Federated Investors, Inc. Reports Strong Third Quarter 2007 Earnings; Money Market Assets Climb to Record $210 Billion
- Total assets under management increase to record $276 billion
- Board declares $0.21 per share quarterly dividend
(PITTSBURGH, Pa., ) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share from continuing operations (EPS) of $0.57 for the quarter ended Sept. 30, 2007 compared to $0.43 for the quarter ended Sept. 30, 2006, an increase of 33 percent. Federated reported YTD 2007 EPS of $1.60 compared to $1.29 per share for the same period in 2006. Federated’s income from continuing operations was $57.7 million for Q3 2007 compared to $45.2 million for Q3 2006. Federated’s YTD 2007 income from continuing operations was $164.8 million compared to $137.9 million for the same period in 2006. Federated’s Q3 2007 results include a non-recurring investment loss of $2.8 million, after-tax, that had an impact of $0.02 to the quarter’s EPS.
Federated’s total managed assets were a record $276.2 billion at Sept. 30, 2007, up $53.5 billion or 24 percent from $222.7 billion at Sept. 30, 2006 and up $16.5 billion or 6 percent from $259.7 billion reported at June 30, 2007. Through its mutual funds and separately managed accounts, Federated managed $66.3 billion in equity and fixed-income assets as of Sept. 30, 2007, an 11 percent increase from $59.9 billion at Sept. 30, 2006. Total average managed assets for Q3 2007 were $267.6 billion, up $47.9 billion or 22 percent from $219.7 billion reported for Q3 2006 and up $11.5 billion or 4 percent from $256.1 billion reported for Q2 2007.
“The long-term credit and risk management strength of Federated’s money market franchise positioned our products well for the unsettled credit markets of the third quarter. As a result, we were able to substantially grow our money market mutual fund assets,” said J. Christopher Donahue, president and CEO. “The economic outlook and market conditions are positive for growth in our money market funds.”
Federated’s board of directors declared a quarterly dividend of $0.21 per share. The dividend is payable on Nov. 15, 2007 to shareholders of record as of Nov. 8, 2007. During Q3 2007, Federated purchased 1,860,188 shares of class B common stock for $61.2 million.
Money market assets in both funds and separate accounts were a record $209.9 billion at Sept. 30, 2007, up $47.1 billion or 29 percent from $162.8 billion at Sept. 30, 2006 and up $16.5 billion or 9 percent from $193.4 billion at June 30, 2007. Money market mutual fund assets increased to a record $190.0 billion at the end of Q3 2007, up $43.2 billion or 29 percent from $146.8 billion at Sept. 30, 2006 and up $17.6 billion or 10 percent from $172.4 billion at June 30, 2007.
Federated’s equity assets were a record $43.5 billion at Sept. 30, 2007, up $5.2 billion or 14 percent from $38.3 billion at Sept. 30, 2006 and up slightly from $43.3 billion at June 30, 2007. Federated’s top-selling equity mutual funds on a net basis were: Federated International Small Company Fund, Federated InterContinental Fund, Federated Kaufmann Small Cap Fund, Federated MDT All Cap Core Fund and Federated Muni and Stock Advantage Fund.
Federated’s fixed-income assets were $22.8 billion at Sept. 30, 2007, up $1.1 billion or 5 percent from $21.7 billion at Sept. 30, 2006 and down slightly from $23.0 billion at June 30, 2007. Federated’s topselling fixed-income mutual funds on a net basis were: Federated Government Ultrashort Duration Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated Total Return Bond Fund; Federated North Carolina Municipal Income Fund; and Federated International Bond Fund.
For Q3 2007, revenue increased by $42.1 million or 17 percent to a record $286.0 million compared to $243.9 million for the same quarter last year. The increase in revenue is primarily due to increases in revenue from average money market managed assets ($28.3 million) and increases in average equity managed assets ($16.2 million). The increases were partially offset by a decrease in revenue from a change in the asset mix of average fixed-income managed assets ($1.6 million). For Q3 2007, Federated derived 50 percent of its revenue from money market assets, 39 percent from equity assets, 10 percent
from fixed-income assets and 1 percent from other products and services.
Revenue for the first nine months of 2007 increased $107.8 million or 15 percent to $826.9 million compared to $719.1 million for the same period in 2006. The YTD revenue increase is primarily due to increases in revenue from average money market managed assets ($64.6 million); increases in average equity managed assets due to the July 2006 acquisition of MDT Advisers ($23.5 million); and increases in remaining average equity managed assets ($26.7 million). The revenue increases were partially offset by a decrease in revenue from a change in the mix of average fixed-income managed assets ($5.2 million). For YTD 2007, Federated derived 49 percent of its revenue from money market assets, 39 percent from equity assets, 11 percent from fixed-income assets and 1 percent from other products and services.
Operating expenses for Q3 2007 increased by $18.2 million or 11 percent to $188.2 million compared to $170.0 million for Q3 2006. The increase in operating expenses was caused primarily by marketing and distribution expenses related to increased average money market managed assets ($15.8 million) and increased incentive compensation expense ($4.2 million).
For the first nine months of 2007, operating expenses increased by $61.1 million or 12 percent to $556.5 million compared to $495.4 million for the same period last year. Higher marketing and distribution expenses related to increased average money market managed assets ($37.9 million); the direct operating expenses of MDT ($13.7 million); and increases in other incentive compensation expense ($7.8 million) drove YTD increases in operating expenses.
Nonoperating expenses increased $4.2 million and $5.6 million for the three and nine months ended Sept. 30, 2007, respectively, compared to the same periods of 2006. These increases were primarily related to a non-recurring $4.9 million, pre-tax, or $2.8 million after-tax investment loss incurred in a Federated-sponsored private placement product during Q3 2007.
Federated will host an earnings conference call at 9 a.m. Eastern on Friday, Oct. 26, 2007. Investors are invited to listen to Federated’s Q3 earnings teleconference by calling 877-407-0782 (domestic) or 201-689-8567 (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. 2, 2007 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering codes 286 and 257326.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $276.2 billion in assets as of Sept. 30, 2007. With 150 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 8 percent of equity fund managers and the top 11 percent of fixed-income fund managers1. For more information, visit FederatedInvestors.com.
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1 Strategic Insight, Aug. 31, 2007. Based on assets under management in open-end funds.
Certain statements in this press release, such as those related to the economic outlook, market conditions and the prospect for money market fund 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 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 that the economic outlook and market conditions remain conducive for money market fund growth, 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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