Federated Investors, Inc. Reports Second Quarter 2005 Results
- Assets Under Management Reach Record $204.7 Billion at Quarter End
- Acquisition of Alliance Capital Management L.P.'s Cash Management Assets Completed
- Q2 2005 Revenue Reaches Record $221.3 Million
(PITTSBURGH, Pa., Jul. 28, 2005) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share from continuing operations of $0.35 for the quarter ended June 30, 2005, compared with $0.44 for the same quarter last year. Income from continuing operations was $37.8 million for Q2 2005 compared to $48.6 million for Q2 2004.
Federated’s Q2 2005 results include a pretax charge to income of $6.6 million for various legal, regulatory and compliance matters, including a net increase of $5.0 million to the estimate of costs for the company’s anticipated settlement of governmental inquiries (Settlement Charges). Certain portions of the Settlement Charges are not tax deductible. The changes made to the Settlement Charges in Q2 2005 reduced net earnings by $0.09 per diluted share.
Federated’s total managed assets were a period-end record $204.7 billion at June 30, 2005, up $20.9 billion or 11 percent from $183.8 billion at June 30, 2004 and up 14 percent from $179.0 billion at March 31, 2005. The increase in assets under management was due to the significant organic growth of Federated’s money market assets across distribution channels and to the conversion of managed assets totaling $0.8 billion in Q1 2005 and $18.5 billion in Q2 2005 related to Federated’s acquisition of Alliance Capital Management L.P.’s cash management assets.
“Federated experienced money market asset growth in each of its major distribution channels during the second quarter,” said J. Christopher Donahue, president and CEO. “We are optimistic about continuing to grow this part of our business, both organically and through acquisitions such as the Alliance transaction.”
Federated’s board of directors declared a quarterly dividend of $0.15 per share. The dividend is payable on August 15, 2005, to shareholders of record as of August 8, 2005.
Through its mutual funds and separately managed accounts, Federated managed $53.2 billion in equity and fixed-income assets as of June 30, 2005, a one percent increase from $52.5 billion at June 30, 2004. Average managed assets for Q2 2005 were $193.1 billion, up $2.6 billion from $190.5 billion reported for Q2 2004 and $13.7 billion higher than the $179.4 billion in average managed assets reported for Q1 2005.
Federated’s equity assets increased to $28.9 billion at June 30, 2005, compared to $28.3 billion at March 31, 2005, and $26.6 billion at June 30, 2004. Federated had $1.3 billion in gross equity fund sales during the quarter. For Q2 2005, Federated had $176 million in net equity fund redemptions and exchanges. The top selling equity funds, on a net basis, were Federated Market Opportunity Fund, Federated Muni and Stock Advantage Fund, Federated Strategic Value Fund and Federated Kaufmann Small Cap Fund.
Federated’s equity managed account product had $170 million in gross sales and $111 million in net sales during the quarter as overall assets in the product grew to $1.3 billion. Sales continued to be led by the Strategic Value (Equity Income) Strategy.
Federated’s fixed-income assets were $24.4 billion at June 30, 2005, down $522 million from March 31, 2005, and down $1.5 billion from June 30, 2004. Federated had $1.4 billion in gross fixed-income fund sales during the quarter. For Q2 2005, Federated had $676 million in net fixed-income fund redemptions and exchanges. The top selling fixed-income funds, on a net basis, were Federated Capital Preservation Fund, Federated Total Return Government Bond Fund, Federated Municipal High Yield Advantage Fund, Inc. and Federated Mortgage Fund.
Money market mutual fund and separately managed account assets totaled $151.4 billion at the end of Q2 2005, up $20.0 billion or 15 percent from $131.4 billion at the end of Q2 2004 and up $25.7 billion or 20 percent from $125.7 billion at the end of Q1 2005. Money market mutual fund assets increased to $136.9 billion at the end of Q2 2005, up 17 percent from $117.5 billion at the end of Q2 2004 and up 25 percent from $109.9 billion at the end of Q1 2005. Money market separate account assets were $14.6 billion at the end of Q2 2005, up six percent from $13.8 billion at the end of Q2 2004 and down eight percent from the end of Q1 2005, due largely to seasonality.
For the quarter ended June 30, 2005, revenue increased four percent to a record $221.3 million compared to $213.1 million for Q2 2004. Revenue growth during the quarter was due primarily to a $13.6 million increase from the conversion of the Alliance money market assets and a $7.3 million increase derived from increased average equity assets. These revenue increases were partially offset by a $10.6 million decline in revenues derived from decreased fixed-income and money market average assets (excluding the money market assets acquired from Alliance). For Q2 2005, Federated derived 42 percent of its revenue from money market assets, 38 percent from equity assets, 17 percent from fixed-income assets and three percent from other sources.
Operating expenses for Q2 2005 of $147.7 million increased $17.8 million or 14 percent from $129.9 million for Q2 2004. The increase was due primarily to $11.6 million in marketing and distribution expenses associated with the Alliance transaction as well as the $5.0 million net increase to the Settlement Charges recorded as other expenses.
Federated will host an earnings conference call at 9 a.m. Eastern on Friday, July 29, 2005. Investors are invited to listen to Federated’s Q2 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 Aug. 5, 2005, by calling 800-642-1687 (domestic) or 706-645-9291 (international) and entering code 7998115.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $204.7 billion in assets as of June 30, 2005. With 138 mutual funds and separately managed accounts in a wide range of investment strategies, Federated provides comprehensive investment management to nearly 5,700 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 and in the top six percent of both fixed income fund and equity fund managers1. For more information, visit FederatedInvestors.com.
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1Strategic Insight, May 31, 2005. Based on assets in open-end funds.
Certain statements in this press release, such as those related to the company’s continued 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, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forwardlooking statements. Among other risks and uncertainties is the ability of the company to continue to grow money market assets through its client base and to identify and complete mergers and acquisitions in a cost-effective manner 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 more likely to occur 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.
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