Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Feb. 10, 2017 | Jun. 30, 2016 | |
Document and Entity Information | |||
Entity Registrant Name | WADDELL & REED FINANCIAL INC | ||
Entity Central Index Key | 1,052,100 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 1,380 | ||
Entity Common Stock, Shares Outstanding | 84,276,768 | ||
Document Fiscal Year Focus | 2,016 | ||
Document Fiscal Period Focus | FY |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Assets: | ||
Cash and cash equivalents | $ 555,102 | $ 558,495 |
Cash and cash equivalents - restricted | 31,137 | 66,880 |
Investment securities | 328,750 | 291,743 |
Receivables: | ||
Funds and separate accounts | 27,181 | 34,399 |
Customers and other | 128,095 | 220,660 |
Income taxes receivable | 933 | 10,594 |
Prepaid expenses and other current assets | 20,641 | 34,800 |
Total current assets | 1,091,839 | 1,217,571 |
Property and equipment, net | 102,449 | 105,434 |
Deferred sales commissions, net | 4,096 | 24,262 |
Goodwill and identifiable intangible assets | 148,569 | 158,118 |
Deferred income taxes | 31,430 | 32,692 |
Other non-current assets | 27,889 | 17,074 |
Total assets | 1,406,272 | 1,555,151 |
Liabilities: | ||
Accounts payable | 28,023 | 32,858 |
Payable to investment companies for securities | 53,691 | 113,648 |
Payable to third party brokers | 31,735 | 49,848 |
Payable to customers | 82,918 | 120,420 |
Accrued compensation | 38,764 | 69,335 |
Other current liabilities | 61,847 | 57,104 |
Total current liabilities | 296,978 | 443,213 |
Long-term debt | 189,605 | 189,432 |
Accrued pension and postretirement costs | 38,379 | 48,810 |
Other non-current liabilities | 26,655 | 27,241 |
Total liabilities | 551,617 | 708,696 |
Commitments and contingencies | ||
Redeemable noncontrolling interests | 10,653 | |
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; 83,118 shares outstanding (82,850 at December 31, 2015) | 997 | 997 |
Additional paid-in capital | 291,908 | 331,611 |
Retained earnings | 1,135,694 | 1,141,608 |
Cost of 16,883 common shares in treasury (16,851 at December 31, 2015) | (531,268) | (566,256) |
Accumulated other comprehensive loss | (53,329) | (61,505) |
Total stockholders' equity | 844,002 | 846,455 |
Total liabilities, redeemable noncontrolling interests and stockholders' equity | $ 1,406,272 | $ 1,555,151 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
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 | 83,118 | 82,850 |
Common shares in treasury | 16,583 | 16,851 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Revenues: | |||
Investment management fees | $ 557,112 | $ 709,562 | $ 768,102 |
Underwriting and distribution fees | 561,670 | 663,998 | 678,678 |
Shareholder service fees | 120,241 | 143,071 | 150,979 |
Total | 1,239,023 | 1,516,631 | 1,597,759 |
Operating expenses: | |||
Underwriting and distribution | 671,105 | 769,781 | 783,327 |
Compensation and related costs (including share-based compensation of $51,514, $47,518, and $54,144, respectively) | 209,849 | 200,752 | 194,410 |
General and administrative | 83,996 | 105,066 | 104,637 |
Subadvisory fees | 9,572 | 9,134 | 8,436 |
Depreciation | 18,359 | 16,046 | 14,634 |
Intangible asset impairment | 9,749 | 7,900 | |
Total | 1,002,630 | 1,100,779 | 1,113,344 |
Operating income | 236,393 | 415,852 | 484,415 |
Investment and other income (loss) | (763) | (5,244) | 16,790 |
Interest expense | (11,122) | (11,068) | (11,042) |
Income before provision for income taxes | 224,508 | 399,540 | 490,163 |
Provision for income taxes | 76,187 | 154,004 | 176,832 |
Net income | 148,321 | 245,536 | 313,331 |
Net income attributable to redeemable noncontrolling interests | 1,414 | ||
Net income attributable to Waddell & Reed Financial, Inc. | $ 146,907 | $ 245,536 | $ 313,331 |
Net income per share attributable to Waddell and Reed Financial, Inc. common shareholders, basic and diluted (in dollars per share) | $ 1.78 | $ 2.94 | $ 3.71 |
Weighted average shares outstanding, basic and diluted (in shares) | 82,668 | 83,499 | 84,485 |
Consolidated Statements of Inc5
Consolidated Statements of Income (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Consolidated Statements of Income | |||
Compensation and related costs, share-based compensation | $ 51,514 | $ 47,518 | $ 54,144 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Consolidated Statements of Comprehensive Income | |||
Net income | $ 148,321 | $ 245,536 | $ 313,331 |
Other comprehensive income: | |||
Unrealized depreciation of available for sale investment securities during the period, net of income tax expense (benefit) of $(2), $2, and $1, respectively | (391) | (4,771) | (6,158) |
Pension and postretirement (expense) benefit, net of income tax expense (benefit) of $4,978, $(3,794), and $(16,725) respectively | 8,567 | (6,291) | (28,426) |
Comprehensive income | 156,497 | 234,474 | 278,747 |
Comprehensive income attributable to redeemable noncontrolling interests | 1,414 | ||
Comprehensive income attributable to Waddell & Reed Financial, Inc. | $ 155,083 | $ 234,474 | $ 278,747 |
Consolidated Statements of Com7
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Consolidated Statements of Comprehensive Income | |||
Unrealized appreciation of available for sale investment securities during the period, income tax expense (benefit) | $ (2) | $ 2 | $ 1 |
Pension and postretirement benefits, income tax expense | $ 4,978 | $ (3,794) | $ (16,725) |
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, 2013 | $ 997 | $ 267,406 | $ 850,600 | $ (415,802) | $ (15,859) | $ 687,342 |
Balance (in shares) at Dec. 31, 2013 | 99,701 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 313,331 | 313,331 | ||||
Recognition of equity compensation | 53,912 | 232 | 54,144 | |||
Net issuance/forfeiture of nonvested shares | (21,817) | 21,817 | ||||
Dividends accrued, $1.84, $1.75, and $1.45 per share, respectively | (122,254) | (122,254) | ||||
Excess tax benefits from share-based payment arrangements | 19,135 | 19,135 | ||||
Repurchase of common stock | (131,030) | (131,030) | ||||
Other comprehensive income | (34,584) | (34,584) | ||||
Balance at the end of the period at Dec. 31, 2014 | $ 997 | 318,636 | 1,041,909 | (525,015) | (50,443) | 786,084 |
Balance (in shares) at Dec. 31, 2014 | 99,701 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 245,536 | 245,536 | ||||
Recognition of equity compensation | 47,256 | 262 | 47,518 | |||
Net issuance/forfeiture of nonvested shares | (39,094) | 39,094 | ||||
Dividends accrued, $1.84, $1.75, and $1.45 per share, respectively | (146,099) | (146,099) | ||||
Excess tax benefits from share-based payment arrangements | 4,813 | 4,813 | ||||
Repurchase of common stock | (80,335) | (80,335) | ||||
Other comprehensive income | (11,062) | (11,062) | ||||
Balance at the end of the period at Dec. 31, 2015 | $ 997 | 331,611 | 1,141,608 | (566,256) | (61,505) | 846,455 |
Balance (in shares) at Dec. 31, 2015 | 99,701 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Adoption of consolidation guidance on January 1, 2016 - redeemable noncontrolling interests in sponsored funds | 14,330 | |||||
Net income | 146,907 | 146,907 | ||||
Recognition of equity compensation | 51,382 | 132 | 51,514 | |||
Net issuance/forfeiture of nonvested shares | (84,741) | 84,741 | ||||
Dividends accrued, $1.84, $1.75, and $1.45 per share, respectively | (152,953) | (152,953) | ||||
Tax impact of share-based payment arrangements | (6,344) | (6,344) | ||||
Repurchase of common stock | (49,753) | (49,753) | ||||
Other comprehensive income | 8,176 | 8,176 | ||||
Balance at the end of the period at Dec. 31, 2016 | $ 997 | $ 291,908 | $ 1,135,694 | $ (531,268) | $ (53,329) | 844,002 |
Balance (in shares) at Dec. 31, 2016 | 99,701 | |||||
Increase (Decrease) in Redeemable Noncontrolling Interest | ||||||
Adoption of consolidation guidance on January 1, 2016 - redeemable noncontrolling interests in sponsored funds | 14,330 | |||||
Net income | 1,414 | |||||
Net redemption of redeemable noncontrolling interests in sponsored funds | (5,091) | |||||
Balance at the end of the period at Dec. 31, 2016 | $ 10,653 |
Consolidated Statement of Stoc9
Consolidated Statement of Stockholders’ Equity (Parenthetical) - $ / shares | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Consolidated Statement of Stockholders’ Equity | |||
Dividends accrued, per share (in dollars per share) | $ 1.84 | $ 1.75 | $ 1.45 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Cash flows from operating activities: | |||
Net income | $ 148,321 | $ 245,536 | $ 313,331 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 18,358 | 16,050 | 14,754 |
Write down of impaired assets | 9,749 | 7,900 | |
Amortization of deferred sales commissions | 23,601 | 43,074 | 64,380 |
Share-based compensation | 51,514 | 47,518 | 54,144 |
Excess tax benefits from share-based payment arrangements | (2,972) | (4,813) | (19,135) |
Investments gain (loss), net | (12,075) | 12,412 | (7,496) |
Net purchases and sales or maturities of trading securities | (24,352) | (75,160) | (38,662) |
Deferred income taxes | (3,715) | (1,410) | 728 |
Net change in trading securities held by consolidated sponsored funds | (79,065) | ||
Other | 451 | 680 | 1,774 |
Changes in assets and liabilities: | |||
Cash and cash equivalents - restricted | 35,743 | 9,715 | 44,824 |
Customer and other receivables | 92,565 | (3,817) | (75,428) |
Payable to investment companies for securities and payable to customers | (97,459) | (5,964) | 17,283 |
Receivables from funds and separate accounts | 7,218 | 4,711 | (2,643) |
Other assets | 2,255 | (25,111) | (5,568) |
Deferred sales commissions | (3,435) | (10,864) | (40,958) |
Accounts payable and payable to third party brokers | (22,948) | (17,510) | 21,640 |
Other liabilities | (20,107) | (1,097) | (5,826) |
Net cash provided by operating activities | 123,647 | 233,950 | 345,042 |
Cash flows from investing activities: | |||
Purchases of available for sale and equity method securities | (72,096) | (27,388) | (166,302) |
Proceeds from sales of available for sale and equity method securities | 156,965 | 36,657 | 164,247 |
Additions to property and equipment | (15,691) | (29,610) | (35,606) |
Net cash of sponsored funds on consolidation | 6,887 | ||
Other | (194) | (2,254) | (1,447) |
Net cash provided by (used in) investing activities | 75,871 | (22,595) | (39,108) |
Cash flows from financing activities: | |||
Dividends paid | (152,830) | (143,959) | (115,263) |
Repurchase of common stock | (49,753) | (80,335) | (131,030) |
Net redemptions and distributions to redeemable noncontrolling interests in sponsored funds | (3,473) | ||
Excess tax benefits from share-based payment arrangements | 2,972 | 4,813 | 19,135 |
Other | 173 | ||
Net cash used in financing activities | (202,911) | (219,481) | (227,158) |
Net increase (decrease) in cash and cash equivalents | (3,393) | (8,126) | 78,776 |
Cash and cash equivalents at beginning of period | 558,495 | 566,621 | 487,845 |
Cash and cash equivalents at end of period | 555,102 | 558,495 | 566,621 |
Cash paid for: | |||
Income taxes, net | 76,982 | 152,262 | 165,189 |
Interest | $ 10,289 | $ 10,297 | $ 10,291 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2016 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Amounts in the accompanying financial statements and notes are rounded to the nearest thousand unless otherwise stated. Certain amounts in the prior years’ financial statements have been reclassified for consistent presentation. The Company operates in one business segment as the Company’s management utilizes a consolidated approach to assess performance and allocate resources. Consolidation In the normal course of our business, we sponsor and manage various types of investment products. These investment products include open-end mutual funds, a closed-end mutual fund, privately offered funds, exchange-traded managed funds, and a Luxembourg SICAV. When creating and launching a new investment product, we typically fund the initial cash investment, commonly referred to as “seeding,” so that the investment product can generate an investment performance track record so that it is able to attract third party investors in the product. Our initial investment in a new product typically represents 100% of the ownership in that product. We generally redeem our investment in seeded products when the related product establishes a sufficient track record, when third party investments in the related product are sufficient to sustain the strategy, or when a decision is made to no longer pursue the strategy. The length of time we hold a majority interest in a product varies based on a number of factors, including market demand, market conditions and investment performance. Our exposure to risk in these investment products is generally limited to any equity investment we have and any earned but uncollected management or other fund-related service fees. In accordance with financial accounting standards, we consolidate certain sponsored investment products in which we have a controlling interest or the investment product meets the criteria of a Variable Interest Entity (“VIE”) and we are deemed to be the primary beneficiary. In order to make this determination, an analysis is performed to determine if the investment product is a VIE or a Voting Interest Entity (“VOE”). Assessing if an entity is a VIE or VOE involves judgment and analysis on an entity by entity basis. Factors included in this assessment include the legal organization of the entity, the Company’s contractual involvement with the entity and any implications resulting from or associated with related parties’ involvement with the entity. A VIE is an entity which does not have adequate equity to finance its activities without subordinated financial support, the equity investors do not have the normal characteristics of equity investors for a potential controlling financial interest as a group, or the voting rights are not proportional to their obligations to absorb the expected losses or their rights to receive the expected residual returns of the entity. The Company is deemed to be the primary beneficiary if it absorbs a majority of the VIE’s expected losses, expected residual returns, or both. If the Company is the primary beneficiary of a VIE, we are required to consolidate the assets, liabilities, results of operations and cash flows of the VIE into our consolidated financial statements. If an entity does not meet the criteria and is not considered a VIE, it is treated as a VOE, which is subject to traditional consolidation concepts based on ownership rights. Sponsored investments products that are considered VOEs are consolidated if we have a controlling financial interest in the entity absent substantive investor rights to replace the investment manager of the entity (kick-out rights). Use of Estimates GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the consolidated financial statements and accompanying notes, and related disclosures of commitments and contingencies. Estimates are used for, but are not limited to, depreciation and amortization, income taxes, valuation of assets, pension and postretirement obligations, and contingencies. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Actual results could differ from our estimates. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and short‑term investments. We consider all highly liquid investments with maturities upon acquisition of 90 days or less to be cash equivalents. Cash and cash equivalents – restricted represents cash held for the benefit of customers and non-customers segregated in compliance with federal and other regulations. Disclosures About Fair Value of Financial Instruments Fair value of cash and cash equivalents, receivables and payables approximates carrying value. Fair value of long‑term debt is disclosed in Note 7. Fair values for investment securities are based on quoted market prices, where available. Otherwise, fair values for investment securities are based on Level 2 or Level 3 inputs detailed in Note 3. Investment Securities and Investments in Sponsored Funds Our investments are comprised of United States, government obligations, investments in sponsored funds and sponsored privately offered funds. Sponsored funds, which include the 1940 Act Mutual Funds, IVH, the IGI Funds and the LLCs, are investments we have made for both general corporate investment purposes and to provide seed capital for new investment products. The Company has classified its investments in certain sponsored funds as either equity method investments (when the Company owns between 20% and 50% of the fund) or as available for sale investments (when the Company owns less than 20% of the fund) as described in Note 3. Investments held by our broker-dealer entities or certain investments that are anticipated to be purchased and sold on a more frequent basis are classified as trading. Unrealized holding gains and losses on securities available for sale, net of related tax effects, are excluded from earnings until realized and are reported as a separate component of comprehensive income. For trading securities, unrealized holding gains and losses are included in earnings. Realized gains and losses are computed using the specific identification method for investment securities, other than sponsored funds. For sponsored funds, realized gains and losses are computed using the average cost method. Substantially all of the Company’s equity method investees are investment companies which record their underlying investments at fair value. Therefore, under the equity method of accounting, our share of the investee's underlying net income or loss is predominantly representative of fair value adjustments in the investments held by the equity method investee. Our share of the investee's net income or loss is based on the most current information available and is recorded as a net gain or loss on investments within investment and other income (loss). Our available for sale investments are reviewed each quarter and adjusted for other than temporary declines in value. We consider factors affecting the issuer and the industry in which the issuer operates, general market trends including interest rates, and our ability and intent to hold an investment until it has recovered. Consideration is given to the length of time an investment’s market value has been below carrying value as well as prospects for recovery to carrying value. When a decline in the fair value of equity securities is determined to be other than temporary, the unrealized loss recorded net of tax in other comprehensive income is realized as a charge to net income, and a new cost basis is established. When a decline in the fair value of debt securities is determined to be other than temporary, the amount of the impairment recognized in earnings depends on whether the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current‑period credit loss. If so, the other than temporary impairment recognized in earnings is equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If not, the portion of the impairment related to the credit loss is recognized in earnings while the portion of the impairment related to other factors is recognized in other comprehensive income, net of tax. Property and Equipment Property and equipment are carried at cost. The costs of improvements that extend the life of a fixed asset are capitalized, while the costs of repairs and maintenance are expensed as incurred. Depreciation and amortization are calculated and recorded using the straight‑line method over the estimated useful life of the related asset (or lease term if shorter), generally three to 10 years for furniture and fixtures; one to 10 years for computer software; one to five years for data processing equipment; one to 30 years for buildings; two to 26 years for other equipment; and up to 15 years for leasehold improvements, which is the lesser of the lease term or expected life. Software Developed for Internal Use Certain internal costs incurred in connection with developing or obtaining software for internal use are capitalized in accordance with ASC 350, “Intangibles – Goodwill and Other Topic.” Internal costs capitalized are included in property and equipment, net in the consolidated balance sheets, and were $13.3 million and $13.9 million as of December 31, 2016 and 2015, respectively. Amortization begins when the software project is complete and ready for its intended use and continues over the estimated useful life, generally one to 10 years. Goodwill and Identifiable Intangible Assets Goodwill represents the excess of cost over fair value of the identifiable net assets of acquired companies. Indefinite-lived intangible assets represent advisory and subadvisory management contracts for managed assets obtained in acquisitions. The Company considers these contracts to be indefinite-lived intangible assets as they are expected to be renewed without significant cost or modification of terms. Goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if events or circumstances indicate that the carrying value may not be recoverable. Goodwill and intangible assets require significant management estimates and judgment, including the valuation determination in connection with the initial purchase price allocation and the ongoing evaluation for impairment. Additional information related to the indefinite-lived intangible assets is included in Note 6. Deferred Sales Commissions We defer certain costs, principally sales commissions and related compensation, which are paid to financial advisors and broker-dealers in connection with the sale of certain mutual fund shares sold without a front-end load sales charge. The costs incurred at the time of the sale of Class B shares sold prior to January 1, 2014 are amortized on a straight-line basis over five years, which approximates the expected life of the shareholders’ investments. Effective January 1, 2014, the Company suspended sales of Class B shares. The costs incurred at the time of the sale of Class C shares are amortized on a straight-line basis over 12 months. Prior to June 16, 2014, the costs incurred at the time of the sale of shares for certain fee-based asset allocation products were deferred and amortized on a straight-line basis, not to exceed three years. We recover deferred sales commissions and related compensation through Rule 12b-1 and other distribution fees, which are paid on the Class B and Class C shares of the Advisors Funds and Ivy Funds, along with CDSCs paid by shareholders who redeem their shares prior to completion of the specified holding period (three years for shares of certain fee-based asset allocation products sold prior to June 16, 2014, six years for a Class B share and 12 months for a Class C share), as well as through client fees paid on the asset allocation products sold prior to June 16, 2014. Effective June 16, 2014 we no longer assess a CDSC to investors upon early redemption of fee-based asset allocation products and amounts deferred for sales commissions and related compensation are classified in the prepaid and other current asset and other non-current assets in our consolidated balance sheet. Should we lose our ability to recover deferred sales commissions through distribution fees or CDSCs, the value of these assets would immediately decline, as would future cash flows. We periodically review the recoverability of the deferred sales commission assets as events or changes in circumstances indicate that their carrying amount may not be recoverable and adjust them accordingly. Impairment adjustments are recognized in operating income as a component of amortization of deferred sales commissions. Revenue Recognition Investment Management and Advisory Fees We recognize investment management fees as earned over the period in which services are rendered. We charge 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 the IGI Funds and from institutional and separate accounts are charged 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. Our investment advisory business receives research products and services from broker-dealers through “soft dollar” arrangements. Consistent with the “soft dollar” safe harbor established by Section 28(e) of the Securities Exchange Act of 1934, as amended, the investment advisory business does not have any contractual obligation requiring it to pay for research products and services obtained through soft dollar arrangements with brokers. As a result, we present “soft dollar” arrangements on a net basis. 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. Distribution, Underwriter and Shareholder Service Fees Underwriting and distribution commission revenues resulting from the sale of investment products are recognized 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. 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 Class B, C, E and Ivy Funds 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% and for the Class I, R6 and Advisors Funds Y shares, which do not charge a service fee. The Funds’ Class B and 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. Fee‑based asset allocation revenues are charged 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 and are recognized monthly. Fees collected from financial advisors for services related to technology and errors and omissions insurance are recorded in underwriting and distribution fees on a gross basis, as the Company is the primary obligor in these arrangements. Shareholder service fees are recognized monthly and are calculated based on the number of accounts or assets under management as applicable. Other administrative service fee revenues are recognized when contractual obligations are fulfilled or as services are provided. Advertising and Promotion We expense all advertising and promotion costs as the advertising or event takes place. Advertising expense was $9.4 million, $15.7 million and $15.7 million for the years ended December 31, 2016, 2015 and 2014, respectively, and is classified in both underwriting and distribution expense and general and administrative expense in the consolidated statements of income. Leases The Company leases office space under various leasing arrangements. Most lease agreements contain renewal options, rent escalation clauses and/or other inducements provided by the landlord. As leases expire, they are typically renewed or replaced in the ordinary course of business. Rent expense is recorded on a straight-line basis, including escalations and inducements, over the term of the lease. Share‑Based Compensation We account for share‑based compensation expense using the fair value method. Under the fair value method, share‑based compensation expense reflects the fair value of share‑based awards measured at grant date, is recognized over the service period, and is adjusted each period for anticipated forfeitures. The Company also issues share‑based awards to our financial advisors, who are independent contractors, and to our Board of Directors. Changes in the Company’s share price result in variable compensation expense over the vesting period of awards granted to our financial advisors and Board of Directors. Accounting for Income Taxes Income tax expense is based on pre-tax financial accounting income, including adjustments made for the recognition or derecognition related to uncertain tax positions. The recognition or derecognition of income tax expense related to uncertain tax positions is determined under the guidance as prescribed by “ Income Taxes Topic ,” ASC 740. Deferred tax assets and liabilities are recognized for the future tax attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is recognized for deferred tax assets if, based on available evidence, it is more likely than not that all or some portion of the asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. |
New Accounting Guidance
New Accounting Guidance | 12 Months Ended |
Dec. 31, 2016 | |
New Accounting Guidance | |
New Accounting Guidance | 2. New Accounting Guidance Accounting Guidance Adopted During Fiscal Year 2016 During the first quarter of 2016, the Company adopted Accounting Standards Update (“ASU”) 2015-02, “ Amendments to the Consolidation Analysis, ” which affects all companies required to evaluate consolidation of another entity. The Company determined that this ASU did not have a material impact on its previous consolidation analysis for its seeded investments in the 1940 Act Mutual Funds, Canadian Mutual Fund, and LLCs. This ASU did impact the consolidation analysis for its seeded investments in the IGI Funds. Prior to ASU 2015-02, the amount of ownership interest held by the Company was determined at the SICAV legal entity level. Under ASU 2015-02, the ownership percentage and consolidation analysis of the IGI Funds is evaluated at each individual sub-fund. To the extent material, the Company is required to consolidate any of its seeded investments if ownership, directly or indirectly, represents more than 50%. During the first quarter of 2016, the Company adopted ASU 2015-03, “ Simplifying the Presentation of Debt Issuance Costs. ” This ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Prior to the implementation of this ASU, the Company classified its debt issuance costs related to a recognized debt liability as either current or non-current assets. Previously, the Company reported $0.2 million of debt issuance costs as current assets and $0.4 million of debt issuance costs as non-current assets on the balance sheet for the period ended December 31, 2015. After implementation of ASU 2015-03, the debt issuance costs have been netted with long-term debt, so that long-term debt is presented as $189.4 million on the balance sheet as of December 31, 2015, to be consistent with the presentation of the December 31, 2016 balance. New Accounting Guidance Not Yet Adopted In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts with Customers, ” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This standard also specifies the accounting for certain costs to obtain or fulfill a contract with a customer. This ASU will supersede much of the existing revenue recognition guidance in accounting principles generally accepted in the United States and is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period; early application is permitted for the first interim period within annual reporting periods beginning after December 15, 2016. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. We have evaluated our population of contracts and concluded that the adoption of this ASU will have an immaterial impact on our consolidated financial statements and related disclosures. In January 2016, the FASB issued ASU 2016-01, “ Recognition and Measurement of Financial Assets and Financial Liabilities, ” which provides updated guidance on the recognition, measurement, presentation and disclosure of certain financial assets and financial liabilities. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We have evaluated our financial assets and financial liabilities and concluded that the adoption of this ASU will have an immaterial impact on our consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02, “ Leases, ” which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU will be presented using a modified retrospective approach, which includes a number of optional practical expedients that entities may elect to apply. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early application permitted. We are evaluating the estimated impact the adoption of this ASU will have on our consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, “ Improvements to Employee Share-Based Payment Accounting, ” which requires recognition of all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement and classification of excess tax benefits along with other income tax cash flows as an operating activity; allows an entity to either estimate the number of awards that are expected to vest or account for forfeitures when they occur; and permits withholding up to the maximum statutory tax rates in the applicable jurisdictions. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. Upon adoption of this standard on January 1, 2017, the Company will account for forfeitures when they occur. We do not expect a material impact on our consolidated financial statements and related disclosures upon adoption of this ASU. However, after the adoption date, recognition of excess tax benefits as income tax benefit and tax deficiencies as income tax expense in the income statement may result in increased volatility in our provision for income taxes and effective tax rate. In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The ASU changes the impairment model for most financial assets, and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. ASU 2016-13 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 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 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” This ASU eliminates the diversity in practice related to the classification of certain cash receipts and payments for debt prepayment or extinguishment costs, the maturing of a zero coupon bond, the settlement of contingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees and beneficial interests obtained in a financial asset securitization. ASU 2016-15 designates the appropriate cash flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investing and financing activities. This ASU i s effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted. We are evaluating the estimated impact the adoption of ASU 2016-15 will have on our consolidated financial statements and related disclosures. In October 2016, the FASB issued ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory.” This ASU is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory by requiring an entity to recognize the income tax consequences when a transfer occurs, instead of when an asset is sold to an outside party. The amendments in this ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. ASU 2016-16 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted. We have concluded that the adoption of this ASU will have an immaterial impact on our consolidated financial statements and related disclosures. In November 2016, the FASB issued ASU No. 2016-18, “ Statement of Cash Flows (Topic 230): Restricted Cash”. This ASU is intended to reduce diversity in practice by adding or clarifying guidance on classification and presentation of changes in restricted cash on the statement of cash flows. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-16 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted. The amendments in this ASU should be applied retrospectively to all periods presented. We are evaluating the estimated impact the adoption of ASU 2016-18 will have on our consolidated financial statements and related disclosures. |
Investment Securities
Investment Securities | 12 Months Ended |
Dec. 31, 2016 | |
Investment Securities | |
Investment Securities | 3. Investment Securities Investment securities at December 31, 2016 and 2015 are as follows: December 31, December 31, 2016 2015 (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds Total available for sale securities Trading securities: Mortgage-backed securities Corporate bond — Common stock Consolidated sponsored funds — Sponsored funds Total trading securities Equity method securities: Sponsored funds Sponsored privately offered funds Total equity method securities Total securities $ The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2016: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds — $ The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2015: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds — $ Mortgage-backed securities, accounted for as trading, and held as of December 31, 2016 mature in 2022. Investment securities with fair values of $234.4 million, $102.2 million and $301.0 million were sold during 2016, 2015 and 2014, respectively. During 2016, net realized gains of $3.6 million were recognized from the sale of $98.2 million in available for sale securities and net realized losses of $2.3 million were recognized from the sale of $58.7 million in equity method securities. During 2015, net realized gains of $3.0 million and $0.6 million were recognized from the sale of $31.6 million in available for sale securities and the sale of $65.9 million in trading securities, respectively, and net realized losses of $0.5 million were recognized from the sale of $5.3 million in equity method securities. During 2014, net realized gains of $5.1 million and $4.1 million were recognized from the sale of $149.8 million in available for sale securities and the sale of $151.2 million in trading securities, respectively. Sponsored Funds The Company did not hold a majority interest in any of our sponsored funds as of December 31, 2015. As a result there are no sponsored funds consolidated in our financial statement for the year ended December 31, 2015. See “ Consolidated Sponsored Funds ” below for a description of our investments in certain sponsored funds that were consolidated during 2016. During 2015, $160.2 million of investments previously classified as available for sale securities were classified as equity method securities, representing seed investments in which the Company owned between 20% and 50% of the fund. As a result, in 2015, $2.1 million of unrealized losses were reclassified from other comprehensive income and recognized in the consolidated statement of income. A summary of available for sale sponsored funds with fair values below carrying values at December 31, 2016 is as follows: Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized December 31, 2016 Fair value losses Fair value losses Fair value losses (in thousands) Sponsored funds $ Based upon our assessment of these sponsored funds, the time frame the sponsored funds have been in a loss position and our intent to hold the sponsored funds until they have recovered, we determined that the recognition of an other than temporary impairment loss by recognizing these losses through the statement of income was not necessary at December 31, 2016. Sponsored Privately Offered Funds The Company holds voting interests in certain sponsored privately offered funds that are structured as investment companies in the legal form of LLCs. The Company held investments in these funds totaling $3.8 million and $4.0 million as of December 31, 2016 and December 31, 2015, respectively, which is our maximum loss exposure. Consolidated Sponsored Funds There were no consolidated sponsored funds at December 31, 2015. The following table details the balances related to consolidated sponsored funds at December 31, 2016, as well as the Company’s net interest in these funds: December 31, 2016 (in thousands) Cash $ Investments Other assets Other liabilities Redeemable noncontrolling interests Net interest in consolidated sponsored funds $ During the year ended December 31, 2016, we consolidated certain of the 1940 Act Mutual Funds and the IGI Funds in which we provided initial seed capital at the time of the fund’s formation. When we no longer have a controlling financial interest in a sponsored fund, it is deconsolidated from our consolidated financial statements. We deconsolidated $44.2 million of these investments from our consolidated balance sheet during the year ended 2016. There was no impact to the consolidated statement of income as a result of this deconsolidation. 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 fair value of municipal bonds is measured based on pricing models that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid‑wants lists, offerings, market movements, the callability of the bond, state of issuance and benchmark yield curves. 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. Securities’ values classified as Level 3 are primarily determined through the use of a single quote (or multiple quotes) from dealers in the securities using proprietary valuation models. These quotes involve significant unobservable inputs, and thus, the related securities are classified as Level 3 securities. The following tables summarize our investment securities as of December 31, 2016 and 2015 that are recognized in our consolidated balance sheets using fair value measurements based on the differing levels of inputs. There were no transfers between levels for the years ended December 31, 2016 or 2015. December 31, 2016 Level 1 Level 2 Level 3 Other Assets Not Held at Fair Value Total (in thousands) Available for sale securities: Sponsored funds $ — — — Sponsored privately offered funds measured at net asset value (1) — — — Trading securities: Mortgage-backed securities — — — Common stock — — — Consolidated sponsored funds — — Sponsored funds — — — Equity method securities: (2) Sponsored funds — — — Sponsored privately offered funds measured at net asset value (1) — — — Total $ — December 31, 2015 Level 1 Level 2 Level 3 Other Assets Not Held at Fair Value Total (in thousands) Available for sale securities: Sponsored funds $ — — — Sponsored privately offered funds measured at net asset value (1) — — — Trading securities: Mortgage-backed securities — — — Corporate bonds — — — Common stock — — — Sponsored funds — — — Equity method securities: (2) Sponsored funds — — — Sponsored privately offered funds measured at net asset value (1) — — — Total $ — (1) 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. (2) Substantially all of the Company’s equity method investments are investment companies that record their underlying investments at fair value. |
Derivative Financial Instrument
Derivative Financial Instruments | 12 Months Ended |
Dec. 31, 2016 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | 4. Derivative Financial Instruments In January 2016, the Company implemented an economic hedge program that uses total return swap contracts to hedge market risk with its investments in certain sponsored funds. As of December 31, 2016, we had 93% of our investments in sponsored funds, excluding our available for sale portfolio, hedged, 81% of which were hedged with total return swap contracts. 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. As of December 31, 2016, excluding derivative financial instruments held in certain consolidated sponsored funds, the Company was party to three total return swap contracts with a combined notional value of $160.2 million. These derivative 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 (loss), net on the Company’s consolidated statement of income. The Company posted $7.1 million in cash collateral with the counterparties of the total return swap contracts as of December 31, 2016. 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; instead the market appreciation or depreciation is included in other current assets or liabilities, respectively, on the Company’s consolidated balance sheets. The following table presents the fair value of the derivative financial instruments, excluding derivative financial instruments held in certain consolidated sponsored funds as of December 31, 2016: December 31, 2016 Balance sheet location Fair value (in thousands) Total return swap contracts Other current liabilities $ The following is a summary of net losses recognized in income for the year ended December 31, 2016: Income statement Year ended location December 31, 2016 (in thousands) Total return swap contracts Investment and other income (loss) $ |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2016 | |
Property and Equipment | |
Property and Equipment | 5. Property and Equipment A summary of property and equipment at December 31, 2016 and 2015 is as follows: Estimated 2016 2015 useful lives (in thousands) Leasehold improvements $ 1 - 15 years Furniture and fixtures 3 - 10 years Equipment 2 - 26 years Computer software 1 - 10 years Data processing equipment 1 - 5 years Buildings 1 - 30 years Land Property and equipment, at cost Accumulated depreciation Property and equipment, net $ Depreciation expense was $18.4 million, $16.0 million and $14.6 million during the years ended December 31, 2016, 2015 and 2014, respectively. At December 31, 2016, we had property and equipment under capital leases with a cost of $1.8 million and accumulated depreciation of $0.8 million. At December 31, 2015, we had property and equipment under capital leases with a cost of $2.1 million and accumulated depreciation of $1.1 million. |
Goodwill and Identifiable Intan
Goodwill and Identifiable Intangible Assets | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Identifiable Intangible Assets | |
Goodwill and Identifiable Intangible Assets | 6. Goodwill and Identifiable Intangible Assets Goodwill represents the excess of cost over fair value of the identifiable net assets of acquired companies. Indefinite-lived intangible assets represent advisory and subadvisory management contracts for managed assets obtained in acquisitions. Goodwill and identifiable intangible assets (all considered indefinite-lived) at December 31, 2016 and 2015 are as follows: December 31, December 31, 2016 2015 (in thousands) Goodwill $ Mutual fund management advisory contracts Mutual fund management subadvisory contract Other — Total identifiable intangible assets Total $ We performed a review of the intangible asset associated with the subadvisory contract during the third quarter of 2016 due to a recent decline in the related assets under management. The decline can be attributed to a realignment of fund offerings. We recorded an impairment charge of $5.7 million in the third quarter of 2016 to this intangible asset as a result of the reduction in assets and associated cash flows, and reduced the associated deferred tax liability by $2.1 million. During the fourth quarter of 2016, we delayed our strategic initiative to globalize our distribution network for the IGI Funds. As a result of this decision, the valuation model for the subadvisory contract associated with the IGI Funds was updated. Based upon the updated valuation model, we determined that the fair value of this intangible asset for the subadvisory contract was less than the carrying amount, creating an impairment of $4.0 million. |
Indebtedness
Indebtedness | 12 Months Ended |
Dec. 31, 2016 | |
Indebtedness | |
Indebtedness | 7. Indebtedness On August 31, 2010, the Company entered into an agreement to complete a $190.0 million private placement of the Senior Notes. Interest is payable semi‑annually in January and July of each year. The most restrictive provisions of the agreement require the Company to maintain a consolidated leverage ratio not to exceed 3.0 to 1.0 for four consecutive quarters and a consolidated interest coverage ratio of not less than 4.0 to 1.0 for four consecutive quarters. The Company was in compliance with these covenants for all periods presented. As of December 31, 2016, the Company’s consolidated leverage ratio was 0.6 to 1.0, and consolidated interest coverage ratio was 27.5 to 1.0. The Company entered into the Credit Facility with various lenders, effective June 28, 2013, which provides for initial borrowings of up to $125.0 million and replaced the Company’s previous revolving credit facility. Lenders could, at their option upon the Company’s request, expand the Credit Facility to $200.0 million. At December 31, 2016 and 2015, there were no borrowings outstanding under the facility. Borrowings under the Credit Facility bear interest at various rates including adjusted LIBOR or an alternative base rate plus, in each case, an incremental margin based on the Company’s credit rating. The Credit Facility also provides for a facility fee on the aggregate amount of commitments under the revolving facility (whether or not utilized). The facility fee is also based on the Company’s credit rating level. The Credit Facility’s covenants match those outlined above for the Senior Notes. Debt is reported at its carrying amount in the consolidated balance sheets. The fair value of the Company’s outstanding indebtedness is approximately $200.7 million at December 31, 2016 compared to the carrying value net of debt issuance costs of $189.6 million. Fair value is calculated based on Level 2 inputs. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes | |
Income Taxes | 8. Income Taxes The provision for income taxes from continuing operations for the years ended December 31, 2016, 2015 and 2014 consists of the following: 2016 2015 2014 (in thousands) Current taxes: Federal $ State Foreign Deferred taxes Provision for income taxes $ The following table reconciles the statutory federal income tax rate with our effective income tax rate from continuing operations for the years ended December 31, 2016, 2015 and 2014: 2016 2015 2014 Statutory federal income tax rate % % % State income taxes, net of federal tax benefits State tax incentives Valuation allowance on losses capital in nature Other items Effective income tax rate % % % The tax effect of temporary differences that give rise to significant portions of deferred tax liabilities and deferred tax assets at December 31, 2016 and 2015 are as follows: 2016 2015 (in thousands) Deferred tax liabilities: Deferred sales commissions $ Property and equipment Benefit plans Identifiable intangible assets Prepaid expenses Total gross deferred liabilities Deferred tax assets: Accrued compensation Additional pension and postretirement liability Other accrued expenses Unrealized losses on investment securities and partnerships Capital loss carryforwards Nonvested stock Unused state tax credits State net operating loss carryforwards Other Total gross deferred assets Valuation allowance Net deferred tax asset $ The Company has a deferred tax asset for a capital loss carryforward that is available to offset current and future capital gains. As of December 31, 2016 and 2015, the deferred tax asset, net of federal tax effect, related to this capital loss carryforward is $3.9 million and $5.9 million, respectively. The capital loss carryforward, if not utilized, will expire in 2018. Other deferred tax assets that could generate potential future capital losses if realized include unrealized losses on investment securities and partnerships of $1.8 million and $7.4 million as of December 31, 2016 and 2015, respectively. Due to the character of the losses and the limited carryforward period permitted by law upon realization, the Company may not realize the full tax benefit of the capital losses. Management believes it is not more likely than not that the Company will generate sufficient future capital gains to realize the full benefit of these capital losses and accordingly, a valuation allowance in the amount of $5.8 million and $13.3 million has been recorded at December 31, 2016 and 2015, respectively. Certain subsidiaries of the Company have net operating loss carryforwards in certain states in which these companies file on a separate company basis. The deferred tax asset, net of federal tax effect, relating to these carryforwards as of December 31, 2016 and 2015 is approximately $5.7 million. The carryforwards, if not utilized, will expire between 2017 and 2036. Management believes it is not more likely than not that these subsidiaries will generate sufficient future taxable income in these states to realize the benefit of the net operating loss carryforwards and, accordingly, a valuation allowance in the amount of $5.6 million and $5.5 million has been recorded at December 31, 2016 and 2015, respectively. The Company has state tax credit carryforwards of $2.1 million and $1.5 million as of December 31, 2016 and 2015, respectively. Of these state tax credit carryforwards, $1.9 million will expire between 2024 and 2032 if not utilized and $0.2 million will expire in 2026 if not utilized. The Company anticipates these credits will be fully utilized prior to their expiration date. As of January 1, 2016, the Company had unrecognized tax benefits, including penalties and interest, of $11.9 million ($8.7 million net of federal benefit) that, if recognized, would impact the Company’s effective tax rate. As of December 31, 2016, the Company had unrecognized tax benefits, including penalties and interest, of $11.5 million ($8.4 million net of federal benefit) that, if recognized, would impact the Company’s effective tax rate. The unrecognized tax benefits that are not expected to be settled within the next 12 months are included in other liabilities in the accompanying consolidated balance sheets; unrecognized tax benefits that are expected to be settled within the next 12 months are included in income taxes payable; and unrecognized tax benefits that reduce a net operating loss, similar tax loss, or tax credit carryforward are presented as a reduction to noncurrent deferred income taxes. The Company’s accounting policy with respect to interest and penalties related to income tax uncertainties is to classify these amounts as income taxes. As of January 1, 2016, the total amount of accrued interest and penalties related to uncertain tax positions recognized in the consolidated balance sheet was $3.4 million ($2.8 million net of federal benefit). The total amount of penalties and interest, net of federal benefit, related to tax uncertainties recognized in the statement of income for the period ended December 31, 2016 was $0.2 million. As of December 31, 2016, the Company had total accrued penalties and interest related to uncertain tax positions of $3.8 million ($3.1 million net of federal benefit) in the consolidated balance sheet, which is included in the total unrecognized tax benefits described above. The following table summarizes the Company's reconciliation of unrecognized tax benefits, excluding penalties and interest, for the years ended December 31, 2016, 2015 and 2014: 2016 2015 2014 (in thousands) Balance at January 1 $ Increases during the year: Gross increases - tax positions in prior period Gross increases - current-period tax positions Decreases during the year: Gross decreases - tax positions in prior period Decreases due to settlements with taxing authorities Decreases due to lapse of statute of limitations Balance at December 31 $ 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. During 2016, the Company settled two open tax years that were undergoing audit by a state jurisdiction in which the Company operates. During 2015, the Company settled three open tax years that were undergoing audit by a state jurisdiction in which the Company operates. During 2014, the Company settled six open tax years that were undergoing audit by state jurisdictions in which the Company operates. The Company is currently under federal audit for the 2014 tax year. The 2013, 2015, and 2016 federal income tax returns are open tax years that remain subject to potential future audit. State income tax returns for all years after 2012 and, in certain states, income tax returns for 2012, 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 | 12 Months Ended |
Dec. 31, 2016 | |
Pension Plan and Postretirement Benefits Other Than Pension | |
Pension Plan and Postretirement Benefits Other Than Pension | 9. Pension Plan and Postretirement Benefits Other Than Pension We provide a non‑contributory retirement plan that covers substantially all employees and certain vested employees of our former parent company (the “Pension Plan”). Benefits payable under the Pension Plan are based on employees’ years of service and compensation during the final ten years of employment. During the third quarter of 2016, the Company offered eligible terminated, vested pension plan participants an option to elect a one-time voluntary lump sum window distribution equal to the present value of the participant’s pension benefit, in settlement of all future pension benefits to which they would otherwise have been entitled. This offer was made in an effort to reduce pension obligations and ongoing annual pension expense. Payments were distributed to participants who accepted the lump sum offer in December 2016 from the assets of the Pension Plan. The Company recognized a non-cash settlement charge of $20.7 million in the fourth quarter of 2016. The charge was actuarially determined based on the acceleration of the recognition of the accumulated unrecognized actuarial loss associated with the Pension Plan. We also sponsor an unfunded defined benefit postretirement medical plan that previously covered substantially all employees, as well as W&R advisors, who are independent contractors. The medical plan is contributory with participant contributions adjusted annually. The medical plan does not provide for post age 65 benefits with the exception of a small group of employees that were grandfathered when such 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. Qualified employees who retired on or before December 31, 2016 may continue to participate in retiree coverage under the plan. The plan amendment resulted in an $8.5 million curtailment gain, recorded as part of net other postretirement benefit costs. A reconciliation of the funded status of these plans and the assumptions related to the obligations at December 31, 2016, 2015 and 2014 are as follows: Other Pension Benefits Postretirement Benefits 2016 2015 2014 2016 2015 2014 (in thousands) Change in projected benefit obligation: Net benefit obligation at beginning of year $ Service cost Interest cost Benefits paid Actuarial (gain) loss Plan amendments — — — — — Retiree contributions — — — Curtailment gain — — — — — Net benefit obligation at end of year $ The accumulated benefit obligation for the Pension Plan was $150.1 million and $177.1 million at December 31, 2016 and 2015, respectively. Other Pension Benefits Postretirement Benefits 2016 2015 2014 2016 2015 2014 (in thousands) Change in plan assets: Fair value of plan assets at beginning of year $ — — — Actual return on plan assets — — — Employer contributions Retiree contributions — — — Benefits paid Fair value of plan assets at end of year $ — — — Funded status at end of year $ Other Pension Benefits Postretirement Benefits 2016 2015 2014 2016 2015 2014 (in thousands, except percentage data) Amounts recognized in the statement of financial position: Current liabilities $ — — — Noncurrent liabilities Net amount recognized at end of year $ Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income: Transition obligation $ — — — Prior service credit (cost) Accumulated gain (loss) Accumulated other comprehensive income (loss) Cumulative employer contributions in excess of (less than) net periodic benefit cost Net amount recognized at end of year $ Weighted average assumptions used to determine benefit obligation at December 31: Discount rate % % % % % % Rate of compensation increase % % % Not applicable The discount rate assumption used to determine the pension and other postretirement benefits obligations was based on the Aon Hewitt AA Only Above Median Yield Curve. This discount rate was determined separately for each plan by plotting the expected benefit payments from each plan against a yield curve of high quality, zero coupon bonds and calculating the single rate that would produce the same present value of liabilities as the yield curve. Our Pension Plan asset allocation at December 31, 2016 and 2015 is as follows: Percentage of Percentage of Plan Assets at Plan Assets at Plan assets by category December 31, 2016 December 31, 2015 Cash % % Equity securities: Domestic % % International % % Fixed income securities % % Gold bullion % % Total % % The primary investment objective is to maximize growth of the Pension Plan assets to meet the projected obligations to the beneficiaries over a long period of time and to do so in a manner that is consistent with the Company’s earnings strength and risk tolerance. Asset allocation is the most important decision in managing the assets and is reviewed regularly. The asset allocation policy considers the Company’s financial strength and long‑term asset class risk/return expectations since the obligations are long‑term in nature. As of December 31, 2016, our Pension Plan assets were invested in our Asset Strategy investment style and are managed by our in‑house investment professionals. Asset Strategy invests in the domestic or foreign market that is believed to offer the greatest probability of return or, alternatively, that provides the highest degree of safety in uncertain times. This style may allocate its assets among stocks, bonds and short‑term investments and since the allocation is dynamically managed and able to take advantage of opportunities as they are presented by the market, there is not a predetermined asset allocation. Dependent on the outlook for the U.S. and global economies, our investment managers make top‑down allocations among stocks, bonds, cash, precious metals and currency markets around the globe. After determining allocations, we seek the best opportunities within each market. Derivative instruments play an important role in this style’s investment process to manage risk and maximize stability of the assets in the portfolio. At December 31, 2016, the Pension Plan had a significant weighting of plan assets invested in equity securities, a concentration not typical of a classic pension plan. Risk management is primarily the responsibility of the investment portfolio manager, who incorporates it with day‑to‑day research and management. Although investment flexibility is essential to this style’s investment process, the Pension Plan does not invest in a number of asset classes that are commonly referred to as alternative investments; namely venture capital, direct real estate properties, timber, or oil, gas or other mineral explorations or development programs or leases. The Pension Plan also has a number of specific guidelines that serve to manage investment risk by placing limits on net securities exposure and concentration of assets within specific companies or industries. We determine the fair value of our Pension Plan assets using broad levels of inputs as defined by related accounting standards and categorized as Level 1, Level 2 or Level 3, as described in Note 3. The following tables summarize our Pension Plan assets as of December 31, 2016 and 2015. There were no transfers between levels for the years ended December 31, 2016 or 2015. 2016 Level 1 Level 2 Level 3 Total (in thousands) Equity securities: Domestic $ — — International — — Equity derivatives — — Fixed income securities: Mortgage-backed securities — — U.S.treasuries — — Corporate bond — — Foreign Bonds — — Gold bullion — — Total investment securities — Cash and other Total $ 2015 Level 1 Level 2 Level 3 Total (in thousands) Equity securities: Domestic $ — — International — — Equity derivatives — — Fixed income securities: Mortgage-backed securities — — U.S.treasuries — — Gold bullion — — Total investment securities — Cash and other Total $ The following table summarizes the activity of plan assets categorized as Level 3 for the years ended December 31, 2016 and 2015: 2016 2015 (in thousands) Level 3 plan assets at beginning of year $ — Sales — Valuation change — Level 3 plan assets at end of year $ — — The 7.50% expected long‑term rate of return on Pension Plan assets reflects management’s expectations of long‑term average rates of return on funds invested to provide for benefits included in the projected benefit obligations. The expected return is based on the outlook for inflation, fixed income returns and equity returns, while also considering historical returns, asset allocation and investment strategy. The plan expects a relatively high return because of the types of investments the portfolio incorporates, the long-term success the portfolio managers have had with generating returns in excess of passive management in those types of investments, and the past history of returns. The ability to use a high concentration of equities, especially international equities, presents portfolio managers the opportunity to earn higher returns than other investment strategies that are restricted to owning lower returning asset classes. The components of net periodic pension and other postretirement costs consisted of the following for the years ended December 31, 2016, 2015 and 2014: Other Pension Benefits Postretirement Benefits 2016 2015 2014 2016 2015 2014 (in thousands) Components of net periodic benefit cost: Service cost $ Interest cost Expected return on plan assets — — — Actuarial (gain) loss amortization — Prior service cost amortization Transition obligation amortization — — — Settlement loss — — — — — Curtailment gain — — — — — Total (1) $ (1) For the year ended December 31, 2016, $19.6 million of net periodic pension and other postretirement benefit costs were included in compensation and related costs and $7.6 million included in underwriting and distribution expense. The estimated net actuarial loss, prior service cost and net transition obligation for the Pension Plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2017 are $5.3 million, $123 thousand and $5 thousand, respectively. The estimated net actuarial gain and prior service credit for the postretirement medical plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2017 are $180 thousand and $4 thousand, respectively. The weighted average assumptions used to determine net periodic benefit cost for the years ended December 31, 2016, 2015 and 2014 are as follows: Other Pension Benefits Postretirement Benefits 2016 2015 2014 2016 2015 2014 Discount rate % % % % % % Expected return on plan assets % % % Not applicable Rate of compensation increase % % % Not applicable We expect the following benefit payments to be paid, which reflect future service as appropriate: Other Pension Postretirement Benefits Benefits (in thousands) 2017 $ 2018 2019 2020 2021 2022 through 2026 $ Our policy with respect to funding the Pension Plan is to fund at least the minimum required by the Employee Retirement Income Security Act of 1974, as amended, and not more than the maximum amount deductible for tax purposes. All contributions made to the Pension Plan for 2016, 2015 and 2014 were voluntary. A contribution of $10 million was made to the Pension Plan in February 2017 and no further contributions are planned for 2017. All Company contributions to other postretirement medical benefits are voluntary, as the postretirement medical plan is not funded and is not subject to any minimum regulatory funding requirements. The contributions for each year represent claims paid for medical expenses, and we anticipate making the 2017 expected contribution with cash generated from operations. Contributions by participants to the postretirement plan were $532 thousand, $349 thousand and $381 thousand for the years ended December 31, 2016, 2015 and 2014, respectively. For measurement purposes, the initial health care cost trend rate was 6.82% for 2016, 7.55% for 2015 and 8.04% for 2014. The health care cost trend rate reflects anticipated increases in health care costs. The initial assumed growth rate of 6.82% for 2016 is assumed to gradually decline over the next 9 years to a rate of 4.5%. The effect of a 1% annual increase in assumed cost trend rates would increase the December 31, 2016 accumulated postretirement benefit obligation by approximately $108 thousand, and the aggregate of the service and interest cost components of net periodic postretirement benefit cost by approximately $133 thousand. The effect of a 1% annual decrease in assumed cost trend rates would decrease the December 31, 2016 accumulated postretirement benefit obligation by approximately $97 thousand, and the aggregate of the service and interest cost components of net periodic postretirement benefit cost by approximately $112 thousand. We also sponsored the Waddell & Reed Financial, Inc. Supplemental Executive Retirement Plan, as amended and restated (the “SERP”), a non-qualified deferred compensation plan covering eligible employees. The SERP was adopted to supplement the annual pension benefit for certain senior executive officers that the Pension Plan was prevented from providing because of compensation and benefit limits in the Internal Revenue Code (the “IRC”). Each calendar year, the Compensation Committee of the Board of Directors (the “Compensation Committee”) credited participants’ SERP accounts with (i) an amount equal to 4% of the participant’s base salary, less the amount of the maximum employer matching contribution available under our 401(k) plan, and (ii) a non formula award, if any, as determined by the Compensation Committee in its discretion. There were no discretionary awards made to participants during 2016, 2015 or 2014. Additionally, each calendar year, participants’ accounts were credited (or charged) with an amount equal to the performance of certain hypothetical investment vehicles since the last preceding year. Upon a participant’s separation, or at such other time based on a pre-existing election by a participant, benefits accumulated under the SERP are payable in installments or in a lump sum. As of December 31, 2016 and 2015, the aggregate liability to participants was $3.8 million. Following a lump sum payment of $3.8 million in February 2017 to the sole remaining participant in the SERP, the Board of Directors terminated the SERP. At December 31, 2016, the accrued pension and postretirement liability recorded in the consolidated balance sheet was comprised of accrued pension costs of $36.4 million and a liability for postretirement benefits in the amount of $2.0 million. The accrued liability for SERP benefits of $3.8 million and the current portion of postretirement liability of $0.4 million is included in other current liabilities on the consolidated balance sheet. At December 31, 2015, the accrued pension and postretirement liability recorded on the consolidated balance sheet was comprised of accrued pension costs of $36.9 million, a liability for postretirement benefits in the amount of $8.1 million and an accrued liability for SERP benefits of $3.8 million. The current portion of postretirement liability of $0.3 million is included in other current liabilities on the consolidated balance sheet. |
Employee Savings Plan
Employee Savings Plan | 12 Months Ended |
Dec. 31, 2016 | |
Employee Savings Plan | |
Employee Savings Plan | 10. Employee Savings Plan We sponsor a defined contribution plan that qualifies under Section 401(k) of the IRC to provide retirement benefits to substantially all of our employees. As allowed under Section 401(k), the plan provides tax‑deferred salary deductions for eligible employees. Our matching contributions to the plan for the years ended December 31, 2016, 2015 and 2014 were $6.8 million, $6.6 million and $6.4 million, respectively. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2016 | |
Stockholders' Equity | |
Stockholders' Equity | 11. Stockholders’ Equity Earnings per Share For the years ended December 31, 2016, 2015 and 2014, earnings per share were computed as follows: 2016 2015 2014 Net income attributable to Waddell & Reed Financial, Inc. $ Weighted average shares outstanding, basic and diluted Earnings per share, basic and diluted $ Dividends We declared dividends on our common stock of $1.84 per share, $1.75 per share and $1.45 per share for the years ended December 31, 2016, 2015 and 2014, respectively. The Board of Directors approved a quarterly dividend on its common stock of $0.46 per share payable on February 1, 2017 to stockholders of record as of January 11, 2017. As of December 31, 2016 and 2015, other current liabilities included $38.2 million and $38.1 million, respectively, for dividends payable to stockholders. Common Stock Repurchases The Board of Directors has authorized the repurchase of our common stock in the open market and/or private purchases. The acquired shares may be used for corporate purposes, including as shares issued to employees in our stock‑based compensation programs. There were 2,320,726 shares, 1,955,509 shares and 2,252,152 shares repurchased in the open market or privately during the years ended December 31, 2016, 2015 and 2014, respectively. The repurchased shares include; 423,726 shares, 432,353 shares and 599,340 shares repurchased from employees who elected to tender shares to cover their minimum tax withholdings with respect to vesting of stock awards during the years ended December 31, 2016, 2015 and 2014, respectively. Accumulated Other Comprehensive Loss The following table summarizes other comprehensive income (loss) activity for the years ended December 31, 2016 and 2015. Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Year ended December 31, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2015 $ Other comprehensive income (loss) before reclassification Amount reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income (loss) Balance at December 31, 2016 $ $ Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Year ended December 31, 2015 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2014 $ Other comprehensive loss before reclassification Amount reclassified from accumulated other comprehensive loss Net current period other comprehensive loss Balance at December 31, 2015 $ $ Reclassifications from accumulated other comprehensive income and included in net income are summarized in the table that follows for the years ended December 31, 2016 and 2015: For the year ended December 31, 2016 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Sponsored funds investment gains $ Investment and other income (loss) Valuation allowance — Provision for income taxes Amortization and settlement of pension and postretirement benefits Underwriting and distribution expense and Compensation and related costs Total $ For the year ended December 31, 2015 Tax (expense) Pre-tax benefit Net of tax Statement of income line item (in thousands) Reclassifications included in net income: Realized gain on sale of sponsored investment securities $ Investment and other income (loss) Valuation allowance — Provision for income taxes Amortization of pension and postretirement benefits Underwriting and distribution expense and Compensation and related costs Total $ |
Redeemable Noncontrolling Inter
Redeemable Noncontrolling Interests | 12 Months Ended |
Dec. 31, 2016 | |
Redeemable Noncontrolling Interests. | |
Redeemable Noncontrolling Interests | 12. Redeemable Noncontrolling Interests The earnings related to redeemable noncontrolling interests included in net income for the year ended December 31, 2016 were $1.4 million. Noncontrolling interests in consolidated sponsored funds may fluctuate from period to period and are impacted by changes in the Company’s percentage of ownership in sponsored funds, changes in third party investment in sponsored funds and market volatility in the sponsored funds’ underlying investments. Year ended December 31, 2016 (in thousands) Redeemable noncontrolling interests in sponsored funds upon adoption of new consolidation accounting guidance on January 1, 2016 $ Redeemable noncontrolling interests in sponsored funds consolidated during the period Redeemable noncontrolling interests ownership change during the period Redeemable noncontrolling interests deconsolidation Net income attributable to redeemable noncontrolling interests Ending balance of redeemable noncontrolling interest in consolidated sponsored funds $ |
Share-Based Compensation
Share-Based Compensation | 12 Months Ended |
Dec. 31, 2016 | |
Share-Based Compensation | |
Share-Based Compensation | 13. Share‑Based Compensation During 2016 the Company utilized one stock based compensation plan: the Company 1998 Stock Incentive Plan, as amended and restated (the “SI Plan”). Two other plans, the Company 1998 Executive Stock Award Plan, as amended and restated, and the Company 1998 Non Employee Director Stock Award Plan, as amended and restated, had no outstanding awards, and, effective February 2016, the Board of Directors terminated both plans. The SI Plan allows us to grant equity compensation awards, including, among other awards, and nonvested stock as part of our overall compensation program to attract and retain key personnel and encourage a greater personal financial investment in the Company, thereby promoting the long-term growth of the Company. In April 2016, our stockholders approved amendments to the SI Plan to, among other things, increase by 5.6 million the number of shares available for awards. Following those amendments, a maximum of 35.6 million shares of common stock are authorized for issuance under the SI Plan and as of December 31, 2016, 3,467,465 shares of common stock were available for issuance under the SI Plan. In addition, we may make incentive payments under the Company 2003 Executive Incentive Plan, as amended and restated (the “EIP”) in the form of cash, stock options, nonvested stock or a combination thereof. Incentive awards paid under the EIP in the form of stock options or nonvested stock are issued out of shares reserved for issuance under the SI Plan. Generally, shares of common stock covered by terminated, surrendered or cancelled options, by forfeited nonvested stock, or by the forfeiture of other awards that do not result in issuance of shares of common stock are again available for awards under the plan from which they were terminated, surrendered, cancelled or forfeited. Nonvested stock awards are valued on the date of grant, have no purchase price and generally vest over four years in 331/3% increments on the second, third and fourth anniversaries of the grant date. However, nonvested stock awards granted on December 31, 2016 vest in 25% increments on the first anniversary of the grant date. The Company also issues nonvested stock awards to W&R financial advisors who are independent contractors. These awards have the same terms as awards issued to employees; however, changes in the Company’s share price result in variable compensation expense over the vesting period. Nonvested shares are forfeited upon the termination of employment with or service to the Company, as applicable, or service on the Board of Directors, dependent upon the circumstances of termination. Except for restrictions placed on the transferability of nonvested stock, holders of nonvested stock have full stockholders’ rights during the term of restriction, including voting rights and the rights to receive cash dividends. A summary of nonvested share activity and related fair value for the year ended December 31, 2016 follows: Weighted Average Nonvested Grant Date Stock Shares Fair Value Nonvested at December 31, 2015 $ Granted Vested Forfeited Nonvested at December 31, 2016 $ For the years ended December 31, 2016, 2015 and 2014, compensation expense related to nonvested stock totaled $51.5 million, $47.5 million and $54.1 million, respectively. The income tax benefit from the compensation expense related to nonvested stock was $19.2 million, $17.6 million and $20.1 million for the years ended December 31, 2016, 2015 and 2014, respectively. These benefits will be recognized upon vesting and may increase or decrease depending on the fair value of the shares on the date of vesting. As of December 31, 2016, the remaining unamortized expense of $112.5 million is expected to be recognized over a weighted average period of 2.7 years. The total fair value of shares vested (at vest date) during the years ended December 31, 2016, 2015 and 2014, was $26.7 million, $53.9 million and $104.8 million, respectively. The Company withholds a portion of each employee’s vested shares to satisfy the minimum tax withholding obligations of the Company with respect to vesting of the shares. |
Uniform Net Capital Rule Requir
Uniform Net Capital Rule Requirements | 12 Months Ended |
Dec. 31, 2016 | |
Uniform Net Capital Rule Requirements | |
Uniform Net Capital Rule Requirements | 14. Uniform Net Capital Rule Requirements Two of our subsidiaries, W&R and IDI are registered broker-dealers and members of the Financial Industry Regulatory Authority, Inc. Broker-dealers are subject to the SEC’s Uniform Net Capital Rule (Rule 15c3‑1), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15.0 to 1.0. The primary difference between net capital and stockholders’ equity is the non‑allowable assets that are excluded from net capital. A broker-dealer may elect not to be subject to the Aggregate Indebtedness Standard of paragraph (a)(1)(i) of Rule 15c3‑1, in which case net capital must exceed the greater of $250 thousand or 2% of aggregate debit items computed in accordance with the Formula for Determination of Reserve Requirements for broker-dealers. W&R made this election and thus is not subject to the aggregate indebtedness ratio as of December 31, 2016 or 2015. Net capital and aggregated indebtedness information for our broker-dealer subsidiaries is presented in the following table as of December 31, 2016 and 2015: 2016 2015 (in thousands) W&R IDI W&R IDI Net capital $ Required capital Excess of required capital $ Ratio of aggregate indebtedness to net capital Not Not applicable 2.50 to 1.0 applicable 2.56 to 1.0 |
Rental Expense and Lease Commit
Rental Expense and Lease Commitments | 12 Months Ended |
Dec. 31, 2016 | |
Rental Expense and Lease Commitments | |
Rental Expense and Lease Commitments | 15. Rental Expense and Lease Commitments We lease certain home office buildings, certain sales and other office space and equipment under long‑term operating leases. Rent expense was $24.3 million, $23.7 million and $22.6 million, for the years ended December 31, 2016, 2015 and 2014, respectively. Future minimum rental commitments under non‑cancelable operating leases are as follows: Year Commitments (in thousands) 2017 $ 2018 2019 2020 2021 Thereafter $ New leases are expected to be executed as existing leases expire. Thus, future minimum lease commitments are not expected to be materially different than those in 2016 |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions | |
Related Party Transactions | 16. Related Party Transactions We earn investment management fee revenues from the Funds and IGI Funds for which we act as an investment adviser, pursuant to an investment management agreement with each Fund. In addition, we have agreements with the Funds pursuant to Rule 12b‑1 under the Investment Company Act of 1940, as amended, pursuant to which distribution and service fees are collected from the Funds for distribution of mutual fund shares, for costs such as advertising and commissions paid to broker-dealers, and for providing ongoing services to shareholders of the Funds and/or maintaining shareholder accounts. We also earn service fee revenues by providing various services to the Funds and their shareholders pursuant to a shareholder servicing agreement with each Fund (except Ivy VIP) and an accounting service agreement with each Fund. Certain of our officers and directors are also officers and/or trustees for the various Funds for which we act as an investment adviser. These agreements are approved or renewed on an annual basis by each Fund’s board of trustees, including a majority of the disinterested members. Revenues for services provided or related to the Funds and IGI Funds for the years ended December 31, 2016, 2015 and 2014 are as follows: 2016 2015 2014 (in thousands) Investment management fees $ Rule 12b-1 service and distribution fees Shareholder service fees Total revenues $ Included in Funds and separate accounts receivable at December 31, 2016 and 2015 are receivables due from the Funds of $21.6 and $26.7 million respectively. |
Contingencies
Contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Contingencies | |
Contingencies | 17. Contingencies 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 Topic.” 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. In an action filed on April 18, 2016 in the District Court of Johnson County, Kansas, Hieu Phan and Audrey Ohman v. Ivy Investment Management Company, et. al. (Case No. I6CV02338 Div. 4), two individuals who allegedly purchased shares of certain affiliated registered investment companies (mutual funds) for which two of the Company’s subsidiaries provide investment management services filed a putative derivative action on behalf of the mutual funds alleging breach of fiduciary duty and breach of contract claims relating to investments held in the affiliated mutual funds by the Company's registered investment advisor subsidiaries, the trustees of two of the Company's affiliated mutual funds, and an officer of the Company (who plaintiffs subsequently voluntarily dismissed). On behalf of the mutual funds, plaintiffs seek monetary damages and demand a jury trial. That Court has set this case for trial on July 16, 2018 through August 10, 2018, although there can be no assurance that the trial will take place on those dates. The Company denies that any of its subsidiaries breached their fiduciary duties to, or committed a breach of the investment management agreement with, the mutual funds at issue. To date, no discovery has taken place. In the opinion of management, the ultimate resolution and outcome of this matter is uncertain. Given the preliminary nature of the proceedings and the Company's dispute over the merits of the claims, the Company is unable to estimate a range of reasonably possible loss, if any, that such matter may represent. While the ultimate resolution of this matter is uncertain, an adverse determination against the Company could have a material adverse impact on our business, financial condition and results of operations. |
Concentrations of Credit Risk
Concentrations of Credit Risk | 12 Months Ended |
Dec. 31, 2016 | |
Concentrations of Credit Risk | |
Concentrations of Credit Risk | 18. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents held. The Company maintains cash and cash equivalents with various financial institutions. Cash deposits maintained at financial institutions may exceed the federally insured limit. |
Selected Quarterly Information
Selected Quarterly Information (Unaudited) | 12 Months Ended |
Dec. 31, 2016 | |
Selected Quarterly Information (Unaudited) | |
Selected Quarterly Information (Unaudited) | 19. Selected Quarterly Information (Unaudited) Quarter First Second Third Fourth (in thousands) 2016 Total revenues $ Net income attributable to Waddell & Reed Financial Inc. $ Net income per share, basic and diluted $ Quarter First Second Third Fourth (in thousands) 2015 Total revenues $ Net income $ Net income per share, basic and diluted $ |
Summary of Significant Accoun30
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Description of Business and Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Amounts in the accompanying financial statements and notes are rounded to the nearest thousand unless otherwise stated. Certain amounts in the prior years’ financial statements have been reclassified for consistent presentation. The Company operates in one business segment as the Company’s management utilizes a consolidated approach to assess performance and allocate resources. |
Consolidation | Consolidation In the normal course of our business, we sponsor and manage various types of investment products. These investment products include open-end mutual funds, a closed-end mutual fund, privately offered funds, exchange-traded managed funds, and a Luxembourg SICAV. When creating and launching a new investment product, we typically fund the initial cash investment, commonly referred to as “seeding,” so that the investment product can generate an investment performance track record so that it is able to attract third party investors in the product. Our initial investment in a new product typically represents 100% of the ownership in that product. We generally redeem our investment in seeded products when the related product establishes a sufficient track record, when third party investments in the related product are sufficient to sustain the strategy, or when a decision is made to no longer pursue the strategy. The length of time we hold a majority interest in a product varies based on a number of factors, including market demand, market conditions and investment performance. Our exposure to risk in these investment products is generally limited to any equity investment we have and any earned but uncollected management or other fund-related service fees. In accordance with financial accounting standards, we consolidate certain sponsored investment products in which we have a controlling interest or the investment product meets the criteria of a Variable Interest Entity (“VIE”) and we are deemed to be the primary beneficiary. In order to make this determination, an analysis is performed to determine if the investment product is a VIE or a Voting Interest Entity (“VOE”). Assessing if an entity is a VIE or VOE involves judgment and analysis on an entity by entity basis. Factors included in this assessment include the legal organization of the entity, the Company’s contractual involvement with the entity and any implications resulting from or associated with related parties’ involvement with the entity. A VIE is an entity which does not have adequate equity to finance its activities without subordinated financial support, the equity investors do not have the normal characteristics of equity investors for a potential controlling financial interest as a group, or the voting rights are not proportional to their obligations to absorb the expected losses or their rights to receive the expected residual returns of the entity. The Company is deemed to be the primary beneficiary if it absorbs a majority of the VIE’s expected losses, expected residual returns, or both. If the Company is the primary beneficiary of a VIE, we are required to consolidate the assets, liabilities, results of operations and cash flows of the VIE into our consolidated financial statements. If an entity does not meet the criteria and is not considered a VIE, it is treated as a VOE, which is subject to traditional consolidation concepts based on ownership rights. Sponsored investments products that are considered VOEs are consolidated if we have a controlling financial interest in the entity absent substantive investor rights to replace the investment manager of the entity (kick-out rights). |
Use of Estimates | In the normal course of our business, we sponsor and manage various types of investment products. These investment products include open-end mutual funds, a closed-end mutual fund, privately offered funds, exchange-traded managed funds, and a Luxembourg SICAV. When creating and launching a new investment product, we typically fund the initial cash investment, commonly referred to as “seeding,” so that the investment product can generate an investment performance track record so that it is able to attract third party investors in the product. Our initial investment in a new product typically represents 100% of the ownership in that product. We generally redeem our investment in seeded products when the related product establishes a sufficient track record, when third party investments in the related product are sufficient to sustain the strategy, or when a decision is made to no longer pursue the strategy. The length of time we hold a majority interest in a product varies based on a number of factors, including market demand, market conditions and investment performance. Our exposure to risk in these investment products is generally limited to any equity investment we have and any earned but uncollected management or other fund-related service fees. In accordance with financial accounting standards, we consolidate certain sponsored investment products in which we have a controlling interest or the investment product meets the criteria of a Variable Interest Entity (“VIE”) and we are deemed to be the primary beneficiary. In order to make this determination, an analysis is performed to determine if the investment product is a VIE or a Voting Interest Entity (“VOE”). Assessing if an entity is a VIE or VOE involves judgment and analysis on an entity by entity basis. Factors included in this assessment include the legal organization of the entity, the Company’s contractual involvement with the entity and any implications resulting from or associated with related parties’ involvement with the entity. A VIE is an entity which does not have adequate equity to finance its activities without subordinated financial support, the equity investors do not have the normal characteristics of equity investors for a potential controlling financial interest as a group, or the voting rights are not proportional to their obligations to absorb the expected losses or their rights to receive the expected residual returns of the entity. The Company is deemed to be the primary beneficiary if it absorbs a majority of the VIE’s expected losses, expected residual returns, or both. If the Company is the primary beneficiary of a VIE, we are required to consolidate the assets, liabilities, results of operations and cash flows of the VIE into our consolidated financial statements. If an entity does not meet the criteria and is not considered a VIE, it is treated as a VOE, which is subject to traditional consolidation concepts based on ownership rights. Sponsored investments products that are considered VOEs are consolidated if we have a controlling financial interest in the entity absent substantive investor rights to replace the investment manager of the entity (kick-out rights). Use of Estimates GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the consolidated financial statements and accompanying notes, and related disclosures of commitments and contingencies. Estimates are used for, but are not limited to, depreciation and amortization, income taxes, valuation of assets, pension and postretirement obligations, and contingencies. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Actual results could differ from our estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include cash on hand and short‑term investments. We consider all highly liquid investments with maturities upon acquisition of 90 days or less to be cash equivalents. Cash and cash equivalents – restricted represents cash held for the benefit of customers and non-customers segregated in compliance with federal and other regulations. |
Disclosures About Fair Value of Financial Instruments | Disclosures About Fair Value of Financial Instruments Fair value of cash and cash equivalents, receivables and payables approximates carrying value. Fair value of long‑term debt is disclosed in Note 7. Fair values for investment securities are based on quoted market prices, where available. Otherwise, fair values for investment securities are based on Level 2 or Level 3 inputs detailed in Note 3. |
Investment Securities and Investments in Sponsored Funds | Investment Securities and Investments in Sponsored Funds Our investments are comprised of United States, government obligations, investments in sponsored funds and sponsored privately offered funds. Sponsored funds, which include the 1940 Act Mutual Funds, IVH, the IGI Funds and the LLCs, are investments we have made for both general corporate investment purposes and to provide seed capital for new investment products. The Company has classified its investments in certain sponsored funds as either equity method investments (when the Company owns between 20% and 50% of the fund) or as available for sale investments (when the Company owns less than 20% of the fund) as described in Note 3. Investments held by our broker-dealer entities or certain investments that are anticipated to be purchased and sold on a more frequent basis are classified as trading. Unrealized holding gains and losses on securities available for sale, net of related tax effects, are excluded from earnings until realized and are reported as a separate component of comprehensive income. For trading securities, unrealized holding gains and losses are included in earnings. Realized gains and losses are computed using the specific identification method for investment securities, other than sponsored funds. For sponsored funds, realized gains and losses are computed using the average cost method. Substantially all of the Company’s equity method investees are investment companies which record their underlying investments at fair value. Therefore, under the equity method of accounting, our share of the investee's underlying net income or loss is predominantly representative of fair value adjustments in the investments held by the equity method investee. Our share of the investee's net income or loss is based on the most current information available and is recorded as a net gain or loss on investments within investment and other income (loss). Our available for sale investments are reviewed each quarter and adjusted for other than temporary declines in value. We consider factors affecting the issuer and the industry in which the issuer operates, general market trends including interest rates, and our ability and intent to hold an investment until it has recovered. Consideration is given to the length of time an investment’s market value has been below carrying value as well as prospects for recovery to carrying value. When a decline in the fair value of equity securities is determined to be other than temporary, the unrealized loss recorded net of tax in other comprehensive income is realized as a charge to net income, and a new cost basis is established. When a decline in the fair value of debt securities is determined to be other than temporary, the amount of the impairment recognized in earnings depends on whether the Company intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis less any current‑period credit loss. If so, the other than temporary impairment recognized in earnings is equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If not, the portion of the impairment related to the credit loss is recognized in earnings while the portion of the impairment related to other factors is recognized in other comprehensive income, net of tax. |
Property and Equipment | Property and Equipment Property and equipment are carried at cost. The costs of improvements that extend the life of a fixed asset are capitalized, while the costs of repairs and maintenance are expensed as incurred. Depreciation and amortization are calculated and recorded using the straight‑line method over the estimated useful life of the related asset (or lease term if shorter), generally three to 10 years for furniture and fixtures; one to 10 years for computer software; one to five years for data processing equipment; one to 30 years for buildings; two to 26 years for other equipment; and up to 15 years for leasehold improvements, which is the lesser of the lease term or expected life. |
Software Developed for Internal Use | Software Developed for Internal Use Certain internal costs incurred in connection with developing or obtaining software for internal use are capitalized in accordance with ASC 350, “Intangibles – Goodwill and Other Topic.” Internal costs capitalized are included in property and equipment, net in the consolidated balance sheets, and were $13.3 million and $13.9 million as of December 31, 2016 and 2015, respectively. Amortization begins when the software project is complete and ready for its intended use and continues over the estimated useful life, generally one to 10 years. |
Goodwill and Identifiable Intangible Assets | Goodwill and Identifiable Intangible Assets Goodwill represents the excess of cost over fair value of the identifiable net assets of acquired companies. Indefinite-lived intangible assets represent advisory and subadvisory management contracts for managed assets obtained in acquisitions. The Company considers these contracts to be indefinite-lived intangible assets as they are expected to be renewed without significant cost or modification of terms. Goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if events or circumstances indicate that the carrying value may not be recoverable. Goodwill and intangible assets require significant management estimates and judgment, including the valuation determination in connection with the initial purchase price allocation and the ongoing evaluation for impairment. Additional information related to the indefinite-lived intangible assets is included in Note 6. |
Deferred Sales Commissions | Deferred Sales Commissions We defer certain costs, principally sales commissions and related compensation, which are paid to financial advisors and broker-dealers in connection with the sale of certain mutual fund shares sold without a front-end load sales charge. The costs incurred at the time of the sale of Class B shares sold prior to January 1, 2014 are amortized on a straight-line basis over five years, which approximates the expected life of the shareholders’ investments. Effective January 1, 2014, the Company suspended sales of Class B shares. The costs incurred at the time of the sale of Class C shares are amortized on a straight-line basis over 12 months. Prior to June 16, 2014, the costs incurred at the time of the sale of shares for certain fee-based asset allocation products were deferred and amortized on a straight-line basis, not to exceed three years. We recover deferred sales commissions and related compensation through Rule 12b-1 and other distribution fees, which are paid on the Class B and Class C shares of the Advisors Funds and Ivy Funds, along with CDSCs paid by shareholders who redeem their shares prior to completion of the specified holding period (three years for shares of certain fee-based asset allocation products sold prior to June 16, 2014, six years for a Class B share and 12 months for a Class C share), as well as through client fees paid on the asset allocation products sold prior to June 16, 2014. Effective June 16, 2014 we no longer assess a CDSC to investors upon early redemption of fee-based asset allocation products and amounts deferred for sales commissions and related compensation are classified in the prepaid and other current asset and other non-current assets in our consolidated balance sheet. Should we lose our ability to recover deferred sales commissions through distribution fees or CDSCs, the value of these assets would immediately decline, as would future cash flows. We periodically review the recoverability of the deferred sales commission assets as events or changes in circumstances indicate that their carrying amount may not be recoverable and adjust them accordingly. Impairment adjustments are recognized in operating income as a component of amortization of deferred sales commissions. |
Revenue Recognition | Revenue Recognition Investment Management and Advisory Fees We recognize investment management fees as earned over the period in which services are rendered. We charge 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 the IGI Funds and from institutional and separate accounts are charged 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. Our investment advisory business receives research products and services from broker-dealers through “soft dollar” arrangements. Consistent with the “soft dollar” safe harbor established by Section 28(e) of the Securities Exchange Act of 1934, as amended, the investment advisory business does not have any contractual obligation requiring it to pay for research products and services obtained through soft dollar arrangements with brokers. As a result, we present “soft dollar” arrangements on a net basis. 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. Distribution, Underwriter and Shareholder Service Fees Underwriting and distribution commission revenues resulting from the sale of investment products are recognized 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. 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 Class B, C, E and Ivy Funds 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% and for the Class I, R6 and Advisors Funds Y shares, which do not charge a service fee. The Funds’ Class B and 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. Fee‑based asset allocation revenues are charged 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 and are recognized monthly. Fees collected from financial advisors for services related to technology and errors and omissions insurance are recorded in underwriting and distribution fees on a gross basis, as the Company is the primary obligor in these arrangements. Shareholder service fees are recognized monthly and are calculated based on the number of accounts or assets under management as applicable. Other administrative service fee revenues are recognized when contractual obligations are fulfilled or as services are provided. |
Advertising and Promotion | Advertising and Promotion We expense all advertising and promotion costs as the advertising or event takes place. Advertising expense was $9.4 million, $15.7 million and $15.7 million for the years ended December 31, 2016, 2015 and 2014, respectively, and is classified in both underwriting and distribution expense and general and administrative expense in the consolidated statements of income. |
Leases | Leases The Company leases office space under various leasing arrangements. Most lease agreements contain renewal options, rent escalation clauses and/or other inducements provided by the landlord. As leases expire, they are typically renewed or replaced in the ordinary course of business. Rent expense is recorded on a straight-line basis, including escalations and inducements, over the term of the lease. |
Share-Based Compensation | Share‑Based Compensation We account for share‑based compensation expense using the fair value method. Under the fair value method, share‑based compensation expense reflects the fair value of share‑based awards measured at grant date, is recognized over the service period, and is adjusted each period for anticipated forfeitures. The Company also issues share‑based awards to our financial advisors, who are independent contractors, and to our Board of Directors. Changes in the Company’s share price result in variable compensation expense over the vesting period of awards granted to our financial advisors and Board of Directors. |
Accounting for Income Taxes | Accounting for Income Taxes Income tax expense is based on pre-tax financial accounting income, including adjustments made for the recognition or derecognition related to uncertain tax positions. The recognition or derecognition of income tax expense related to uncertain tax positions is determined under the guidance as prescribed by “ Income Taxes Topic ,” ASC 740. Deferred tax assets and liabilities are recognized for the future tax attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is recognized for deferred tax assets if, based on available evidence, it is more likely than not that all or some portion of the asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. |
Investment Securities (Tables)
Investment Securities (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Investment Securities | |
Schedule of investment securities | Investment securities at December 31, 2016 and 2015 are as follows: December 31, December 31, 2016 2015 (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds Total available for sale securities Trading securities: Mortgage-backed securities Corporate bond — Common stock Consolidated sponsored funds — Sponsored funds Total trading securities Equity method securities: Sponsored funds Sponsored privately offered funds Total equity method securities Total securities $ |
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 December 31, 2016: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds — $ The following is a summary of the gross unrealized gains (losses) related to securities classified as available for sale at December 31, 2015: Amortized Unrealized Unrealized cost gains losses Fair value (in thousands) Available for sale securities: Sponsored funds $ Sponsored privately offered funds — $ |
Summary of available for sale sponsored funds with fair values below carrying values | A summary of available for sale sponsored funds with fair values below carrying values at December 31, 2016 is as follows: Less than 12 months 12 months or longer Total Unrealized Unrealized Unrealized December 31, 2016 Fair value losses Fair value losses Fair value losses (in thousands) Sponsored funds $ |
Summary of balances related to consolidated sponsored funds as well the company’s net interest in these funds | The following table details the balances related to consolidated sponsored funds at December 31, 2016, as well as the Company’s net interest in these funds: December 31, 2016 (in thousands) Cash $ Investments Other assets Other liabilities Redeemable noncontrolling interests Net interest in consolidated sponsored funds $ |
Derivative Financial Instrume32
Derivative Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
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 derivative financial instruments held in certain consolidated sponsored funds as of December 31, 2016: December 31, 2016 Balance sheet location Fair value (in thousands) Total return swap contracts Other current liabilities $ |
Schedule of net losses recognized in income of derivative financial instrument | The following is a summary of net losses recognized in income for the year ended December 31, 2016: Income statement Year ended location December 31, 2016 (in thousands) Total return swap contracts Investment and other income (loss) $ |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property and Equipment | |
Schedule of property and equipment, net | Estimated 2016 2015 useful lives (in thousands) Leasehold improvements $ 1 - 15 years Furniture and fixtures 3 - 10 years Equipment 2 - 26 years Computer software 1 - 10 years Data processing equipment 1 - 5 years Buildings 1 - 30 years Land Property and equipment, at cost Accumulated depreciation Property and equipment, net $ |
Goodwill and Identifiable Int34
Goodwill and Identifiable Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Identifiable Intangible Assets | |
Schedule of goodwill and identifiable intangible assets | December 31, December 31, 2016 2015 (in thousands) Goodwill $ Mutual fund management advisory contracts Mutual fund management subadvisory contract Other — Total identifiable intangible assets Total $ |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes | |
Schedule of provision for income taxes | 2016 2015 2014 (in thousands) Current taxes: Federal $ State Foreign Deferred taxes Provision for income taxes $ |
Schedule of reconciliation of statutory federal income tax rate with effective income tax rate | 2016 2015 2014 Statutory federal income tax rate % % % State income taxes, net of federal tax benefits State tax incentives Valuation allowance on losses capital in nature Other items Effective income tax rate % % % |
Schedule of deferred tax liabilities and deferred tax assets | 2016 2015 (in thousands) Deferred tax liabilities: Deferred sales commissions $ Property and equipment Benefit plans Identifiable intangible assets Prepaid expenses Total gross deferred liabilities Deferred tax assets: Accrued compensation Additional pension and postretirement liability Other accrued expenses Unrealized losses on investment securities and partnerships Capital loss carryforwards Nonvested stock Unused state tax credits State net operating loss carryforwards Other Total gross deferred assets Valuation allowance Net deferred tax asset $ |
Summary of the Company's reconciliation of unrecognized tax benefits, excluding penalties and interest | 2016 2015 2014 (in thousands) Balance at January 1 $ Increases during the year: Gross increases - tax positions in prior period Gross increases - current-period tax positions Decreases during the year: Gross decreases - tax positions in prior period Decreases due to settlements with taxing authorities Decreases due to lapse of statute of limitations Balance at December 31 $ |
Pension Plan and Postretireme36
Pension Plan and Postretirement Benefits Other Than Pension (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Pension Plan and Postretirement Benefits Other Than Pension | |
Schedule of changes in net funded status, disclosure of amounts recognized in the balance sheet, and the assumptions used to determine the benefit obligation | Other Pension Benefits Postretirement Benefits 2016 2015 2014 2016 2015 2014 (in thousands) Change in projected benefit obligation: Net benefit obligation at beginning of year $ Service cost Interest cost Benefits paid Actuarial (gain) loss Plan amendments — — — — — Retiree contributions — — — Curtailment gain — — — — — Net benefit obligation at end of year $ |
Schedule of pension plan asset allocation | Other Pension Benefits Postretirement Benefits 2016 2015 2014 2016 2015 2014 (in thousands) Change in plan assets: Fair value of plan assets at beginning of year $ — — — Actual return on plan assets — — — Employer contributions Retiree contributions — — — Benefits paid Fair value of plan assets at end of year $ — — — Funded status at end of year $ Other Pension Benefits Postretirement Benefits 2016 2015 2014 2016 2015 2014 (in thousands, except percentage data) Amounts recognized in the statement of financial position: Current liabilities $ — — — Noncurrent liabilities Net amount recognized at end of year $ Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income: Transition obligation $ — — — Prior service credit (cost) Accumulated gain (loss) Accumulated other comprehensive income (loss) Cumulative employer contributions in excess of (less than) net periodic benefit cost Net amount recognized at end of year $ Weighted average assumptions used to determine benefit obligation at December 31: Discount rate % % % % % % Rate of compensation increase % % % Not applicable |
Summary of entity's pension plan assets | Percentage of Percentage of Plan Assets at Plan Assets at Plan assets by category December 31, 2016 December 31, 2015 Cash % % Equity securities: Domestic % % International % % Fixed income securities % % Gold bullion % % Total % % |
Summary of entity's pension plan assets fair value | 2016 Level 1 Level 2 Level 3 Total (in thousands) Equity securities: Domestic $ — — International — — Equity derivatives — — Fixed income securities: Mortgage-backed securities — — U.S.treasuries — — Corporate bond — — Foreign Bonds — — Gold bullion — — Total investment securities — Cash and other Total $ 2015 Level 1 Level 2 Level 3 Total (in thousands) Equity securities: Domestic $ — — International — — Equity derivatives — — Fixed income securities: Mortgage-backed securities — — U.S.treasuries — — Gold bullion — — Total investment securities — Cash and other Total $ |
Summary of the activity of plan assets categorized as Level 3 | 2016 2015 (in thousands) Level 3 plan assets at beginning of year $ — Sales — Valuation change — Level 3 plan assets at end of year $ — — |
Schedule of components of net periodic pension and other postretirement costs | Other Pension Benefits Postretirement Benefits 2016 2015 2014 2016 2015 2014 (in thousands) Components of net periodic benefit cost: Service cost $ Interest cost Expected return on plan assets — — — Actuarial (gain) loss amortization — Prior service cost amortization Transition obligation amortization — — — Settlement loss — — — — — Curtailment gain — — — — — Total (1) $ |
Schedule of weighted average assumptions used to determine net periodic cost and benefit obligation | Other Pension Benefits Postretirement Benefits 2016 2015 2014 2016 2015 2014 Discount rate % % % % % % Expected return on plan assets % % % Not applicable Rate of compensation increase % % % Not applicable |
Schedule of expected benefit payments to be paid | Other Pension Postretirement Benefits Benefits (in thousands) 2017 $ 2018 2019 2020 2021 2022 through 2026 $ |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Stockholders' Equity | |
Components of basic and diluted earnings per share | 2016 2015 2014 Net income attributable to Waddell & Reed Financial, Inc. $ Weighted average shares outstanding, basic and diluted Earnings per share, basic and diluted $ |
Summary of other comprehensive income (loss) activity | Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Year ended December 31, 2016 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2015 $ Other comprehensive income (loss) before reclassification Amount reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income (loss) Balance at December 31, 2016 $ $ Change in valuation allowance for unrealized Pension and Total Unrealized gains postretirement accumulated gains (losses) (losses) on benefits other on investment investment unrealized comprehensive Year ended December 31, 2015 securities securities gains (losses) income (loss) (in thousands) Balance at December 31, 2014 $ Other comprehensive loss before reclassification Amount reclassified from accumulated other comprehensive loss Net current period other comprehensive loss Balance at December 31, 2015 $ $ |
Redeemable Noncontrolling Int38
Redeemable Noncontrolling Interests (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Redeemable Noncontrolling Interests. | |
Schedule of rollforward of redeemable noncontrolling interests in consolidated sponsored funds | Year ended December 31, 2016 (in thousands) Redeemable noncontrolling interests in sponsored funds upon adoption of new consolidation accounting guidance on January 1, 2016 $ Redeemable noncontrolling interests in sponsored funds consolidated during the period Redeemable noncontrolling interests ownership change during the period Redeemable noncontrolling interests deconsolidation Net income attributable to redeemable noncontrolling interests Ending balance of redeemable noncontrolling interest in consolidated sponsored funds $ |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Share-Based Compensation | |
Summary of nonvested share activity and related fair value | Weighted Average Nonvested Grant Date Stock Shares Fair Value Nonvested at December 31, 2015 $ Granted Vested Forfeited Nonvested at December 31, 2016 $ |
Uniform Net Capital Rule Requ40
Uniform Net Capital Rule Requirements (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Uniform Net Capital Rule Requirements | |
Schedule of net capital and aggregated indebtedness information for broker/dealer subsidiaries | 2016 2015 (in thousands) W&R IDI W&R IDI Net capital $ Required capital Excess of required capital $ Ratio of aggregate indebtedness to net capital Not Not applicable 2.50 to 1.0 applicable 2.56 to 1.0 |
Rental Expense and Lease Comm41
Rental Expense and Lease Commitments (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Rental Expense and Lease Commitments | |
Schedule of future minimum rental commitments under non-cancelable operating leases | Year Commitments (in thousands) 2017 $ 2018 2019 2020 2021 Thereafter $ |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions | |
Schedule of revenues for services provided or related to the Funds and IGI | 2016 2015 2014 (in thousands) Investment management fees $ Rule 12b-1 service and distribution fees Shareholder service fees Total revenues $ |
Selected Quarterly Informatio43
Selected Quarterly Information (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Selected Quarterly Information (Unaudited) | |
Schedule of selected quarterly Information | Quarter First Second Third Fourth (in thousands) 2016 Total revenues $ Net income attributable to Waddell & Reed Financial Inc. $ Net income per share, basic and diluted $ Quarter First Second Third Fourth (in thousands) 2015 Total revenues $ Net income $ Net income per share, basic and diluted $ |
Summary of Significant Accoun44
Summary of Significant Accounting Policies - Basis of Presentation and Consolidation (Details) | 12 Months Ended |
Dec. 31, 2016item | |
Summary of Significant Accounting Policies | |
Number of operating business segments | 1 |
Summary of Significant Accoun45
Summary of Significant Accounting Policies - Summary of property and equipment (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Summary of property and equipment | ||
Internal costs capitalized | $ 13.3 | $ 13.9 |
Furniture and fixtures | Minimum | ||
Summary of property and equipment | ||
Estimated useful lives | 3 years | |
Furniture and fixtures | Maximum | ||
Summary of property and equipment | ||
Estimated useful lives | 10 years | |
Computer software | Minimum | ||
Summary of property and equipment | ||
Estimated useful lives | 1 year | |
Computer software | Maximum | ||
Summary of property and equipment | ||
Estimated useful lives | 10 years | |
Data processing equipment | Minimum | ||
Summary of property and equipment | ||
Estimated useful lives | 1 year | |
Data processing equipment | Maximum | ||
Summary of property and equipment | ||
Estimated useful lives | 5 years | |
Buildings | Minimum | ||
Summary of property and equipment | ||
Estimated useful lives | 1 year | |
Buildings | Maximum | ||
Summary of property and equipment | ||
Estimated useful lives | 30 years | |
Other equipment | Minimum | ||
Summary of property and equipment | ||
Estimated useful lives | 2 years | |
Other equipment | Maximum | ||
Summary of property and equipment | ||
Estimated useful lives | 26 years | |
Leasehold improvements | Minimum | ||
Summary of property and equipment | ||
Estimated useful lives | 1 year | |
Leasehold improvements | Maximum | ||
Summary of property and equipment | ||
Estimated useful lives | 15 years |
Summary of Significant Accoun46
Summary of Significant Accounting Policies - Deferred Sales Commissions and Revenue Recognition (Details) | 12 Months Ended |
Dec. 31, 2016 | |
Class B | |
Deferred Sales Commissions | |
Amortization period of the cost incurred at the time of sale | 5 years |
Required holding period of shares | 6 years |
Maximum service plan fee (as a percent) | 0.25% |
Maximum distribution plan fee (as a percent) | 0.75% |
Class C | |
Deferred Sales Commissions | |
Amortization period of the cost incurred at the time of sale | 12 months |
Required holding period of shares | 12 months |
Maximum service plan fee (as a percent) | 0.25% |
Maximum distribution plan fee (as a percent) | 0.75% |
Asset allocation product | |
Deferred Sales Commissions | |
Required holding period of shares | 3 years |
Asset allocation product | Maximum | |
Deferred Sales Commissions | |
Amortization period of the cost incurred at the time of sale | 3 years |
Class A | |
Deferred Sales Commissions | |
Maximum service plan fee (as a percent) | 0.25% |
Maximum distribution plan fee (as a percent) | 0.25% |
Class A | Maximum | |
Deferred Sales Commissions | |
Sales charge (as a percent) | 5.75% |
Class E | |
Deferred Sales Commissions | |
Maximum service plan fee (as a percent) | 0.25% |
Class E | Maximum | |
Deferred Sales Commissions | |
Sales charge (as a percent) | 5.75% |
Ivy Funds Y | |
Deferred Sales Commissions | |
Maximum service plan fee (as a percent) | 0.25% |
Class R | |
Deferred Sales Commissions | |
Maximum service plan fee (as a percent) | 0.50% |
Summary of Significant Accoun47
Summary of Significant Accounting Policies - Advertising and Promotion (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Advertising and Promotion | |||
Advertising expense | $ 9.4 | $ 15.7 | $ 15.7 |
New Accounting Guidance (Detail
New Accounting Guidance (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Long-term Debt, Excluding Current Maturities | $ 189,605 | $ 189,432 |
Scenario, Previously Reported | ||
Debt issuance costs, current | 200 | |
Debt issuance costs, non-current | $ 400 |
Investment Securities - Investm
Investment Securities - Investment securities and summary of the gains (losses) related to securities (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2016 | |
Available for sale securities: | ||
Amortized cost | $ 47,300 | $ 129,692 |
Unrealized gains | 759 | 1,133 |
Unrealized losses | (6,682) | (7,449) |
Fair value | 41,377 | 123,376 |
Trading securities: | ||
Fair value | 29,813 | 175,365 |
Unrealized losses | 2,100 | |
Equity method securities | ||
Equity method securities | 220,553 | 30,009 |
Total investment securities | 291,743 | 328,750 |
Transfers to equity method securities | 160,200 | |
Sponsored funds | ||
Available for sale securities: | ||
Amortized cost | 46,800 | 129,427 |
Unrealized gains | 434 | 828 |
Unrealized losses | (6,682) | (7,449) |
Fair value | 40,552 | 122,806 |
Trading securities: | ||
Fair value | 29,701 | 29,541 |
Equity method securities | ||
Equity method securities | 217,380 | 26,775 |
Sponsored privately offered funds | ||
Available for sale securities: | ||
Amortized cost | 500 | 265 |
Unrealized gains | 325 | 305 |
Fair value | 825 | 570 |
Equity method securities | ||
Equity method securities | 3,173 | 3,234 |
Total investment securities | 4,000 | 3,800 |
Mortgage-backed securities | ||
Trading securities: | ||
Fair value | 20 | 13 |
Corporate bonds | ||
Trading securities: | ||
Fair value | 5 | |
Common Stock | ||
Trading securities: | ||
Fair value | $ 87 | 101 |
Consolidated Sponsored Funds | ||
Trading securities: | ||
Fair value | $ 145,710 |
Investment Securities - Sponsor
Investment Securities - Sponsored Privately Offered Funds (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Investment Securities | |||
Total investment securities | $ 328,750 | $ 291,743 | |
Investment securities, sold at fair value | 234,400 | 102,200 | $ 301,000 |
Net realized gain recognized from sale of available for sale securities | 3,600 | 3,000 | 5,100 |
Available for sale securities, sold at fair value | 98,200 | 31,600 | 149,800 |
Net realized gain (loss) recognized from sale of trading securities | 600 | 4,100 | |
Sales of trading securities | 65,900 | $ 151,200 | |
Net realized gain (loss) on equity method investments | (2,300) | (500) | |
Sale of equity method investments | 58,700 | 5,300 | |
Sponsored privately offered funds | |||
Investment Securities | |||
Total investment securities | $ 3,800 | $ 4,000 |
Investment Securities - Availab
Investment Securities - Available for sale sponsored funds with fair values below carrying values (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Fair value | |
Less than 12 months | $ 71,051 |
12 months or longer | 34,182 |
Total temporarily impaired securities | 105,233 |
Unrealized losses | |
Less than 12 months | (1,834) |
12 months or longer | (5,615) |
Total Unrealized losses on temporarily impaired securities | $ (7,449) |
Investment Securities - Consoli
Investment Securities - Consolidated sponsored funds (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Investment Securities | ||||
Cash | $ 555,102 | $ 558,495 | $ 566,621 | $ 487,845 |
Redeemable noncontrolling interests | (10,653) | |||
Consolidated Sponsored Funds | ||||
Investment Securities | ||||
Cash | 6,885 | |||
Investments | 145,710 | |||
Other assets | 763 | |||
Other liabilities | (390) | |||
Redeemable noncontrolling interests | (10,653) | |||
Net interest in consolidated sponsored funds | 142,315 | $ 0 | ||
Deconsolidated sponsored funds value | $ 44,200 |
Investment Securities - Fair va
Investment Securities - Fair value of investment securities (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Fair value of investments | ||
Available-for-sale Securities | $ 123,376 | $ 41,377 |
Trading Securities | 175,365 | 29,813 |
Equity method securities | 30,009 | 220,553 |
Total investment securities | 328,750 | 291,743 |
Amount of transfer between levels | 0 | 0 |
Total | ||
Fair value of investments | ||
Total investment securities | 328,750 | 291,743 |
Sponsored funds | ||
Fair value of investments | ||
Available-for-sale Securities | 122,806 | 40,552 |
Trading Securities | 29,541 | 29,701 |
Equity method securities | 26,775 | 217,380 |
Sponsored funds | Total | ||
Fair value of investments | ||
Available-for-sale Securities | 122,806 | 40,552 |
Trading Securities | 29,541 | 29,701 |
Equity method securities | 26,775 | 217,380 |
Sponsored privately offered funds | ||
Fair value of investments | ||
Available-for-sale Securities | 570 | 825 |
Equity method securities | 3,234 | 3,173 |
Total investment securities | 3,800 | 4,000 |
Sponsored privately offered funds | Total | ||
Fair value of investments | ||
Available-for-sale Securities | 570 | 825 |
Equity method securities | 3,234 | 3,173 |
Mortgage-backed securities | ||
Fair value of investments | ||
Trading Securities | 13 | 20 |
Mortgage-backed securities | Total | ||
Fair value of investments | ||
Trading Securities | 13 | 20 |
Corporate bonds | ||
Fair value of investments | ||
Trading Securities | 5 | |
Corporate bonds | Total | ||
Fair value of investments | ||
Trading Securities | 5 | |
Common Stock | ||
Fair value of investments | ||
Trading Securities | 101 | 87 |
Common Stock | Total | ||
Fair value of investments | ||
Trading Securities | 101 | 87 |
Consolidated Sponsored Funds | ||
Fair value of investments | ||
Trading Securities | 145,710 | |
Consolidated Sponsored Funds | Total | ||
Fair value of investments | ||
Trading Securities | 145,710 | |
Level 1 | ||
Fair value of investments | ||
Total investment securities | 280,070 | 287,720 |
Level 1 | Sponsored funds | ||
Fair value of investments | ||
Available-for-sale Securities | 122,806 | 40,552 |
Trading Securities | 29,541 | 29,701 |
Equity method securities | 26,775 | 217,380 |
Level 1 | Common Stock | ||
Fair value of investments | ||
Trading Securities | 101 | 87 |
Level 1 | Consolidated Sponsored Funds | ||
Fair value of investments | ||
Trading Securities | 100,847 | |
Level 2 | ||
Fair value of investments | ||
Total investment securities | 44,876 | 25 |
Level 2 | Mortgage-backed securities | ||
Fair value of investments | ||
Trading Securities | 13 | 20 |
Level 2 | Corporate bonds | ||
Fair value of investments | ||
Trading Securities | 5 | |
Level 2 | Consolidated Sponsored Funds | ||
Fair value of investments | ||
Trading Securities | 44,863 | |
Other Assets Not Held at Fair Value | ||
Fair value of investments | ||
Total investment securities | 3,804 | 3,998 |
Other Assets Not Held at Fair Value | Sponsored privately offered funds | ||
Fair value of investments | ||
Available-for-sale Securities | 570 | 825 |
Equity method securities | $ 3,234 | $ 3,173 |
Derivative Financial Instrume54
Derivative Financial Instruments (Details) - Not designated as a hedge $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($)contract | |
Total return swap contracts | |
Derivative Financial Instruments | |
Number of contracts | contract | 3 |
Notional value | $ 160,200 |
Cash collateral with the counterparties | 7,100 |
Total return swap contracts | Investment and other income (loss) | |
Derivative Financial Instruments | |
Net gains (losses) recognized in income | (31,974) |
Total return swap contracts | Other current liabilities | |
Derivative Financial Instruments | |
Fair value | $ 475 |
Sponsored funds | |
Derivative Financial Instruments | |
Investment ownership interest (as a percent) | 93.00% |
Sponsored funds | Total return swap contracts | |
Derivative Financial Instruments | |
Investment ownership interest (as a percent) | 81.00% |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Summary of property and equipment | |||
Property and equipment, at cost | $ 208,484 | $ 205,413 | |
Accumulated depreciation | (106,035) | (99,979) | |
Property and equipment, net | 102,449 | 105,434 | |
Depreciation | 18,359 | 16,046 | $ 14,634 |
Leasehold improvements | |||
Summary of property and equipment | |||
Property and equipment, at cost | $ 22,426 | 21,741 | |
Leasehold improvements | Minimum | |||
Summary of property and equipment | |||
Estimated useful lives | 1 year | ||
Leasehold improvements | Maximum | |||
Summary of property and equipment | |||
Estimated useful lives | 15 years | ||
Furniture and fixtures | |||
Summary of property and equipment | |||
Property and equipment, at cost | $ 30,501 | 29,462 | |
Furniture and fixtures | Minimum | |||
Summary of property and equipment | |||
Estimated useful lives | 3 years | ||
Furniture and fixtures | Maximum | |||
Summary of property and equipment | |||
Estimated useful lives | 10 years | ||
Equipment | |||
Summary of property and equipment | |||
Property and equipment, at cost | $ 20,616 | 20,901 | |
Equipment | Minimum | |||
Summary of property and equipment | |||
Estimated useful lives | 2 years | ||
Equipment | Maximum | |||
Summary of property and equipment | |||
Estimated useful lives | 26 years | ||
Computer software | |||
Summary of property and equipment | |||
Property and equipment, at cost | $ 100,941 | 96,310 | |
Computer software | Minimum | |||
Summary of property and equipment | |||
Estimated useful lives | 1 year | ||
Computer software | Maximum | |||
Summary of property and equipment | |||
Estimated useful lives | 10 years | ||
Data processing equipment | |||
Summary of property and equipment | |||
Property and equipment, at cost | $ 19,458 | 20,335 | |
Data processing equipment | Minimum | |||
Summary of property and equipment | |||
Estimated useful lives | 1 year | ||
Data processing equipment | Maximum | |||
Summary of property and equipment | |||
Estimated useful lives | 5 years | ||
Buildings | |||
Summary of property and equipment | |||
Property and equipment, at cost | $ 11,699 | 12,860 | |
Buildings | Minimum | |||
Summary of property and equipment | |||
Estimated useful lives | 1 year | ||
Buildings | Maximum | |||
Summary of property and equipment | |||
Estimated useful lives | 30 years | ||
Land | |||
Summary of property and equipment | |||
Property and equipment, at cost | $ 2,843 | 3,804 | |
Property and equipment under capital leases | |||
Summary of property and equipment | |||
Property and equipment, at cost | 1,800 | 2,100 | |
Accumulated depreciation | $ (800) | $ (1,100) |
Goodwill and Identifiable Int56
Goodwill and Identifiable Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2014 | Dec. 31, 2015 | |
Goodwill and identifiable intangible assets | |||||
Goodwill | $ 106,970 | $ 106,970 | $ 106,970 | ||
Other | 200 | 200 | |||
Total identifiable intangible assets | 41,599 | 41,599 | 51,148 | ||
Total goodwill and identifiable intangible assets | 148,569 | 148,569 | 158,118 | ||
Write down of impaired assets | 9,749 | $ 7,900 | |||
Mutual fund management advisory contracts | |||||
Goodwill and identifiable intangible assets | |||||
Mutual fund contracts | 38,699 | 38,699 | 42,748 | ||
Mutual fund management subadvisory contracts | |||||
Goodwill and identifiable intangible assets | |||||
Mutual fund contracts | 2,700 | $ 2,700 | $ 8,400 | ||
Write down of impaired assets | $ 4,000 | $ 5,700 | |||
Reduction of deferred tax liability | $ 2,100 |
Indebtedness (Details)
Indebtedness (Details) $ in Millions | 12 Months Ended | |||
Dec. 31, 2016USD ($)item | Dec. 31, 2015USD ($) | Jun. 28, 2013USD ($) | Aug. 31, 2010USD ($) | |
Indebtedness | ||||
Fair value of outstanding indebtedness | $ 200.7 | $ 189.6 | ||
Credit Facility | ||||
Indebtedness | ||||
Maximum borrowing capacity | $ 125 | |||
Amount that borrowing capacity can be expanded upon entity's request | $ 200 | |||
Borrowing outstanding under the facility | $ 0 | $ 0 | ||
Variable Rate Basis | LIBOR | |||
Senior Notes | ||||
Indebtedness | ||||
Face amount of notes issued and sold | $ 190 | |||
Consolidated leverage ratio | 0.6 | |||
Number of consecutive quarters for which the maximum consolidated leverage ratio is required to be maintained under financial covenants | item | 4 | |||
Number of consecutive quarters for which the minimum consolidated interest coverage ratio is required to be maintained under financial covenants | item | 4 | |||
Consolidated interest coverage ratio | 27.5 | |||
Senior Notes | Maximum | ||||
Indebtedness | ||||
Consolidated leverage ratio | 3 | |||
Senior Notes | Minimum | ||||
Indebtedness | ||||
Consolidated interest coverage ratio | 4 |
Income Taxes - Provision for in
Income Taxes - Provision for income taxes and reconciliation of statutory federal income tax rate with effective income tax rate (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Current taxes: | |||
Federal | $ 72,711 | $ 142,576 | $ 161,863 |
State | 7,174 | 12,800 | 14,206 |
Foreign | 17 | 38 | 35 |
Total currently payable | 79,902 | 155,414 | 176,104 |
Deferred taxes | (3,715) | (1,410) | 728 |
Provision for income taxes | $ 76,187 | $ 154,004 | $ 176,832 |
Reconciliation of statutory federal income tax rate with the entity's effective income tax rate | |||
Statutory federal income tax rate (as a percent) | 35.00% | 35.00% | 35.00% |
State income taxes, net of federal tax benefits (as a percent) | 2.20% | 2.00% | 2.10% |
State tax incentives (as a percent) | (0.30%) | (0.10%) | (0.20%) |
Valuation allowance on losses capital in nature (as a percent) | (3.40%) | 0.90% | (1.00%) |
Other items (as a percent) | 0.40% | 0.70% | 0.20% |
Effective income tax rate (as a percent) | 33.90% | 38.50% | 36.10% |
Income Taxes - Deferred tax lia
Income Taxes - Deferred tax liabilities and deferred tax assets (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred tax liabilities: | ||
Deferred sales commissions | $ (484) | $ (2,337) |
Property and equipment | (13,906) | (9,775) |
Benefit plans | (12,137) | (14,058) |
Identifiable intangible assets | (11,118) | (13,705) |
Prepaid expenses | (1,968) | (2,231) |
Total gross deferred liabilities | (39,613) | (42,106) |
Deferred tax assets: | ||
Accrued compensation | 10,678 | 11,015 |
Additional pension and postretirement liability | 27,204 | 32,183 |
Other accrued expenses | 7,058 | 5,851 |
Unrealized losses on investment securities and partnerships | 1,834 | 7,426 |
Capital loss carryforwards | 3,920 | 5,919 |
Nonvested stock | 20,516 | 20,608 |
Unused state tax credits | 2,115 | 1,470 |
State net operating loss carryforwards | 5,716 | 5,666 |
Other | 3,430 | 3,463 |
Total gross deferred assets | 82,471 | 93,601 |
Valuation allowance | (11,428) | (18,803) |
Net deferred tax asset | 31,430 | 32,692 |
Capital loss carryforward, valuation allowance | 5,800 | 13,300 |
Operating loss carryforward, valuation allowance | 5,600 | $ 5,500 |
State tax credit carryforwards that will expire between 2024 and 2032 if not utilized | 1,900 | |
State tax credit carryforwards that will expire in 2026 if not utilized | $ 200 |
Income Taxes - Unrecognized tax
Income Taxes - Unrecognized tax benefits narrative (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes | ||
Unrecognized tax benefits, including penalties and interest that if recognized would impact effective tax rate | $ 11.5 | $ 11.9 |
Unrecognized tax benefits, including penalties and interest, net of federal tax benefit that if recognized would affect effective tax rate | 8.4 | 8.7 |
Accrued interest and penalties related to uncertain tax positions | 3.8 | 3.4 |
Accrued interest and penalties related to uncertain tax positions, net of federal benefit | 3.1 | $ 2.8 |
Total expense of interest and penalties, net of federal benefit related to uncertain tax positions | $ 0.2 |
Income Taxes - Reconciliation o
Income Taxes - Reconciliation of unrecognized tax benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Reconciliation of unrecognized tax benefits, excluding penalties and interest | |||
Balance at the beginning of the period | $ 8,448 | $ 8,105 | $ 9,013 |
Increases during the year: | |||
Gross increases - tax positions in prior period | 465 | 1,401 | 433 |
Gross increases - current-period tax positions | 494 | 700 | 656 |
Decreases during the year: | |||
Gross decreases - tax positions in prior period | (167) | (308) | (192) |
Decreases due to settlements with taxing authorities | (21) | (486) | (877) |
Decreases due to lapse of statute of limitations | (1,485) | (964) | (928) |
Balance at the end of the period | $ 7,734 | $ 8,448 | $ 8,105 |
Number of open tax years settled | 2 years | 3 years | 6 years |
Pension Plan and Postretireme62
Pension Plan and Postretirement Benefits Other Than Pension - Changes in net funded status, disclosure of amounts recognized in the balance sheet, and the assumptions used to determine the benefit (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Amounts recognized in the statement of financial position: | |||||
Noncurrent liabilities | $ (38,379) | $ (38,379) | $ (48,810) | ||
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 | ||||
Non-cash settlement charge | (20,700) | $ (20,681) | |||
Change in projected benefit obligation: | |||||
Net benefit obligation at beginning of year | 210,783 | 208,085 | $ 172,105 | ||
Service cost | 12,199 | 12,080 | 10,084 | ||
Interest cost | 9,432 | 8,420 | 8,395 | ||
Benefits paid | (52,288) | (10,184) | (8,733) | ||
Actuarial (gain) loss | 795 | (7,618) | 26,410 | ||
Plan amendments | (176) | ||||
Net benefit obligation at end of year | 180,921 | 180,921 | 210,783 | 208,085 | |
Accumulated benefit obligation | 150,100 | 150,100 | 177,100 | ||
Change in plan assets: | |||||
Fair value of plan assets at beginning of year | 173,885 | 175,548 | 170,430 | ||
Actual return on plan assets | 2,932 | (11,479) | (6,149) | ||
Employer contributions | 20,000 | 20,000 | 20,000 | ||
Benefits paid | (52,288) | (10,184) | (8,733) | ||
Fair value of plan assets at end of year | 144,529 | 144,529 | 173,885 | 175,548 | |
Funded status at end of year | (36,392) | (36,392) | (36,898) | (32,537) | |
Amounts recognized in the statement of financial position: | |||||
Noncurrent liabilities | (36,392) | (36,392) | (36,898) | (32,537) | |
Net amount recognized at end of year | (36,392) | (36,392) | (36,898) | (32,537) | |
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income: | |||||
Transition obligation | (11) | (11) | (16) | (21) | |
Prior service credit (cost) | (346) | (346) | (720) | (1,179) | |
Accumulated gain (loss) | (73,775) | (73,775) | (88,882) | (75,681) | |
Accumulated other comprehensive income (loss) | (74,132) | (74,132) | (89,618) | (76,881) | |
Cumulative employer contributions in excess of (less than) net periodic benefit cost | 37,740 | 37,740 | 52,720 | 44,344 | |
Net amount recognized at end of year | $ (36,392) | $ (36,392) | $ (36,898) | $ (32,537) | |
Weighted average assumptions used to determine benefit obligation at December 31: | |||||
Discount rate (as a percent) | 4.39% | 4.39% | 4.60% | 4.13% | |
Rate of compensation increase (as a percent) | 5.12% | 5.12% | 5.12% | 5.12% | |
Other Postretirement Benefits | |||||
Pension Plan and Postretirement Benefits Other than Pension | |||||
Curtailment gain | $ 8,500 | $ 8,475 | |||
Change in projected benefit obligation: | |||||
Net benefit obligation at beginning of year | 8,421 | $ 9,902 | $ 8,172 | ||
Service cost | 555 | 910 | 719 | ||
Interest cost | 297 | 397 | 397 | ||
Benefits paid | (674) | (505) | (527) | ||
Actuarial (gain) loss | 1,790 | (2,632) | 760 | ||
Retiree contributions | 532 | 349 | 381 | ||
Curtailment gain | (8,475) | ||||
Net benefit obligation at end of year | $ 2,446 | 2,446 | 8,421 | 9,902 | |
Change in plan assets: | |||||
Employer contributions | 142 | 156 | 146 | ||
Retiree contributions | 532 | 349 | 381 | ||
Benefits paid | (674) | (505) | (527) | ||
Funded status at end of year | (2,446) | (2,446) | (8,421) | (9,902) | |
Amounts recognized in the statement of financial position: | |||||
Current liabilities | (458) | (458) | (316) | (279) | |
Noncurrent liabilities | (1,988) | (1,988) | (8,105) | (9,623) | |
Net amount recognized at end of year | (2,446) | (2,446) | (8,421) | (9,902) | |
Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income: | |||||
Prior service credit (cost) | 6 | 6 | 2 | (17) | |
Accumulated gain (loss) | 954 | 954 | 2,897 | 265 | |
Accumulated other comprehensive income (loss) | 960 | 960 | 2,899 | 248 | |
Cumulative employer contributions in excess of (less than) net periodic benefit cost | (3,406) | (3,406) | (11,320) | (10,150) | |
Net amount recognized at end of year | $ (2,446) | $ (2,446) | $ (8,421) | $ (9,902) | |
Weighted average assumptions used to determine benefit obligation at December 31: | |||||
Discount rate (as a percent) | 3.46% | 3.46% | 4.44% | 4.07% |
Pension Plan and Postretireme63
Pension Plan and Postretirement Benefits Other Than Pension - Pension plan asset allocation (Details) | Dec. 31, 2016 | Dec. 31, 2015 |
Pension Plan and Postretirement Benefits Other Than Pension | ||
Cash (as a percent) | 18.00% | 24.00% |
Equity securities: | ||
Domestic (as a percent) | 49.00% | 53.00% |
International (as a percent) | 17.00% | 15.00% |
Fixed income securities (as a percent) | 10.00% | 5.00% |
Gold bullion (as a percent) | 6.00% | 3.00% |
Percentage of plan assets allocation | 100.00% | 100.00% |
Pension Plan and Postretireme64
Pension Plan and Postretirement Benefits Other Than Pension - Plan assets fair value (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Pension Plan and Postretirement Benefits Other than Pension | ||||
Amount of transfer between levels | $ 0 | $ 0 | ||
Level 3 | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | $ 3,402 | |||
Pension Benefits | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Amount of transfer between levels | 0 | 0 | ||
Total fair value | 144,529 | 173,885 | $ 175,548 | $ 170,430 |
Pension Benefits | Equity securities | Domestic | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 71,159 | 92,037 | ||
Pension Benefits | Equity securities | International | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 24,622 | 25,822 | ||
Pension Benefits | Equity derivatives | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 12 | 280 | ||
Pension Benefits | Mortgage-backed securities | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 10 | 11 | ||
Pension Benefits | U.S. treasuries | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 4,801 | |||
Pension Benefits | Corporate bonds | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 526 | 8,113 | ||
Pension Benefits | Foreign Bonds | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 8,897 | |||
Pension Benefits | Gold bullion | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 8,420 | 5,226 | ||
Pension Benefits | Total investment securities | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 118,447 | 131,489 | ||
Pension Benefits | Cash and other | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 26,082 | 42,396 | ||
Pension Benefits | Level 1 | Equity securities | Domestic | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 71,159 | 92,037 | ||
Pension Benefits | Level 1 | Equity securities | International | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 24,622 | 25,822 | ||
Pension Benefits | Level 1 | Gold bullion | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 8,420 | 5,226 | ||
Pension Benefits | Level 1 | Total investment securities | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 104,201 | 123,085 | ||
Pension Benefits | Level 2 | Equity derivatives | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 12 | 280 | ||
Pension Benefits | Level 2 | Mortgage-backed securities | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 10 | 11 | ||
Pension Benefits | Level 2 | U.S. treasuries | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 4,801 | |||
Pension Benefits | Level 2 | Corporate bonds | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 526 | 8,113 | ||
Pension Benefits | Level 2 | Foreign Bonds | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | 8,897 | |||
Pension Benefits | Level 2 | Total investment securities | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Total fair value | $ 14,246 | $ 8,404 |
Pension Plan and Postretireme65
Pension Plan and Postretirement Benefits Other Than Pension - Plan assets categorized as Level 3 (Details) - Level 3 $ in Thousands | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Summary of the activity of plan assets categorized as Level 3 during the period | |
Fair value of plan assets at beginning of year | $ 3,402 |
Sales | (3,432) |
Valuation change | $ 30 |
Pension Plan and Postretireme66
Pension Plan and Postretirement Benefits Other Than Pension - Components of net periodic costs, weighted average assumptions, and expected benefit payments (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Feb. 28, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Weighted average assumptions used to determine net periodic benefit cost | ||||||
Expected return on plan assets (as a percent) | 7.50% | |||||
Pension Benefits | ||||||
Components of net periodic benefit cost: | ||||||
Service cost | $ 12,199 | $ 12,080 | $ 10,084 | |||
Interest cost | 9,432 | 8,420 | 8,395 | |||
Expected return on plan assets | (13,927) | (14,510) | (14,016) | |||
Actuarial (gain) loss amortization | 6,215 | 5,171 | 1,496 | |||
Prior service cost amortization | 374 | 459 | 468 | |||
Transition obligation amortization | 5 | 5 | 5 | |||
Settlement loss | $ 20,700 | 20,681 | ||||
Total | 34,979 | $ 11,625 | $ 6,432 | |||
Amounts that will be amortized from accumulated other comprehensive income into net periodic benefit cost in next fiscal year | ||||||
Estimated net gain (loss) that will be amortized from accumulated other comprehensive income into net periodic benefit cost | (5,300) | |||||
Estimated prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost | 123 | |||||
Estimated transition obligation that will be amortized from accumulated other comprehensive income into net periodic benefit cost | $ 5 | |||||
Weighted average assumptions used to determine net periodic benefit cost | ||||||
Discount rate (as a percent) | 4.60% | 4.13% | 4.97% | |||
Expected return on plan assets (as a percent) | 7.50% | 7.75% | 7.75% | |||
Rate of compensation increase (as a percent) | 5.12% | 5.12% | 5.12% | |||
Expected benefit payments | ||||||
2,016 | 5,492 | $ 5,492 | ||||
2,017 | 7,066 | 7,066 | ||||
2,018 | 7,496 | 7,496 | ||||
2,019 | 8,240 | 8,240 | ||||
2,020 | 10,613 | 10,613 | ||||
2021 through 2025 | 63,588 | 63,588 | ||||
Total | 102,495 | 102,495 | ||||
Entity's contribution to Pension Plan | 20,000 | $ 20,000 | $ 20,000 | |||
Pension Benefits | Subsequent Event | ||||||
Expected benefit payments | ||||||
Entity's contribution to Pension Plan | $ 10,000 | |||||
Other Postretirement Benefits | ||||||
Components of net periodic benefit cost: | ||||||
Service cost | 555 | 910 | 719 | |||
Interest cost | 297 | 397 | 397 | |||
Actuarial (gain) loss amortization | (153) | (17) | ||||
Prior service cost amortization | 4 | 19 | 55 | |||
Curtailment gain | $ (8,500) | (8,475) | ||||
Total | (7,772) | $ 1,326 | $ 1,154 | |||
Amounts that will be amortized from accumulated other comprehensive income into net periodic benefit cost in next fiscal year | ||||||
Estimated net gain (loss) that will be amortized from accumulated other comprehensive income into net periodic benefit cost | 180 | |||||
Estimated prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost | $ 4 | |||||
Weighted average assumptions used to determine net periodic benefit cost | ||||||
Discount rate (as a percent) | 4.44% | 4.07% | 4.94% | |||
Expected benefit payments | ||||||
2,016 | 458 | $ 458 | ||||
2,017 | 416 | 416 | ||||
2,018 | 404 | 404 | ||||
2,019 | 319 | 319 | ||||
2,020 | 237 | 237 | ||||
2021 through 2025 | 559 | 559 | ||||
Total | $ 2,393 | 2,393 | ||||
Entity's contribution to Pension Plan | 142 | $ 156 | $ 146 | |||
Contributions by participants | $ 532 | $ 349 | $ 381 |
Pension Plan and Postretireme67
Pension Plan and Postretirement Benefits Other Than Pension - Narrative (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Feb. 28, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Pension Benefits | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Accrued costs of benefit plan | $ 36,400 | $ 36,900 | ||
Other Postretirement Benefits | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Initial health care cost trend rate (as a percent) | 6.82% | 7.55% | 8.04% | |
Rate to which the cost trend rate is assumed to decline (as a percent) | 4.50% | |||
Effect of 1% annual increase in assumed health care cost trend rates on the accumulated postretirement benefit obligation | $ 108 | |||
Effect of 1% annual increase in assumed health care cost trend rates on the service and interest cost components | 133 | |||
Effect of 1% annual decrease in assumed health care cost trend rates on the accumulated postretirement benefit obligation | 97 | |||
Effect of 1% annual decrease in assumed health care cost trend rates on the service and interest cost components | 112 | |||
Accrued costs of benefit plan | 2,000 | $ 8,100 | ||
Current portion of postretirement liability | $ 458 | 316 | $ 279 | |
SERP | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Percentage of executive's base salary that is used to credit participants SERP accounts | 4.00% | |||
Amount of discretionary awards made to participants | $ 0 | 0 | ||
Accrued costs of benefit plan | $ 3,800 | $ 3,800 | ||
SERP | Subsequent Event | ||||
Pension Plan and Postretirement Benefits Other than Pension | ||||
Lump sum payment | $ 3,800 |
Employee Savings Plan (Details)
Employee Savings Plan (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Employee Savings Plan | |||
Employer's matching contribution to the plan | $ 6.8 | $ 6.6 | $ 6.4 |
Stockholders' Equity - Earnings
Stockholders' Equity - Earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands | Feb. 01, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Components of basic and diluted earnings per share | ||||||||||||
Net income | $ 22,417 | $ 53,827 | $ 33,695 | $ 36,968 | $ 62,920 | $ 48,058 | $ 67,445 | $ 67,113 | $ 146,907 | $ 245,536 | $ 313,331 | |
Weighted average shares outstanding - basic and diluted | 82,668,000 | 83,499,000 | 84,485,000 | |||||||||
Earnings per share: | ||||||||||||
Earnings per share, basic and diluted (in dollars per share) | $ 1.78 | $ 2.94 | $ 3.71 | |||||||||
Dividends | ||||||||||||
Dividends accrued, per share (in dollars per share) | $ 1.84 | $ 1.75 | $ 1.45 | |||||||||
Dividends to be paid | $ 38,200 | $ 38,100 | $ 38,200 | $ 38,100 | ||||||||
Common stock repurchases | ||||||||||||
Shares repurchased in the open market or privately | 2,320,726 | 1,955,509 | 2,252,152 | |||||||||
Shares repurchased from employees to cover minimum income tax withholdings | 423,726 | 432,353 | 599,340 | |||||||||
Subsequent Event | ||||||||||||
Dividends | ||||||||||||
Dividends accrued, per share (in dollars per share) | $ 0.46 |
Stockholders' Equity - Other co
Stockholders' Equity - Other comprehensive income (loss) activity (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
AOCI Attributable to Parent, Net of Tax | |||
Balance at the beginning of the period | $ 846,455 | $ 786,084 | $ 687,342 |
Net current period other comprehensive income (loss) | 8,176 | (11,062) | (34,584) |
Balance at the end of the period | 844,002 | 846,455 | 786,084 |
Accumulated Other Comprehensive Income(Loss) | |||
AOCI Attributable to Parent, Net of Tax | |||
Balance at the beginning of the period | (61,505) | (50,443) | (15,859) |
Other comprehensive income (loss) before reclassification | (5,395) | (13,824) | |
Amount reclassified from accumulated other comprehensive income (loss) | 13,571 | 2,762 | |
Net current period other comprehensive income (loss) | 8,176 | (11,062) | (34,584) |
Balance at the end of the period | (53,329) | (61,505) | (50,443) |
Unrealized (gains) losses on investment securities | |||
AOCI Attributable to Parent, Net of Tax | |||
Balance at the beginning of the period | (3,729) | (727) | |
Other comprehensive income (loss) before reclassification | 1,948 | (2,464) | |
Amount reclassified from accumulated other comprehensive income (loss) | (2,191) | (538) | |
Net current period other comprehensive income (loss) | (243) | (3,002) | |
Balance at the end of the period | (3,972) | (3,729) | (727) |
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 | (3,240) | (1,471) | |
Other comprehensive income (loss) before reclassification | 1,195 | (1,463) | |
Amount reclassified from accumulated other comprehensive income (loss) | (1,343) | (306) | |
Net current period other comprehensive income (loss) | (148) | (1,769) | |
Balance at the end of the period | (3,388) | (3,240) | (1,471) |
Pension and postretirement benefits | |||
AOCI Attributable to Parent, Net of Tax | |||
Balance at the beginning of the period | (54,536) | (48,245) | |
Other comprehensive income (loss) before reclassification | (8,538) | (9,897) | |
Amount reclassified from accumulated other comprehensive income (loss) | 17,105 | 3,606 | |
Net current period other comprehensive income (loss) | 8,567 | (6,291) | |
Balance at the end of the period | $ (45,969) | $ (54,536) | $ (48,245) |
Stockholders' Equity - Reclassi
Stockholders' Equity - Reclassifications from accumulated other comprehensive income (loss) and included in net income (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Reclassifications from accumulated other comprehensive income (loss) | ||
Reclassifications included in net income: | ||
Pre-tax | $ (23,637) | $ (4,804) |
Tax (expense) benefit | 10,066 | 2,042 |
Net of tax | (13,571) | (2,762) |
Realized loss on sale of sponsored investment securities | Investment and other income (loss) | Reclassifications from accumulated other comprehensive income (loss) | ||
Reclassifications included in net income: | ||
Pre-tax | 3,489 | 850 |
Tax (expense) benefit | (1,298) | (312) |
Net of tax | 2,191 | 538 |
Change in valuation allowance for unrealized gains (losses) on investment securities | ||
Reclassifications included in net income: | ||
Net of tax | 1,343 | 306 |
Change in valuation allowance for unrealized gains (losses) on investment securities | Provision for income taxes | Reclassifications from accumulated other comprehensive income (loss) | ||
Reclassifications included in net income: | ||
Tax (expense) benefit | 1,343 | 306 |
Net of tax | 1,343 | 306 |
Pension and postretirement benefits | ||
Reclassifications included in net income: | ||
Net of tax | (17,105) | (3,606) |
Pension and postretirement benefits | Underwriting and distribution expense and Compensation and related costs | Reclassifications from accumulated other comprehensive income (loss) | ||
Reclassifications included in net income: | ||
Pre-tax | (27,126) | (5,654) |
Tax (expense) benefit | 10,021 | 2,048 |
Net of tax | $ (17,105) | $ (3,606) |
Redeemable Noncontrolling Int72
Redeemable Noncontrolling Interests (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Redeemable noncontrolling interests in consolidated sponsored funds | |
Redeemable noncontrolling interests in sponsored funds upon adoption of new accounting guidance on January 1, 2016 | $ 14,330 |
Redeemable noncontrolling interests in sponsored funds consolidated during the period | 18,249 |
Redeemable noncontrolling interests ownership change during the period | 20,894 |
Redeemable noncontrolling interests deconsolidation | (44,234) |
Net income attributable to redeemable noncontrolling interests | 1,414 |
Ending balance of redeemable noncontrolling interest in consolidated sponsored funds | $ 10,653 |
Share-Based Compensation - Narr
Share-Based Compensation - Narrative (Details) | 1 Months Ended | 12 Months Ended | |
Apr. 30, 2016shares | Dec. 31, 2016planshares | Dec. 31, 2015 | |
Share-Based Compensation | |||
Number of stock-based compensation plans | plan | 1 | ||
Vesting period | 4 years | ||
Percentage increments vested on anniversaries of the grant date | 25.00% | 33.33% | |
1998 Stock Incentive Plan ("SI Plan") | |||
Share-Based Compensation | |||
Increase in number of shares available for awards | 5,600,000 | ||
Maximum number of shares of common stock authorized for issuance | 35,600,000 | ||
Number of shares of common stock available for issuance | 3,467,465 |
Share-Based Compensation - Nonv
Share-Based Compensation - Nonvested share activity and related fair value (Details) - Nonvested stock awards - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Nonvested Stock Shares | |||
Nonvested at the beginning of the period (in shares) | 3,405,207 | ||
Granted (in shares) | 2,700,977 | ||
Vested (in shares) | (1,207,677) | ||
Forfeited (in shares) | (112,404) | ||
Nonvested at the end of the period (in shares) | 4,786,103 | 3,405,207 | |
Nonvested Stock Shares, Weighted Average Grant Date Fair Value | |||
Nonvested at the beginning of the period (in dollars per share) | $ 50.09 | ||
Granted (in dollars per share) | 21.89 | ||
Vested (in dollars per share) | 48.70 | ||
Forfeited (in dollars per share) | 40.96 | ||
Nonvested at the end of the period (in dollars per share) | $ 34.74 | $ 50.09 | |
Compensation expense | $ 51.5 | $ 47.5 | $ 54.1 |
Related income tax benefit recognized | 19.2 | 17.6 | 20.1 |
Remaining unamortized expense of nonvested stock expected to be recognized | $ 112.5 | ||
Period for expense amortized | 2 years 8 months 12 days | ||
Total fair value of shares vested | $ 26.7 | $ 53.9 | $ 104.8 |
Uniform Net Capital Rule Requ75
Uniform Net Capital Rule Requirements - Narrative (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($)subsidiary | |
Uniform Net Capital Rule Requirements | |
Number of subsidiaries registered as broker dealers | subsidiary | 2 |
Maximum ratio of aggregate indebtedness to net capital | 15 |
Minimum net capital | $ | $ 250 |
Net capital percentage of debit balances | 2.00% |
Uniform Net Capital Rule Requ76
Uniform Net Capital Rule Requirements - Net capital and aggregated indebtedness information for broker/dealer subsidiaries (Details) $ in Thousands | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) |
Waddell & Reed, Inc. (W&R) | ||
Net capital and aggregated indebtedness information for entity's broker/dealer subsidiaries | ||
Net capital | $ 52,639 | $ 21,719 |
Required capital | 250 | 250 |
Excess of required capital | 52,389 | 21,469 |
Ivy Funds Distributor, Inc. (IFDI) | ||
Net capital and aggregated indebtedness information for entity's broker/dealer subsidiaries | ||
Net capital | 12,894 | 17,310 |
Required capital | 2,152 | 2,956 |
Excess of required capital | $ 10,742 | $ 14,354 |
Ratio of aggregate indebtedness to net capital | 2.50 | 2.56 |
Rental Expense and Lease Comm77
Rental Expense and Lease Commitments (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Rental Expense and Lease Commitments | |||
Rent expense | $ 24,300 | $ 23,700 | $ 22,600 |
Future minimum rental commitments under non-cancelable operating leases | |||
2,017 | 22,494 | ||
2,018 | 17,759 | ||
2,019 | 12,875 | ||
2,020 | 7,859 | ||
2,021 | 4,847 | ||
Thereafter | 9,843 | ||
Total | $ 75,677 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Related Party Transactions | |||
Total revenues | $ 852,446 | $ 1,100,844 | $ 1,199,004 |
Receivables due from the Funds | 21,600 | 26,700 | |
Investment management fees | |||
Related Party Transactions | |||
Total revenues | 523,304 | 654,727 | 709,179 |
Rule 12b-1 service and distribution fees | |||
Related Party Transactions | |||
Total revenues | 208,901 | 303,046 | 338,846 |
Shareholder service fees | |||
Related Party Transactions | |||
Total revenues | $ 120,241 | $ 143,071 | $ 150,979 |
Selected Quarterly Informatio79
Selected Quarterly Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Selected Quarterly Information (Unaudited) | |||||||||||
Total revenues | $ 292,913 | $ 303,086 | $ 319,208 | $ 323,816 | $ 361,074 | $ 376,109 | $ 393,990 | $ 385,458 | $ 1,239,023 | $ 1,516,631 | $ 1,597,759 |
Net income | $ 22,417 | $ 53,827 | $ 33,695 | $ 36,968 | $ 62,920 | $ 48,058 | $ 67,445 | $ 67,113 | $ 146,907 | $ 245,536 | $ 313,331 |
Net income per share attributable to Waddell and Reed Financial, Inc. common shareholders, basic and diluted (in dollars per share) | $ 0.27 | $ 0.65 | $ 0.41 | $ 0.45 | $ 0.76 | $ 0.58 | $ 0.80 | $ 0.80 | $ 1.78 | $ 2.94 | $ 3.71 |