Federated Investors, Inc. Reports Third Quarter 2006 Earnings
- Assets Under Management Reach a Record $222 Billion
- Equity and Fixed-Income Assets Reach $60 Billion
- Board declares quarterly dividend of $0.18
(PITTSBURGH, Pa., 10/26/2006 09:02 PM) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share from continuing operations (EPS) of $0.43 for the quarter ended Sept. 30, 2006. Federated’s Q3 2006 financial results include a charge of $2.3 million pre-tax, or $0.01 per share after tax, related to the estimated cost of distributing Federated’s 2005 regulatory settlement amount. For Q3 2005, Federated reported EPS of $0.60, which included the recognition of an insurance reimbursement of $23.6 million, or $0.14 per share after tax. For the nine months ended Sept. 30, 2006, Federated reported EPS of $1.29 compared to $1.01 for the same period in 2005.
Federated’s income from continuing operations was $45.2 million for Q3 2006 compared to $64.8 million for Q3 2005. For the nine months ended Sept. 30, 2006, income from continuing operations was $137.9 million compared to $109.6 million for the same period in 2005.
Federated’s total managed assets reached a record $222.7 billion at Sept. 30, 2006, up $15.3 billion or 7 percent from $207.4 billion at Sept. 30, 2005 and up $12.2 billion or 6 percent from the $210.5 billion reported at June 30, 2006. Through its mutual funds and separately managed accounts, Federated managed a record $59.9 billion in equity and fixed-income assets as of Sept. 30, 2006, a $6.4 billion or 12 percent increase from $53.5 billion as of Sept. 30, 2005. Average managed assets for Q3 2006 were $219.7 billion, up $11.6 billion or 6 percent from $208.1 billion reported for Q3 2005 and up $5.8 billion or 3 percent from $213.9 billion in average managed assets reported for Q2 2006. Early in Q3 2006, Federated completed the acquisition of the $6.7 billion quantitative equity firm MDTA LLC. MDTA assets increased to $7.1 billion at Sept. 30, 2006.
"During the quarter, Federated’s equity assets under management grew by nearly $8 billion to over $38 billion at the end of the quarter due to our acquisition of MDTA, improving equity product sales and market appreciation," said President and CEO J. Christopher Donahue. "In addition, Federated grew its money market assets under management as demand increased among broker/dealer and trust clients. With a backdrop of a more favorable interest rate environment, we believe that we will continue to grow money market assets over time."
During Q3 2006, Federated purchased 787,221 shares of class B common stock for $23.1 million. The board of directors declared a quarterly dividend of $0.18 per share. The dividend is payable on Nov. 15, 2006 to shareholders of record as of Nov. 8, 2006.
Federated’s equity assets were a record $38.3 billion at Sept. 30, 2006, up $8.6 billion or 29 percent from $29.7 billion at Sept. 30, 2005 and up $7.8 billion or 26 percent from $30.5 billion at June 30, 2006. Federated’s top selling equity mutual funds on a net basis were: Federated Strategic Value Fund, Federated Market Opportunity Fund, Federated Kaufmann Small Cap Fund, MDT All Cap Core Fund and MDT Balanced Fund.
Federated’s fixed-income assets were $21.7 billion at Sept. 30, 2006, down $2.1 billion or 9 percent from $23.8 billion at Sept. 30, 2005 and down slightly from June 30, 2006. Federated’s top selling fixed-income mutual funds on a net basis were: Federated Total Return Bond Fund, Federated Total Return Government Bond Fund, Federated International High Income Fund and Federated Municipal High Yield Advantage Fund, Inc.
Money market assets in both funds and separate accounts were $162.8 billion at Sept. 30, 2006, up $8.8 billion or 6 percent from $154.0 billion at Sept. 30, 2005 and up $4.5 billion or 3 percent from $158.3 billion at June 30, 2006. Money market mutual fund assets were $146.8 billion at the end of Q3 2006, up $7.2 billion or 5 percent from $139.6 billion at Sept. 30, 2005 and up $4.8 billion or 3 percent from $142.0 billion at June 30, 2006. Average money market mutual fund assets were $145.8 billion for Q3 2006, up $5.7 billion or 4 percent from $140.1 billion for Q3 2005 and up $2.0 billion or 1 percent from $143.8 billion for Q2 2006.
For Q3 2006, revenue increased $5.9 million or 3 percent to $243.9 million compared to $238.0 million for the same quarter last year, primarily due to Federated’s acquisition of MDTA LLC in July. For Q3 2006, Federated derived 47 percent of its revenue from money market assets, 39 percent from equity assets, 13 percent from fixed-income assets and 1 percent from other products and services. Revenue for the first nine months of 2006 increased $61.5 million or 9 percent to $719.1 million compared to $657.6 million for the first nine months of 2005, primarily due to the acquisition of the cash management business of Alliance Capital Management L.P. ($43.2 million); the acquisition of MDTA LLC ($6.8 million); and increases in average equity ($20.0 million) and money market ($18.2 million) assets under management, offset by a decrease in fixed-income assets ($14.8 million) under management. For YTD 2006, Federated derived 47 percent of its revenue from money market assets, 39 percent from equity assets, 13 percent from fixed-income assets and 1 percent from other products.
Operating expenses for Q3 2006 increased by $39.1 million or 30 percent to $170.0 million compared to $130.9 million for Q3 2005. Operating expenses for Q3 2005 included the recognition of a $23.6 million insurance reimbursement related to costs incurred for various legal, regulatory and compliance matters. For Q3 2006, as compared to Q3 2005, other increases to operating expenses were caused primarily by the marketing and distribution expenses related to the acquisition of MDTA LLC ($5.8 million) and increased money market ($5.3 million) and equity ($1.2 million) assets. For YTD 2006, operating expenses increased by $47.2 million or 11 percent to $495.4 million compared to $448.2 million for the same period last year. Increases in YTD 2006 operating expenses, as compared to YTD 2005, were caused primarily by the above-mentioned insurance reimbursement; the Alliance acquisition ($37.9 million); the marketing and distribution expenses related to increased equity ($4.3 million) and money market ($12.9 million) assets; and the acquisition of MDTA LLC ($5.8 million). These increases were partially offset by the $55.6 million of regulatory settlement expense, which was recorded in the first half of 2005.
Federated will host an earnings conference call at 9 a.m. Eastern on Friday, Oct. 27, 2006. Investors are invited to listen to Federated’s Q3 earnings teleconference by calling 888-412-9259 (domestic) or 706-679-0848 (international) prior to the 9 a.m. start time for the teleconference. 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 Nov. 3, 2006 by calling 800-642-1687 (domestic) or 706-645-9291 (international) and entering code 7815144.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $222.7 billion in assets as of Sept. 30, 2006. With 149 mutual funds and a variety of separately managed account options, Federated provides comprehensive investment management to more than 5,400 institutions and intermediaries including corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Federated ranks in the top 2 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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1 Strategic Insight, August 2006. Based on assets under management in open-end funds.
Certain statements in this press release, such as those related to interest rates and growth of money market assets, 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 to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Among other risks are the uncertainty of interest rate changes and the ability of the company to grow money market assets as a result of such changes, as well as the risk 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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