Federated Investors, Inc. Reports First Quarter 2004 Earnings
- Equity assets increase to record $26.4 billion, up 52 percent since Q1 2003
- Quarterly dividend increases 20 percent to $0/.102
- David M. Kelly to join board as new independent director
(PITTSBURGH, Pa., Apr. 19, 2004) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment management companies, today reported earnings per diluted share (EPS) of $0.46 for the quarter ended March 31, 2004 compared with $0.43 per share for the same quarter last year. Net income was $51.7 million for Q1 2004 compared to net income of $48.7 million for Q1 2003. Federated’s Q1 2004 earnings include expenses of $4.3 million associated with various legal, regulatory and compliance matters. Of this amount, $2.8 million represents an additional accrual of estimated costs for the company’s internal review of past mutual fund trading practices and $1.5 million is for expenses including: legal fees from ongoing related lawsuits, responses to additional regulatory requests for information, costs associated with the planned transfer agency outsourcing, new compliance-related costs and other related expenses.
Federated's total managed assets were $193.9 billion at March 31, 2004, down $1.8 billion or one percent from $195.7 billion at March 31, 2003 and down $4.0 billion or two percent from $197.9 billion reported at December 31, 2003. Average managed assets for Q1 2004 were $200.1 billion, down $0.6 billion from $200.7 billion reported for Q1 2003 and $1.0 billion higher than the $199.1 billion in average managed assets reported for Q4 2003. Through its mutual funds and separately managed accounts, Federated managed a record $55.9 billion in equity and fixed-income assets as of March 31, 2004, an increase of 22 percent from $45.8 billion as of March 31, 2003.
"The mix and balance of Federated's extensive product linfe continues to produce earnings growth across economic cycles. Asset growth in our equity products drove Federated’s revenue growth during the quarter. We remain optimistic that the investments we've made in people and our commitment to fundamental investing processes in the equity area will lead to further success," said J. Christopher Donahue, president and CEO.
The company also announced that its board of directors declared a quarterly dividend of $0.102 per share. The dividend is payable on May 14, 2004, to shareholders of record as of May 7, 2004. During Q1 2004, Federated purchased 415,101 shares of class B common stock for $12.7 million. At the company’s annual meeting today, it is anticipated that shareholders will elect David M. Kelly as a new independent director. Kelly, 61, is chairman, president and chief executive officer of publicly traded Matthews International Corporation, a designer, manufacturer and marketer of memorialization products and caskets for the cemetery and funeral home industries. He brings 35 years of international and domestic business experience to Federated’s board. Kelly earned a bachelor of science degree from Boston College, a master of science degree from Yale University and a master of business administration from Harvard Business School. Kelly is also a member of the board of directors at Mestek, Inc. and Duquesne Light.
Through the combination of net asset value appreciation and net flows into equity products, Federated's equity assets increased to a record $26.4 billion at March 31, 2004, compared to $17.4 billion at the end of Q1 2003 and $25.6 billion at December 31, 2003. Federated produced $2.0 billion in gross equity fund sales and $0.5 billion in net equity fund sales and exchanges for Q1 2004. Federated's fixed-income assets were $29.5 billion at March 31, 2004, up $1.1 billion from March 31, 2003 and down slightly from December 31, 2003. Federated produced $2.6 billion in gross fixedincome fund sales and ($0.5) billion in net redemptions and exchanges for Q1 2004.
Money market fund and money market separately managed accounts totaled $138.0 billion at the end of Q1 2004, down $11.9 billion or eight percent from $149.9 billion at the end of Q1 2003 and down three percent from $142.8 billion at the end of Q4 2003. Consistent with industry trends, money market fund assets decreased and were $121.8 billion at the end of Q1 2004, down eight percent from $132.5 billion at the end of Q1 2003 and down six percent from $128.9 billion at the end of Q4 2003. Money market separate account assets were $16.2 billion at the end of Q1 2004, down seven percent from $17.4 billion at the end of Q1 2003 and up 17 percent from the end of Q4 2003. Factors which influence the relative demand for Federated's money market products include uses of cash by corporations and other institutional clients for purposes such as tax payments, as well as the relative attractiveness of direct market alternative investments for yields. Federated is the largest institutional manager of money market assets1 and the firm's products feature a reputation for stability, convenience, credit analysis, diversification, yield and related services.
For the quarter ended March 31, 2004, revenue increased 17 percent to $227.1 million as compared to Q1 2003. Operating expenses increased 20 percent for Q1 2004 to $138.0 million from $115.2 million for Q1 2003. Increases in revenue, operating expense and debt expense—nonrecourse include the result of applying financing treatment in 2004 to account for B-share distribution-related funding arrangements. The impact of financing treatment in Q1 2004 was $12.8 million of additional revenue, $9.5 million of additional operating expense and $4.5 million of additional debt expense—nonrecourse. As a result of contractual changes in 2004, the increases in Federated's revenue and operating income were partially offset by the elimination of portfolio accounting revenue and expenses related to Federated-sponsored funds. First quarter 2003 included $4.1 million of revenue and $3.4 million of operating expenses that, due to the portfolio accounting contract changes, are no longer recorded effective for Q1 2004. Refer to the Unaudited Condensed Consolidated Statements of Income contained herein for the specific line items affected.
For Q1 2004, Federated derived 40 percent of its revenue from money market assets, 35 percent from equity assets, 20 percent from fixed-income assets and 5 percent from other products. Federated will host an earnings conference call at 1:00 p.m. on April 19, 2004. 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 1:00 p.m. Eastern start time for the teleconference. The call may also be accessed in real time on the Internet via the About Us section of www.federatedinvestors.com. A replay will be available after 4:00 p.m. and until April 26, 2004, by calling 800-642-1687 (domestic) or 706-645-9291 (international) and entering code 6547292.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $193.9 billion in assets as of March 31, 2004. With 136 mutual funds and separately managed accounts in a wide range of investment strategies, Federated provides comprehensive investment management to nearly 5,900 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 four percent of fixed-income fund managers and the top six percent of equity fund managers2. For more information, visit www.federatedinvestors.com.
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1iMoneyNet, February 29, 2004. Based on assets in open-ended funds.
2Strategic Insight, February 29, 2004. Based on assets in open-ended funds.
Certain statements in this press release, such as those related to the prospects for 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, 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. Such factors include those 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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