors may combine their purchases of all fund shares to qualify for a reduced sales charge. When a client invests in a fee-based asset allocation product, Class I or Y shares are purchased at net asset value, and we do not charge an initial sales charge. Underwriting and distribution revenues resulting from payments from independent financial advisors for office space, compliance oversight and affiliation fees are earned over the period in which the service is provided, which is generally monthly and is based on a fee schedule. Shareholder service fee revenue primarily includes transfer agency fees, custodian fees from retirement plan accounts, and portfolio accounting and administration fees. Transfer agency fees and portfolio accounting and administration fees are asset‑based revenues or account‑based revenues, while custodian fees from retirement plan accounts are based on the number of client accounts. Custodian fees, transfer agency fees and portfolio accounting and administration fees are earned upon completion of the service when all performance obligations have been satisfied. All revenue recognized in the consolidated statements of income is considered to be revenue from contracts with customers. The vast majority of revenue is determined based on average assets and is earned daily or monthly or is transactional and is earned on the trade date. As such, revenue from remaining performance obligations is not significant. The following table depicts the disaggregation of revenue by product and distribution channel: Three months ended Three months ended Nine months ended Nine months ended (in thousands) (in thousands) Investment management fees: Funds $ 123,764 128,078 376,193 376,563 Institutional 5,538 6,071 17,192 18,900 Total investment management fees $ 129,302 134,149 393,385 395,463 Underwriting and distribution fees: Unaffiliated Rule 12b-1 service and distribution fees $ 19,707 22,322 60,734 69,191 Sales commissions on front-end load mutual fund and variable annuity sales 441 353 1,418 1,118 Other revenues 126 217 459 996 Total unaffiliated distribution fees $ 20,274 22,892 62,611 71,305 Broker-Dealer Fee-based asset allocation product revenues $ 69,468 61,115 201,565 176,184 Rule 12b-1 service and distribution fees 18,106 19,026 54,591 56,544 Sales commissions on front-end load mutual fund and variable annuity sales 13,651 12,941 41,900 41,796 Sales commissions on other products 9,111 7,974 26,632 23,671 Other revenues 9,698 4,944 28,923 16,999 Total broker-dealer distribution fees 120,034 106,000 353,611 315,194 Total distribution fees $ 140,308 128,892 416,222 386,499 Shareholder service fees: Total shareholder service fees $ 25,508 26,406 78,464 80,706 Total revenues $ 295,118 289,447 888,071 862,668 |
Investment Securities
Investment Securities | 9 Months Ended |
Sep. 30, 2018 | |
Investment Securities | |
Investment Securities | 4. Investment securities at September 30, 2018 and December 31, 2017 are as follows: September 30, December 31, 2018 2017 (in thousands) Available for sale securities: Certificates of deposit $ 5,002 12,999 Commercial paper 7,920 34,978 Corporate bonds 180,780 197,442 U.S. Treasury bills 25,445 19,779 Total available for sale securities 219,147 265,198 Trading debt securities: Certificates of deposit — 1,999 Commercial paper 1,981 — Corporate bonds 58,545 55,414 U.S. Treasury bills 8,810 4,929 Mortgage-backed securities 8 10 Consolidated sponsored funds 35,086 62,038 Total trading securities 104,430 124,390 Equity securities: Common stock 8,088 116 Sponsored funds (1) 160,852 137,857 Sponsored privately offered funds 839 695 Consolidated sponsored funds 32,548 77,048 Total equity securities 202,327 215,716 Equity method securities: Sponsored funds 62,503 95,188 Total securities $ 588,407 700,492 (1) Includes $124.0 million of investments at December 31, 2017, that were previously reported as available for sale securities prior to the adoption of ASU 2016-01 on January 1, 2018. Refer to Note 1 – Description of Business and Significant Accounting Policies – Basis of Presentation. Certificates of deposit, commercial paper, corporate bonds and U.S. Treasury bills accounted for as available for sale and held as of September 30, 2018 mature as follows: Amortized cost Fair value (in thousands) Within one year $ 90,565 90,143 After one year but within five years 130,562 129,004 $ 221,127 219,147 Commercial paper, corporate bonds, U.S. Treasury bills and mortgage-backed securities accounted for as trading and held as of September 30, 2018 mature as follows: Fair value (in thousands) Within one year $ 25,031 After one year but within five years 39,654 After 10 years 4,659 $ 69,344 The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at September 30, 2018: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Certificates of deposit $ 5,000 2 — 5,002 Commercial paper 7,902 18 — 7,920 Corporate bonds 182,276 7 (1,503) 180,780 U.S. Treasury bills 25,949 — (504) 25,445 $ 221,127 27 (2,007) 219,147 The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2017: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Certificates of deposit $ 13,000 1 (2) 12,999 Commercial paper 34,836 142 — 34,978 Corporate bonds 198,404 33 (995) 197,442 U.S. Treasury bills 20,019 — (240) 19,779 $ 266,259 176 (1,237) 265,198 A summary of available for sale investment securities with fair values below carrying values at September 30, 2018 and December 31, 2017 is as follows: Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized September 30, 2018 Fair value losses Fair value losses Fair value losses (in thousands) Corporate bonds $ 55,682 (293) 112,246 (1,210) 167,928 (1,503) U.S. Treasury bills 5,920 (16) 19,525 (488) 25,445 (504) $ 61,602 (309) 131,771 (1,698) 193,373 (2,007) Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized December 31, 2017 Fair value losses Fair value losses Fair value losses (in thousands) Certificates of deposit $ 2,998 (2) — — 2,998 (2) Corporate bonds 192,409 (995) — — 192,409 (995) U.S. Treasury bills 19,779 (240) — — 19,779 (240) $ 215,186 (1,237) — — 215,186 (1,237) The Company’s investment portfolio included 46 securities, having an aggregate fair value of $193.4 million, which were in an unrealized loss position at September 30, 2018, compared to 53 securities, with an aggregate fair value of $215.2 million at December 31, 2017. The Company evaluated all of the available for sale securities in an unrealized loss position at September 30, 2018 and December 31, 2017, and concluded no other-than-temporary impairment existed at September 30, 2018 or December 31, 2017. The unrealized losses in the Company’s investment portfolio at September 30, 2018 were primarily caused by changes in interest rates. At this time, the Company does not intend to sell, and does not believe it will be required to sell these securities before recovery of their amortized cost. Sponsored Funds The Company has classified its equity investments in the Ivy Funds as equity method investments (when the Company owns between 20% and 50% of the fund) or equity securities (when the Company owns less than 20% of the fund). These entities do not meet the criteria of a variable interest entity (“VIE”) and are considered to be voting interest entities (“VOE”). The Company has determined the Ivy Funds are VOEs because the structure of the investment products is such that the voting rights held by the equity holders provide for equality among equity investors. Sponsored Privately Offered Funds The Company holds an interest in a privately offered fund structured in the form of a limited liability company. The members of this entity have the substantive ability to remove the Company as managing member or dissolve the entity upon a simple majority vote. This entity does not meet the criteria of a VIE and is considered to be a VOE. Consolidated Sponsored Funds The following table details the balances related to consolidated sponsored funds at September 30, 2018, and at December 31, 2017, as well as the Company’s net interest in these funds: September 30, December 31, 2018 2017 (in thousands) Cash $ 77,480 8,472 Investments 67,634 139,086 Other assets 2,661 1,588 Other liabilities (1,125) (1,040) Redeemable noncontrolling interests (16,133) (14,509) Net interest in consolidated sponsored funds $ 130,517 133,597 During the three months ended September 30, 2018, we consolidated an Ivy Fund, Ivy NextShares and Ivy Global Investors Funds in which we provided initial seed capital at the time of the funds’ formation. In May, we started the process of liquidating the Ivy Global Investors Société d’Investissement à Capital Variable and its Ivy Global Investors sub-funds, including converting the investments held by the sub-funds to cash. When we no longer have a controlling financial interest in a sponsored fund, it is deconsolidated from our consolidated financial statements. Fair Value Accounting standards establish a framework for measuring fair value and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of the asset. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset. An individual investment’s fair value measurement is assigned a level based upon the observability of the inputs that are significant to the overall valuation. The three-level hierarchy of inputs is summarized as follows: · Level 1 – Investments are valued using quoted prices in active markets for identical securities. · Level 2 – Investments are valued using other significant observable inputs, including quoted prices in active markets for similar securities. · Level 3 – Investments are valued using significant unobservable inputs, including the Company’s own assumptions in determining the fair value of investments. Assets classified as Level 2 can have a variety of observable inputs. These observable inputs are collected and utilized, primarily by an independent pricing service, in different evaluated pricing approaches depending upon the specific asset to determine a value. The carrying amounts of certificates of deposit and commercial paper are measured at amortized cost, which approximates fair value due to the short-time between purchase and expected maturity of the investments. Depending on the nature of the inputs, these investments are generally classified as Level 1 or 2 within the fair value hierarchy. U.S. Treasury bills are valued upon quoted market prices for similar assets in active markets, quoted prices for identical or similar assets that are not active and inputs other than quoted prices that are observable or corroborated by observable market data. The fair value of corporate bonds is measured using various techniques, which consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads and fundamental data relating to the issuer. The fair value of equity derivatives is measured based on active market broker quotes, evaluated broker quotes and evaluated prices from vendors. The following tables summarize our investment securities as of September 30, 2018 and December 31, 2017 that are recognized in our consolidated balance sheets using fair value measurements based on the differing levels of inputs. September 30, 2018 Level 1 Level 2 Level 3 Other Assets Held at Net Asset Value Total (in thousands) Cash equivalents: (1) Money market funds $ 112,289 — — — 112,289 Commercial paper — 48,554 — — 48,554 Total cash equivalents $ 112,289 48,554 — — 160,843 Available for sale securities: Certificates of deposit $ — 5,002 — — 5,002 Commercial paper — 7,920 — — 7,920 Corporate bonds — 180,780 — — 180,780 U.S. Treasury bills — 25,445 — — 25,445 Trading debt securities: Commercial paper — 1,981 — — 1,981 Corporate bonds — 58,545 — 58,545 U.S. Treasury bills — 8,810 — — 8,810 Mortgage-backed securities — 8 — — 8 Consolidated sponsored funds — 35,086 — — 35,086 Equity securities: Common stock 8,049 — 39 — 8,088 Sponsored funds 160,852 — — — 160,852 Sponsored privately offered funds measured at net asset value (2) — — — 839 839 Consolidated sponsored funds 32,548 — — — 32,548 Equity method securities: (3) Sponsored funds 62,503 — — — 62,503 Total $ 263,952 323,577 39 839 588,407 December 31, 2017 Level 1 Level 2 Level 3 Other Assets Held at Net Asset Value Total (in thousands) Cash equivalents: (1) Money market funds $ 145,785 — — — 145,785 Commercial paper — 11,064 — — 11,064 Total cash equivalents $ 145,785 11,064 — — 156,849 Available for sale securities: Certificates of deposit $ — 12,999 — — 12,999 Commercial paper — 34,978 — — 34,978 Corporate bonds — 197,442 — — 197,442 U.S. Treasury bills — 19,779 — — 19,779 Trading debt securities: Certificates of deposit — 1,999 — — 1,999 Corporate bonds — 55,414 — 55,414 U.S. Treasury bills — 4,929 — — 4,929 Mortgage-backed securities — 10 — — 10 Consolidated sponsored funds — 62,038 — — 62,038 Equity securities: Common stock 116 — — — 116 Sponsored funds 137,857 — — — 137,857 Sponsored privately offered funds measured at net asset value (2) — — — 695 695 Consolidated sponsored funds 77,048 — — — 77,048 Equity method securities: (3) Sponsored funds 95,188 — — — 95,188 Total $ 310,209 389,588 — 695 700,492 (1) Cash equivalents include highly liquid investments with original maturities of 90 days or less. Cash investments in actively traded money market funds are measured at NAV and are classified as Level 1. Cash investments in commercial paper are measured at cost, which approximates fair value because of the short time between purchase of the instrument and its expected realization, and are classified as Level 2. (2) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets. (3) Substantially all of the Company’s equity method investments are investment companies that record their underlying investments at fair value. The following table summarizes the activity of investments categorized as Level 3 for the nine months ended September 30, 2018: For the nine months ended September 30, 2018 (in thousands) Level 3 assets at December 31, 2017 $ — Additions 419 Valuation change (63) Redemptions (317) Level 3 assets at September 30, 2018 $ 39 |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | 5. The Company has in place an economic hedge program that uses total return swap contracts to hedge market risk related to its investments in certain sponsored funds. Certain of the consolidated sponsored funds may utilize derivative financial instruments within their portfolios in pursuit of their stated investment objectives. We do not hedge for speculative purposes. Excluding derivative financial instruments held in certain consolidated sponsored funds, the Company was party to five total return swap contracts with a combined notional value of $198.4 million and six total return swap contracts with a combined notional value of $213.9 million as of September 30, 2018 and December 31, 2017, respectively. These derivative financial instruments are not designated as hedges for accounting purposes. Changes in fair value of the total return swap contracts are recognized in investment and other income on the Company’s consolidated statements of income. The Company posted $6.4 million and $9.7 million in cash collateral with the counterparties of the total return swap contracts as of September 30, 2018 and December 31, 2017, respectively. The cash collateral is included in Customers and other receivables on the Company’s consolidated balance sheet. The Company does not record its fair value in derivative transactions against the posted collateral. The following table presents the fair value of the derivative financial instruments, excluding derivative financial instruments held in certain consolidated sponsored funds as of September 30, 2018 and December 31, 2017 and is calculated based on Level 2 inputs: The following table presents the fair value of the derivative financial instruments, excluding The following table presents the fair value of the derivative financial instruments, excluding derivative financial instruments held in certain consolidated sponsored funds as of September 30, 2018 and December 31, 2017 and is calculated based on Level 2 inputs: September 30, December 31, 2018 2017 Balance sheet location Fair value Fair value (in thousands) Total return swap contracts Other current liabilities $ 550 1,093 The following is a summary of net losses recognized in income for the three and nine months ended September 30, 2018 and September 30, 2017: Three months ended Nine months ended Income statement September 30, September 30, location 2018 2017 2018 2017 (in thousands) (in thousands) Total return swap contracts Investment and other income $ (6,769) (8,855) $ (7,313) (27,321) |
Goodwill and Identifiable Intan
Goodwill and Identifiable Intangible Assets | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Identifiable Intangible Assets | |
Goodwill and Identifiable Intangible Assets | 6. Goodwill represents the excess of purchase price over the tangible assets and identifiable intangible assets of an acquired business. Our goodwill is not deductible for tax purposes. Goodwill and identifiable intangible assets (all considered indefinite lived) at September 30, 2018 and December 31, 2017 are as follows: September 30, December 31, 2018 2017 (in thousands) Goodwill $ 106,970 106,970 Mutual fund management advisory contracts 38,699 38,699 Mutual fund management subadvisory contract — 1,200 Other 200 200 Total identifiable intangible assets 38,899 40,099 Total $ 145,869 147,069 |
Indebtedness
Indebtedness | 9 Months Ended |
Sep. 30, 2018 | |
Indebtedness | |
Indebtedness | 7. Debt is reported at its carrying amount in the consolidated balance sheet. The fair value of the Company’s senior unsecured note maturing January 13, 2021 is $98.4 million at September 30, 2018 compared to the carrying value net of debt issuance costs of $94.8 million, which is listed under long-term debt in the consolidated balance sheet. Fair value is calculated based on Level 2 inputs. |
Income Tax Uncertainties
Income Tax Uncertainties | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Uncertainties | |
Income Tax Uncertainties | 8. In the accompanying consolidated balance sheet, unrecognized tax benefits that are not expected to be settled within the next 12 months are included in other liabilities; unrecognized tax benefits that are expected to be settled within the next 12 months are included in income taxes payable; unrecognized tax benefits that reduce a net operating loss, similar tax loss, or tax credit carryforward are presented as a reduction to non-current deferred income taxes. As of September 30, 2018 and December 31, 2017, the Company’s consolidated balance sheet included unrecognized tax benefits, including penalties and interest, of $2.9 million ($2.5 million net of federal benefit) and $10.9 million ($8.9 million net of federal benefit), respectively, that if recognized, would impact the Company’s effective tax rate. The Company finalized a voluntary disclosure agreement with a state tax jurisdiction in June 2018, which reduced unrecognized tax benefits by $9.3 million ($7.6 million net of federal benefit). The Company’s accounting policy with respect to interest and penalties related to income tax uncertainties is to classify these amounts as income taxes. The total amount of penalties and interest, net of federal impact, related to income tax uncertainties recognized in the statement of income for the nine month period ended September 30, 2018 was a benefit of $2.7 million. The total amount of accrued penalties and interest related to uncertain tax positions recognized in the consolidated balance sheet at September 30, 2018 and December 31, 2017 is $0.8 million ($0.7 million net of federal benefit) and $4.0 million ($3.5 million net of federal benefit), respectively. In the ordinary course of business, many transactions occur for which the ultimate tax outcome is uncertain. In addition, respective tax authorities periodically audit our income tax returns. These audits examine our significant tax filing positions, including the timing and amounts of deductions and the allocation of income among tax jurisdictions. The Company is currently under audit in a state jurisdiction in which it operates. The Company expects to settle the audit in this jurisdiction within the next 12-month period. The Company’s liability for unrecognized tax benefits, including penalties and interest, is not expected to decrease significantly upon settlement of this audit. Additionally, such settlement is not anticipated to have a significant impact on the results of operations. The 2015, 2016, and 2017 federal income tax returns are open tax years that remain subject to potential future audit. State income tax returns for all years after 2013 and, in certain states, income tax returns for 2013, are subject to potential future audit by tax authorities in the Company’s major state tax jurisdictions. |
Pension Plan and Postretirement
Pension Plan and Postretirement Benefits Other Than Pension | 9 Months Ended |
Sep. 30, 2018 | |
Pension Plan and Postretirement Benefits Other Than Pension | |
Pension Plan and Postretirement Benefits Other Than Pension | 9. Benefits payable under the Pension Plan are based on employees’ years of service and compensation during the final 10 years of employment. On July 26, 2017, the Compensation Committee of the Company’s Board of Directors approved an amendment to freeze the Pension Plan effective September 30, 2017. After September 30, 2017, participants in the Pension Plan do not accrue additional benefits for future service or compensation. Participants retain benefits accumulated as of September 30, 2017 in accordance with the terms of the Pension Plan. During the third quarter of 2018, we contributed $4.0 million to the Pension Plan. We also sponsor an unfunded defined benefit postretirement medical plan that previously covered substantially all employees, as well as independent financial advisors associated with Waddell & Reed, Inc. The medical plan is contributory with participant contributions adjusted annually. The medical plan does not provide for benefits after age 65 with the exception of a small group of employees that were grandfathered when this plan was established. During the third quarter of 2016, the Company amended this plan to discontinue the availability of coverage for any individuals who retire after December 31, 2016. The components of net periodic pension and other postretirement costs related to these plans were as follows: Other Other Pension Benefits Postretirement Benefits Pension Benefits Postretirement Benefits Three months ended September 30, Three months ended September 30, Nine months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 2018 2017 2018 2017 (in thousands) (in thousands) Components of net periodic benefit cost: Service cost $ — 2,958 $ — — $ — 8,367 $ — — Interest cost 1,497 1,522 14 15 4,490 4,780 41 44 Expected return on plan assets (2,065) (2,510) — — (6,196) (7,627) — — Actuarial loss — 6,552 — — — 6,552 — — Actuarial gain amortization — — (30) (45) — — (90) (135) Prior service credit amortization — — (1) (1) — — (2) (3) Curtailment gain — (31,621) — — (31,621) — — Total $ (568) (23,099) $ (17) (31) $ (1,706) (19,549) $ (51) (94) |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2018 | |
Stockholders' Equity | |
Stockholders' Equity | 10. Earnings per Share The components of basic and diluted earnings per share were as follows: Three months ended Nine months ended September 30, September 30, 2018 2017 2018 2017 (in thousands, except per share amounts) Net income attributable to Waddell & Reed Financial, Inc. $ 46,305 53,582 $ 137,120 111,515 Weighted average shares outstanding, basic and diluted 79,595 83,476 81,372 83,719 Earnings per share, basic and diluted $ 0.58 0.64 $ 1.69 1.33 Dividends On July 24, 2018, the Board of Directors approved a dividend on our Class A common stock in the amount of $0.25 per share to stockholders of record on October 11, 2018. The total dividend paid on November 1, 2018 was $19.7 million and was included in other current liabilities as of September 30, 2018. Common Stock Repurchases The Board of Directors has authorized the repurchase of our Class A common stock in the open market and/or private purchases. The acquired shares may be used for corporate purposes, including issuing shares to employees in our stock-based compensation programs. There were 1,424,612 shares and 190,056 shares repurchased in the open market or privately during the three months ended September 30, 2018 and 2017, respectively, which includes 225 shares and 56 shares, respectively, repurchased from employees who tendered shares to cover income tax withholdings with respect to vesting of stock awards during these two reporting periods. There were 4,519,546 shares and 904,410 shares repurchased in the open market or privately during the nine months ended September 30, 2018 and 2017, respectively, which includes 630,159 shares and 239,410 shares, respectively, repurchased from employees who tendered shares to cover income tax withholdings with respect to the vesting of stock awards during each of these two reporting periods. Accumulated Other Comprehensive Income (Loss) The following tables summarize accumulated other comprehensive income (loss) activity for the three and nine months ended September 30, 2018 and September 30, 2017. Total Unrealized Postretirement accumulated gains (losses) benefits other on investment unrealized comprehensive Three months ended September 30, 2018 securities gains (losses) income (loss) (in thousands) Balance at June 30, 2018 $ (1,772) 440 (1,332) Other comprehensive income before reclassification 218 — 218 Amount reclassified from accumulated other comprehensive loss 44 (24) 20 Net current period other comprehensive income (loss) 262 (24) 238 Balance at September 30, 2018 $ (1,510) 416 (1,094) Change in valuation allowance for unrealized Total Unrealized gains Postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Three months ended September 30, 2017 securities securities gains (losses) income (loss) (in thousands) Balance at June 30, 2017 $ (1,986) (540) 546 (1,980) Other comprehensive income before reclassification 1,968 800 — 2,768 Amount reclassified from accumulated other comprehensive loss (438) (260) (30) (728) Net current period other comprehensive income (loss) 1,530 540 (30) 2,040 Balance at September 30, 2017 $ (456) — 516 60 Total Unrealized Postretirement accumulated gains (losses) benefits other on investment unrealized comprehensive Nine months ended September 30, 2018 securities gains (losses) income (loss) (in thousands) Balance at December 31, 2017 $ 145 379 524 Amount reclassified to retained earnings for recently adopted ASUs (955) 107 (848) Other comprehensive loss before reclassification (744) — (744) Amount reclassified from accumulated other comprehensive loss 44 (70) (26) Net current period other comprehensive (loss) income (1,655) 37 (1,618) Balance at September 30, 2018 $ (1,510) 416 (1,094) Change in valuation allowance for unrealized Total Unrealized gains Postretirement accumulated (gains) losses (losses) on benefits other on investment investment unrealized comprehensive Nine months ended September 30, 2017 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2016 $ (3,972) (3,388) 603 (6,757) Other comprehensive income before reclassification 4,113 3,743 — 7,856 Amount reclassified from accumulated other comprehensive loss (597) (355) (87) (1,039) Net current period other comprehensive income (loss) 3,516 3,388 (87) 6,817 Balance at September 30, 2017 $ (456) — 516 60 Reclassifications from accumulated other comprehensive income (loss) and included in net income are summarized in the tables that follow. For the three months ended September 30, 2018 Tax (expense) Statement of income Pre-tax benefit Net of tax line item or retained earnings (in thousands) Reclassifications included in net income: Losses on available for sale debt securities $ (58) 14 (44) Investment and other income (loss) Amortization of postretirement benefits 31 (7) 24 Compensation and benefits and retained earnings Total $ (27) 7 (20) For the three months ended September 30, 2017 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment gains $ 698 (260) 438 Investment and other income (loss) Valuation allowance — 260 260 Provision for income taxes Amortization of postretirement benefits 46 (16) 30 Compensation and benefits and retained earnings Total $ 744 (16) 728 For the nine months ended September 30, 2018 Tax Pre-tax expense Net of tax Statement of income line item (in thousands) Reclassifications included in net income or retained earnings for ASUs adopted in 2018: Sponsored funds investment gains $ 1,295 (340) 955 Investment and other income (loss) Losses on available for sale debt securities (58) 14 (44) Investment and other income (loss) Amortization of postretirement benefits 92 (129) (37) Compensation and benefits and retained earnings Total $ 1,329 (455) 874 For the nine months ended September 30, 2017 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment gains $ 952 (355) 597 Investment and other income (loss) Valuation allowance — 355 355 Provision for income taxes Amortization of postretirement benefits 138 (51) 87 Compensation and benefits and retained earnings Total $ 1,090 (51) 1,039 |
Contingencies
Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Contingencies | |
Contingencies | 11. The Company is involved from time to time in various legal proceedings, regulatory investigations and claims incident to the normal conduct of business, which may include proceedings that are specific to us and others generally applicable to business practices within the industries in which we operate. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our business, financial condition and on the results of operations in a particular quarter or year. The Company establishes reserves for litigation and similar matters when those matters present material loss contingencies that management determines to be both probable and reasonably estimable in accordance with ASC 450, “Contingencies.” These amounts are not reduced by amounts that may be recovered under insurance or claims against third parties, but undiscounted receivables from insurers or other third parties may be accrued separately. The Company regularly revises such accruals in light of new information. The Company discloses the nature of the contingency when management believes it is reasonably possible the outcome may be significant to the Company’s consolidated financial statements and, where feasible, an estimate of the possible loss. For purposes of our litigation contingency disclosures, “significant” includes material matters as well as other items that management believes should be disclosed. Management’s judgment is required related to contingent liabilities because the outcomes are difficult to predict. Shareholder Derivative Litigation In an action filed on April 18, 2016 in the District Court of Johnson County, Kansas, Hieu Phan v. Ivy Investment Management Company, et al. (Case No. I6CV02338 Div. 4), plaintiff filed a putative derivative action on behalf of the nominal defendant, a mutual fund trust affiliated with the Company, alleging breach of fiduciary duty and breach of contract claims relating to an investment held in the affiliated mutual fund by the Company's registered investment adviser subsidiary. On behalf of the nominal defendant trust, plaintiff filed claims against the Company’s registered investment adviser subsidiary and current and retired trustees of the trust seeking monetary damages and demanding a jury trial. While the Company denies that any of its subsidiaries breached their fiduciary duties to, or committed a breach of the investment management agreement with, the nominal defendant trust, the parties to the litigation reached a settlement. The February 14, 2018 settlement agreement provided a full release for the benefit of defendants and for the payment of $19.9 million (less $6.1 million for attorney’s fees plus nominal costs associated with notice to shareholders), recoverable to the Company through insurance, to the affiliated mutual fund for the benefit of its shareholders. On July 30, 2018, the court entered an order granting final approval of the settlement. 401(k) Plan Class Action Litigation In an action filed on June 23, 2017 and amended on June 26, 2017 in the U.S. District Court for the District of Kansas, Schapker v. Waddell & Reed Financial, Inc., et al, (Case No. 17-2365 D. Kan.), Stacy Schapker, a participant in the Company’s 401(k) and Thrift Plan, as amended and restated (the “401(k) Plan”), filed a lawsuit against the Company, the Company’s Board of Directors, the Administrative Committee of the 401(k) Plan, and unnamed Jane and John Doe Defendants 1-25. On August 7, 2017, plaintiff filed a second amended complaint, which was filed on behalf of the 401(k) Plan and a proposed class of 401(k) Plan participants, purports to assert claims for breach of fiduciary duty and prohibited transactions under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) based on the 401(k) Plan’s offering of investments managed by the Company or its affiliates during a proposed class period of June 23, 2011 to present. The second amended complaint dismissed the Company’s Board of Directors as a defendant and named as defendants the Company, the Compensation Committee of the Company’s Board of Directors, the Administrative Committee of the 401(k) Plan, and the individuals who served on those committees during the proposed class period. Following the denial of their motion to dismiss, on March 8, 2018, defendants filed their answer and defenses to plaintiff’s second amended complaint. On April 23, 2018, the court entered an initial scheduling order, ordering the parties to complete mediation by August 31, 2018. While the Company and the other defendants deny any and all liability with respect to the claims, the parties have reached an agreement in principle to settle the litigation. The parties are finalizing the terms of the proposed settlement, which will be subject to preliminary and final court approval. The payment contemplated by the proposed settlement is recoverable to the Company through insurance. The Company has recorded a liability and offsetting receivable from insurance, as reflected in the Company's consolidated balance sheet. |
Description of Business and S_2
Description of Business and Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Description of Business and Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation We have prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to enable a reasonable understanding of the information presented. The information in this Quarterly Report on Form 10-Q should be read in conjunction with Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Form 10-K”). Certain amounts in the prior year’s financial statements have been reclassified for consistent presentation. The accompanying unaudited consolidated financial statements are prepared consistent with the accounting policies described in Note 1 to the consolidated financial statements included in our 2017 Form 10-K with the exception of the adoption of Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts from Customers, ” ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” ASU 2016-18, “Statement of Cash Flows: Restricted Cash,” ASU 2017-07, “Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” and ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which all became effective January 1, 2018. The implementation of ASU 2014-09 did not have a material impact on the measurement or recognition of revenue from prior periods. See Note 3 – Revenue Recognition, for additional accounting policy information and the additional disclosures required by this ASU. Upon adoption of ASU 2016-01, we reclassified net unrealized holding gains, net of taxes, related to our available for sale investment portfolio from accumulated other comprehensive income to retained earnings. See consolidated statement of stockholders’ equity and redeemable noncontrolling interests for the financial statement reclassification impact of adopting this ASU. Upon adoption of ASU 2016-18, the Cash and cash equivalents – restricted financial statement line item was included as a component of cash and cash equivalents on the Company’s consolidated statements of cash flows for all periods presented. The adoption of ASU 2017-07 changed the income statement presentation of our noncontributory retirement plan that covers substantially all employees and certain vested employees of our former parent company (the “Pension Plan”) by requiring separation between operating expense (service cost component) and non-operating expense (all other components, including interest cost, amortization of prior service cost, mark-to-market gains and losses, curtailments and settlements, etc.). In addition, only the service cost component is eligible for capitalization as part of an asset. The adoption of this ASU had no effect on our net income because it only impacted the classification of certain information on the consolidated statements of income. An amendment to freeze the Pension Plan was approved effective September 30, 2017; therefore, after September 30, 2017, we no longer incur service costs. The service cost component of net periodic benefit cost was recognized in compensation and related costs through September 30, 2017. The other components of net periodic cost were reclassified to investment and other income (loss) on a retrospective basis. Upon early adoption of ASU 2018-02 tax effects that were stranded in other comprehensive income due to the Tax Reform Act were reclassified from accumulated other comprehensive income to retained earnings. The adoption of this ASU did not have a material impact on our consolidated financial statements and related disclosures. See consolidated statement of stockholders’ equity and redeemable noncontrolling interests for the financial statement reclassification impact of adopting this ASU. Additionally, during the first quarter of 2018, we changed the presentation of certain line items in the consolidated statements of income that were intended to improve the transparency of the Company’s financial statements through clearer alignment of operating expenses with financial statement captions. Specifically, the Company revised its accounting policy related to the reporting of indirect underwriting and distribution expenses in the former underwriting and distribution caption and certain expenses historically reported as general and administrative. Expenses previously recorded as Underwriting and distribution expenses were retrospectively reclassified into (a) the following existing operating expense captions: Compensation and benefits and General and administrative, and (b) the following newly created operating expense captions: Distribution, Technology, Occupancy, and Marketing and advertising. Certain expenses historically reported as general and administrative were retrospectively reclassified into the following newly created operating expense captions: Technology, Occupancy, and Marketing and advertising. The Company considered the change in policy to be preferable and did not consider the change to be material to its consolidated financial statements. These changes were applied retrospectively to all periods presented and did not affect net income attributable to the Company. In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting of only a normal and recurring nature) necessary to present fairly our financial position at September 30, 2018 and the results of operations and cash flows for the nine months ended September 30, 2018 and 2017 in conformity with accounting principles generally accepted in the United States. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue Recognition | |
Summary of Disaggregation of revenue | Three months ended Three months ended Nine months ended Nine months ended (in thousands) (in thousands) Investment management fees: Funds $ 123,764 128,078 376,193 376,563 Institutional 5,538 6,071 17,192 18,900 Total investment management fees $ 129,302 134,149 393,385 395,463 Underwriting and distribution fees: Unaffiliated Rule 12b-1 service and distribution fees $ 19,707 22,322 60,734 69,191 Sales commissions on front-end load mutual fund and variable annuity sales 441 353 1,418 1,118 Other revenues 126 217 459 996 Total unaffiliated distribution fees $ 20,274 22,892 62,611 71,305 Broker-Dealer Fee-based asset allocation product revenues $ 69,468 61,115 201,565 176,184 Rule 12b-1 service and distribution fees 18,106 19,026 54,591 56,544 Sales commissions on front-end load mutual fund and variable annuity sales 13,651 12,941 41,900 41,796 Sales commissions on other products 9,111 7,974 26,632 23,671 Other revenues 9,698 4,944 28,923 16,999 Total broker-dealer distribution fees 120,034 106,000 353,611 315,194 Total distribution fees $ 140,308 128,892 416,222 386,499 Shareholder service fees: Total shareholder service fees $ 25,508 26,406 78,464 80,706 Total revenues $ 295,118 289,447 888,071 862,668 |
Investment Securities (Tables)
Investment Securities (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Investment Securities | |
Schedule of investment securities | September 30, December 31, 2018 2017 (in thousands) Available for sale securities: Certificates of deposit $ 5,002 12,999 Commercial paper 7,920 34,978 Corporate bonds 180,780 197,442 U.S. Treasury bills 25,445 19,779 Total available for sale securities 219,147 265,198 Trading debt securities: Certificates of deposit — 1,999 Commercial paper 1,981 — Corporate bonds 58,545 55,414 U.S. Treasury bills 8,810 4,929 Mortgage-backed securities 8 10 Consolidated sponsored funds 35,086 62,038 Total trading securities 104,430 124,390 Equity securities: Common stock 8,088 116 Sponsored funds (1) 160,852 137,857 Sponsored privately offered funds 839 695 Consolidated sponsored funds 32,548 77,048 Total equity securities 202,327 215,716 Equity method securities: Sponsored funds 62,503 95,188 Total securities $ 588,407 700,492 (1) Includes $124.0 million of investments at December 31, 2017, that were previously reported as available for sale securities prior to the adoption of ASU 2016-01 on January 1, 2018. Refer to Note 1 – Description of Business and Significant Accounting Policies – Basis of Presentation. |
Summary of maturities of securities held | Certificates of deposit, commercial paper, corporate bonds and U.S. Treasury bills accounted for as available for sale and held as of September 30, 2018 mature as follows: Amortized cost Fair value (in thousands) Within one year $ 90,565 90,143 After one year but within five years 130,562 129,004 $ 221,127 219,147 Commercial paper, corporate bonds, U.S. Treasury bills and mortgage-backed securities accounted for as trading and held as of September 30, 2018 mature as follows: Fair value (in thousands) Within one year $ 25,031 After one year but within five years 39,654 After 10 years 4,659 $ 69,344 |
Summary of the gains (losses) related to securities | The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at September 30, 2018: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Certificates of deposit $ 5,000 2 — 5,002 Commercial paper 7,902 18 — 7,920 Corporate bonds 182,276 7 (1,503) 180,780 U.S. Treasury bills 25,949 — (504) 25,445 $ 221,127 27 (2,007) 219,147 The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2017: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Certificates of deposit $ 13,000 1 (2) 12,999 Commercial paper 34,836 142 — 34,978 Corporate bonds 198,404 33 (995) 197,442 U.S. Treasury bills 20,019 — (240) 19,779 $ 266,259 176 (1,237) 265,198 |
Summary of available for sale investment securities with fair values below carrying values | Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized September 30, 2018 Fair value losses Fair value losses Fair value losses (in thousands) Corporate bonds $ 55,682 (293) 112,246 (1,210) 167,928 (1,503) U.S. Treasury bills 5,920 (16) 19,525 (488) 25,445 (504) $ 61,602 (309) 131,771 (1,698) 193,373 (2,007) Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized December 31, 2017 Fair value losses Fair value losses Fair value losses (in thousands) Certificates of deposit $ 2,998 (2) — — 2,998 (2) Corporate bonds 192,409 (995) — — 192,409 (995) U.S. Treasury bills 19,779 (240) — — 19,779 (240) $ 215,186 (1,237) — — 215,186 (1,237) |
Summary of balances related to consolidated sponsored funds as well the company’s net interest in these funds | September 30, December 31, 2018 2017 (in thousands) Cash $ 77,480 8,472 Investments 67,634 139,086 Other assets 2,661 1,588 Other liabilities (1,125) (1,040) Redeemable noncontrolling interests (16,133) (14,509) Net interest in consolidated sponsored funds $ 130,517 133,597 |
Schedule of fair value of investment securities | September 30, 2018 Level 1 Level 2 Level 3 Other Assets Held at Net Asset Value Total (in thousands) Cash equivalents: (1) Money market funds $ 112,289 — — — 112,289 Commercial paper — 48,554 — — 48,554 Total cash equivalents $ 112,289 48,554 — — 160,843 Available for sale securities: Certificates of deposit $ — 5,002 — — 5,002 Commercial paper — 7,920 — — 7,920 Corporate bonds — 180,780 — — 180,780 U.S. Treasury bills — 25,445 — — 25,445 Trading debt securities: Commercial paper — 1,981 — — 1,981 Corporate bonds — 58,545 — 58,545 U.S. Treasury bills — 8,810 — — 8,810 Mortgage-backed securities — 8 — — 8 Consolidated sponsored funds — 35,086 — — 35,086 Equity securities: Common stock 8,049 — 39 — 8,088 Sponsored funds 160,852 — — — 160,852 Sponsored privately offered funds measured at net asset value (2) — — — 839 839 Consolidated sponsored funds 32,548 — — — 32,548 Equity method securities: (3) Sponsored funds 62,503 — — — 62,503 Total $ 263,952 323,577 39 839 588,407 December 31, 2017 Level 1 Level 2 Level 3 Other Assets Held at Net Asset Value Total (in thousands) Cash equivalents: (1) Money market funds $ 145,785 — — — 145,785 Commercial paper — 11,064 — — 11,064 Total cash equivalents $ 145,785 11,064 — — 156,849 Available for sale securities: Certificates of deposit $ — 12,999 — — 12,999 Commercial paper — 34,978 — — 34,978 Corporate bonds — 197,442 — — 197,442 U.S. Treasury bills — 19,779 — — 19,779 Trading debt securities: Certificates of deposit — 1,999 — — 1,999 Corporate bonds — 55,414 — 55,414 U.S. Treasury bills — 4,929 — — 4,929 Mortgage-backed securities — 10 — — 10 Consolidated sponsored funds — 62,038 — — 62,038 Equity securities: Common stock 116 — — — 116 Sponsored funds 137,857 — — — 137,857 Sponsored privately offered funds measured at net asset value (2) — — — 695 695 Consolidated sponsored funds 77,048 — — — 77,048 Equity method securities: (3) Sponsored funds 95,188 — — — 95,188 Total $ 310,209 389,588 — 695 700,492 (1) Cash equivalents include highly liquid investments with original maturities of 90 days or less. Cash investments in actively traded money market funds are measured at NAV and are classified as Level 1. Cash investments in commercial paper are measured at cost, which approximates fair value because of the short time between purchase of the instrument and its expected realization, and are classified as Level 2. (2) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets. (3) Substantially all of the Company’s equity method investments are investment companies that record their underlying investments at fair value. |
Schedule of activity of investments categorized as Level 3 | For the nine months ended September 30, 2018 (in thousands) Level 3 assets at December 31, 2017 $ — Additions 419 Valuation change (63) Redemptions (317) Level 3 assets at September 30, 2018 $ 39 |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Financial Instruments | |
Schedule of fair value of derivative financial instruments, excluding derivative financial instruments held in certain consolidated sponsored funds | The following table presents the fair value of the derivative financial instruments, excluding The following table presents the fair value of the derivative financial instruments, excluding derivative financial instruments held in certain consolidated sponsored funds as of September 30, 2018 and December 31, 2017 and is calculated based on Level 2 inputs: September 30, December 31, 2018 2017 Balance sheet location Fair value Fair value (in thousands) Total return swap contracts Other current liabilities $ 550 1,093 |
Schedule of net losses recognized in income of derivative financial instrument | Three months ended Nine months ended Income statement September 30, September 30, location 2018 2017 2018 2017 (in thousands) (in thousands) Total return swap contracts Investment and other income $ (6,769) (8,855) $ (7,313) (27,321) |
Goodwill and Identifiable Int_2
Goodwill and Identifiable Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Identifiable Intangible Assets | |
Schedule of goodwill and identifiable intangible assets | September 30, December 31, 2018 2017 (in thousands) Goodwill $ 106,970 106,970 Mutual fund management advisory contracts 38,699 38,699 Mutual fund management subadvisory contract — 1,200 Other 200 200 Total identifiable intangible assets 38,899 40,099 Total $ 145,869 147,069 |
Pension Plan and Postretireme_2
Pension Plan and Postretirement Benefits Other Than Pension (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Pension Plan and Postretirement Benefits Other Than Pension | |
Schedule of components of net periodic pension and other postretirement costs | Other Other Pension Benefits Postretirement Benefits Pension Benefits Postretirement Benefits Three months ended September 30, Three months ended September 30, Nine months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 2018 2017 2018 2017 (in thousands) (in thousands) Components of net periodic benefit cost: Service cost $ — 2,958 $ — — $ — 8,367 $ — — Interest cost 1,497 1,522 14 15 4,490 4,780 41 44 Expected return on plan assets (2,065) (2,510) — — (6,196) (7,627) — — Actuarial loss — 6,552 — — — 6,552 — — Actuarial gain amortization — — (30) (45) — — (90) (135) Prior service credit amortization — — (1) (1) — — (2) (3) Curtailment gain — (31,621) — — (31,621) — — Total $ (568) (23,099) $ (17) (31) $ (1,706) (19,549) $ (51) (94) |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Stockholders' Equity | |
Components of basic and diluted earnings per share | Three months ended Nine months ended September 30, September 30, 2018 2017 2018 2017 (in thousands, except per share amounts) Net income attributable to Waddell & Reed Financial, Inc. $ 46,305 53,582 $ 137,120 111,515 Weighted average shares outstanding, basic and diluted 79,595 83,476 81,372 83,719 Earnings per share, basic and diluted $ 0.58 0.64 $ 1.69 1.33 |
Summary of other comprehensive income (loss) activity | Total Unrealized Postretirement accumulated gains (losses) benefits other on investment unrealized comprehensive Three months ended September 30, 2018 securities gains (losses) income (loss) (in thousands) Balance at June 30, 2018 $ (1,772) 440 (1,332) Other comprehensive income before reclassification 218 — 218 Amount reclassified from accumulated other comprehensive loss 44 (24) 20 Net current period other comprehensive income (loss) 262 (24) 238 Balance at September 30, 2018 $ (1,510) 416 (1,094) Change in valuation allowance for unrealized Total Unrealized gains Postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Three months ended September 30, 2017 securities securities gains (losses) income (loss) (in thousands) Balance at June 30, 2017 $ (1,986) (540) 546 (1,980) Other comprehensive income before reclassification 1,968 800 — 2,768 Amount reclassified from accumulated other comprehensive loss (438) (260) (30) (728) Net current period other comprehensive income (loss) 1,530 540 (30) 2,040 Balance at September 30, 2017 $ (456) — 516 60 Total Unrealized Postretirement accumulated gains (losses) benefits other on investment unrealized comprehensive Nine months ended September 30, 2018 securities gains (losses) income (loss) (in thousands) Balance at December 31, 2017 $ 145 379 524 Amount reclassified to retained earnings for recently adopted ASUs (955) 107 (848) Other comprehensive loss before reclassification (744) — (744) Amount reclassified from accumulated other comprehensive loss 44 (70) (26) Net current period other comprehensive (loss) income (1,655) 37 (1,618) Balance at September 30, 2018 $ (1,510) 416 (1,094) Change in valuation allowance for unrealized Total Unrealized gains Postretirement accumulated (gains) losses (losses) on benefits other on investment investment unrealized comprehensive Nine months ended September 30, 2017 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2016 $ (3,972) (3,388) 603 (6,757) Other comprehensive income before reclassification 4,113 3,743 — 7,856 Amount reclassified from accumulated other comprehensive loss (597) (355) (87) (1,039) Net current period other comprehensive income (loss) 3,516 3,388 (87) 6,817 Balance at September 30, 2017 $ (456) — 516 60 |
Summary of reclassifications from accumulated other comprehensive income (loss) and included in net income | For the three months ended September 30, 2018 Tax (expense) Statement of income Pre-tax benefit Net of tax line item or retained earnings (in thousands) Reclassifications included in net income: Losses on available for sale debt securities $ (58) 14 (44) Investment and other income (loss) Amortization of postretirement benefits 31 (7) 24 Compensation and benefits and retained earnings Total $ (27) 7 (20) For the three months ended September 30, 2017 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment gains $ 698 (260) 438 Investment and other income (loss) Valuation allowance — 260 260 Provision for income taxes Amortization of postretirement benefits 46 (16) 30 Compensation and benefits and retained earnings Total $ 744 (16) 728 For the nine months ended September 30, 2018 Tax Pre-tax expense Net of tax Statement of income line item (in thousands) Reclassifications included in net income or retained earnings for ASUs adopted in 2018: Sponsored funds investment gains $ 1,295 (340) 955 Investment and other income (loss) Losses on available for sale debt securities (58) 14 (44) Investment and other income (loss) Amortization of postretirement benefits 92 (129) (37) Compensation and benefits and retained earnings Total $ 1,329 (455) 874 For the nine months ended September 30, 2017 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment gains $ 952 (355) 597 Investment and other income (loss) Valuation allowance — 355 355 Provision for income taxes Amortization of postretirement benefits 138 (51) 87 Compensation and benefits and retained earnings Total $ 1,090 (51) 1,039 |
Description of Business and S_3
Description of Business and Significant Accounting Policies (Details) $ in Billions | Sep. 30, 2018USD ($) |
Description of Business and Significant Accounting Policies | |
Assets under management | $ 79.5 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of revenue (Details) | 9 Months Ended |
Sep. 30, 2018 | |
Ivy Funds Class Y | |
Revenue Recognition | |
Maximum service plan fee (as a percent) | 0.25% |
Ivy Funds Class A | |
Revenue Recognition | |
Maximum distribution plan fee (as a percent) | 0.25% |
Ivy Funds Class C | |
Revenue Recognition | |
Maximum service plan fee (as a percent) | 0.25% |
Maximum distribution plan fee (as a percent) | 0.75% |
Ivy Funds Class E | |
Revenue Recognition | |
Maximum service plan fee (as a percent) | 0.25% |
Ivy Funds Class R | |
Revenue Recognition | |
Maximum service plan fee (as a percent) | 0.50% |
Maximum | Ivy Funds Class E | |
Revenue Recognition | |
Sales charge (as a percent) | 5.75% |
Revenue Recognition - Disaggr_2
Revenue Recognition - Disaggregation of revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue Recognition | ||||
Total Revenues | $ 295,118 | $ 289,447 | $ 888,071 | $ 862,668 |
Investment management fees | ||||
Revenue Recognition | ||||
Total Revenues | 129,302 | 134,149 | 393,385 | 395,463 |
Investment management fees - Funds | ||||
Revenue Recognition | ||||
Total Revenues | 123,764 | 128,078 | 376,193 | 376,563 |
Investment management fees - Institutional | ||||
Revenue Recognition | ||||
Total Revenues | 5,538 | 6,071 | 17,192 | 18,900 |
Underwriting and distribution fees | ||||
Revenue Recognition | ||||
Total Revenues | 140,308 | 128,892 | 416,222 | 386,499 |
Unaffiliated | ||||
Revenue Recognition | ||||
Total Revenues | 20,274 | 22,892 | 62,611 | 71,305 |
Unaffiliated Rule 12b-1 service and distribution fees | ||||
Revenue Recognition | ||||
Total Revenues | 19,707 | 22,322 | 60,734 | 69,191 |
Unaffiliated sales commissions on front-end load mutual fund and variable annuity sales | ||||
Revenue Recognition | ||||
Total Revenues | 441 | 353 | 1,418 | 1,118 |
Unaffiliated other revenues | ||||
Revenue Recognition | ||||
Total Revenues | 126 | 217 | 459 | 996 |
Broker-dealer | ||||
Revenue Recognition | ||||
Total Revenues | 120,034 | 106,000 | 353,611 | 315,194 |
Broker-dealer fee based asset allocation product revenue | ||||
Revenue Recognition | ||||
Total Revenues | 69,468 | 61,115 | 201,565 | 176,184 |
Broker-dealer Rule 12b-1 service and distribution fees | ||||
Revenue Recognition | ||||
Total Revenues | 18,106 | 19,026 | 54,591 | 56,544 |
Broker-dealer sales commissions on front-end load mutual fund and variable annuity sales | ||||
Revenue Recognition | ||||
Total Revenues | 13,651 | 12,941 | 41,900 | 41,796 |
Broker-dealer sales commissions on other products | ||||
Revenue Recognition | ||||
Total Revenues | 9,111 | 7,974 | 26,632 | 23,671 |
Broker-dealer other revenues | ||||
Revenue Recognition | ||||
Total Revenues | 9,698 | 4,944 | 28,923 | 16,999 |
Shareholder service fees | ||||
Revenue Recognition | ||||
Total Revenues | $ 25,508 | $ 26,406 | $ 78,464 | $ 80,706 |
Investment Securities - Investm
Investment Securities - Investment securities (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Available for sale securities: | ||
Available for sale securities | $ 219,147 | $ 265,198 |
Trading debt securities: | ||
Trading debt securities | 104,430 | 124,390 |
Equity securities: | ||
Equity securities | 202,327 | 215,716 |
Equity method securities: | ||
Total investment securities | 588,407 | 700,492 |
Certificates of deposit | ||
Available for sale securities: | ||
Available for sale securities | 5,002 | 12,999 |
Trading debt securities: | ||
Trading debt securities | 1,999 | |
Commercial paper | ||
Available for sale securities: | ||
Available for sale securities | 7,920 | 34,978 |
Trading debt securities: | ||
Trading debt securities | 1,981 | |
Corporate bonds | ||
Available for sale securities: | ||
Available for sale securities | 180,780 | 197,442 |
Trading debt securities: | ||
Trading debt securities | 58,545 | 55,414 |
U.S. treasury bills | ||
Available for sale securities: | ||
Available for sale securities | 25,445 | 19,779 |
Trading debt securities: | ||
Trading debt securities | 8,810 | 4,929 |
Fixed income securities: Mortgage-backed securities | ||
Trading debt securities: | ||
Trading debt securities | 8 | 10 |
Common Stock | ||
Equity securities: | ||
Equity securities | 8,088 | 116 |
Consolidated Sponsored Funds | ||
Trading debt securities: | ||
Trading debt securities | 35,086 | 62,038 |
Equity securities: | ||
Equity securities | 32,548 | 77,048 |
Sponsored funds | ||
Equity securities: | ||
Equity securities | 160,852 | 137,857 |
Equity method securities: | ||
Equity method securities | 62,503 | 95,188 |
Sponsored funds | Previous accounting guidance | ||
Equity method securities: | ||
Available for sale securities | 124,000 | |
Sponsored privately offered funds measured at net asset value | ||
Equity securities: | ||
Equity securities | $ 839 | $ 695 |
Investment Securities - Maturit
Investment Securities - Maturity (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Amortized Cost | ||
Within one year | $ 90,565 | |
After one year but within five years | 130,562 | |
Amortized Cost | 221,127 | $ 266,259 |
Fair value | ||
Within one year | 90,143 | |
After one year but within five years | 129,004 | |
Total fair value | 219,147 | $ 265,198 |
Fair value | ||
Within one year | 25,031 | |
After one year but within five years | 39,654 | |
After 10 years | 4,659 | |
Total fair value | $ 69,344 |
Investment Securities - Inves_2
Investment Securities - Investment securities and summary of the gains (losses) related to securities (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Available for sale securities: | ||
Amortized Cost | $ 221,127 | $ 266,259 |
Unrealized gains | 27 | 176 |
Unrealized losses | (2,007) | (1,237) |
Fair value | 219,147 | 265,198 |
Certificates of deposit | ||
Available for sale securities: | ||
Amortized Cost | 5,000 | 13,000 |
Unrealized gains | 2 | 1 |
Unrealized losses | (2) | |
Fair value | 5,002 | 12,999 |
Commercial paper | ||
Available for sale securities: | ||
Amortized Cost | 7,902 | 34,836 |
Unrealized gains | 18 | 142 |
Fair value | 7,920 | 34,978 |
Corporate bonds | ||
Available for sale securities: | ||
Amortized Cost | 182,276 | 198,404 |
Unrealized gains | 7 | 33 |
Unrealized losses | (1,503) | (995) |
Fair value | 180,780 | 197,442 |
U.S. treasury bills | ||
Available for sale securities: | ||
Amortized Cost | 25,949 | 20,019 |
Unrealized losses | (504) | (240) |
Fair value | $ 25,445 | $ 19,779 |
Investment Securities - Availab
Investment Securities - Available for sale sponsored funds with fair values below carrying values (Details) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018USD ($)security | Dec. 31, 2017USD ($)security | |
Fair value | ||
Less than 12 months | $ 61,602 | $ 215,186 |
12 months or longer | 131,771 | |
Total temporarily impaired securities | 193,373 | 215,186 |
Unrealized losses | ||
Less than 12 months | (309) | (1,237) |
12 months or longer | (1,698) | |
Total Unrealized losses on temporarily impaired securities | $ (2,007) | $ (1,237) |
Securities in an unrealized loss position | security | 46 | 53 |
Other-than-temporary impairment of available for sale securities | $ 0 | $ 0 |
Certificates of deposit | ||
Fair value | ||
Less than 12 months | 2,998 | |
Total temporarily impaired securities | 2,998 | |
Unrealized losses | ||
Less than 12 months | (2) | |
Total Unrealized losses on temporarily impaired securities | (2) | |
Corporate bonds | ||
Fair value | ||
Less than 12 months | 55,682 | 192,409 |
12 months or longer | 112,246 | |
Total temporarily impaired securities | 167,928 | 192,409 |
Unrealized losses | ||
Less than 12 months | (293) | (995) |
12 months or longer | (1,210) | |
Total Unrealized losses on temporarily impaired securities | (1,503) | (995) |
U.S. treasury bills | ||
Fair value | ||
Less than 12 months | 5,920 | 19,779 |
12 months or longer | 19,525 | |
Total temporarily impaired securities | 25,445 | 19,779 |
Unrealized losses | ||
Less than 12 months | (16) | (240) |
12 months or longer | (488) | |
Total Unrealized losses on temporarily impaired securities | $ (504) | $ (240) |
Investment Securities - Consoli
Investment Securities - Consolidated Sponsored and Sponsored Privately Offered Funds (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Investment Securities | ||
Cash | $ 270,478 | $ 207,829 |
Redeemable noncontrolling interests | (16,133) | (14,509) |
Consolidated Sponsored Funds | ||
Investment Securities | ||
Cash | 77,480 | 8,472 |
Investments | 67,634 | 139,086 |
Other assets | 2,661 | 1,588 |
Other liabilities | (1,125) | (1,040) |
Redeemable noncontrolling interests | (16,133) | (14,509) |
Net interest in consolidated sponsored funds | $ 130,517 | $ 133,597 |
Investment Securities - Fair va
Investment Securities - Fair value of investment securities (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Fair value of investments | ||
Cash equivalents | $ 160,843 | $ 156,849 |
Available for sale securities | 219,147 | 265,198 |
Trading debt securities | 104,430 | 124,390 |
Equity securities | 202,327 | 215,716 |
Total investment securities | 588,407 | 700,492 |
Money market funds | ||
Fair value of investments | ||
Cash equivalents | 112,289 | 145,785 |
Certificates of deposit | ||
Fair value of investments | ||
Available for sale securities | 5,002 | 12,999 |
Trading debt securities | 1,999 | |
Commercial paper | ||
Fair value of investments | ||
Cash equivalents | 48,554 | 11,064 |
Available for sale securities | 7,920 | 34,978 |
Trading debt securities | 1,981 | |
Corporate bonds | ||
Fair value of investments | ||
Available for sale securities | 180,780 | 197,442 |
Trading debt securities | 58,545 | 55,414 |
U.S. treasury bills | ||
Fair value of investments | ||
Available for sale securities | 25,445 | 19,779 |
Trading debt securities | 8,810 | 4,929 |
Fixed income securities: Mortgage-backed securities | ||
Fair value of investments | ||
Trading debt securities | 8 | 10 |
Common Stock | ||
Fair value of investments | ||
Equity securities | 8,088 | 116 |
Consolidated Sponsored Funds | ||
Fair value of investments | ||
Trading debt securities | 35,086 | 62,038 |
Equity securities | 32,548 | 77,048 |
Sponsored funds | ||
Fair value of investments | ||
Equity securities | 160,852 | 137,857 |
Equity method securities | 62,503 | 95,188 |
Sponsored privately offered funds measured at net asset value | ||
Fair value of investments | ||
Equity securities | 839 | 695 |
Level 1 | ||
Fair value of investments | ||
Cash equivalents | 112,289 | 145,785 |
Total investment securities | 263,952 | 310,209 |
Level 1 | Money market funds | ||
Fair value of investments | ||
Cash equivalents | 112,289 | 145,785 |
Level 1 | Common Stock | ||
Fair value of investments | ||
Equity securities | 8,049 | 116 |
Level 1 | Consolidated Sponsored Funds | ||
Fair value of investments | ||
Equity securities | 32,548 | 77,048 |
Level 1 | Sponsored funds | ||
Fair value of investments | ||
Equity securities | 160,852 | 137,857 |
Equity method securities | 62,503 | 95,188 |
Level 2 | ||
Fair value of investments | ||
Cash equivalents | 48,554 | 11,064 |
Total investment securities | 323,577 | 389,588 |
Level 2 | Certificates of deposit | ||
Fair value of investments | ||
Available for sale securities | 5,002 | 12,999 |
Trading debt securities | 1,999 | |
Level 2 | Commercial paper | ||
Fair value of investments | ||
Cash equivalents | 48,554 | 11,064 |
Available for sale securities | 7,920 | 34,978 |
Trading debt securities | 1,981 | |
Level 2 | Corporate bonds | ||
Fair value of investments | ||
Available for sale securities | 180,780 | 197,442 |
Trading debt securities | 58,545 | 55,414 |
Level 2 | U.S. treasury bills | ||
Fair value of investments | ||
Available for sale securities | 25,445 | 19,779 |
Trading debt securities | 8,810 | 4,929 |
Level 2 | Fixed income securities: Mortgage-backed securities | ||
Fair value of investments | ||
Trading debt securities | 8 | 10 |
Level 2 | Consolidated Sponsored Funds | ||
Fair value of investments | ||
Trading debt securities | 35,086 | 62,038 |
Level 3 | ||
Fair value of investments | ||
Total investment securities | 39 | |
Level 3 | Common Stock | ||
Fair value of investments | ||
Equity securities | 39 | |
Other Assets Not Held at Fair Value | ||
Fair value of investments | ||
Total investment securities | 839 | 695 |
Other Assets Not Held at Fair Value | Sponsored privately offered funds measured at net asset value | ||
Fair value of investments | ||
Equity securities | $ 839 | $ 695 |
Investment Securities - Inves_3
Investment Securities - Investment category (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Additions | $ 419 |
Valuation change | (63) |
Redemptions | (317) |
Level 3 assets at end of period | $ 39 |
Derivative Financial Instrume_3
Derivative Financial Instruments (Details) - Not designated as a hedge $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018USD ($)contract | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($)contract | Sep. 30, 2017USD ($) | Dec. 31, 2017USD ($)contract | |
Total return swap contracts | |||||
Derivative Financial Instruments | |||||
Number of contracts | contract | 5 | 5 | 6 | ||
Notional value | $ 198,400 | $ 198,400 | $ 213,900 | ||
Cash collateral with the counterparties | 6,400 | 6,400 | 9,700 | ||
Total return swap contracts | Investment and other income (loss) | |||||
Derivative Financial Instruments | |||||
Net gains (losses) recognized in income | (6,769) | $ (8,855) | (7,313) | $ (27,321) | |
Level 2 | Other current liabilities | |||||
Derivative Financial Instruments | |||||
Fair value - liabilities | $ 550 | $ 550 | $ 1,093 |
Goodwill and Identifiable Int_3
Goodwill and Identifiable Intangible Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Goodwill and identifiable intangible assets | ||
Goodwill | $ 106,970 | $ 106,970 |
Other | 200 | 200 |
Total identifiable intangible assets | 38,899 | 40,099 |
Total goodwill and identifiable intangible assets | 145,869 | 147,069 |
Mutual fund management advisory contracts | ||
Goodwill and identifiable intangible assets | ||
Mutual fund contracts | $ 38,699 | 38,699 |
Mutual fund management subadvisory contract | ||
Goodwill and identifiable intangible assets | ||
Mutual fund contracts | $ 1,200 |
Indebtedness (Details)
Indebtedness (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Indebtedness | ||
Long-term debt | $ 94,836 | $ 94,783 |
Senior 5.75% unsecured notes due, 2021 ("Series B Notes") | ||
Indebtedness | ||
Fair value of outstanding long-term indebtedness | 98,400 | |
Long-term debt | $ 94,800 |
Income Tax Uncertainties (Detai
Income Tax Uncertainties (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Income Tax Uncertainties | ||
Unrecognized tax benefits, including penalties and interest that if recognized would impact effective tax rate | $ 2.9 | $ 10.9 |
Unrecognized tax benefits, including penalties and interest, net of federal tax benefit that if recognized would affect effective tax rate | 2.5 | 8.9 |
Unrecognized tax benefits, reduced | 9.3 | |
Unrecognized tax benefits, net of federal benefit, reduced | 7.6 | |
Total expense of interest and penalties, net of federal benefit related to uncertain tax positions | (2.7) | |
Accrued interest and penalties related to uncertain tax positions | 0.8 | 4 |
Accrued interest and penalties related to uncertain tax positions, net of federal benefit | $ 0.7 | $ 3.5 |
Pension Plan and Postretireme_3
Pension Plan and Postretirement Benefits Other Than Pension (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Pension Benefits | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Final number of years of employee's compensation to determine the benefits payable | 10 years | |||
Employer contributions | $ 4,000 | |||
Components of net periodic benefit cost: | ||||
Service cost | $ 2,958 | $ 8,367 | ||
Interest cost | 1,497 | 1,522 | $ 4,490 | 4,780 |
Expected return on plan assets | (2,065) | (2,510) | (6,196) | (7,627) |
Actuarial loss | 6,552 | 6,552 | ||
Curtailment gain | (31,621) | (31,621) | ||
Total | (568) | (23,099) | $ (1,706) | (19,549) |
Other Postretirement Benefits | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Age of employees after which the plan does not provide benefits | 65 years | |||
Components of net periodic benefit cost: | ||||
Interest cost | 14 | 15 | $ 41 | 44 |
Actuarial gain amortization | (30) | (45) | (90) | (135) |
Prior service credit amortization | (1) | (1) | (2) | (3) |
Total | $ (17) | $ (31) | $ (51) | $ (94) |
Stockholders' Equity - Earnings
Stockholders' Equity - Earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 24, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 |
Components of basic and diluted earnings per share | |||||
Net income attributable to Waddell & Reed Financial, Inc. | $ 46,305 | $ 53,582 | $ 137,120 | $ 111,515 | |
Weighted average shares outstanding - basic and diluted | 79,595,000 | 83,476,000 | 81,372,000 | 83,719,000 | |
Earnings per share: | |||||
Earnings per share, basic and diluted (in dollars per share) | $ 0.58 | $ 0.64 | $ 1.69 | $ 1.33 | |
Dividends | |||||
Dividends accrued, per share (in dollars per share) | $ 0.25 | $ 0.75 | |||
Dividends to be paid | $ 19,700 | $ 19,700 | |||
Common stock repurchases | |||||
Shares repurchased in the open market or privately | 1,424,612 | 190,056 | 4,519,546 | 904,410 | |
Shares repurchased from employees to cover income tax withholdings | 225 | 56 | 630,159 | 239,410 |
Stockholders' Equity - Other co
Stockholders' Equity - Other comprehensive income (loss) activity (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
AOCI Attributable to Parent, Net of Tax | ||||
Balance at the beginning of the period | $ 872,884 | |||
Balance at the end of the period | $ 893,510 | 893,510 | ||
Accumulated Other Comprehensive Income (Loss) | ||||
AOCI Attributable to Parent, Net of Tax | ||||
Balance at the beginning of the period | (1,332) | $ (1,980) | 524 | $ (6,757) |
Amount reclassified to retained earnings for recently adopted ASUs | (848) | |||
Other comprehensive income (loss) before reclassification | 218 | 2,768 | (744) | 7,856 |
Amount reclassified from accumulated other comprehensive loss | 20 | (728) | (26) | (1,039) |
Net current period other comprehensive income (loss) | 238 | 2,040 | (1,618) | 6,817 |
Balance at the end of the period | (1,094) | 60 | (1,094) | 60 |
Unrealized gains (losses) on investment securities | ||||
AOCI Attributable to Parent, Net of Tax | ||||
Balance at the beginning of the period | (1,772) | (1,986) | 145 | (3,972) |
Amount reclassified to retained earnings for recently adopted ASUs | (955) | |||
Other comprehensive income (loss) before reclassification | 218 | 1,968 | (744) | 4,113 |
Amount reclassified from accumulated other comprehensive loss | 44 | (438) | 44 | (597) |
Net current period other comprehensive income (loss) | 262 | 1,530 | (1,655) | 3,516 |
Balance at the end of the period | (1,510) | (456) | (1,510) | (456) |
Change in valuation allowance for unrealized gains (losses) on investment securities | ||||
AOCI Attributable to Parent, Net of Tax | ||||
Balance at the beginning of the period | (540) | (3,388) | ||
Other comprehensive income (loss) before reclassification | 800 | 3,743 | ||
Amount reclassified from accumulated other comprehensive loss | (260) | (355) | ||
Net current period other comprehensive income (loss) | 540 | 3,388 | ||
Postretirement benefits unrealized gains (losses) | ||||
AOCI Attributable to Parent, Net of Tax | ||||
Balance at the beginning of the period | 440 | 546 | 379 | 603 |
Amount reclassified to retained earnings for recently adopted ASUs | 107 | |||
Amount reclassified from accumulated other comprehensive loss | (24) | (30) | (70) | (87) |
Net current period other comprehensive income (loss) | (24) | (30) | 37 | (87) |
Balance at the end of the period | $ 416 | $ 516 | $ 416 | $ 516 |
Stockholders' Equity - Reclassi
Stockholders' Equity - Reclassifications from accumulated other comprehensive income (loss) and included in net income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Reclassifications from accumulated other comprehensive income | ||||
Reclassifications included in net income: | ||||
Pre-tax | $ (27) | $ 744 | $ 1,329 | $ 1,090 |
Tax (expense) benefit | 7 | (16) | (455) | (51) |
Net of tax | (20) | 728 | 874 | 1,039 |
Sponsored funds investment gains | Investment and other income (loss) | Reclassifications from accumulated other comprehensive income | ||||
Reclassifications included in net income: | ||||
Pre-tax | 698 | 1,295 | 952 | |
Tax (expense) benefit | (260) | (340) | (355) | |
Net of tax | 438 | 955 | 597 | |
Losses on available for sale debt securities | Investment and other income (loss) | Reclassifications from accumulated other comprehensive income | ||||
Reclassifications included in net income: | ||||
Pre-tax | (58) | (58) | ||
Tax (expense) benefit | 14 | 14 | ||
Net of tax | (44) | (44) | ||
Change in valuation allowance for unrealized gains (losses) on investment securities | ||||
Reclassifications included in net income: | ||||
Net of tax | 260 | 355 | ||
Change in valuation allowance for unrealized gains (losses) on investment securities | Provision for income taxes | Reclassifications from accumulated other comprehensive income | ||||
Reclassifications included in net income: | ||||
Tax (expense) benefit | 260 | 355 | ||
Net of tax | 260 | 355 | ||
Postretirement benefits unrealized gains (losses) | ||||
Reclassifications included in net income: | ||||
Net of tax | 24 | 30 | 70 | 87 |
Postretirement benefits unrealized gains (losses) | Underwriting and distribution expense and Compensation and related costs | Reclassifications from accumulated other comprehensive income | ||||
Reclassifications included in net income: | ||||
Pre-tax | 31 | 46 | 92 | 138 |
Tax (expense) benefit | (7) | (16) | (129) | (51) |
Net of tax | $ 24 | $ 30 | $ (37) | $ 87 |
Contingencies (Details)
Contingencies (Details) - Case No I6CV02338 Div. 4 $ in Millions | Feb. 14, 2018USD ($) |
Shareholder Derivative Litigation | |
Settlement amount | $ 19.9 |
Attorney’s fees plus nominal costs associated with notice to shareholders | $ 6.1 |