Federated Investors, Inc. Reports First Quarter 2008 Earnings; Total Assets Under Management Surpass Record $338 Billion
- Money market assets increase to a record $278 billion
- Diluted EPS increases 10 percent over Q1 2007
- Board increases quarterly dividend 14 percent to $0.24 per share
(Pittsburgh, Pa., 04/24/2008 07:59 AM) — Federated Investors, Inc. (NYSE: FII), one of the nation’s largest investment managers, today reported earnings per diluted share of $0.55 for the quarter ended March 31, 2008, compared to $0.50 for the quarter ended March 31, 2007, an increase of 10 percent. Federated’s net income was $55.8 million for Q1 2008 compared to $51.8 million for Q1 2007.
Federated's total managed assets were a record $338.5 billion at March 31, 2008, up $88.0 billion or 35percent from $250.5 billion at March 31, 2007 and up $36.9 billion or 12 percent from the $301.6 billion reported at Dec. 31, 2007. The increase in total managed assets was driven by a $40.9 billion increase in money market assets during Q1 2008. Average managed assets for Q1 2008 were $322.0 billion, up $75.5 billion or 31 percent from $246.5 billion reported for Q1 2007 and up $31.9 billion or 11 percent from $290.1 billion in average managed assets reported for Q4 2007.
"As investors sought havens from market volatility in the first quarter, Federated’s asset flows were driven by a demand for our money market and fixed-income offerings," said J. Christopher Donahue, president and CEO. "In addition, Federated’s gross sales of equity mutual funds increased compared to the prior quarter and from the first quarter of 2007 against a backdrop of difficult market conditions."
Federated's board of directors declared a quarterly dividend of $0.24 per share, an increase of 14 percent from $0.21 per share last quarter. The dividend is payable on May 15, 2008 to shareholders of record as of May 8, 2008. During Q1 2008, Federated purchased 68,684 shares of class B common stock for $2.1 million.
Money market assets in both funds and separate accounts were a record $277.5 billion at March 31, 2008, up $91.5 billion or 49 percent from $186.0 billion at March 31, 2007 and up $40.9 billion or 17 percent from $236.6 billion at Dec. 31, 2007. Money market mutual fund assets increased to a record $242.3 billion at the end of Q1 2008, up $78.5 billion or 48 percent from $163.8 billion at March 31, 2007 and up $27.3 billion or 13 percent from $215.0 billion at Dec. 31, 2007.
Federated's equity assets were $37.5 billion at March 31, 2008, down $3.8 billion or 9 percent from $41.3 billion at March 31, 2007 and down $4.7 billion or 11 percent from $42.2 billion at Dec. 31, 2007. Federated’s equity asset decreases were driven by market depreciation. Federated’s top-selling equity funds on a net basis were: Federated InterContinental Fund, Federated Market Opportunity Fund, Federated Capital Appreciation Fund II, Federated Kaufmann Large Cap Fund and Federated MDT Small Cap Growth Fund.
Federated's fixed-income assets were $23.4 billion at March 31, 2008, up slightly from $23.2 billion at March 31, 2007 and up $0.6 billion or 3 percent from $22.8 billion at Dec. 31, 2007. Federated’s topselling fixed-income funds on a net basis were: Federated U.S. Government Securities Fund: 2-5 Years; Federated Total Return Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years; Capital Preservation Fund; and Federated Municipal Ultrashort Fund.
For Q1 2008, revenue increased $41.3 million or 16 percent to $305.7 million compared to $264.4 million for the same quarter last year. The increase in revenue is primarily due to an increase in revenue from average money market managed assets ($47.9 million) and the impact of leap year on Q1 2008 compared to Q1 2007 ($2.3 million). Federated voluntarily waived an additional $3.7 million in fund fee revenue due to higher registration, custody and printing/postage expenses resulting from increased money market fund assets, changes in certain fund investment allocations and regulatory mailings. In addition, there was a decrease in revenue from average equity assets under management ($3.6 million) and a change in the mix of average fixed-income assets under management ($1.1 million). For Q1 2008, Federated derived 56 percent of its revenue from money market assets, 33 percent from equity assets, 10 percent from fixed-income assets and 1 percent from other products and services.
Compared to the prior quarter, total revenue increased by $5.4 million or 2 percent. The increase was primarily due to an increase in revenue from average money market managed assets ($23.0 million). The revenue increase was partially offset by a decrease in revenue from average equity managed assets ($10.9 million); one fewer day in Q1 2008 as compared to Q4 2007 ($4.3 million); and increases in Federated’s voluntary fee waivers primarily due to higher fund registration ($1.9 million). Operating expenses for Q1 2008 increased $34.1 million or 19 percent to $214.7 million compared to $180.6 million for Q1 2007. The increase in operating expenses was primarily attributable to an increase in marketing and distribution expenses of $27.4 million. Of this amount, $24.6 million related to increased average money market managed assets and to a lesser extent, changes in the terms of distribution contracts with certain intermediary customers. In addition, regular and incentive compensation expenses increased by $6.9 million.
Compared to Q4 2007, operating expenses increased slightly. Compensation and related expenses decreased $9.7 million in Q1 2008 as compared to Q4 2007. The prior quarter included $15 million in compensation expenses related to new employment agreements with certain Federated Kaufmann employees and Q1 2008 included $1.7 million in new compensation for Federated Kaufmann personnel. In addition, Q1 2008 compensation was higher due to $1.8 million for seasonally higher payroll tax and employee benefit expenses, $1.2 million due to higher base pay expenses and $1.2 million in additional expense related to 2007 incentive pay. Overall, marketing and distribution expense increased by $11.5 million for the consecutive quarter comparison. Of this amount, $10.8 million was due to higher average money market managed assets and, to a lesser extent, changes in the terms of distribution contracts with certain intermediary customers. Q1 2008 marketing and distribution expense was also affected by one fewer day compared to the prior quarter, resulting in $1.2 million less in these expenses.
Federated will host an earnings conference call at 9 a.m. Eastern on April 25, 2008. Investors are invited to listen to Federated’s Q1 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 May 2, 2008 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering codes 286 and 281178.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $338.5 billion in assets as of March 31, 2008. With 147 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 10 percent of fixed-income fund managers1. For more information, visit FederatedInvestors.com.
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1 Strategic Insight, February 29, 2008. Based on assets under management in open-end funds.
Certain statements in this press release, such as those related to asset flows and sales, 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. Among other risks and uncertainties is the ability of the company to sustain asset flows and sales and 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.
Federated Securities Corp. is distributor of the Federated funds.
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