Federated Investors, Inc. Reports Strong Fourth Quarter and Record Full Year 2002 EPS and Net Income
- 2002 EPS Increases 24% to Record $1.74; Net Income up 21% to Record $204 Million
- Managed Assets Reach New High of $195.4 Billion
- Bond Fund Sales up 67% in 2002; Equity Fund Sales Increase 9%
(PITTSBURGH, PA, ) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment management companies, today reported earnings per diluted share (EPS) of $0.42 and net income of $48.9 million for the three months ended December 31, 2002, up 24 percent and 20 percent, respectively from Q4 2001. Q4 2002 results were reduced by an impairment charge of $0.01 per share or $2.1 million pre-tax from the write down of certain technology assets. Q4 2001 included an extraordinary item from early debt retirement of $0.04 per share or $6.6 million pre-tax.
For full year 2002, including the reduction from the impairment charge, Federated reported record EPS of $1.74 and net income of $203.8 million, up 24 percent and 21 percent, respectively from 2001.
Federated's total managed assets were $195.4 billion at December 31, 2002, up $15.7 billion or nine percent from $179.7 billion at the end of 2001 and up eight percent from the end of Q3 2002. Average managed assets for Q4 2002 were $192.6 billion, $16.6 billion higher than the $176.0 billion reported for Q4 2001 and $2.6 billion higher than the $190.0 billion in average assets reported for Q3 2002.
"Federated completed another successful year of achieving strong earnings growth – made possible by our broad line of investment solutions as well as our diversified distribution capabilities," said J. Christopher Donahue, president and CEO. "Throughout 2002, demand for our money market and other fixed-income investments, as well as certain core products within our equity investment line enabled Federated to reach record highs in earnings and managed assets."
The company also announced that its board of directors declared a quarterly dividend of $0.057 per share. The dividend is payable on February 14, 2003, to shareholders of record as of February 7, 2003.
In Q4 2002, Federated continued its share buyback program by purchasing 1,184,600 shares of Federated Investors, Inc. class B common stock for $30.5 million in the open market. For full year 2002, Federated purchased 2,676,970 shares of class B common stock for $76.2 million in the open market.
Federated's strong fixed-income fund sales continued, reaching $4.1 billion in Q4 2002. Fixed-income fund sales of $14.7 billion in 2002 were 67 percent higher than in 2001 and 2002 net sales for fixedincome funds improved to $3.9 billion from $2.7 billion in 2001. Equity fund sales were $1.3 billion and $5.8 billion for the quarter and year ended December 31, 2002, respectively, an increase of four percent and nine percent over the same periods last year, respectively. Net equity fund sales for 2002 were $47 million compared to net redemptions of $656 million in 2001.
Top selling funds for Q4 2002 included: Federated Government Ultrashort Fund; Federated Ultrashort Bond Fund; Federated Capital Appreciation Fund (a core equity fund); Federated Municipal Ultrashort Fund and Federated High Yield Trust.
Through its mutual funds and separate accounts, Federated managed $44.6 billion in fixed-income and equity assets as of December 31, 2002. Due to strong sales and performance, fixed-income assets increased to $26.5 billion at the end of 2002, up $5.5 billion from the end of 2001 and up $1.3 billion from the end of Q3 2002. Equity assets declined to $18.1 billion at the end of 2002 compared to $22.6 billion at the end of 2001 due to market depreciation. Equity assets were up $1.0 billion from the end of Q3 2002 as equity market conditions showed some improvement.
"In 2002, Federated enhanced its investment management team with key hires, and further diversified its product line by adding two new closed-end municipal bond products, starting a new managed account product and preparing to launch a 529 educational savings product," stated Donahue. "We expect that each of these positive developments will lead to growth in 2003."
Federated continued to produce strong financial performance during Q4 2002. For comparison purposes, 2001 results are adjusted to reflect reductions in revenues and expenses related to the change in Federated's B-share program and for the change in accounting for goodwill as if these changes were effective at the beginning of 2001. With the sale of Federated's residual interest in future cash flows from its B-share program in Q4 2001, Federated no longer records certain revenues and expenses related to these cash flows. Q4 and full year 2001 other service fee revenue was reduced by $10.6 million and $48.1 million, amortization of deferred sales commissions was reduced by $5.6 million and $26.3 million and nonrecourse debt expense was reduced by $4.4 million and $19.1 million, respectively. Also beginning in 2002, goodwill is no longer amortized. For comparison purposes, Q4 and full year 2001 goodwill amortization was reduced by $1.8 million and $5.9 million, respectively. The following table compares Q4 and full year 2002 actual results with Q4 and full year 2001 results, adjusted for these changes.
|(in thousands, except per share data)||Actual Q4 2002||Adjusted Q4 2001||% Change||Actual 2002||Adjusted 2001||% Change|
|Nonoperating Expenses, net||$(503)||$(9,087)||(94)%||$(5,064)||$(14,625)||(65)%|
"Nonoperating Expenses, net" for 2001 included a one-time pre-tax gain of $9.0 million from the sale of Federated's rights to future potential cash flows from its B-share financing program, $14.1 million in pre-tax CBO impairment charges and $8.1 million in pre-tax mutual fund investment net losses. For Q4 2002, Federated derived 49 percent of its revenues from money market assets, 27 percent from equity assets, 19 percent from fixed-income assets and five percent from other products.
During Q4 2002, Federated evaluated the recoverability of certain software assets used in connection with its retirement services operations. Based on this evaluation, Federated determined that the assets were impaired and recorded a $2.1 million pre-tax charge in "Operating expenses - Other" to write down the carrying value of the assets to estimated fair value as of December 31, 2002.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $195 billion in assets as of December 31, 2002. With more than 135 mutual funds, various separately managed accounts and closed-end funds, Federated provides comprehensive investment management to more than 5,300 institutions and intermediaries including corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Federated ranks in the top one percent of money market fund managers in the industry, the top four percent of fixedincome fund managers and the top five percent of equity fund managers1. For more information, visit FederatedInvestors.com.
Investors are invited to listen to Federated’s fourth quarter and year end 2002 earnings teleconference on January 23, 2003 by calling 888-412-9259 (domestic) or 706-679-0848 (international) prior to the 9 a.m. EDT start time for the teleconference. The call may also be accessed in real time on the Internet via the Company section of FederatedInvestors.com. A replay will be available after 12:30 p.m. and until January 30, by calling 800-642-1687 (domestic) or 706-645-9291 (international) and entering code 7421690.
1 Strategic Insights, November 2002. Based on assets in open-end funds.
Certain statements in this press release, such as those related to the prospects for growth 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. Such factors include those discussed in the company’s annual and quarterly reports as filed with the Securities and Exchange Commission. Many of these factors may be more likely to occur as a result of the ongoing threat of terrorism. 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.
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