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Waddell & Reed Swings to Profit in Second Quarter

Christopher Sahl

The company reported net income of $29.7 million, or 36 cents per diluted share, in the three months ended June. That compares with a net loss of $33.0 million, or 40 cents per diluted share, in the second quarter last year.

The year-earlier figure includes two nonrecurring charges: a $39.4 million settlement with the Securities and Exchange Commission and state regulators, and a $20 million payment "to recognize the impairment of goodwill" with one of its subsidiaries, Austin Calvert & Flavin. Excluding the charges, Waddell's earnings for the second quarter of 2006 were $26.4 million, or 32 cents a diluted share.

The result matched the expectations of analysts surveyed by Thomson Financial.

Waddell finished the second quarter with $53.96 billion in assets under management, an increase of nearly 20% over the year-earlier period. The rise was mostly attributable to market appreciation. The company took in a net $1.1 billion of new money in sales through the wholesale channel in the second quarter, up 59% on the year, although this was partially offset by net redemptions by institutional investors and through investment advisers.

Net redemptions by institutional investors increased to $182 million in the second quarter from $147 million a year earlier, while advisers redeemed a net $161 million, up from $37 million.

The stock was down 2.43% in late morning trading.