Federated Investors, Inc. Reports Third Quarter 2008 Earnings; Total Managed Assets Increase to Quarter-End Record $344 Billion
- YTD 2008 EPS increases 4 percent over YTD 2007 EPS
- Money market assets increase $78 billion since end of Q3 2007
- Board declares quarterly dividend of $0.24 per share
(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 $0.56 for the quarter ended Sept. 30, 2008 compared to $0.57 for the same quarter last year. Income from continuing operations was $56.2 million for Q3 2008 compared to $57.7 million for Q3 2007.
Federated reported YTD 2008 EPS of $1.66 compared to $1.60 for the same period in 2007, an increase of 4 percent. For the nine months ended Sept. 30, 2008, income from continuing operations was $167.2 million compared to $164.8 million for the same period in 2007.
Federated's total managed assets were $344.0 billion at Sept. 30, 2008, up $67.8 billion or 25 percent from $276.2 billion at Sept. 30, 2007 and up $10.5 billion or 3 percent from the $333.5 billion reported at June 30, 2008. Asset growth was driven by a $77.9 billion increase in money market assets over the last year. Average managed assets for Q3 2008 were $335.1 billion, up $67.5 billion or 25 percent from $267.6 billion reported for Q3 2007 and down $8.2 billion or 2 percent from $343.3 billion reported for Q2 2008.
"Federated's position as an industry leader in high quality money market products benefited our clients and the company during a quarter that saw unprecedented market conditions,” said J. Christopher Donahue, president and chief executive officer. “In addition to strong growth in money market products, Federated continued to see solid flows into its bond funds with over $500 million in net sales during the third quarter.”
Federated's board of directors declared a quarterly dividend of $0.24 per share. The dividend is payable on Nov. 14, 2008 to shareholders of record as of Nov. 7, 2008. During Q3 2008, Federated paid a special cash dividend of $2.76 per share and a regular quarterly dividend of $0.24 per share, for a total of $3.00 per share or $305.4 million to its shareholders. Federated purchased 73,896 shares of Federated Investors, Inc. class B common stock for $1.5 million during Q3 2008. These transactions were funded with available cash and financing from a $140 million term loan facility entered into during Q3 2008 and borrowings under the company’s existing revolving credit facility.
Money market assets in both funds and separate accounts were $287.8 billion at Sept. 30, 2008, up $77.9 billion or 37 percent from $209.9 billion at Sept. 30, 2007 and up $16.7 billion or 6 percent from $271.1 billion at June 30, 2008. Money market mutual fund assets were $259.2 billion at the end of Q3 2008, up $69.2 billion or 36 percent from $190.0 billion at Sept. 30, 2007 and up $18.6 billion or 8 percent from $240.6 billion at June 30, 2008. Federated’s government money market funds attracted substantial inflows during the extreme stress of the markets throughout the quarter.
Federated's fixed-income assets were $24.5 billion at Sept. 30, 2008, up $1.8 billion or 8 percent from $22.7 billion at Sept. 30, 2007 and down $0.6 billion or 2 percent from $25.1 billion at June 30, 2008. Federated had inflows of $0.5 billion into its bond funds during the quarter and $1.6 billion during the first nine months of 2008. Federated’s top-selling fixed-income mutual funds on a net basis were: Federated Municipal Ultrashort Fund; Federated Government Ultrashort Duration Fund; Federated Total Return Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years; and Federated U.S. Government Securities Fund: 2-5 Years.
Federated's equity assets were $31.7 billion at Sept. 30, 2008, down $11.8 billion or 27 percent from $43.5 billion at Sept. 30, 2007 and down $5.6 billion or 15 percent from $37.3 billion at June 30, 2008 due mainly to market depreciation. Federated’s top-selling equity mutual funds on a net basis were: Federated Capital Appreciation Fund II, Federated Kaufmann Large Cap Fund, Federated Capital Appreciation Fund, Federated MDT Balanced Fund and Federated MDT Small Cap Growth Fund.
Q3 2008 vs. Q3 2007
For Q3 2008, revenue increased $19.5 million or 7 percent to $305.9 million compared to $286.4 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 ($42.0 million) and average fixed-income assets ($0.4 million). The increase was partially offset by a decrease in revenue from average equity managed assets ($20.2 million). For Q3 2008, Federated derived 60 percent of its revenue from money market assets, 30 percent from equity assets, 9 percent from fixed-income assets and 1 percent from other products and services.
Operating expenses for Q3 2008 increased $24.5 million or 13 percent to $212.7 million compared to $188.2 million for Q3 2007. The increase in operating expenses was primarily attributable to higher marketing and distribution expenses of $15.9 million primarily from higher average money market managed assets. In addition, compensation and related expenses increased by $8.4 million. Nonoperating expenses for Q3 2008 decreased $3.4 million or 72 percent to $1.3 million compared to $4.7 million for Q3 2007 primarily due to lower investment losses.
Q3 2008 vs. Q2 2008
Compared to the prior quarter, revenue decreased by $4.4 million or 1 percent. The revenue decrease was primarily due to a decrease in average equity managed assets ($8.8 million), partially offset by the impact of one additional day in the third quarter ($3.5 million).
Compared to Q2 2008, operating expenses decreased by $6.4 million or 3 percent. Marketing and distribution expenses decreased $3.7 million from Q2 2008 primarily due to lower average money market and equity managed assets. In addition, professional service fees decreased $1.2 million.
Nonoperating expenses increased $1.2 million compared to the prior quarter due mainly to an increase in mark-to-market investment losses and an increase in recourse debt expense.
YTD 2008 vs. YTD 2007
Revenue for the first nine months of 2008 increased $94.5 million or 11 percent to $921.9 million compared to $827.4 million for the same period last year. The increase in revenue is primarily due to an increase in revenue from average money market managed assets ($137.7 million). The increase was partially offset by a decrease in revenue from average equity managed assets ($33.6 million), a decrease due to a change in the mix of average fixed-income managed assets ($1.5 million) and an increase in the amount of fund revenue that was voluntarily waived for competitive reasons ($5.3 million).
For YTD 2008, Federated derived 58 percent of its revenue from money market assets, 31 percent from equity assets, 10 percent from fixed-income assets and 1 percent from other products and services.
Operating expenses for the year-to-date period ended Sept. 30, 2008 increased $90.0 million or 16 percent to $646.5 million compared to $556.5 million for the same period of last year. The increase in operating expenses was attributable to a $66.5 million increase in marketing and distribution expenses related primarily to increased average money market managed assets. Additionally, compensation and related expenses increased $23.1 million.
Nonoperating expenses for YTD 2008 decreased $2.9 million or 71 percent to $1.2 million compared to $4.1 million for the same period in 2007 due to lower investment losses.
Federated will host an earnings conference call at 9 a.m. Eastern on Oct. 24, 2008. Investors are invited to listen to Federated’s Q3 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 Oct. 31, 2008 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering codes 286 and 299011.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $344.0 billion in assets as of Sept. 30, 2008. With 147 mutual funds and a variety of separately managed account options, Federated provides comprehensive investment management to nearly 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 9 percent of fixed-income fund managers1. For more information, visit FederatedInvestors.com.
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1 Strategic Insight, Aug. 31, 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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