Federated Investors, Inc. Reports Fourth Quarter and Full-Year 2013 Earnings

  • Equity and bond assets surpass $100 billion at year end
  • Net equity sales top $800 million during Q4 2013
  • Board declares $0.25 per share quarterly dividend


(PITTSBURGH, Pa., 01/23/2014 01:24 PM) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share (EPS) of $0.39 for Q4 2013 compared to $0.44 for the same quarter last year on net income of $41.1 million for Q4 2013 compared to $49.6 million for Q4 2012.   Federated reported 2013 EPS of $1.55 compared to $1.79 for 2012 on 2013 net income of $162.2 million compared to $188.1 million for 2012. Federated's financial results for 2012 included the recognition of insurance proceeds that reduced pre-tax operating expenses by $20.2 million and increased EPS by $0.12 per share, after tax.

Federated's total managed assets were $376.1 billion at Dec. 31, 2013, down $3.7 billion or 1 percent from $379.8 billion at Dec. 31, 2012 and up $9.4 billion or 3 percent from $366.7 billion reported at Sept. 30, 2013.  Average managed assets for Q4 2013 were $366.2 billion, down $2.5 billion or 1 percent from $368.7 billion reported for Q4 2012 and up $2.0 billion or 1 percent from $364.2 billion reported for Q3 2013. 

“With nearly three-quarters of  Federated's equity funds delivering one-year performance that beat a majority of their peers in 2013, we are well positioned to meet increased investor interest in our broad range of equity strategies," said J. Christopher Donahue, president and chief executive officer. "Such strong performance in a range of styles expanded client interest beyond our  dividend-oriented strategies to additional options such as large-cap growth, international, small-cap value and balanced strategies, as well.”

Federated's board of directors declared a quarterly dividend of $0.25 per share.  The dividend is payable on Feb. 14, 2014 to shareholders of record as of Feb. 7, 2014.  In 2013, the company paid total dividends of $0.98 per share.  During Q4 2013, Federated purchased 295,638 shares of Federated class B common stock for $7.0 million, bringing the total for 2013 to 645,343 shares purchased for $14.2 million.  

Federated's equity assets were $44.1 billion at Dec. 31, 2013, up $9.1 billion or 26 percent from $35.0 billion at Dec. 31, 2012 and up $3.8 billion or 9 percent from $40.3 billion at Sept. 30, 2013.  Top-selling equity funds during Q4 2013 on a net basis were Federated Capital Income Fund, Federated Kaufmann Large Cap Fund, Federated International Leaders Fund, Federated International Strategic Value Dividend Fund and Federated Clover Small Value Fund. 

Federated's fixed-income assets were $50.1 billion at Dec. 31, 2013, down $2.6 billion or 5 percent from $52.7 billion at Dec. 31, 2012 and up slightly from $50.0 billion at Sept. 30, 2013.  Bond assets in the liquidation portfolio were $5.9 billion at Dec. 31, 2013.  Top-selling fixed-income funds during Q4 2013 on a net basis were Federated Institutional High Yield Bond Fund, Federated Sterling Cash Plus Fund, Federated Short-Term Income Fund, Federated Floating Rate Strategic Income Fund and Federated High Yield Trust. 
 
Money market assets in both funds and separate accounts were $276.0 billion at Dec. 31, 2013, down $8.7 billion or 3 percent from $284.7 billion at Dec. 31, 2012 and up $5.7 billion or 2 percent from $270.3 billion at Sept. 30, 2013.  Money market mutual fund assets were $240.0 billion at Dec. 31, 2013, down $15.7 billion or 6 percent from $255.7 billion at Dec. 31, 2012 and up $2.1 billion or 1 percent from $237.9 billion at Sept. 30, 2013. 

Financial Summary

Q4 2013 vs. Q4 2012

Revenue decreased by $30.1 million or 12 percent due primarily to an increase in voluntary fee waivers related to certain money market funds in order for those funds to maintain positive or zero net yields and a decrease in revenue due to lower average money market and fixed-income assets.  The decrease was partially offset by an increase in revenue from higher average equity assets. See additional information about voluntary fee waivers in the table at the end of this financial summary. 

During Q4 2013, Federated derived 63 percent of its revenue from equity and fixed-income assets (40 percent from equity assets and 23 percent from fixed-income assets), 36 percent from money market assets and 1 percent from other products and services.

Operating expenses decreased $6.7 million or 4 percent primarily due to a decrease in distribution expenses associated with  increased fee waivers related to the low-yield environment for money market funds, partially offset by an increase in compensation and related expense.  

Nonoperating income, net, increased $6.7 million or 296 percent.  The change primarily reflects an increase in investment income from gains realized on investments and a reduction in the level of pre-tax non-cash impairment charges related to changes in the fair value of a minority interest investment.

Q4 2013 vs. Q3 2013

Revenue increased by $2.9 million or 1 percent primarily due to higher average equity assets. 

Operating expenses increased by $0.9 million or 1 percent primarily due to an increase in compensation and related expense.

Nonoperating income, net, increased $3.7 million or 466 percent due primarily to a reduction in the level of pre-tax non-cash impairment charges related to changes in the fair value of a minority interest investment.

YTD 2013 vs. YTD 2012

Revenue decreased by $67.3 million or 7 percent primarily due to an increase in voluntary fee waivers and was partially offset by an increase in revenue due to higher average equity assets.

During 2013, Federated derived 60 percent of its revenue from equity and fixed-income assets (37 percent from equity assets and 23 percent from fixed-income assets), 39 percent from money market assets and 1 percent from other products and services.

Operating expenses decreased by $6.5 million or 1 percent primarily due to a decrease in distribution expenses related to the low-yield environment and were partially offset by an increase in professional service fees due to the aforementioned insurance proceeds recorded as a reduction to professional service fees in 2012 and an increase in compensation and related expense.

Nonoperating income, net,  increased $11.4 million or 278 percent primarily reflecting an increase in investment income from gains realized on investments and a reduction in debt expense.

Federated's level of business activity and financial results are dependent upon many factors including market conditions, investment performance and investor behavior.  These factors and others including asset levels, product sales and redemptions, market appreciation or depreciation, revenues, fee waivers and expenses can impact Federated's activity levels and financial results significantly.  Risk factors and uncertainties that can influence Federated's financial results are discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission.

Fee waivers to maintain positive or zero net yields and the resulting negative impact of these waivers could vary significantly in the future as they are contingent on a number of variables including, but not limited to, changes in assets within the money market funds, available yields on instruments held by the money market funds, actions by the Federal Reserve, the U.S. Department of the Treasury, the Securities and Exchange Commission, the Financial Stability Oversight Council and other governmental entities, changes in expenses of the money market funds, changes in the mix of money market customer assets, changes in the distribution fee arrangements with customers, Federated’s willingness to continue the fee waivers and changes in the extent to which the impact of the waivers is shared by third parties.


Federated will host an earnings conference call at 9 a.m. Eastern on Jan. 24, 2014.  Investors are invited to listen to Federated's earnings teleconference by calling 877-407-0782 (domestic) or 201-689-8567 (international) prior to the 9 a.m. start time.  The call may also be accessed in real time on the Internet via the About Federated section of FederatedInvestors.com.  A replay will be available after 12:30 p.m. and through Jan. 31, 2014 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering access code 13574383.

Federated Investors, Inc. is one of the largest investment managers in the United States, managing $376.1 billion in assets as of Dec. 31, 2013.  With 135 funds and a variety of separately managed account options, Federated provides comprehensive investment management to approximately 6,000 institutions and intermediaries including corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers.  Federated ranks in the top 3 percent of money market fund managers in the industry, the top 7 percent of equity fund managers and the top 9 percent of fixed-income fund managers1.  For more information, visit FederatedInvestors.com

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The preceeding paragraphs only represent a portion of the press release. To view the entire press release, download the PDF.

1 Strategic Insight, Nov. 30, 2013.  Based on assets under management in open-end funds.

*These financial statements represent only a portion of the quarterly press release.

Certain statements in this press release, such as those related to the level of fee waivers and expenses incurred by the company, product demand and performance, investor interest, asset flows and mix, fee arrangements with customers and market conditions constitute or may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.  Other risks and uncertainties include the ability of the company to predict the level of fee waivers and expenses in future quarters, which could vary significantly depending on a variety of factors identified above, and include the ability of the company to sustain product demand and asset flows and mix, which could vary significantly depending on market conditions, investment performance and investor behavior.  Other risks and uncertainties also include the risk factors discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission.  As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither the company nor any other person assumes responsibility for the accuracy and completeness of such statements in the future.