UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ____________
Commission file number 001-13913
WADDELL & REED FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0261715
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
6300 LAMAR AVENUE
OVERLAND PARK, KANSAS
66202
(Address of principal executive offices)
(Zip Code)
(913) 236-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------- -------
Shares outstanding of each of the registrant's classes of common stock as
of the last practicable date:
Class Outstanding as of July 20, 2001*
------------------------------------ --------------------------------
Class A Common stock, $.01 par value 79,821,763
* The number of common shares reflects the combination of our two classes
of common stock as a result of the conversion of our shares of Class B common
stock into shares of Class A common stock on a one-for-one basis at the close of
business on April 30, 2001. As of May 1, 2001, all Class A common stock trades
on the New York Stock Exchange under the ticker symbol "WDR."
WADDELL & REED FINANCIAL, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 2001
INDEX
PAGE NO.
-------
Part I. Financial Information
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets at
June 30, 2001 and December 31, 2000 3
Consolidated Statements of Operations
for the three months and six months ended
June 30, 2001 and June 30, 2000 4
Consolidated Statements of Comprehensive
Income for the three months and six months ended
June 30, 2001 and June 30, 2000 5
Consolidated Statements of Changes in Stockholders'
Equity for the six months ended June 30, 2001 6
Consolidated Statements of Cash Flows for the six months
ended June 30, 2001 and June 30, 2000 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WADDELL & REED FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
======================================================================================================
June 30, December 31,
2001 2000
(unaudited)
ASSETS
- ------------------------------------------------------------------------------------------------------
Assets:
Cash and cash equivalents $ 64,444 68,082
Investment securities, available-for-sale 56,291 57,639
Receivables:
Funds and separate accounts 12,793 13,963
Customers and other 20,778 21,477
Deferred income taxes 39 45
Prepaid expenses and other current assets 5,918 4,868
- ------------------------------------------------------------------------------------------------------
Total current assets 160,263 166,074
Property and equipment, net 32,312 55,453
Deferred sales commissions, net 12,040 10,108
Goodwill (net of accumulated amortization of $35,321 and $31,995) 177,008 180,173
Deferred income taxes 3,325 1,026
Other assets 12,081 9,352
- ------------------------------------------------------------------------------------------------------
Total assets $ 397,029 422,186
======================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------
Liabilities:
Current liabilities:
Accounts payable $ 26,733 41,558
Accrued sales force compensation 13,541 18,741
Accrued other compensation 8,619 11,774
Short term notes payable 33,055 0
Income taxes payable 16,970 126
Accrued purchase price liability for acquired subsidiaries 0 13,110
Other current liabilities 3,151 8,429
- ------------------------------------------------------------------------------------------------------
Total current liabilities 102,069 93,738
Long-term debt 204,998 175,320
Accrued pensions and post-retirement costs 12,921 11,295
Other liabilities 1,361 223
- ------------------------------------------------------------------------------------------------------
Total liabilities 321,349 280,576
- ------------------------------------------------------------------------------------------------------
Stockholders' equity :
Common stock (See table below) 997 997
Additional paid-in capital 251,031 251,990
Retained earnings 253,861 206,589
Deferred compensation (10,034) (10,950)
Treasury stock (See table below) (417,641) (305,008)
Accumulated other comprehensive income (2,534) (2,008)
- ------------------------------------------------------------------------------------------------------
Total stockholders' equity 75,680 141,610
- ------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 397,029 422,186
======================================================================================================
Common stock ($0.01 par value)
2001 2000
---- ----
Authorized ............................ 250,000,000 250,000,000
Issued ................................ 99,700,761 99,700,761
Outstanding ........................... 79,795,180 83,410,519
Treasury Stock ........................ 19,905,581 16,290,242
See accompanying notes to unaudited consolidated financial statements.
3
WADDELL & REED FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Unaudited (in thousands, except for per share data)
=================================================================== =====================
For the three months For the six months
ended June 30, ended June 30,
---------------------- ---------------------
2001 2000 2001 2000
- ------------------------------------------------------------------- ---------------------
Revenues:
Investment management fees $ 54,779 $ 62,301 $110,982 $126,106
Underwriting and distribution fees 58,346 55,891 107,213 101,372
Shareholder service fees 14,786 13,604 29,158 24,898
Investment and other revenue 1,463 1,979 3,171 6,141
- ------------------------------------------------------------------- ---------------------
Total revenues 129,374 133,775 250,524 258,517
- ------------------------------------------------------------------- ---------------------
Expenses:
Underwriting and distribution 50,752 49,914 94,472 91,310
Compensation and related costs 14,126 14,423 28,936 28,424
General and administrative 6,752 7,441 12,771 14,053
Depreciation 1,296 885 2,536 1,516
Interest expense 4,862 4,268 9,260 6,767
Amortization of goodwill 1,674 1,523 3,326 2,452
- ------------------------------------------------------------------- ---------------------
Total expenses 79,462 78,454 151,301 144,522
- ------------------------------------------------------------------- ---------------------
Income before provision for income taxes 49,912 55,321 99,223 113,995
Provision for income taxes 18,814 21,611 37,529 44,159
- ------------------------------------------------------------------- ---------------------
Net income $ 31,098 $ 33,710 $ 61,694 $ 69,836
=================================================================== =====================
Net income per share:
- Basic $ 0.39 $ 0.41 $ 0.76 $ 0.84
- Diluted $ 0.38 $ 0.39 $ 0.73 $ 0.81
=================================================================== =====================
Weighted average shares outstanding:
- Basic 79,761 82,129 80,968 83,428
- Diluted 82,801 86,218 84,171 86,718
=================================================================== =====================
Dividends declared per common share $ 0.0884 $ 0.0884 $ 0.1768 $ 0.1768
See accompanying notes to unaudited consolidated financial statements.
4
WADDELL & REED FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Unaudited (in thousands)
===================================================================================================================================
For the three months For the six months
ended June 30, ended June 30,
---------------------- -----------------------
2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 31,098 $ 33,710 $ 61,694 $ 69,836
Other comprehensive income:
Net unrealized appreciation (depreciation) of investments during
the period, net of income taxes of $432, $417, $(308), and $1,104 702 683 (505) 1,775
Reclassification adjustment for amounts included in net income, net of
income taxes of $(7), $(5), $(12), and $(822) (12) (8) (21) (1,314)
- ------------------------------------------------------------------------------------------------------- -----------------------
Comprehensive Income $ 31,788 $ 34,385 $ 61,168 $ 70,297
===================================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
5
WADDELL & REED FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the Six Months Ended June 30, 2001
Unaudited (in thousands)
==================================================================================================================================
Accumulated Total
Additional other stock-
Common stock paid-in Retained Deferred Treasury Comprehensive holders'
Shares Amount capital earnings Compensation Stock Income equity
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 99,701 $ 997 251,990 206,589 (10,950) (305,008) (2,008) 141,610
Net income - - - 61,694 - - - 61,694
Recognition of deferred compensation - - 212 - 916 - - 1,128
Dividends paid - - - (14,422) - - - (14,422)
Exercise of stock options, net - - (3,673) - - 9,415 - 5,742
Tax benefit from exercise of options - - 2,502 - - - - 2,502
Treasury stock repurchases - - - - - (122,048) - (122,048)
Unrealized loss on investment
securities - - - - - - (526) (526)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2001 99,701 $ 997 251,031 253,861 (10,034) (417,641) (2,534) 75,680
==================================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
6
WADDELL & REED FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Unaudited (in thousands)
========================================================================================================
For the six months ended June 30,
---------------------------------
2001 2000
- --------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 61,694 $ 69,836
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,908 4,005
Gain on sale of investments (31) (2,096)
Recognition of deferred compensation 1,128 719
(Gain)/Loss on sale of fixed assets 325 (17)
Capital gains and dividends reinvested (53) (77)
Deferred income taxes (1,972) 5,773
Changes in assets and liabilities (net of acquisition):
Receivables from funds and separate accounts 1,170 (5,122)
Other receivables 699 (2,826)
Other assets (5,712) (3,737)
Accounts payable (14,825) 3,098
Other liabilities 13,762 8,994
- --------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 62,093 78,550
- --------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to investment securities (1,060) (7,756)
Proceeds from sale of investment securities 952 37,761
Proceeds from maturity of investment securities 618 2,185
Proceeds from sale of real estate 28,233 0
Additions of property and equipment (6,670) (15,464)
Acquisition of subsidiaries (net of cash acquired) 0 (60,185)
Additional purchase price payments for subsidiaries (13,269) 0
Other 28 0
- --------------------------------------------------------------------------------------------------------
Net cash provided by/(used) in investing activities 8,832 (43,459)
- --------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings 56,165 90,000
Cash dividends (14,422) (14,880)
Purchase of treasury stock (122,048) (96,177)
Exercise of stock options 5,742 5,655
- --------------------------------------------------------------------------------------------------------
Net cash used in financing activities (74,563) (15,402)
- --------------------------------------------------------------------------------------------------------
Net increase/(decrease) in cash and cash equivalents (3,638) 19,689
Cash and cash equivalents at beginning of period 68,082 60,977
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 64,444 $ 80,666
========================================================================================================
See accompanying notes to unaudited consolidated financial statements.
7
WADDELL & REED FINANCIAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
WADDELL & REED FINANCIAL, INC. AND SUBSIDIARIES
Waddell & Reed Financial, Inc. and subsidiaries (hereinafter referred to as
the "Company", "we", "us", or "our") derive our revenues primarily from
investment management, distribution, administration, and related services
provided to the Waddell & Reed Advisors Funds ("Advisors Funds"), W&R Funds, W&R
Target Funds ("Target Funds") and institutional accounts in the United States.
BASIS OF PRESENTATION
In our opinion, the accompanying unaudited balance sheets and related
interim statements of income, stockholders' equity, cash flows, and
comprehensive income reflect all adjustments consisting only of normal recurring
items necessary for their fair presentation in conformity with accounting
principles generally accepted in the United States. Preparing financial
statements requires us to make estimates and assumptions that affect the
reported amount of assets, liabilities, revenues and expenses. Actual results
may differ from these estimates. Interim results are not necessarily indicative
of results for a full year. The information in this Form 10-Q should be read in
conjunction with Management's Discussion and Analysis and our audited financial
statements and notes thereto included in our December 31, 2000 Form 10-K
included in our Annual Report.
EARNINGS PER SHARE
Basic earnings per share is computed based on the weighted average number
of common shares outstanding for the periods ended June 30, 2001 and 2000,
respectively. Diluted earnings per share for these periods are computed based on
the weighted average number of common shares outstanding plus the effect of the
dilutive impact of stock options.
The components of basic and diluted earnings per share were as follows (in
thousands except per share data):
Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
------- ------- ------- -------
Net income....................................................... $31,098 $33,710 $61,694 $69,836
======= ======= ======= =======
Weighted average shares outstanding-basic........................ 79,761 82,129 80,968 83,428
Incremental shares from assumed conversions...................... 3,040 4,089 3,203 3,290
------- ------- ------- -------
Weighted average shares outstanding-diluted...................... 82,801 86,218 84,171 86,718
======= ======= ======= =======
Earnings per share:
Basic......................................................... $ 0.39 $ 0.41 $ 0.76 $ 0.84
Diluted....................................................... $ 0.38 $ 0.39 $ 0.73 $ 0.81
8
2. STOCKHOLDERS' EQUITY
For the six month period ended June 30, 2001, we repurchased 4.0 million
shares of common stock for $30.50 per share at a total cost, including
commissions, of $122.0 million.
On April 25, 2001, we declared a dividend payable on August 1, 2001 in the
amount of $.0884 per share to shareholders of record as of July 11, 2001. The
total dividend to be paid on August 1, 2001 is $7,053,894.
On April 25, 2001, our stockholders approved an Agreement and Plan of
Merger by and between the Company and WDR Sub, Inc., one of the Company's
wholly-owned subsidiaries, with the Company to remain as the surviving
corporation. The merger effected a combination of our Class A and Class B common
stock on a one-for-one basis. Effective as of the end of business on April 30,
2001, each share of our Class B common stock was converted into one share of
Class A common stock and the number of Class A authorized shares increased from
150,000,000 to 250,000,000 to account for the elimination of the 100,000,000
authorized Class B shares. We terminated the Class B common stock registration
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
it is no longer listed or traded on the New York Stock Exchange (the "NYSE").
Our Class A common stock will continue to be registered under the Exchange Act
and will continue to be listed and traded on the NYSE under the symbol "WDR."
The financial statements reflect the combination of Class A and Class B common
stock retroactively.
3. DEBT
In January 2001, we issued $200.0 million in principal amount 7.5% senior
notes due 2006 for net proceeds of $197.6 million (net of discounts, commissions
and expenses) to repay amounts borrowed under the money market loan program and
for general corporate purposes. Our 2001 second quarter overall weighted average
interest rate was 7.6% compared to 7.4% for the same period in the prior year.
During the quarter, we had net repayments of $40.9 million, an increase of $5.0
million from the same period in the prior year. For the six month period ended
June 30, 2001, the overall weighted average interest rate was 7.8% compared to
7.3% for the first six months of 2000. During the first half of 2001, we had net
borrowings of $56.2 million compared to $90.0 million from the same period in
2000.
4. RECENT ACCOUNTING DEVELOPMENTS
In July 2001, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 141 "BUSINESS COMBINATIONS"
("SFAS 141") and Statement of Financial Accounting Standards No. 142 "GOODWILL
AND OTHER INTANGIBLE ASSETS" ("SFAS 142"). SFAS 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001 as well as all purchase method business combinations completed after
June 30, 2001. SFAS 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually.
SFAS 141 is effective immediately, except with regard to business
combinations initiated prior to July 1, 2001 and SFAS 142 is effective January
1, 2002. Furthermore, any goodwill and intangible assets determined to have
indefinite useful lives that are acquired in a purchase business combination
completed after June 30, 2001 will not be amortized. Goodwill and intangible
assets
9
acquired in business combinations completed before July 1, 2001 will continue to
be amortized until the adoption of SFAS 142.
SFAS 141 will require upon adoption of SFAS 142 that goodwill acquired in a
prior purchase business combination be evaluated and any necessary
reclassifications be made in order to conform to the new criteria in SFAS 141
for recognition apart from goodwill. Any impairment loss will be measured as of
the date of the adoption and recognized as a cumulative effect of a change in
accounting principles in the first interim period. We do not expect that the
adoption of these statements will result in any impairment of goodwill or
intangible assets at this time.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CERTAIN STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, INCLUDING STATEMENTS REGARDING OUR EXPECTATIONS, HOPES,
BELIEFS, INTENTIONS OR STRATEGIES REGARDING THE FUTURE. ALL STATEMENTS, OTHER
THAN STATEMENTS OF HISTORICAL FACT INCLUDED IN THIS FORM 10-Q REGARDING OUR
FINANCIAL POSITION, BUSINESS STRATEGY AND OTHER PLANS AND OBJECTIVES FOR FUTURE
OPERATIONS ARE FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING STATEMENTS
INCLUDED IN THIS FORM 10-Q ARE BASED ON INFORMATION AVAILABLE TO US ON THE DATE
HEREOF, AND WE ASSUME NO OBLIGATION TO UPDATE SUCH FORWARD-LOOKING STATEMENTS,
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. ALTHOUGH WE
BELIEVE THAT THE ASSUMPTIONS AND EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE REASONABLE, WE CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL
PROVE TO HAVE BEEN CORRECT OR THAT WE WILL TAKE ANY ACTIONS THAT MAY PRESENTLY
BE PLANNED AND NEITHER US NOR ANY OTHER PERSON WILL BE RESPONSIBLE FOR THE
ACCURACY OR COMPLETENESS OF ANY SUCH FORWARD-LOOKING STATEMENTS. CERTAIN
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM OUR
EXPECTATIONS ARE DISCLOSED IN THE "RISK FACTORS" SECTION OF OUR FORM 10-K ANNUAL
REPORT, WHICH INCLUDE, WITHOUT LIMITATION, THE ADVERSE EFFECT FROM A DECLINE IN
SECURITIES MARKETS OR IF OUR PRODUCTS' PERFORMANCE DECLINES, FAILURE TO RENEW
INVESTMENT MANAGEMENT AGREEMENTS, ADVERSE RESULTS OF LITIGATION, COMPETITION,
CHANGES IN GOVERNMENT REGULATION, AVAILABILITY AND TERMS OF CAPITAL, ACQUISITION
STRATEGY AND OTHER RISKS AS SET OUT IN THE REPORTS FILED BY US WITH THE
SECURITIES AND EXCHANGE COMMISSION. SHOULD ONE OR MORE OF THESE RISKS
MATERIALIZE OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE FORECASTED OR EXPECTED. ALL SUBSEQUENT
WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO US, OR PERSONS ACTING
ON OUR BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY SUCH FACTORS.
THE INFORMATION CONTAINED IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH
THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN THIS FORM
10-Q AND THE AUDITED FINANCIAL STATEMENTS AND NOTES THERETO IN OUR ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000.
OVERVIEW
We derive our revenues from providing investment management, distribution
and administrative services primarily to the Advisors Funds, W&R Funds and
Target Funds, as well as to institutional and separate accounts. Investment
management fees, our most substantial source of revenues, are based on the
amount of average assets under management and the management fee rates charged.
10
Sales levels, financial market conditions, redemptions and the composition of
assets affect these fees. Underwriting and distribution revenues consist of
sales charges and commissions derived from the sale of investment and insurance
products and distribution fees. The products sold have various sales charge
structures and the revenues received from product sales vary based on the type
and amount sold. Rule 12b-1 distribution and service fees earned for
distributing shares of certain mutual fund share classes are based upon a
percentage of assets and fluctuate based on financial market conditions, sales,
and redemptions. Shareholder service fees include transfer agency fees,
custodian fees for retirement plan accounts and mutual fund accounting fees.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2001 AS COMPARED TO
THREE MONTHS ENDED JUNE 30, 2000
Second quarter 2001 net income was $31.1 million or $0.38 per share on
a diluted basis, compared with net income of $33.7 million or $0.39 per share
for the prior year's second quarter. Net income per share decreased 2.6% quarter
over quarter. Operating revenues, excluding investment and other income, for the
second quarter of 2001, were $127.9 million, down 2.9% over last year's second
quarter.
Management fee revenues were $54.8 million for the second quarter of
2001, a decrease of $7.5 million or 12% from 2000's second quarter. Mutual fund
management fees decreased by $7.1 million or 13% quarter over quarter, in line
with the 13% decrease in average mutual fund assets as market conditions
worsened. The management fee rate for mutual funds declined to 66.9 basis points
in 2001's second quarter from 67.4 basis points for 2000's period. The decline
in equity markets caused equity mutual funds, which typically have a higher
management fee rates, to comprise a slightly smaller percentage of total mutual
fund assets under management when compared with the prior year. The retail
redemption rate (excluding money market funds) rose to 8.1% for the second
quarter of 2001 from 6.3% for the same period last year. Almost half of the
increase in the redemption rate was attributable to lower asset balances (the
denominator in the ratio) as equity markets declined.
Management fee revenues from institutional and separate accounts
declined by $0.4 million, or 6.4%. Average institutional and separate account
assets under management declined by 16%. The average management fee rate for
institutional and separate accounts improved to 49.3 basis points from 44.3
basis points as new business with higher fee rates offset lost business with
substantially lower rates.
Underwriting and distribution fee revenues were $58.3 million for the
second quarter of 2001, a 4.4% increase from the previous year's second quarter.
Lower sales volume from The Legend Group ("Legend"), acquired in March 2000,
reduced underwriting and distribution fee revenues by $2.9 million during the
second quarter of 2001. Excluding Legend's impact these revenues increased by
$5.3 million, or 12%, driven primarily by the 28% increase in front-load
investment product sales.
Revenues from front-load investment products, consisting primarily of
Class A shares and variable annuities, increased $4.6 million or 14% while sales
of these products increased 28%. Revenues increased at a much lower rate than
that of the related sales due to significantly lower commission rates received
on variable annuity exchanges. Overall commission rates on variable annuity
sales declined from 7.7% to 5.4%. Also, additional asset-based compensation on
variable annuities was $0.8 million lower than last year due to the previously
announced court order preventing us from collecting fees on pre-2000 assets
underwritten by United Investors Life Insurance Company ("UILIC").
11
The increase in variable annuity exchanges resulted primarily from our
clients exchanging their UILIC policies into Nationwide Financial Services, Inc.
("Nationwide") policies offering more attractive features and service following
UILIC's termination of its principal underwriting agreement with us. While these
exchanges are beneficial to our clients individually, at the corporate level,
they are unproductive in that they divert the efforts of our advisors away from
selling new products and thus they do not increase our assets under management.
Since these exchanges are much less profitable over the long-term, advisor
compensation is structured to discourage the activity. Despite this
disincentive, the volume is a direct result of having more competitive
Nationwide variable products available to our advisors for their use in
providing the best service possible to our clients.
Revenues from deferred-load Class B and Class C shares declined $0.2
million or 4.5% primarily due to an 8.2% decline in related assets under
management, somewhat offset by higher contingent deferred sales charges. The
remaining increase of $0.9 million came from greater sales growth of insurance
products and financial plans.
Investment Product Sales ($ in millions; excludes money market fund sales,
Legend sales and sales at net asset value)
2Q01 2Q00 % CHANGE
------- ------- --------
Front-load (Class A) $ 338.1 $ 432.9 -21.9
W&R Target funds (variable products) 137.8 165.2 -16.6
Variable annuity exchanges 290.9 0.0 N/A
-------- --------
Front-load product total 766.8 598.1 28.2
-------- --------
Back-load (Class B) 63.7 102.0 -37.5
Level-load (Class C) 31.7 63.8 -50.3
-------- --------
Deferred-load product total 95.4 165.8 -42.5
-------- --------
Total retail product sales 862.2 763.9 12.9
Institutional and separate accounts 366.9 265.6 38.1
-------- --------
Total investment product sales $1,229.1 $1,029.5 19.4
======== ========
Underwriting and distribution expenses, consisting of direct costs and
indirect costs, increased $0.8 million or 1.7% in the second quarter of 2001.
Legend contributed $6.7 million to this quarter's underwriting and distribution
expenses, compared to $8.7 million in last year's second quarter, a decline of
$2.0 million, in correlation to sales volume. The increase, after excluding
Legend's contribution, was 6.9%. This provided for a distribution margin of
11.9% compared with 7.8% last year's second quarter. Including Legend, the
distribution margin was 13.0% compared with 10.7% for last year's second
quarter. Expenses rose less than their corresponding revenues primarily as a
result of the change in sales mix towards variable annuity exchanges, which have
a reduced compensation structure.
Sales force productivity, as measured by retail investment product
sales per advisor, decreased less than 1% from $300 thousand in the second
quarter of 2000 to $298 thousand in the second quarter of 2001. Second quarter
sales productivity for financial advisors with two years or more of tenure
increased by 6.6% from $425 thousand in the second quarter of 2000 to $453
thousand in the second quarter of 2001. The number of financial advisors was
2,950, up 396 or 16% from last year's second quarter.
12
Shareholder service fees from transfer agency, custodian, and
accounting services were $14.8 million for the second quarter of 2001, up 8.7%
from last year's second quarter. Legend's custodial service fee revenues, which
are based on a percentage of their custodial assets, contributed $1.5 million in
the second quarter of 2001, compared to $1.7 million in the second quarter of
2000, a decline of $0.2 million. Excluding Legend's impact, service fee revenues
were $13.2 million, or 12% higher than last year's second quarter. The increase
was due primarily to the 191 thousand, or 10% increase in the average number of
customer accounts. The number of shareholder accounts was 2.07 million at June
30, 2001, compared with 1.88 million at June 30, 2000.
Compensation and related costs decreased $0.3 million or 2.1% from last
year's second quarter. Base salaries increased $1.3 million due largely to last
year's personnel increases; however, this was more than offset by lower
incentive based compensation and bonuses. General and administrative expenses
decreased $0.7 million or 9.2% in the second quarter of 2001 when compared with
last year's second quarter. Higher costs for home office lease expense were more
than offset by cost containment in other discretionary overhead items such as
mutual fund shareholder expenses, shareholder communications and personnel
recruiting.
Interest and other income declined from $2.0 million for last year's
second quarter to $1.5 million for the same period this year primarily due to
lower average amounts invested in commercial paper and lower short term rates.
The average amount invested in commercial paper for second quarter of 2001 was
$38.0 million at an average rate of 4.3% compared to $59.1 million at 6.7% last
year. Interest expense increased from $4.3 million for last year's second
quarter to $4.9 million for the same period this year as the average outstanding
balance and average rate increased. The average balance outstanding, including
both short and long term debt, was $257.0 million and $217.1 million for the
second quarters ended 2001 and 2000, respectively. The average rates for these
periods were 7.6% and 7.4%, respectively. While short term rates have declined,
in January 2001 we issued $200.0 million par of senior notes at 7.5%, issued at
a discount to yield 7.7%. The purpose of this issuance was to repay amounts
borrowed under short term arrangements and for general corporate purposes.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2001 AS COMPARED TO SIX MONTHS
ENDED JUNE 30, 2000
For the six months ended June 30, 2001, net income was $61.7 million or
$0.73 per share on a diluted basis, compared with net income of $69.8 million or
$0.81 per share for the same period in 2000. Net income per share on a diluted
basis decreased 9.9% year over year. Operating revenues, excluding investment
and other income, for the six months ended June 30, 2001 were $247.4 million,
down 2.0% over the same period last year.
Management fee revenues were $111.0 million for the six months ended
June 30, 2001, a decrease of $15.1 million or 12% over the same period last
year. These decreases in management fee revenues came from both mutual fund and
institutional business. Mutual fund management fees decreased $13.7 million or
12% year over year, while average mutual fund assets under management decreased
by 11%. The average mutual fund management fee rate fell to 66.9 basis points
for the first six months of 2001, from 67.7 basis points for the same period
last year. The decline in equity markets caused equity mutual funds, which
typically have a higher management fee rates, to comprise a slightly smaller
percentage of total mutual fund assets under management
13
when compared with the prior year. The retail redemption rates (excluding money
market funds) for the first six months of 2001 was 8.4%, compared with 7.0% for
the same period in 2000.
Management fee revenues from institutional and separately managed
accounts decreased by 11%, to $12.0 million at June 30, 2001 from $13.5 million
for the same period last year. Included in 2000 were performance fees of $0.8
million related to one of our separately managed accounts. Excluding these
performance fees, the average management fee rate for institutional and
separately managed accounts improved to 48.5 basis points from 44.1 basis points
as new business with higher fee rates offset loss business with substantially
lower rates.
Underwriting and distribution fee revenues were $107.2 million for the
first six months of 2001, a 6% increase from the same period last year. Legend
contributed $16.8 million to the current year's underwriting and distribution
fee revenues, compared to $11.2 million for the same period in 2000. Excluding
Legend's contribution, underwriting and distribution fee revenues were basically
unchanged with last year. Revenues from front-load investment products were also
flat compared to last year, while related sales were up 10%. Revenues did not
increase in correlation to sales due to lower commission rates received on these
sales, namely variable annuities. Overall commission rates on variable annuity
sales declined from 7.7% to 5.9%. Additionally, asset-based compensation on
variable annuities was $0.7 million lower than last year due to the previously
announced court order preventing us from collecting fees on pre-2000 assets
underwritten by UILIC.
Investment Product Sales ($ in millions; excludes money market fund sales,
Legend sales and sales at net asset value)
YTD YTD
2001 2000 % CHANGE
------- ------- --------
Front-load (Class A) $ 732.1 $ 889.1 -17.7
W&R Target funds (variable products) 276.3 320.6 -13.8
Variable annuity exchanges 325.4 0.0 N/A
-------- --------
Front-load product total 1,333.8 1,209.7 10.3
-------- --------
Back-load (Class B) 135.7 213.2 -36.4
Level-load (Class C) 63.3 161.7 -60.9
-------- --------
Deferred-load product total 199.0 374.9 -46.9
-------- --------
Total retail product sales 1,532.8 1,584.6 -3.3
Institutional and separate accounts 722.1 583.2 23.8
-------- --------
Total investment product sales $2,254.9 $2,167.8 4.0
======== ========
Underwriting and distribution expenses, consisting of direct costs and
indirect costs, increased $3.2 million or 3.5% in the first six months of 2001.
Legend's operations contributed $4.9 million to the underwriting and
distribution expenses increase. Excluding Legend's contribution, underwriting
and distribution expenses decreased $1.7 million or 2.1%. The change in expenses
did not correlate to the change in revenues primarily as a result of the change
in sales mix towards variable annuity exchanges, which have a reduced
compensation structure.
Sales force productivity, as measured by retail investment product
sales per advisor, decreased 14% from $622 thousand in the six months ended June
30, 2000 to $537 thousand for the same period in 2001. For the six month period
ended June 30, sales productivity for financial advisors with two years or more
of tenure decreased by 12% from $881 thousand for the six months ended June 30,
2000 to $773 thousand for the six months ended June 30, 2001.
14
Shareholder service fees from transfer agency, custodian, and
accounting services were $29.2 million for the six months ended June 30, 2001,
up 17% from the same period last year. Legend contributed $3.0 million to
shareholder service fee revenues in the first six months of 2001, compared to
$1.7 million for last year's same period. Legend was acquired on March 31st of
2000 and therefore only impacted last year's second quarter. Excluding Legend's
contribution, the increase was 13%. The increase was due primarily to the 190
thousand increase in the average number of customer accounts, representing a 10%
increase over the previous year.
Compensation and related costs increased $0.5 million in the first six
months of 2001, a 2% increase over the same period last year. Compensation
expense of Legend, which did not effect last year's first quarter, increased by
$0.7 million. Excluding Legend, compensation expense declined $0.2 million or
0.8%. Salaries increased $2.4 million or 15% due to a 10% increase in average
number of personnel coupled with normal salary increase. However, this was
offset by lower incentive based compensation and bonuses.
General and administrative expenses for this year's six months were
$1.3 million or 9.1% lower when compared with the same period last year.
Legend's operations contributed an increase of $0.7 million to overhead
expenses. Reduction in non-Legend general and administrative expenses include a
greater portion of information systems support being dedicated to underwriting
and distribution efforts during 2001, the costs of which are reflected in
underwriting and distribution expense. Also, costs incurred in the first half of
last year associated with the restructuring and renaming of our fund families
and adding additional share classes were not incurred in 2001. Finally, cost
containment measures in other discretionary overhead items such as mutual fund
shareholder expenses, shareholder communications and personnel recruiting
contributed to the decline in these expenses.
Interest and other income declined $6.1 million for this year's six
months to $3.2 million for the same period this year primarily due a $2.1
million realized gain from sale of securities during the first quarter of 2000
to partially finance the acquisition of Legend. A secondary reason is
attributable to lower average amounts invested in commercial paper and lower
short term rates. The average amount invested in commercial paper for the first
six months of 2001 was $44.5 million at an average rate of 5.4% compared to
$58.7 million at 6.2% last year. Interest expense increased from $6.8 million
for last year's six months to $9.3 million for the same period this year as
average outstanding debt and interestrates increased. The average balance
outstanding, including both short and long term debt, was $239.7 million and
$183.8 million for the six months ended 2001 and 2000, respectively. Average
interest rates for these periods were 7.8% and 7.3%, respectively. While short
term rates have declined, in January 2001 we issued $200.0 million par of senior
notes at 7.5%, issued at a discount to yield 7.7%. The purpose of this issuance
was to repay amounts borrowed under short term arrangements and for general
corporate purposes.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and liquid marketable securities were $120.7
million at June 30, 2001, a decrease of $5.0 million from December 31, 2000.
Cash and cash equivalents included reserves of $11.4 million and $21.9 million
for the benefit of customers in compliance with securities regulations at June
30, 2001 and December 31, 2000, respectively. Liquid assets, which
15
consist of cash and cash equivalents, available-for-sale investments and current
receivables decreased to $154.3 million at June 30, 2001 from $161.2 million at
December 31, 2000.
Cash flow provided from operations was $62.0 million and $78.6 million
for the first half of 2001 and 2000, respectively. The primary reasons that cash
flow from operations were lower than the same period last year were a $14.8
million reduction in accounts payable instead of a $3.1 million increase and
lower net income. Larger changes in accounts payable were realized due to the
timing of payments. Cash flow provided from investing activities was $8.8
million compared with net cash used of $43.5 million for the same period in the
prior year. Cash flow from investing activities in the first six months of 2001
included net proceeds of $28.2 million related to the sale of our two home
office buildings, which were subsequently leased back for a period of fifteen
years. A gain on this transaction of $1.3 million will be amortized over the
operating lease term. Proceeds from this sale were used to pay down short-term
borrowings, fund stock repurchases, and for general corporate purposes. In the
first half of 2000, we acquired Legend for $61.1 million, which was partially
funded by the sale of $37.8 million of investment securities. In the first half
of 2001, additional contingent payments of $13.3 million were made to previous
owners of acquired companies for attaining specified earnings before interest,
taxes, depreciation, and amortization ("EBITDA") levels as stipulated in the
purchase agreements. Cash flow used in financing activities during the first
half of 2001 was $74.6 million, an increase of $59.2 million from the same
period last year. The increase was principally attributable to larger
repurchases of our common stock in the current year.
We have a $220 million 364-Day revolving credit facility available to
us at an interest rate of LIBOR plus 0.425%. This facility is expandable to $330
million with a syndicate of eight banks, whereby syndicates could, at their
option upon our request, increase the loan by $110 million. We also utilize a
money market loan program, which is similar to commercial paper. As of June 30,
2001, there was no outstanding balance on the credit facility and the
outstanding balance related to the money market loan program was $33.1 million,
excluding accrued interest. In January 2001, we also issued $200.0 million in
principal amount 7.5% senior notes due 2006 for net proceeds of $197.6 million
(net of discounts, commissions and expenses) to repay amounts borrowed under the
money market loan program and for general corporate purposes. During the first
six months of 2001, we had net borrowings of $56.2 million, a decrease of $33.8
million from the same period in the prior year. The ratio of total debt to total
capitalization was 75.9% and 55.3% at June 30, 2001 and December 31, 2000,
respectively. The primary use of the borrowed funds in the current six-month
period was to repurchase $122.0 million of stock under our stock repurchase
program.
We believe our available cash, marketable securities, and expected cash
flow from operations will be sufficient to fund dividends, obligations,
operations, as well as advance sales commissions, and to meet any other
reasonably foreseeable cash needs. The company also maintains investment-grade
credit ratings for both short-term and long-term debt.
GROSS PRODUCTION PER ADVISOR
An additional method of measuring productivity is being introduced to
more fully reflect the activities of the advisors and to more closely relate to
the industry's standard methods of using gross commissions per representative to
measure productivity. In particular, this measure will reflect activities, such
as sales of our new SPA product that do not collect new assets, but are expected
to generate significant recurring revenues based on assets under management. For
the quarter, gross
16
production per advisor was $17.2 thousand, which was down 4.5% from the second
quarter of 2000 of $18.0 thousand and up 21.1% from the first quarter of 2001 at
$14.2 thousand. For purposes of this productivity measure, gross production
consists of front-end sales loads, and distribution fee revenues as it would be
received from an underwriter, from both proprietary and other mutual funds. In
addition, it includes fees from our new SPA product, fees received for financial
planning, and commissions earned on insurance products. However, this measure
excludes underwriting fees, 12b-1 service fees, variable annuity distribution
fees and all revenues related to Class Y shares, third-party sales, and the
activities of Legend - all of which do not relate to the distribution activities
of our proprietary Waddell & Reed advisors sales force.
NEW SALES INITIATIVES
Beginning in the fourth quarter of 2001, we expect to market the
Waddell & Reed InvestEd Plan, a college savings program known as a 529 plan. The
Waddell & Reed InvestEd Plan will utilize Waddell & Reed Advisor Funds
exclusively. Our advisors have responded very favorably to this product and we
expect that they will support it enthusiastically on launch.
Our Strategic Portfolio Allocation ("SPA") product is now available for
all of our tax advantaged accounts and has been expanded for use by our entire
sales force. This dynamic asset allocation service, created by our subsidiary
The Legend Group, was well received in initial testing. We now expect volume to
accelerate given broader availability.
These initiatives diversify the sources of our sales and provide our
growing proprietary sales force with comprehensive product resources to support
their financial planning efforts on behalf of clients.
17
OTHER INFORMATION
ASSETS UNDER MANAGEMENT
(amounts in millions)
ENDING 2Q01 2Q00 % CHANGE 1Q01 % CHANGE
------- ------- -------- ------- --------
Mutual Fund
Equity $24,363 $29,685 -17.9 $23,229 4.9
Fixed Income 3,199 3,202 -0.1 3,184 0.5
Money Market 1,106 854 29.5 1,191 -7.1
------- ------- -------
Total 28,668 33,741 -15.0 27,604 3.9
Institutional and private accounts 5,186 6,010 -13.7 4,645 11.6
------- ------- -------
Total $33,854 $39,751 -14.8 $32,249 5.0
======= ======= =======
AVERAGE*
Mutual Fund
Equity $24,674 $29,067 -15.1 $26,125 -5.6
Fixed Income 3,203 3,206 -0.1 3,171 1.0
Money Market 1,124 885 27.0 1,072 4.9
----- --- -----
Total 29,001 33,158 -12.5 30,368 -4.5
Institutional and private accounts 4,997 5,947 -16.0 4,934 1.3
----- ----- -----
Total $33,998 $39,105 -13.1 $35,302 -3.7
======= ======= =======
* Average calculated using daily ending balances for mutual funds and monthly
ending balances for institutional and private accounts.
OTHER ITEMS
2Q01 2Q00 % CHANGE YTD 2001 YTD 2000 % CHANGE
---- ---- -------- -------- -------- --------
REDEMPTION RATES - LONG TERM
Retail 8.1% 6.3% 8.4% 7.0%
Total 8.4% 6.4% 8.6% 7.3%
SALES PER ADVISOR (000S)
Total 298 300 -0.7 537 622 -13.7
2+ Years * 453 425 6.6 773 881 -12.3
0 to 2 Years ** 64 95 -32.6 109 183 -40.4
Other 35 167 -79.0 132 212 -37.7
Gross Production per advisor (000s) 17.2 18.0 -4.5 31.5 35.2 -10.5
Number of advisors *** 2,950 2,554 15.5
Number of shareholder accounts 2,066,845 1,880,644 9.9
* Advisors licensed with the Company for two or more years.
** Advisors licensed with the Company for less than two years.
*** Excludes Legend advisors
18
FORWARD LOOKING INFORMATION
From time-to-time, information or statements provided by or on behalf
of the Company, including those within this quarterly report on Form 10-Q may
contain certain "forward-looking information," including information relating to
anticipated growth in our revenues or earnings, anticipated changes in the
amount and composition of assets under management, our anticipated expense
levels, and our expectations regarding financial markets and other conditions.
Readers are cautioned that any forward-looking information provided by or on
behalf of the Company is not a guarantee of future performance. Actual results
may differ materially from those contained in these forward-looking statements
as a result of various factors, including but not limited to those discussed
below. Further, such forward-looking statements speak only as of the date on
which such statements are made, and the Company undertakes no obligation to
update or revise any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events, whether as a result of new information,
future developments or otherwise.
Our future revenues will fluctuate due to many factors, such as the
total value and composition of assets under our management and related cash
inflows or outflows in the Advisors, W&R and W&R Target mutual funds (the
"Funds") and other investment portfolios; fluctuations in national and worldwide
financial markets resulting in appreciation or depreciation of assets under our
management; the relative investment performance of the Funds and other
investment portfolios as compared to competing offerings; the expense ratios of
the Funds; investor sentiment and investor confidence; the ability to maintain
our investment management and administrative fees at appropriate levels;
competitive conditions in the mutual fund, asset management, and broader
financial services sectors; our introduction of new mutual funds and investment
portfolios; our ability to contract with the Funds for payment for investment
advisory-related administrative services provided to the Funds and their
shareholders; the continuation of trends in the retirement plan marketplace
favoring defined contribution plans and participant-directed investments;
potential misuse of client funds and information in the possession of our
financial advisors; and the development of additional distribution channels may
not be successful. Our revenues are substantially dependent on fees earned under
contracts with the Funds and could be adversely affected if the independent
directors of one or more of the Funds determined to terminate or significantly
alter the terms of the investment management or related administrative services
agreements.
Our future operating results are also dependent upon the level of our
operating expenses, which are subject to fluctuation for the following or other
reasons: variations in the level of compensation expense due to, among other
things, performance-based bonuses, changes in our employee count and mix, and
competitive factors; unanticipated costs that may be incurred to protect
investor accounts and the goodwill of our clients; and disruptions of services,
including those provided by third parties such as communications, power, and the
mutual fund transfer agent system. In addition, our future operating results may
also be impacted by our ability to incur additional debt and by adverse
litigation. The Company's business is also subject to substantial governmental
regulation, and changes in legal, regulatory, accounting, tax, and compliance
requirements may have a substantial effect on our operations and results,
including but not limited to effects on costs we incur and effects on investor
interest in mutual funds and investing in general or in particular classes of
mutual funds or other investments.
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Since December 31, 2000, there has been no material change in the
information provided in Item 7A of the 2000 Form 10-K Annual Report.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
As previously reported, on April 25, 2001, our stockholders approved an
Agreement and Plan of Merger by and between the Company and WDR Sub, Inc., one
of the Company's wholly-owned subsidiaries, with the Company to remain as the
surviving corporation. The merger effected a combination of our Class A and
Class B common stock on a one-for-one basis. Effective as of the end of business
on April 30, 2001, each share of our Class B common stock was converted into one
share of Class A common stock and the number of Class A authorized shares
increased from 150,000,000 to 250,000,000 to account for the elimination of the
100,000,000 authorized Class B shares. We terminated the Class B common stock
registration under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and it is no longer listed or traded on the New York Stock
Exchange (the "NYSE"). Our Class A common stock will continue to be registered
under the Exchange Act and will continue to be listed and traded on the NYSE
under the symbol "WDR."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Annual Meeting of Stockholders held on April 25, 2001.
(b) Directors re-elected to additional three year terms at the Annual
Meeting:
Henry J. Herrmann, James M. Raines and William L. Rogers
Other Directors whose terms of office continued after the Annual
Meeting:
Robert L. Hechler, Ronald C. Reimer, Keith A. Tucker and
Jerry W. Walton.
(c)(1) ELECTION OF DIRECTORS
---------------------
FOR WITHHELD
----------- ---------
Henry J. Herrmann 216,504,479 733,389
James M. Raines 216,752,641 485,227
William L. Rogers 215,205,517 2,032,351
(2) APPROVAL OF AGREEMENT AND PLAN OF MERGER - The agreement was
submitted to stockholders for approval of a merger between the
Company and WDR Sub, Inc. a wholly owned subsidiary, with the
Company to remain as the surviving corporation as described
above.
Class A and B common stock voting together as a single class:
FOR AGAINST ABSTAIN BROKER NON-VOTE
----------- --------- ------- ---------------
176,365,241 1,720,503 110,275 39,041,849
20
Class B common stock voting as a separate class:
FOR AGAINST ABSTAIN BROKER NON-VOTE
----------- --------- ------- ---------------
141,250,635 1,638,480 89,505 35,528,945
(3) RATIFY APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS
------------------------------------------------------
FOR 2001
--------
FOR AGAINST ABSTAIN
----------- --------- -------
215,934,263 1,195,995 107,610
No broker non-votes on this proposal.
ITEM 5. OTHER INFORMATION
Forward-Looking Statements
We desire to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 (the "1995 Act"). The 1995 Act provides
a "safe harbor" for forward-looking statements to encourage companies to provide
information without fear of litigation so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected. Although we do not anticipate that we
will make forward-looking statements as a general policy, we will make
forward-looking statements as required by law or regulation, and from time to
time may make such statements with respect to management's estimation of our
future operating results and business.
We hereby incorporate into this report by reference to our Form 10-K
for the year ended December 31, 2000, the cautionary statements found on pages
29-32 of such Form 10-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 27th day of July, 2001.
WADDELL & REED FINANCIAL, INC.
By: /s/ John E. Sundeen, Jr.
------------------------
Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
By: /s/ D. Tyler Towery
------------------------
Vice President and
Controller
(Principal Accounting Officer)
22