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Federated Investors, Inc. Reports Third Quarter 2009 Earnings

  • Equity and fixed-income assets increase $6.3 billion to reach $61 billion for Q3 2009
  • Net bond fund sales reach $1.8 billion for Q3 2009
  • Board declares quarterly dividend of $0.24 per share

(PITTSBURGH, Pa., Oct. 22, 2009) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share from continuing operations (EPS) of $0.56 for the quarter ended Sept. 30, 2009 compared to $0.52 for the same quarter last year. Income from continuing operations was $57.0 million for Q3 2009 compared to $56.2 million for Q3 2008.

Federated reported YTD 2009 EPS of $1.42 compared to $1.62 for the same period in 2008. For the nine months ended Sept. 30, 2009, income from continuing operations was $145.4 million compared to $167.2 million for the same period in 2008. Earnings for YTD 2009 included $20.8 million in non-cash impairment charges recognized primarily in Q1 2009.

Federated's total managed assets were $392.3 billion at Sept. 30, 2009, up $48.3 billion or 14 percent from $344.0 billion at Sept. 30, 2008 and down $9.5 billion or 2 percent from $401.8 billion reported at June 30, 2009. Average managed assets for Q3 2009 were $408.1 billion, up $73.0 billion or 22 percent from $335.1 billion reported for Q3 2008 and down $6.3 billion or 2 percent from $414.4 billion reported for Q2 2009.

"Federated's fluctuating fund sales have increased more than 50 percent from the same time last year," said J. Christopher Donahue, president and chief executive officer. "Investors continue to recognize Federated's reputation for managing a broad line of stock, bond and alternative strategies that can help them meet their investing needs."

Federated's board of directors declared a quarterly dividend of $0.24 per share. The dividend is payable on Nov. 13, 2009 to shareholders of record as of Nov. 9, 2009. During Q3 2009, Federated purchased 470,581 shares of Federated class B common stock for $12.0 million.

Federated's fixed-income assets were $32.0 billion at Sept. 30, 2009, up $9.3 billion or 41 percent from $22.7  million at Sept. 30, 2008 and up $3.3 billion or 11 percent from $28.7 billion at June 30, 2009. Federated experienced continued strong net positive flows into its bond funds with $1.8 billion during Q3 2009, bringing total bond fund inflows to $5.6 billion so far in 2009, an increase of $4.0 billion over the first nine months of 2008. Net sales were driven by strong flows into ultrashort bond funds and intermediate-term bond funds including Federated Total Return Bond Fund.

Federated's equity assets were $29.1 billion at Sept. 30, 2009, down $2.6 billion or 8 percent from $31.7 billion at Sept. 30, 2008 and up $2.9 billion or 11 percent from $26.2 billion at June 30, 2009. During Q3 2009, Federated's net flows into equity funds were $126 million. Net sales were led by Federated Prudent Bear Fund and Federated Market Opportunity Fund, both of which invest in alternative-asset classes, and Federated Kaufmann Small Cap Fund, a growth fund.

Money market assets in both funds and separate accounts were $318.1 billion at Sept. 30, 2009, up $30.3 billion or 11 percent from $287.8 billion at Sept. 30, 2008 and down $28.3 billion or 8 percent from $346.4 billion at June 30, 2009. Money market mutual fund assets were $287.6 billion at Sept. 30, 2009, up $28.4 billion or 11 percent from $259.2 billion at Sept. 30, 2008 and down $25.2 billion or 8 percent from $312.8 billion at June 30, 2009.

Financial Summary

Q3 2009 vs. Q3 2008
For Q3 2009, revenue decreased by $12.3 million or 4 percent from the same quarter last year. The decrease in revenue primarily reflects $36.5 million in voluntary fee waivers related to certain money market funds in order to maintain positive or zero net yields. The fee waivers were partially offset by a related reduction in marketing and distribution expenses of $27.9 million such that the net impact on operating income was a decrease of $8.6 million. Lower average equity managed assets also contributed to decreased revenue. These decreases were partially offset by increased revenue from higher average money market and fixed-income managed assets.

Fee waivers to produce positive or zero net yields may increase and such increases could be significant. The amount of these waivers will be determined by a variety of factors including available yields on instruments held by the money market funds, changes in assets within money market funds, actions by the Federal Reserve and the U.S. Department of the Treasury, changes in the mix of money market customer assets, changes in expenses of the money market funds and Federated's willingness to continue these waivers.

For Q3 2009, Federated derived 63 percent of its revenue from money market assets, 24 percent from equity assets, 12 percent from fixed-income assets and 1 percent from other products and services. Operating expenses for Q3 2009 were $198.9 million compared to $212.7 million for Q3 2008. Marketing and distribution expenses decreased because of the aforementioned fee-waiver-related reductions, partially offset by the impact of increases in average money market managed assets.

Q3 2009 vs. Q2 2009
Compared to the prior quarter, revenue decreased by $13.3 million or 4 percent. The decrease in revenue primarily reflects a $19.6 million increase in voluntary fee waivers on certain money market funds in order to maintain positive or zero net yields. The fee waivers were offset by a related decrease in marketing and distribution expenses of $16.5 million such that the net impact on operating income was a decrease of $3.1 million compared to the prior quarter. In addition, revenue decreased due to lower average money market managed assets. These decreases were partially offset by the impact of increased average equity and fixed-income managed assets.

Compared to Q2 2009, operating expenses decreased by $20.0 million or 9 percent. Changes from the prior period include a decrease in marketing and distribution expenses primarily related to the aforementioned fee-waiver related reductions.

YTD 2009 vs. YTD 2008
Revenue for the first nine months of 2009 decreased by $10.8 million or 1 percent compared to the same period last year. The decrease in revenue primarily reflects voluntary fee waivers of $63.1 million on certain money market funds in order to maintain positive or zero net yields. The fee waivers were partially offset by a related reduction in marketing and distribution expenses of $43.8 million such that the net impact on operating income was a decrease of $19.3 million. In addition, revenue decreased due to lower average equity managed assets. These decreases were partially offset by the impact of increased average money market and fixed-income managed assets.

For YTD 2009, Federated derived 67 percent of its revenue from money market assets, 21 percent from equity assets, 11 percent from fixed-income assets and 1 percent from other products and services.

Operating expenses for the first nine months of 2009 increased by $21.8 million or 3 percent compared to the same period of last year primarily due to $20.8 million in non-cash impairment charges recorded primarily in Q1 2009.

Federated's level of business activity and financial results are dependent upon many factors including market conditions, investment performance and investor behavior. These factors and others including asset levels, product sales and redemptions, market appreciation or depreciation, revenues, fee waivers and expenses can impact Federated's activity levels and financial results significantly. Risk factors and uncertainties that can influence Federated's financial results are discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission.

Federated will host an earnings conference call at 9 a.m. Eastern on Friday, Oct. 23, 2009. Investors are invited to listen to Federated's 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 Federated section of FederatedInvestors.com. A replay will be available after 12:30 p.m. and until Oct. 30, 2009 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering codes 286 and 334400.

Federated Investors, Inc. is one of the largest investment managers in the United States, managing $392.3 billion in assets as of Sept. 30, 2009. With 150 funds and a variety of separately managed account options, Federated provides comprehensive investment management to nearly 5,300 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 6 percent of fixed-income fund managers and the top 8 percent of equity 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, August 31, 2009. Based on assets under management in open-end funds.

Certain statements in this press release, such as those related to the level of fee waivers incurred by the company, and asset flows, constitute or may 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. Other risks and uncertainties include the ability of the company to predict the level of fee waivers in future quarters, which could vary significantly depending on a variety of factors identified above, and include the ability of the company to sustain asset flows, which could vary significantly depending on market conditions, investment performance and investor behavior. Other risks and uncertainties also include the risk factors discussed in the company’s annual and quarterly reports as filed with the Securities and Exchange Commission. 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.

Financial Statements

Full Press Release

Media Contacts

For information and interviews, please contact our media relations team:

Meghan McAndrew
412-288-8103

J.T. Tuskan
412-288-7895

Analyst Contacts

Ray Hanley
412-288-1920



 
 
 
 
 
 
 
 
 
 
 
Federated Securities Corp. is distributor of the Federated Funds.
Separately managed accounts are made available through Federated Global Investment Management, Corp.; Federated Investment Counseling; and Federated MDTA LLC, each a registered investment advisor.
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