Federated Investors, Inc. Reports First Quarter 2014 Earnings

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.

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.

SOURCE Federated Investors, Inc.