W&R Earnings Miss Mark
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Tuesday, April 23, 2002

W&R Earnings Miss Mark

Waddell & Reed came in light on first quarter earning, reporting just $0.30 per share and missing analyst's estimates of $0.34 per share. The firm pointed to weak sales as one reason for the shortfall. The firm is one of the first asset managers to report earnings. Last week T. Rowe Price also reported below expectations earnings.

Investors reacted to the news by dropping the price of Waddell & Reed shares 2.5 percent lower on the open.

Total sales of asset management products fell nearly 17 percent to $853 million in the first quarter from $1,028 million. Sales of retail fund products were off 12.4 percent and sales of separate account and institutional products fell nearly twice that amount (24 percent).

"Although improving, our market continued to show a lack of conviction during the quarter; this was reflected in our sales volume as our clients for the most part remained on the sidelines," said company officials. They added that average new daily sales increased throughout the quarter, boding well for the future.

Retail mutual fund management fee revenues at the firm decreased $6.0 million, or 12%, in correlation with a 12% decrease in average mutual fund assets, it reported.

Mutual fund management fee revenue rates improved slightly in the first quarter of 2002 to 67.2 basis points from 66.9 basis points in the first quarter of 2001.

The retail redemption rate, which excludes money market funds, decreased from 8.7% in the first quarter of 2001 to 8.2% in this year's first quarter.

Assets in firm's institutional and separate account product lines grew 9 percent over the first quarter 2001. However, average management fees fell to 47.5 basis points from 48.6 basis points in the first quarter of 2001.

Putnam Investments Assets ($ mil)
Mar-02 Mar-01
Mutual Funds:
Core Equity $62 $59
Value Equity 54 55
Growth Equity 52 69
Fixed Income 49 48
Total Mutal Funds 217 231
Institutional Accounts:
Core Equity 46 42
Value Equity 7 6
Growth Equity 26 26
Fixed Income 18 16
Total Institutional 97 90
Total Ending Assets (March 31) $314 $321
Average Assets $310 $352
Assets from Non-US Investors $30 $27
Source: Marsh & McLennan Companies, Inc.

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