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(PITTSBURGH, Pa., 01/24/2013 11:19 AM) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share (EPS) of $0.44 for the quarter ended Dec. 31, 2012 as compared to $0.36 for the same quarter last year. Q4 2012 EPS reflects a $0.04 reduction due to the application of the two-class method of computing EPS in connection with the special dividend paid in Q4 2012. Net income was $49.6 million for Q4 2012 compared to $36.9 million for Q4 2011. Federated reported 2012 EPS of $1.79 compared to $1.45 for 2011 and net income of $188.1 million for 2012 compared to $150.9 million for 2011.
Federated's total managed assets were $379.8 billion at Dec. 31, 2012, up $10.1 billion or 3 percent from $369.7 billion at Dec. 31, 2011 and up $15.7 billion or 4 percent from $364.1 billion reported at Sept. 30, 2012. Average managed assets for Q4 2012 were $368.7 billion, up $10.4 billion or 3 percent from $358.3 billion reported for Q4 2011 and up $7.6 billion or 2 percent from $361.1 billion reported for Q3 2012. Net sales of equity and fixed-income funds and separate accounts were $685 million for Q4 2012.
"In 2012, Federated's range of income-oriented investment strategies proved to be highly attractive options for investors," said J. Christopher Donahue, president and chief executive officer. "On the equity side, assets in our strategic-value dividend strategies increased more than 35 percent during the year to $14 billion, while on the fixed-income side, Federated had record sales of nearly $22 billion in our funds and separate accounts."
Federated's board of directors declared a quarterly dividend of $0.24 per share. The dividend is payable on Feb. 15, 2013 to shareholders of record as of Feb. 8, 2013. During Q4 2012, Federated paid a regular quarterly dividend of $0.24 per share and a special dividend of $1.51 per share. In 2012, the company paid total dividends in the amount of $2.47 per share. During Q4 2012, Federated purchased 50,000 shares of Federated class B common stock for $1.0 million. In 2012, the company purchased 321,687 shares of Federated class B common stock for $6.3 million.
Federated's equity assets were $35.0 billion at Dec. 31, 2012, up $4.1 billion or 13 percent from $30.9 billion at Dec. 31, 2011 and down $0.4 billion or 1 percent from $35.4 billion at Sept. 30, 2012. Top-selling equity funds during Q4 2012 on a net basis were Federated Capital Income Fund, Federated International Strategic Value Dividend Fund, Federated Managed Volatility Fund II, Federated Muni and Stock Advantage Fund and Federated Clover Small Value Fund.
Federated's fixed-income assets were a record $52.7 billion at Dec. 31, 2012, up $7.9 billion or 18 percent from $44.8 billion at Dec. 31, 2011 and up $1.3 billion or 3 percent from $51.4 billion at Sept. 30, 2012. Fixed-income assets in liquidation portfolios were $7.3 billion at Dec. 31, 2012. Fixed-income sales during Q4 2012 were driven by strong net flows into Federated's short-duration products, Federated Total Return Bond Fund and Federated Institutional High Yield Bond Fund.
Money market assets in both funds and separate accounts were $284.7 billion at Dec. 31, 2012, down $0.4 billion from $285.1 billion at Dec. 31, 2011 and up $15.1 billion or 6 percent from $269.6 billion at Sept. 30, 2012. Money market mutual fund assets were $255.7 billion at Dec. 31, 2012, down $0.2 billion from $255.9 billion at Dec. 31, 2011 and up $10.9 billion or 4 percent from $244.8 billion at Sept. 30, 2012. The Q4 2012 increase in money market assets reflects a variety of factors including the ongoing confidence of clients in money market funds as an investment vehicle, favorable market conditions and seasonality.
Q4 2012 vs. Q4 2011
Revenue increased by $28.4 million or 13 percent due primarily to a decrease in voluntary fee waivers related to certain money market funds in order for these funds to maintain positive or zero net yields. The reduction in fee waivers was primarily the result of improved yields available on securities held by money market funds. In addition, revenue increased due to an increase in average fixed-income and equity assets. See additional information about voluntary fee waivers in the table at the end of this financial summary.
During Q4 2012, Federated derived 52 percent of its revenue from equity and fixed-income assets (30 percent from equity assets and 22 percent from fixed-income assets), 47 percent from money market assets and 1 percent from other products and services.
Operating expenses increased $7.1 million or 5 percent primarily as a result of an increase in distribution expense related to reduced fee waivers and an increase in compensation and related expense. These increases were partially offset by a reduction in professional service fees due to the recognition of insurance proceeds in Q4 2012.
Nonoperating expenses, net, increased $0.9 million due primarily to a $3.0 million impairment charge in Q4 2012 related to a change in the value of a minority interest investment, partially offset by an increase in investment income.
Q4 2012 vs. Q3 2012
Revenue increased by $6.4 million or 3 percent primarily due to an increase in total average assets.
Operating expenses increased by $13.2 million or 9 percent primarily related to an increase in professional service fees due to a decrease in the recognition of insurance proceeds.
Nonoperating expenses, net, increased $2.4 million due primarily to the aforementioned impairment charge.
YTD 2012 vs. YTD 2011
Revenue increased by $50.6 million, or 6 percent primarily due to a decrease in the aforementioned voluntary fee waivers mainly as a result of improved yields available on securities held by money market funds and an increase in average fixed-income assets.
Federated derived 52 percent of its revenue from equity and fixed-income assets (31 percent from equity assets and 21 percent from fixed-income assets), 47 percent from money market assets and 1 percent from other products and services.
Operating expenses decreased by $4.5 million or 1 percent. The decrease primarily reflects lower professional service fees due to the recognition of insurance proceeds in 2012 and nonrecurring legal expenses incurred in Q1 2011. This decrease was partially offset by increases in distribution expenses related to reduced fee waivers and increased average fixed-income assets and an increase in compensation and related expenses.
Nonoperating expenses, net, decreased by $7.0 million or 63 percent. The decrease reflects an increase in investment income primarily as a result of realized and unrealized gains on investments and a reduction in debt expense. These decreases were partially offset by the aforementioned impairment charge.
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 in the future 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, the Financial Stability Oversight Council 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.
Federated will host an earnings conference call at 9 a.m. Eastern on Jan. 25, 2013. 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 Feb. 1, 2013 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering access code 407161.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $379.8 billion in assets as of Dec. 31, 2012. With 137 funds and a variety of separately managed account options, Federated provides comprehensive investment management to approximately 4,700 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 8 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, download the PDF.
1 Strategic Insight, Nov. 30, 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, 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.