Federated Investors, Inc. Reports First Quarter 2014 Earnings - WAFB 9 News Baton Rouge, Louisiana News, Weather, Sports

Federated Investors, Inc. Reports First Quarter 2014 Earnings

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SOURCE Federated Investors, Inc.

- Equity assets increase $8 billion from Q1 2013 to a record $46 billion

- Equity and bond assets surpass $102 billion at quarter end

- Board declares $0.25 per share quarterly dividend

PITTSBURGH, April 24, 2014 /PRNewswire/ -- Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share (EPS) of $0.34 for Q1 2014 compared to $0.41 for the same quarter last year on net income of $35.2 million for Q1 2014 compared to $43.0 million for Q1 2013.  

Federated's total managed assets were $366.2 billion at March 31, 2014.  Although total assets were down $11.1 billion or 3 percent from $377.3 billion at March 31, 2013 and down $9.9 billion or 3 percent from $376.1 billion reported at Dec. 31, 2013, growth in equity assets was offset by lower money market and fixed income assets.  Average managed assets for Q1 2014 were $374.4 billion, down $6.8 billion or 2 percent from $381.2 billion reported for Q1 2013 and up $8.2 billion or 2 percent from $366.2 billion reported for Q4 2013. 

"Federated's strong gross equity sales reflect our multi-strategy investment approach where 70 percent of our fund assets outperformed the majority of their peers over the last three years," said J. Christopher Donahue, president and chief executive officer.  "Federated saw continued success with our dividend income and balanced strategies, the Kaufmann large-growth product, an international equity strategy and our high-yield offerings on the bond side."

Federated's board of directors declared a quarterly dividend of $0.25 per share.  The dividend is payable on May 15, 2014 to shareholders of record as of May 8, 2014.  During Q1 2014, Federated purchased 277,971 shares of Federated class B common stock for $7.5 million.  

Federated's equity assets were a record $45.9 billion at March 31, 2014, up $8.0 billion or 21 percent from $37.9 billion at March 31, 2013 and up $1.8 billion or 4 percent from $44.1 billion at Dec. 31, 2013.  Top-selling equity funds during Q1 2014 on a net basis were Federated International Leaders Fund, Federated Kaufmann Large Cap Fund, Federated Capital Income Fund, Federated Muni and Stock Advantage Fund and Federated Managed Volatility Fund II.

Federated's fixed-income assets were $51.0 billion at March 31, 2014, down $1.8 billion or 3 percent from $52.8 billion at March 31, 2013 and up $0.9 billion or 2 percent from $50.1 billion at Dec. 31, 2013.  Bond assets in the liquidation portfolio were $5.7 billion at March 31, 2014.  Top-selling fixed-income funds during Q1 2014 on a net basis were Federated Institutional High Yield Bond Fund, Federated Ultrashort Bond Fund, Federated Floating Rate Strategic Income Fund, Federated Total Return Bond Fund and Federated High Yield Trust.

Money market assets in both funds and separate accounts were $263.6 billion at March 31, 2014, down $16.1 billion or 6 percent from $279.7 billion at March 31, 2013 and down $12.4 billion or 4 percent from $276.0 billion at Dec. 31, 2013.  Money market mutual fund assets were $227.5 billion at March 31, 2014, down $15.2 billion or 6 percent from $242.7 billion at March 31, 2013 and down $12.5 billion or 5 percent from $240.0 billion at Dec. 31, 2013.

Financial Summary

Q1 2014 vs. Q1 2013

Revenue decreased by $16.5 million or 7 percent primarily due 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 lower average money market and fixed-income assets.  The decrease was partially offset by an increase in revenue from higher average equity assets. See additional information about voluntary fee waivers in the table at the end of this financial summary. 

During Q1 2014, Federated derived 65 percent of its revenue from equity and fixed-income assets (42 percent from equity assets and 23 percent from fixed-income assets), 34 percent from money market assets and 1 percent from other products and services.

Operating expenses decreased $4.9 million or 3 percent primarily due to a decrease in distribution expenses associated with  increased fee waivers related to the low-yield environment for money market funds, partially offset by an increase in compensation and related expense.  

Q1 2014 vs. Q4 2013

Revenue decreased by $3.2 million or 2 percent primarily due to fewer days in Q1 2014 and an increase in voluntary fee waivers partially offset by higher average assets. 

Operating expenses were flat. 

Nonoperating income, net, decreased $3.7 million or 82 percent due primarily to a decrease in investment income from lower gains realized on investments in Q1 2014.

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 significantly impact Federated's activity levels and financial results.  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 and the resulting negative impact of these waivers 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 Securities and Exchange Commission, 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, changes in the distribution fee arrangements with third parties, 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.


Unaudited Money Market Fund Yield Waiver Impact to Consolidated Statements of Income

(in millions)



Quarter Ended


Change


Quarter Ended


Change


March 31,


March 31,


Q1 2013 to


Dec. 31,


Q4 2013 to


2014


2013


Q1 2014


2013


Q1 2014

Investment advisory fees

$

(73.1)


$

(54.9)


$

(18.2)


$

(70.9)


$

(2.2)

Other service fees

(33.6)


(32.4)


(1.2)


(33.7)


0.1

Total revenue

(106.7)


(87.3)


(19.4)


(104.6)


(2.1)

Less: Reduction in distribution expense

74.3


64.8


9.5


73.3


1.0

Operating income

(32.4)


(22.5)


(9.9)


(31.3)


(1.1)

Less: Reduction in noncontrolling interest

2.7


0.8


1.9


2.0


0.7

Pre-tax impact

$

(29.7)


$

(21.7)


$

(8.0)


$

(29.3)


$

(0.4)


Federated will host an earnings conference call at 9 a.m. Eastern on April 25, 2014.  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 2, 2014 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering access code 13579678.

Federated Investors, Inc. is one of the largest investment managers in the United States, managing $366.2 billion in assets as of March 31, 2014.  With 134 funds and a variety of separately managed account options, Federated provides comprehensive investment management to nearly 6,100 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 7 percent of equity fund managers and the top 9 percent of fixed-income fund managers1.  For more information, visit FederatedInvestors.com

1) Strategic Insight, Feb. 28, 2014.  Based on assets under management in open-end funds.
Federated Securities Corp. is distributor of the Federated funds.  
Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling and Federated MDTA LLC, each a registered investment adviser.

Certain statements in this press release, such as those related to the level of fee waivers and expenses incurred by the company, product demand and performance, investor interest, asset flows and mix, fee arrangements with customers and market conditions 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 and expenses 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 and mix, 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.

Unaudited Condensed Consolidated Statements of Income







(in thousands, except per share data)



Quarter Ended

% Change

Quarter Ended

% Change




Q1 2013 to Q1


Q4 2013 to Q1


March 31, 2014

March 31, 2013

2014

Dec. 31, 2013

2014

Revenue







Investment advisory fees, net

$

135,093

$

150,763

(10)%

$

138,051

(2)%

Administrative service fees, net

54,727

56,828

(4)

55,354

(1)

Other service fees, net

20,780

19,332

7

20,399

2

Other, net

896

1,049

(15)

918

(2)

Total Revenue

211,496

227,972

(7)

214,722

(2)









Operating Expenses








Compensation and related

71,759

66,937

7

68,725

4

Distribution

48,558

58,240

(17)

49,802

(2)

Professional service fees

8,381

8,844

(5)

9,241

(9)

Office and occupancy

6,915

6,432

8

6,838

1

Systems and communications

6,404

6,623

(3)

6,628

(3)

Advertising and promotional

3,439

3,422

0

3,760

(9)

Travel and related

2,861

2,686

7

4,108

(30)

Other

6,534

6,589

(1)

5,862

11

Total Operating Expenses

154,851

159,773

(3)

154,964

0

Operating Income

56,645

68,199

(17)

59,758

(5)









Nonoperating Income (Expenses)








Investment income, net

3,613

4,428

(18)

8,089

(55)

Debt expense

(2,812)

(3,253)

(14)

(2,996)

(6)

Other, net

(5)

(40)

(88)

(636)

(99)

Total Nonoperating Income, net

796

1,135

(30)

4,457

(82)

Income before income taxes

57,441

69,334

(17)

64,215

(11)

Income tax provision

21,796

24,646

(12)

22,039

(1)

Net income including the noncontrolling interest in subsidiaries

35,645

44,688

(20)

42,176

(15)

Less: Net income attributable to the noncontrolling interest in

subsidiaries

451

1,694

(73)

1,105

(59)

Net Income

$

35,194

$

42,994

(18)%

$

41,071

(14)%









Amounts Attributable to Federated








Earnings Per Share1








Basic and diluted

$

0.34

$

0.41

(17)%

$

0.39

(13)%

Weighted-average shares outstanding








Basic

100,725

100,518



100,760


Diluted

100,727

100,518



100,762


Dividends declared per share

$

0.25

$

0.24


$

0.25


1) Unvested share-based payment awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of earnings per share under the "two-class method." As such, total net income of $1.4 million, $1.7 million and $1.4 million available to unvested restricted shares for the quarterly periods ended March 31, 2014, March 31, 2013 and Dec. 31, 2013, respectively, was excluded from the computation of earnings per share.

 

 


Unaudited Condensed Consolidated Balance Sheets




(in thousands)

March 31, 2014

Dec 31, 2013

Assets



Cash and other investments

$

256,709

$

292,178

Other current assets

43,651

47,140

Intangible assets, net and goodwill

734,807

735,345

Other long-term assets

59,706

61,134

Total Assets

$

1,094,873

$

1,135,797





Liabilities, Redeemable Noncontrolling Interests and Equity




Current liabilities

$

186,180

$

214,205

Long-term debt

170,000

198,333

Other long-term liabilities

146,173

141,398

Redeemable noncontrolling interests

16,573

15,517

Equity excluding treasury stock

1,321,068

1,317,583

Treasury stock

(745,121)

(751,239)

Total Liabilities, Redeemable Noncontrolling Interests and Equity

$

1,094,873

$

1,135,797


 

 

Unaudited Changes in Equity and Fixed-Income Fund and Separate Account Assets

(in millions)




Quarter Ended


March 31, 2014


Dec. 31, 2013


March 31, 2013

Equity funds




Beginning assets

$

28,097


$

25,930


$

23,152

Sales

2,292


1,913


1,752

Redemptions

(1,833)


(1,740)


(2,388)

Net sales (redemptions)

459


173


(636)

Net exchanges

32


47


47

Market gains and losses/reinvestments1

620


1,947


1,928

Ending assets

$

29,208


$

28,097


$

24,491





Equity separate accounts2




Beginning assets

$

16,051


$

14,353


$

11,858

Sales3

845


1,337


1,106

Redemptions3

(778)


(701)


(568)

Net sales3

67


636


538

Market gains and losses4

553


1,062


965

Ending assets

$

16,671


$

16,051


$

13,361







Total equity2






Beginning assets

$

44,148


$

40,283


$

35,010

Sales3

3,137


3,250


2,858

Redemptions3

(2,611)


(2,441)


(2,956)

Net sales (redemptions)3

526


809


(98)

Net exchanges

32


47


47

Market gains and losses/reinvestments1

1,173


3,009


2,893

Ending assets

$

45,879


$

44,148


$

37,852







Fixed-income funds






Beginning assets

$

39,606


$

39,944


$

42,478

Sales

4,248


3,944


5,148

Redemptions

(4,025)


(4,400)


(5,009)

Net sales (redemptions)

223


(456)


139

Net exchanges

(59)


(131)


(42)

Market gains and losses/reinvestments1

467


249


37

Ending assets

$

40,237


$

39,606


$

42,612







Fixed-income separate accounts2






Beginning assets

$

10,520


$

10,018


$

10,233

Sales3

254


751


531

Redemptions3

(232)


(368)


(645)

Net sales (redemptions)3

22


383


(114)

Net exchanges

0


7


0

Market gains and losses4

204


112


39

Ending assets

$

10,746


$

10,520


$

10,158







Total fixed income2






Beginning assets

$

50,126


$

49,962


$

52,711

Sales3

4,502


4,695


5,679

Redemptions3

(4,257)


(4,768)


(5,654)

Net sales (redemptions)3

245


(73)


25

Net exchanges

(59)


(124)


(42)

Market gains and losses/reinvestments1

671


361


76

Ending assets

$

50,983


$

50,126


$

52,770

1)

Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates.

2)

Includes separately managed accounts, institutional accounts and sub-advised funds and other managed products.

3)

For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of Market gains and losses.

4)

Reflects the approximate changes in the fair value of the securities held by the portfolios.

 

 

Unaudited Total Changes in Equity and Fixed-Income Assets

(in millions)



Quarter Ended


March 31, 2014


Dec. 31, 2013


March 31, 2013





Funds




Beginning assets

$

67,703


$

65,874


$

65,630

Sales

6,540


5,857


6,900

Redemptions

(5,858)


(6,140)


(7,397)

Net sales (redemptions)

682


(283)


(497)

Net exchanges

(27)


(84)


5

Market gains and losses/reinvestments1

1,087


2,196


1,965

Ending assets

$

69,445


$

67,703


$

67,103





Separate accounts2




Beginning assets

$

26,571


$

24,371


$

22,091

Sales3

1,099


2,088


1,637

Redemptions3

(1,010)


(1,069)


(1,213)

Net sales3

89


1,019


424

Net exchanges

0


7


0

Market gains and losses4

757


1,174


1,004

Ending assets

$

27,417


$

26,571


$

23,519





Total assets 2




Beginning assets

$

94,274


$

90,245


$

87,721

Sales3

7,639


7,945


8,537

Redemptions3

(6,868)


(7,209)


(8,610)

Net sales (redemptions)3

771


736


(73)

Net exchanges

(27)


(77)


5

Market gains and losses/reinvestments1

1,844


3,370


2,969

Ending assets

$

96,862


$

94,274


$

90,622

1)

Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates.

2)

Includes separately managed accounts, institutional accounts and sub-advised funds and other managed products.

3)

For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of Market gains and losses.

4)

Reflects the approximate changes in the fair value of the securities held by the portfolios.

 

 

(unaudited)


MANAGED ASSETS

(in millions)

March 31, 2014


Dec. 31, 2013


Sept. 30, 2013


June 30, 2013


March 31, 2013

By Asset Class


Equity

$

45,879


$

44,148


$

40,283


$

38,705


$

37,852

Fixed-income

50,983


50,126


49,962


50,005


52,770

Money market

263,648


275,952


270,293


268,532


279,668

Liquidation portfolio1

5,690


5,858


6,177


6,561


7,019

Total Managed Assets

$

366,200


$

376,084


$

366,715


$

363,803


$

377,309

By Product Type


Funds:


Equity

$

29,208


$

28,097


$

25,930


$

25,030


$

24,491

Fixed-income

40,237


39,606


39,944


40,188


42,612

Money market

227,470


240,048


237,949


232,874


242,734

Total Fund Assets

$

296,915


$

307,751


$

303,823


$

298,092


$

309,837

Separate accounts:


Equity

$

16,671


$

16,051


$

14,353


$

13,675


$

13,361

Fixed-income

10,746


10,520


10,018


9,817


10,158

Money market

36,178


35,904


32,344


35,658


36,934

Total Separate Accounts

$

63,595


$

62,475


$

56,715


$

59,150


$

60,453

Total Liquidation Portfolio1

$

5,690


$

5,858


$

6,177


$

6,561


$

7,019

Total Managed Assets

$

366,200


$

376,084


$

366,715


$

363,803


$

377,309








AVERAGE MANAGED ASSETS

Quarter Ended

(in millions)

March 31, 2014


Dec. 31, 2013


Sept. 30, 2013


June 30, 2013


March 31, 2013

By Asset Class


Equity

$

44,693


$

42,539


$

39,910


$

38,762


$

36,685

Fixed-income

50,658


50,268


49,983


52,375


52,732

Money market

273,233


267,351


267,881


274,899


284,588

Liquidation portfolio1

5,791


6,050


6,434


6,834


7,215

Total Avg. Assets

$

374,375


$

366,208


$

364,208


$

372,870


$

381,220

By Product Type


Funds:


Equity

$

28,516


$

27,157


$

25,761


$

25,094


$

24,037

Fixed-income

39,987


39,883


39,987


42,258


42,581

Money market

235,228


234,788


234,528


237,790


250,652

Total Avg. Fund Assets

$

303,731


$

301,828


$

300,276


$

305,142


$

317,270

Separate accounts:


Equity

$

16,177


$

15,382


$

14,149


$

13,668


$

12,648

Fixed-income

10,671


10,385


9,996


10,117


10,151

Money market

38,005


32,563


33,353


37,109


33,936

Total Avg. Separate Accounts

$

64,853


$

58,330


$

57,498


$

60,894


$

56,735

Total Avg. Liquidation Portfolio1

$

5,791


$

6,050


$

6,434


$

6,834


$

7,215

Total Avg. Managed Assets

$

374,375


$

366,208


$

364,208


$

372,870


$

381,220

1) Liquidation portfolio represents a portfolio of distressed bonds at cost. Federated has been retained by a third party to manage these assets through an orderly liquidation process that will generally occur over a multi-year period. Management-fee rates earned from this portfolio are lower than those of traditional separate account mandates.

 

 

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