Federated Investors, Inc. Reports First Quarter 2012 Earnings
- Diluted EPS increases 14 percent to $0.41 per share compared to Q4 2011
- Equity and fixed-income assets increase $4.4 billion during Q1 2012 to $88.9 billion
- Net sales in equity and fixed-income funds and separate accounts were $1.4 billion in Q1 2012
- Board declares $0.24 per share quarterly dividend
(PITTSBURGH, Pa., ) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share (EPS) of $0.41 for the quarter ended March 31, 2012 as compared to $0.32 for the same quarter last year. Net income was $42.3 million for Q1 2012 compared to $33.2 million for Q1 2011, which included approximately $11.3 million, after tax or $0.11 per diluted share, in nonrecurring legal expenses.
Federated's total managed assets were $363.6 billion at March 31, 2012, up $8.7 billion or 2 percent from $354.9 billion at March 31, 2011 and down $6.1 billion or 2 percent from $369.7 billion reported at Dec. 31, 2011. Average managed assets for Q1 2012 were $370.1 billion, up $13.8 billion or 4 percent from $356.3 billion reported for Q1 2011 and up $11.9 billion or 3 percent from $358.3 billion reported for Q4 2011. Combined equity and fixed-income net sales for funds and separate accounts were a positive $1.4 billion for Q1 2012.
“Investors' growing demand for income and Federated's broad array of high-quality income-oriented products continued to prove beneficial for our company during the first quarter,'' said J. Christopher Donahue, president and chief executive officer. “Equity assets increased 8 percent over the past 12 months driven by substantial inflows into our dividend-driven Strategic Value lineup. Our fixed-income assets increased 11 percent over the same period amid continued investor interest in our high yield-oriented and multisector bond offerings.''
Federated's board of directors declared a quarterly dividend of $0.24 per share. The dividend is payable on May 15, 2012 to shareholders of record as of May 8, 2012. During Q1 2012, Federated purchased 50,000 shares of Federated class B common stock for $1.1 million.
Federated's equity assets were $34.1 billion at March 31, 2012, up $2.5 billion or 8 percent from $31.6 billion at March 31, 2011 and up $3.2 billion or 10 percent from $30.9 billion at Dec. 31, 2011. During the quarter, net equity separate account sales were strong at $975 million, driven by flows into the Strategic Value Dividend strategy and Clover Small Cap Value Equity strategy. Top-selling equity funds during Q1 2012 on a net basis were Federated Strategic Value Dividend Fund, Federated International Strategic Value Dividend Fund, Federated Managed Volatility Fund II and Federated Clover Small Value Fund.
Federated's fixed-income assets were $46.2 billion at March 31, 2012, up $4.4 billion or 11 percent from $41.8 billion at March 31, 2011 and up $1.4 billion or 3 percent from $44.8 billion at Dec. 31, 2011. Fixed-income assets in liquidation portfolios were $8.6 billion at March 31, 2012. Fixed-income sales were driven by strong net flows into Federated Municipal Ultrashort Fund, Federated Total Return Bond Fund, Federated Institutional High Yield Bond Fund, Federated's Capital Preservation Fund and Federated Ultrashort Bond Fund.
Money market assets in both funds and separate accounts were $274.7 billion at March 31, 2012, up $3.6 billion or 1 percent from $271.1 billion at March 31, 2011 and down $10.4 billion or 4 percent from $285.1 billion at Dec. 31, 2011.
Money market mutual fund assets were $245.2 billion at March 31, 2012, up $6.2 billion or 3 percent from $239.0 billion at March 31, 2011 and down $10.7 billion or 4 percent from $255.9 billion at Dec. 31, 2011.
Q1 2012 vs. Q1 2011
Revenue decreased by $8.6 million or 4 percent due primarily to an increase in voluntary fee waivers related to certain money market funds in order for those funds to maintain positive or zero net yields and a decrease in revenue due to the change in the mix of average equity assets. These decreases were partially offset by an increase in revenue from higher average money market and fixed-income assets. See additional information about voluntary fee waivers in the table at the end of this financial summary.
Federated derived 53 percent of its revenue from equity and fixed-income assets (32 percent from equity assets and 21 percent from fixed-income assets), 46 percent from money market assets and 1 percent from other products and services.
Operating expenses were $159.9 million compared to $182.4 million. This decrease of $22.5 million or 12 percent was primarily a result of lower professional service fees as the company incurred nonrecurring legal expenses in Q1 2011.
Additionally, intangible-asset-related expense decreased due to mark-to-market adjustments of an acquisition-related contingent payment liability in both periods, as well as certain intangible assets becoming fully amortized in 2011.
Q1 2012 vs. Q4 2011
Revenue increased by $13.9 million or 6 percent primarily related to an increase in total average managed assets and a decrease in the aforementioned fee waivers due mainly to improved money market fund yields partially offset by a decrease in the number of days from the prior quarter.
Operating expenses increased by $5.4 million or 3 percent. The increase was primarily related to an increase in compensation and related expense due primarily to the annual reset of payroll taxes and 401(k) contributions and an increase in distribution expense primarily due to improved money market fund yields. Additionally, intangible-asset-related expense decreased due to a Q1 2012 mark-to-market adjustment of an acquisition-related contingent payment liability.
Federated's level of business activity and financial results are dependent upon many factors including market conditions, investment performance and investor behavior. These factors and others including asset levels, product sales and redemptions, market appreciation or depreciation, revenues, fee waivers and expenses can impact Federated's activity levels and financial results significantly. Risk factors and uncertainties that can influence Federated's financial results are discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission.
Fee waivers to maintain positive or zero net yields could vary significantly from management’s estimates as they are contingent on a number of variables including, but not limited to, changes in assets within the money market funds, available yields on instruments held by the money market funds, actions by the Federal Reserve, the U.S. Department of the Treasury and other governmental entities, changes in expenses of the money market funds, changes in the mix of money market customer assets, Federated’s willingness to continue the fee waivers and changes in the extent to which the impact of the waivers is shared by third parties.
Money Market Fund Yield Waiver Impact
|Quarter Ended||Change Q1 2011 to Q1 2012||Quarter Ended|| |
Change Q4 2011 to Q1 2012
|Mar. 31, 2012||Mar. 31, 2011||Dec. 31, 2011|
|Investment advisory fees||$ (52.9)||$ (36.0)||$ (16.9)||$ (58.8)||$ 5.9|
|Other service fees||(27.5)||(27.4)||(0.1)||(30.2)||2.7|
|$ (80.4)||$ (63.4)||$ (17.0)||$ (89.0)||$ 8.6|
|Operating income||$ (22.9)||$ (13.9)||$ (9.0)||$ (27.1)||$ 4.2|
|Pre-tax impact||$ (22.3)||$ (13.1)||$ (9.2)||$ (26.1)||$ 3.8|
Federated will host an earnings conference call at 9 a.m. Eastern on April 27, 2012. 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. 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 through May 4, 2012 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering codes 286 and 392082.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $363.6 billion in assets as of March 31, 2012. With 134 funds and a variety of separately managed account options, Federated provides comprehensive investment management to approximately 4,800 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 7 percent of equity fund managers and the top 7 percent of fixed-income fund managers1. For more information, visit FederatedInvestors.com.
The preceeding paragraphs only represent a portion of the press release. To view the entire press release click on the full press release above.
1 Strategic Insight, Feb. 29, 2012. Based on assets under management in open-end funds.
*These financial statements represent only a portion of the quarterly press release.
Certain statements in this press release, such as those related to the level of fee waivers incurred by the company, and product demand 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 product demand and 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.
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