Federated Investors, Inc. Reports Second Quarter 2013 Earnings

PITTSBURGH, July 25, 2013 /PRNewswire/ -- Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share (EPS) of $0.39 and net income of $40.4 million for Q2 2013, each of which is the same amount reported for Q2 2012.  Federated reported YTD 2013 EPS of $0.80, matching the amount reported for the first half of 2012. 

Federated's total managed assets were $363.8 billion at June 30, 2013, up $7.9 billion or 2 percent from $355.9 billion at June 30, 2012 and down $13.5 billion or 4 percent from $377.3 billion reported at March 31, 2013.  Average managed assets for Q2 2013 were $372.9 billion, up $12.3 billion or 3 percent from $360.6 billion reported for Q2 2012 and down $8.3 billion or 2 percent from $381.2 billion reported for Q1 2013. 

"Equity sales were positive for the quarter with strong client interest in a variety of strategies, especially our income-oriented portfolios investing in both U.S. and international dividend-paying companies," said J. Christopher Donahue, president and chief executive officer.  "Federated offers a diversified approach to the pursuit of dividends and income with a range of equity, fixed-income and balanced investment solutions."

Federated's board of directors declared a quarterly dividend of $0.25 per share, a 4 percent increase from the prior quarter.  The dividend is payable on Aug. 15, 2013 to shareholders of record as of Aug. 8, 2013.  During Q2 2013, Federated purchased 158,133 shares of Federated class B common stock for $2.8 million. 

Federated's equity assets were $38.7 billion at June 30, 2013, up $5.5 billion or 17 percent from $33.2 billion at June 30, 2012 and up $0.8 billion or 2 percent from $37.9 billion at March 31, 2013.  Top-selling equity funds during Q2 2013 on a net basis were Federated Strategic Value Dividend Fund, Federated Capital Income Fund, Federated International Strategic Value Dividend Fund, Federated Kaufmann Large Cap Fund and Federated Muni and Stock Advantage Fund. 

Federated's fixed-income assets were $50.0 billion at June 30, 2013, up $1.0 billion or 2 percent from $49.0 billion at June 30, 2012 and down $2.8 billion or 5 percent from $52.8 billion at March 31, 2013.  Bond assets in the liquidation portfolio were $6.6 billion at June 30, 2013.  Top-selling fixed-income funds during Q2 2013 on a net basis included several of Federated's U.S. and U.K.-domiciled short-duration products and Federated Institutional High Yield Bond Fund. 

Money market assets in both funds and separate accounts were $268.5 billion at June 30, 2013, up $3.0 billion or 1 percent from $265.5 billion at June 30, 2012 and down $11.2 billion or 4 percent from $279.7 billion at March 31, 2013.  Money market mutual fund assets were $232.9 billion at June 30, 2013, down $5.7 billion or 2 percent from $238.6 billion at June 30, 2012 and down $9.8 billion or 4 percent from $242.7 billion at March 31, 2013. 

Financial Summary

Q2 2013 vs. Q2 2012

Revenue decreased by $8.3 million or 4 percent due primarily to an increase in voluntary fee waivers related to certain money market funds in order for these funds to maintain positive or zero net yields.  The decrease was partially offset by an increase in revenue due to higher average equity and fixed-income assets. See additional information about voluntary fee waivers in the table at the end of this financial summary. 

During Q2 2013, Federated derived 59 percent of its revenue from equity and fixed-income assets (36 percent from equity assets and 23 percent from fixed-income assets), 40 percent from money market assets and 1 percent from other products and services.

Operating expenses decreased $5.3 million or 3 percent primarily related to a decrease in distribution expense related to increased fee waivers, which were partially offset by increased compensation and related expenses.  

Q2 2013 vs. Q1 2013

Revenue decreased by $4.2 million or 2 percent primarily due to an increase in voluntary fee waivers.

Operating expenses decreased by $2.0 million or 1 percent. The decrease primarily reflects lower distribution expense related to the aforementioned increase in fee waivers. 

YTD 2013 vs. YTD 2012

Revenue decreased by $10.6 million or 2 percent primarily due to an increase in voluntary fee waivers, which was partially offset by an increase from higher average equity, fixed-income and money market assets.

For the first half of 2013, Federated derived 57 percent of its revenue from equity and fixed-income assets (34 percent from equity assets and 23 percent from fixed-income assets), 42 percent from money market assets and 1 percent from other products and services.

Operating expenses decreased by $5.5 million or 2 percent primarily due to a decrease in distribution expense related primarily to increased fee waivers that were partially offset by an increase related to a change in the mix of average money market assets and increased compensation and related expenses.

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 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, 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 July 26, 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 http://FederatedInvestors.com.  A replay will be available after 12:30 p.m. and through Aug. 2, 2013 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering access code 417387.

Federated Investors, Inc. is one of the largest investment managers in the United States, managing $363.8 billion in assets as of June 30, 2013.  With 135 funds and a variety of separately managed account options, Federated provides comprehensive investment management to approximately 5,700 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 http://FederatedInvestors.com.

1 Strategic Insight, May 31, 2013.  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, asset flows and mix 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.

SOURCE Federated Investors, Inc.