Federated Investors, Inc. Reports Second Quarter 2007 Earnings; Total Assets Reach Record $260 Billion

  • Equity assets set new record high
  • Revenue climbs to quarterly record $277 million
  • 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 $0.54 for the quarter ended June 30, 2007 compared to $0.44 for the quarter ended June 30, 2006, an increase of 23 percent. Federated reported YTD 2007 EPS of $1.04 compared to $0.86 per share for the same period in 2006. Federated’s income from continuing operations was $55.3 million for Q2 2007 compared to $46.7 million for Q2 2006. Federated’s YTD 2007 income from continuing operations was $107.0 million compared to $92.7 million for the same period in 2006.

Federated’s total managed assets were a record $259.7 billion at June 30, 2007, up $49.2 billion or 23 percent from $210.5 billion at June 30, 2006 and up $9.2 billion or 4 percent from the $250.5 billion reported at March 31, 2007. Through its mutual funds and separately managed accounts, Federated managed $66.3 billion in equity and fixed-income assets as of June 30, 2007, a 27 percent increase from $52.2 billion at June 30, 2006. Total average managed assets for Q2 2007 were $256.1 billion, up $42.2 billion or 20 percent from $213.9 billion reported for Q2 2006 and up $9.6 billion or 4 percent from $246.5 billion reported for Q1 2007.

“The environment for cash management products during the second quarter benefited Federated across our distribution channels, as the firm saw $8.6 billion in asset growth in our money market funds,” said J. Christopher Donahue, president and CEO. “Our flagship multi-sector bond fund, Federated Total Return Bond Fund, brings to bear the firm’s best ideas about different fixed-income asset classes and had strong gross and net flows during the quarter.” Federated’s board of directors declared a quarterly dividend of $0.21 per share. The dividend is payable on Aug. 15, 2007 to shareholders of record as of Aug. 8, 2007. During Q2 2007, Federated purchased 271,257 shares of class B common stock for $9.6 million.

Money market assets in both funds and separate accounts were a record $193.4 billion at June 30, 2007, up $35.1 billion or 22 percent from $158.3 billion at June 30, 2006 and up $7.4 billion or 4 percent from $186.0 billion at March 31, 2007. Money market mutual fund assets increased to a record $172.4 billion at the end of Q2 2007, up $30.4 billion or 21 percent from $142.0 billion at June 30, 2006 and up $8.6 billion or 5 percent from $163.8 billion at March 31, 2007.

Federated’s equity assets were a record $43.3 billion at June 30, 2007, up $12.8 billion or 42 percent from $30.5 billion at June 30, 2006 and up $2.0 billion or 5 percent from $41.3 billion at March 31, 2007. Federated’s top-selling equity mutual funds on a net basis were: Federated Strategic Value Fund, Federated Muni and Stock Advantage Fund, Federated Kaufmann Small Cap Fund, Federated MDT All Cap Core Fund and Federated Equity Income Fund. Federated continued to see growth in its equity separate account products, which had $197 million in net flows during Q2 2007.

Federated’s fixed-income assets were $23.0 billion at June 30, 2007, up $1.3 billion or 6 percent from $21.7 billion at June 30, 2006 and down slightly from $23.2 billion at March 31, 2007. Federated’s top-selling fixed-income mutual funds on a net basis were: Federated Total Return Bond Fund; Federated Mortgage Fund; Federated U.S. Government Securities Fund: 2-5 Years; and Federated Municipal High Yield Advantage Fund. Federated saw solid organic growth in its fixed-income separate account products, which had $54 million in net flows during Q2 2007.

Financial Summary
For Q2 2007, revenue increased by $40.1 million or 17 percent to a record $276.5 million compared to $236.4 million for the same quarter last year. The increase in revenue is primarily due to increases in revenue from average money market managed assets ($21.9 million); increases in average equity managed assets due to the MDT acquisition ($10.0 million); and increases in remaining average equity managed assets ($9.7 million). The increases were partially offset by a decrease in revenue from a change in the asset mix of average fixed-income managed assets ($1.1 million). For Q2 2007, Federated derived 48 percent of its revenue from money market assets, 40 percent from equity assets, 11 percent from fixed-income assets and 1 percent from other products and services.

Revenue for the first half of 2007 increased $65.7 million or 14 percent to $540.9 million compared to $475.2 million for the first half of 2006. The YTD revenue increase is primarily due to increases in revenue from average money market managed assets ($35.9 million); increases in average equity managed assets due to the MDT acquisition ($19.0 million); and increases in remaining average equity managed assets ($15.8 million). The increases were partially offset by a decrease in revenue from a change in the asset mix of average fixed-income managed assets ($3.7 million). For YTD 2007, Federated derived 48 percent of its revenue from money market assets, 40 percent from equity assets, 11 percent from fixed-income assets and 1 percent from other products and services.

Operating expenses for Q2 2007 increased by $26.8 million or 17 percent to $187.6 million compared to $160.8 million for Q2 2006. The increase in operating expenses was caused primarily by marketing and distribution expenses related to increased money market managed assets ($13.4 million) and direct operating expenses related to the MDT acquisition ($6.4 million). For the first half of 2007, operating expense increased by $42.9 million or 13 percent to $368.3 million compared to $325.4 million for the same period last year. Higher marketing and distribution expenses related to increased money market managed assets ($22.3 million) and the direct operating expenses of MDT ($13.3 million) drove YTD increases in operating expenses.

Federated will host an earnings conference call at 9 a.m. Eastern on July 27, 2007. Investors are invited to listen to Federated’s Q2 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 Aug. 3, 2007 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering codes 286 and 247443.

Federated Investors, Inc. is one of the largest investment managers in the United States, managing $259.7 billion in assets as of June 30, 2007. With 151 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 3 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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The preceding paragraphs represent only a portion of the press release. To view the entire press release click on the full press release on the right.

1 Strategic Insight, May 31, 2007. Based on assets under management in open-end funds.

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Full Press Release

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Federated Securities Corp. is distributor of the Federated Funds.
Separately managed accounts are made available through Federated Investment Counseling and MDT Advisers, both registered investment advisors.
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