Federated Investors, Inc. Reports First Quarter 2006 Earnings
- Total assets increase to record $217.5 billion at quarter end
- Equity assets reach record $31.6 billion and money market assets reach record $163.6 billion at quarter end
- Board increases quarterly dividend 20 percent from $0.15 to $0.18
(PITTSBURGH, Pa., ) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share of $0.45 for the quarter ended March 31, 2006. These results include net earnings of $2.8 million or $0.03 per share classified as income from discontinued operations related to the sale of the company’s tradeclearing operation. This sale, to be completed over a series of closings, began in Q1 2006 and is expected to be substantially complete by the end of Q2 2006. Federated’s Q1 2006 results also include a pre-tax charge of $2.0 million or $0.01 net per share for severance expense and $1.3 million pre-tax or $0.01 net per share in stock-based compensation expense resulting from the required adoption of SFAS 123(R). In addition, revenues were reduced by $1.0 million pre-tax or $0.01 net per share from the impact of advisory fee reductions implemented on Jan. 1, 2006.
Federated’s income from continuing operations was $0.43 per diluted share for the quarter ended March 31, 2006 compared with $0.06 per share for the same quarter last year. Income from continuing operations was $46.1 million for Q1 2006 compared to $6.8 million for Q1 2005.
Federated’s total managed assets were $217.5 billion at March 31, 2006, up $38.5 billion or 22 percent from $179.0 billion at March 31, 2005 and up $4.1 billion or 2 percent from the $213.4 billion reported at Dec. 31, 2005. Through its mutual funds and separately managed accounts, Federated managed $53.9 billion in equity and fixed-income assets as of March 31, 2006, a 1 percent increase from $53.2 billion as of March 31, 2005. Average managed assets for Q1 2006 were $217.5 billion, up $38.1 billion or 21 percent from $179.4 billion reported for Q1 2005 and up $7.4 billion or 4 percent from $210.1 billion in average managed assets reported for Q4 2005.
“Federated continues its commitment to enhance the investment performance of our equity portfolios, develop new products and complete acquisitions, such as the two transactions closed during the first quarter, in order to grow our assets under management,” said J. Christopher Donahue, president and CEO.
Federated’s board of directors declared a quarterly dividend of $0.18 per share, an increase of 20 percent from $0.15 per share last quarter. The dividend is payable on May 15, 2006 to shareholders of record as of May 8, 2006. During Q1 2006, Federated purchased 632,607 shares of class B common stock for $22.9 million.
Federated’s equity assets were $31.6 billion at March 31, 2006, up $3.3 billion or 12 percent from $28.3 billion at March 31, 2005 and up $1.8 billion or 6 percent from $29.8 billion at Dec. 31, 2005. Federated’s top selling equity mutual funds on a net basis were: Federated Kaufmann Small Cap Fund, Federated Kaufmann Fund, Federated Strategic Value Fund and Federated Muni and Stock Advantage Fund. Federated continued to grow assets through strategic acquisitions in Q1 2006 as Federated Mid-Cap Index Fund acquired $218 million in assets from the Mason Street Index 400 Fund and Federated Kaufmann Fund acquired $158 million in assets from the Wayne Hummer Growth Fund.
Federated’s fixed-income assets were $22.3 billion at March 31, 2006, down $2.6 billion or 10 percent from $24.9 billion at March 31, 2005 and down $0.7 billion or 3 percent from $23.0 billion at Dec. 31, 2005. Federated’s top selling fixed-income mutual funds on a net basis were: Federated Total Return Government Fund, Federated Total Return Bond Fund and Federated Intermediate Government/Corporate Fund.
Money market assets in both funds and separate accounts were $163.6 billion at March 31, 2006, up $37.9 billion or 30 percent from $125.7 billion at March 31, 2005 and up $3.0 billion or 2 percent from $160.6 billion at Dec. 31, 2005. Money market mutual fund assets increased to $146.0 billion at the end of Q1 2006, up 33 percent from $109.9 billion at March 31, 2005 and up slightly from $145.3 billion Dec. 31, 2005.
For Q1 2006, revenue increased $36.9 million or 18 percent to $238.8 million as compared to $201.9 million for the same quarter last year, primarily due to Federated’s acquisition of Alliance Capital Management L.P.’s cash management business in 2005 and to organic growth in money market assets. Higher equity assets also led to the increase in revenue, partially offset by lower fixed income assets. Revenue for Q1 2006 included the impact of $1.0 million in advisory-fee reductions implemented Jan. 1, 2006 related to the company’s settlement with the New York State Attorney General. For Q1 2006, Federated derived 47 percent of its revenue from money market assets, 38 percent from equity assets, 14 percent from fixed-income assets and 1 percent from other products.
Operating expenses for Q1 2006 of $164.6 million decreased by $8.7 million or 5 percent from $173.3 million for Q1 2005. Marketing and distribution expense was affected primarily by higher expenses related to the Alliance acquisition.
Discontinued operations for Q1 2006 reflects $1.0 million or $0.01 per share of primarily after-tax operating income related to Federated’s trade-clearing operation, which the company began to divest in Q1 2006, and $1.8 million or $0.02 per share for the reversal of a tax-valuation allowance for the portion of Federated’s capital loss carryforwards that will likely be realized as a result of the capital gain expected on the sale of the trade-clearing operation.
Federated’s assets by market definitions changed as of Jan. 1, 2006. Channels that had been included in the former Institutional market are now included in the Broker/Dealer and Wealth Management & Trust markets. For further explanations of these changes, please see the Managed Assets schedule herein or for historical data, please see the Historical Assets Under New Market Definitions chart on the About Us page of FederatedInvestors.com.
Federated will host an earnings conference call at 9 a.m. Eastern on April 28, 2006. Investors are invited to listen to Federated’s Q1 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 May 5, 2006 by calling 800-642-1687 (domestic) or 706-645-9291 (international) and entering code 7696082.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $217.5 billion in assets as of March 31, 2006. With 140 mutual funds and a variety of separately managed accounts options, Federated provides comprehensive investment management to nearly 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 seven percent of fixed-income fund managers and the top seven percent of equity fund managers1. For more information, visit FederatedInvestors.com.
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1 Strategic Insight, February 28, 2006. Based on assets under management in open-end funds.
Certain statements in this press release, such as those related to the development of enhanced investment performance, the development of new products and acquisition activity, 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. Among other risks and uncertainties is the ability of the Company to implement processes to enhance investment performance, increase sales as a result of new products it may create, identify and complete suitable acquisitions at acceptable prices and 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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