Federated Investors, Inc. Announces Fourth Quarter and Year-End 2005 Earnings
- Assets under management reach period-end record $213.4 billion
- Money market assets reach period-end record $160.6 billion
(PITTSBURGH, Pa., ) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share (EPS) from continuing operations1 of $0.48 for the quarter ended Dec. 31, 2005, a 60 percent increase from Q4 2004's EPS from continuing operations of $0.30. Income from continuing operations for Q4 2005 increased 61 percent to $51.8 million compared to income from continuing operations of $32.3 million for Q4 2004.
Federated's Q4 earnings include a $3.2 million pre-tax or $0.02 per share net charge to financial results for various legal, regulatory and compliance matters. This charge includes a non-recurring pre-tax expense of $2.2 million or $0.01 per share net related to regulatory settlements with the Securities and Exchange Commission (SEC) and the New York State Attorney General (NYAG) and certain undertakings required therein. Federated's Q4 2004 earnings from continuing operations included a $21.1 million pre-tax or $0.15 per share net charge for various legal, regulatory and compliance matters.
For 2005, Federated reported EPS from continuing operations of $1.51, a seven percent decrease from $1.63 in 2004. Federated reported income from continuing operations of $163.3 million for 2005, a nine percent decrease from $179.7 million for 2004. Federated's 2005 financial results include a $41.6 million pre-tax or $0.36 per share net charge related to various legal, regulatory and compliance matters, including an insurance reimbursement of $23.6 million pre-tax or $0.14 per share net. Federated's 2004 earnings from continuing operations included a $32.0 million pre-tax or $0.22 per share net charge for various legal, regulatory and compliance matters.
Federated's total managed assets were $213.4 billion at Dec. 31, 2005, up $34.1 billion or 19 percent from $179.3 billion at Dec. 31, 2004 and up $6.0 billion or three percent from $207.4 billion at Sept. 30, 2005. Average managed assets for Q4 2005 were $210.1 billion, up $31.2 billion or 17 percent from $178.9 billion reported for Q4 2004 and up $2.0 billion or one percent from $208.1 billion in average managed assets reported for Q3 2005.
“Federated's broad money market product line, reputation and scale in the industry make us a logical choice for clients looking to manage their cash. During 2005 our money market assets increased over $36 billion or nearly 30 percent through acquisitions and organic growth, " said J. Christopher Donahue, president and CEO. “As we get closer to the end of the rate tightening cycle, we expect to see increased demand for Federated's money market products in 2006."
The company also announced that its board of directors declared a quarterly dividend of $0.15 per share. The dividend is payable on Feb. 15, 2006 to shareholders of record as of Feb. 8, 2006. During Q4 2005, Federated purchased 165,042 shares of class B common stock for $6.0 million. For 2005, the company purchased 920,103 shares for $25.5 million.
Money market assets in both funds and separate accounts totaled a record $160.6 billion at Dec. 31, 2005, $36.3 billion or 29 percent more than $124.3 billion at Dec. 31, 2004 and up from $154.0 billion at Sept. 30, 2005. Average money market assets in both funds and separate accounts were $157.4 billion for the quarter ended Dec. 31, 2005, compared to $125.3 billion for the same period last year and $154.4 billion for Q3 2005. Average money market fund assets of $143.7 billion for Q4 2005 increased from $112.4 billion for Q4 2004 and from $140.1 billion for the prior quarter.
As a result of increases in net asset values, equity assets increased to $29.8 billion at Dec. 31, 2005, compared to $29.0 billion at the end of 2004 and $29.7 billion at the end of Q3 2005. Among equity funds, Federated had strong net sales during the quarter in the Federated Strategic Value Fund, a value fund; Federated Market Opportunity Fund, a contrarian value fund; Federated Muni and Stock Advantage Fund, a tax-advantaged income fund; and Federated Kaufmann Small Cap Fund, a smallcap growth fund. Additionally, driven by strong net sales, Federated's managed account equity products increased to $1.6 billion at Dec. 31, 2005 from $1.1 billion at the end of 2004.
Through its mutual funds and separate accounts, Federated managed $52.8 billion in equity and fixed-income assets at Dec. 31, 2005, down $2.2 billion from $55.0 billion at the end of 2004. Fixed-income assets were $23.0 billion at Dec. 31, 2005, down $2.9 billion from the end of 2004 and down $0.8 billion from Q3 2005. Rising short-term interest rates had a negative effect on net sales in 2005 as redemptions continued in Federated's ultrashort products.
For Q4 2005, Federated derived 47 percent of its revenue from money market assets, 36 percent from equity assets, 14 percent from fixed-income assets and three percent from other products and services. For 2005, Federated derived 43 percent of its revenue from money market assets, 38 percent from equity assets, 16 percent from fixed-income assets and three percent from other products and services.
For Q4 2005, total revenue increased 17 percent to $241.8 million from $207.2 million for Q4 2004 and grew slightly from the prior quarter's $241.4 million. Total revenue for 2005 increased eight percent to $909.2 million compared to $843.3 million for 2004. The year-over-year increase in total revenue was due primarily to increased average money market assets resulting from Federated's acquisition of Alliance Capital Management L.P.'s cash management business (the Alliance Acquisition) and organic growth.
Operating expenses increased nine percent for Q4 2005 to $155.5 million from $142.7 million for Q4 2004 due primarily to increased marketing and distribution and amortization of intangible assets associated with the Alliance Acquisition, which were partially offset by decreased costs for various legal, regulatory and compliance matters. Operating expenses for 2005 increased 16 percent to $610.2 million compared to $525.4 million for 2004 due to increased costs related to the Alliance Acquisition as mentioned above and increased costs for various legal, regulatory and compliance matters.
Federated will host an earnings conference call at 9:00 a.m. on Friday, Jan. 27, 2006. Investors are invited to listen to Federated's Q4 and year-end 2005 earnings teleconference by calling 888-412-9259 (domestic) or 706-679-0848 (international) prior to the 9:00 a.m. Eastern start time. The call may also be accessed in real time on the Internet via the About Us section of FederatedInvestors.com. A replay will be available after 12:30 p.m. and until Feb. 3, 2006 by calling 800-642-1687 (domestic) or 706-645-9291 (international) and entering code 4216772.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $213.4 billion in assets as of Dec. 31, 2005. With 136 mutual funds and various separately managed accounts, Federated provides comprehensive investment management worldwide to 5,500 institutions and intermediaries including corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Federated ranks in the top two percent of money market fund managers in the industry, the top six percent of fixed-income fund managers and the top seven percent of equity fund managers.2 For more information visit FederatedInvestors.com.
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1 Income from continuing operations exclude the results of operations, net of tax, from the sale of the firm's mutual fund transfer agency business to Boston Financial Data Services in June 2004 and the sale of Investlink Technologies to Bluff Point, LLC, in August 2005. Financial results have been reclassified to reflect this activity as discontinued operations.
2 Strategic Insight, November 2005. Based on assets under management in open-end funds.
Certain statements in this press release, such as those related to demand for the company's money market products, 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 the ability to grow our customer base, develop new applications for our products and complete acquisitions, as well as those factors discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission. Many of these factors may be impacted 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 in the future.
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