EX-99.1 2 a991-2013q1earningspressre.htm PRESS RELEASE 99.1 - 2013 Q1 Earnings Press Release

Exhibit 99.1

Federated Investors, Inc. Reports First Quarter 2013 Earnings
•
Equity and bond assets increase $2.6 billion during Q1 2013 to a record $98 billion
•
Board declares $0.24 per share quarterly dividend
(PITTSBURGH, Pa., April 25, 2013) — 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, 2013, which was unchanged from the same quarter last year. Net income was $43.0 million for Q1 2013 compared to $42.3 million for Q1 2012.
Federated's total managed assets were $377.3 billion at March 31, 2013, up $13.7 billion or 4 percent from $363.6 billion at March 31, 2012 and down $2.5 billion or 1 percent from $379.8 billion reported at Dec. 31, 2012. Average managed assets for Q1 2013 were $381.2 billion, up $11.1 billion or 3 percent from $370.1 billion reported for Q1 2012 and up $12.5 billion or 3 percent from $368.7 billion reported for Q4 2012.
“With more than 80 percent of Federated's rated equity-fund assets finishing in the top half of their respective categories for the one-year period, we saw strong demand for a range of strategies, including our Kaufmann large growth portfolio, international equity funds and balanced products,” said J. Christopher Donahue, president and chief executive officer.  “At the same time, we continued to see significant sales in a variety of income-oriented strategies, both equity and fixed income.”
Federated's board of directors declared a quarterly dividend of $0.24 per share. The dividend is payable on May 15, 2013 to shareholders of record as of May 8, 2013. During Q1 2013, Federated purchased 131,472 shares of Federated class B common stock for $2.7 million. 
Federated's equity assets were $37.9 billion at March 31, 2013, up $3.8 billion or 11 percent from $34.1 billion at March 31, 2012 and up $2.9 billion or 8 percent from $35.0 billion at Dec. 31, 2012. Top-selling equity funds during Q1 2013 on a net basis were Federated Kaufmann Large Cap Fund, Federated International Strategic Value Dividend Fund, Federated Capital Income Fund, Federated International Leaders Fund and Federated Managed Volatility Fund II.
Federated's fixed-income assets were a record $52.8 billion at March 31, 2013, up $6.6 billion or 14 percent from $46.2 billion at March 31, 2012 and up $0.1 billion from $52.7 billion at Dec. 31, 2012. Bond assets in the liquidation portfolio were $7.0 billion at March 31, 2013. Fixed-income sales during Q1 2013 were driven by net sales in Federated Institutional High Yield Bond Fund, Federated's short-duration products, Federated Floating Rate Strategic Income Fund and Federated Bond Fund.
Money market assets in both funds and separate accounts were $279.7 billion at March 31, 2013, up $5.0 billion or 2 percent from $274.7 billion at March 31, 2012 and down $5.0 billion or 2 percent from $284.7 billion at Dec. 31, 2012. Money market mutual fund assets were $242.7 billion at March 31, 2013, down $2.5 billion or 1 percent from $245.2 billion at March 31, 2012 and down $13.0 billion or 5 percent from $255.7 billion at Dec. 31, 2012.
Financial Summary
Q1 2013 vs. Q1 2012
Revenue decreased by $2.3 million or 1 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

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Federated Reports Q1 2013 Earnings
Page 2 of 8

in revenue due to higher average fixed-income and equity assets. See additional information about voluntary fee waivers in the table at the end of this financial summary.
During Q1 2013, Federated derived 56 percent of its revenue from equity and fixed-income assets (33 percent from equity assets and 23 percent from fixed-income assets), 43 percent from money market assets and 1 percent from other products and services.
Operating expenses were down slightly from the prior year.
Q1 2013 vs. Q4 2012
Revenue decreased by $16.9 million or 7 percent primarily due to an increase in voluntary fee waivers and fewer days in the quarter, partially offset by an increase in average assets.
Operating expenses decreased by $1.9 million or 1 percent. The decrease primarily reflects lower distribution expense related to the aforementioned increase in fee waivers. The decrease was partially offset by an increase in compensation and related expense and an increase in professional service fees, as Q4 2012 included the recognition of insurance proceeds.
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.
Money Market Fund Yield Waiver Impact to Consolidated Statements of Income
(in millions)
 
Quarter Ended
 
Change
Q1 2012 to Q1 2013
 
Quarter Ended
 
Change
Q4 2012 to Q1 2013
 
March 31, 2013
 
March 31, 2012
 
 
Dec. 31, 2012
 
Investment advisory fees
$
(54.9
)
 
$
(52.9
)
 
$
(2.0
)
 
$
(40.0
)
 
$
(14.9
)
Other service fees
(32.4
)
 
(27.5
)
 
(4.9
)
 
(30.7
)
 
(1.7
)
Total Revenue
$
(87.3
)
 
$
(80.4
)
 
$
(6.9
)
 
$
(70.7
)
 
$
(16.6
)
Less: Reduction in distribution expense
64.8

 
57.5

 
7.3

 
54.9

 
9.9

Operating income
$
(22.5
)
 
$
(22.9
)
 
$
0.4

 
$
(15.8
)
 
$
(6.7
)
Less: Reduction in noncontrolling interest
0.8

 
0.6

 
0.2

 
0.3

 
0.5

Pre-tax impact
$
(21.7
)
 
$
(22.3
)
 
$
0.6

 
$
(15.5
)
 
$
(6.2
)

Federated will host an earnings conference call at 9 a.m. Eastern on April 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 FederatedInvestors.com. A replay will be available after 12:30 p.m. and through May 3, 2013 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering access code 411857.



  
Federated Reports Q1 2013 Earnings
Page 3 of 8

Federated Investors, Inc. is one of the largest investment managers in the United States, managing $377.3 billion in assets as of March 31, 2013. With 137 funds and a variety of separately managed account options, Federated provides comprehensive investment management to approximately 5,500 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 8 percent of fixed-income fund managers1. For more information, visit FederatedInvestors.com.
###
1 Strategic Insight, Feb. 28, 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 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.





  
Federated Reports Q1 2013 Earnings
Page 4 of 8

Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
 
 
 
 
 
 
Quarter Ended
% Change Q1 2012 to Q1 2013
Quarter Ended
 % Change Q4 2012 to Q1 2013
 
March 31, 2013
March 31, 2012
Dec. 31, 2012
Revenue
 
 
 
 
 
Investment advisory fees, net
$
150,763

$
149,348

1
 %
$
166,813

(10
)%
Administrative service fees, net
56,828

57,292

(1
)
57,372

(1
)
Other service fees, net
19,332

22,655

(15
)
19,818

(2
)
Other, net
1,049

986

6

821

28

Total Revenue
227,972

230,281

(1
)
244,824

(7
)
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
Compensation and related
66,937

64,065

4

63,211

6

Distribution
58,240

61,693

(6
)
65,278

(11
)
Professional service fees
8,844

10,308

(14
)
6,549

35

Systems and communications
6,623

6,310

5

6,100

9

Office and occupancy
6,432

6,253

3

6,349

1

Advertising and promotional
3,422

2,928

17

3,611

(5
)
Travel and related
2,686

2,751

(2
)
3,837

(30
)
Intangible asset related
763

21

3,533

951

(20
)
Other
5,826

5,605

4

5,746

1

Total Operating Expenses
159,773

159,934

0

161,632

(1
)
Operating Income
68,199

70,347

(3
)
83,192

(18
)
 
 
 
 
 
 
Nonoperating Income (Expenses)
 
 
 
 
 
Investment income, net
4,428

3,346

32

4,343

2

Debt expense
(3,253
)
(3,711
)
(12
)
(3,506
)
(7
)
Other, net
(40
)
(37
)
8

(3,112
)
(99
)
Total Nonoperating Income (Expenses), net
1,135

(402
)
382

(2,275
)
150

Income before income taxes
69,334

69,945

(1
)
80,917

(14
)
Income tax provision
24,646

25,538

(3
)
28,961

(15
)
Net income including noncontrolling interest in subsidiaries
44,688

44,407

1

51,956

(14
)
Less: Net income attributable to the noncontrolling interest in subsidiaries
1,694

2,082

(19
)
2,375

(29
)
Net Income
$
42,994

$
42,325

2
 %
$
49,581

(13
)%
 
 
 
 
 
 
Amounts Attributable to Federated
 
 
 
 
 
Earnings Per Share1
 
 
 
 
 
Basic and diluted
$
0.41

$
0.41

0
 %
$
0.44

(7
)%
Weighted-average shares outstanding
 
 
 


 
Basic and diluted
100,518

100,112

 
100,374

 
Dividends declared per share
$
0.24

$
0.24

 
$
1.75

 
1) Unvested share-based payment awards that receive non-forfeitable dividends 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 $1.7 million, $1.5 million and $5.7 million available to unvested restricted shares for the quarterly periods ended March 31, 2013, March 31, 2012 and Dec. 31, 2012, respectively, was excluded from the computation of earnings per share.




















  
Federated Reports Q1 2013 Earnings
Page 5 of 8


Unaudited Condensed Consolidated Balance Sheets
 
 
(in thousands)
March 31, 2013
Dec. 31, 2012
Assets


Cash and other investments
$
306,857

$
258,628

Other current assets
39,390

41,434

Intangible assets, net and goodwill
727,163

727,857

Other long-term assets
63,858

62,142

Total Assets
$
1,137,268

$
1,090,061

 
 
 
Liabilities and Equity
 
 
Current liabilities
$
137,541

$
181,134

Long-term debt
265,625

276,250

Other long-term liabilities
135,119

128,733

Equity excluding treasury stock
1,350,401

1,263,966

Treasury stock
(751,418
)
(760,022
)
Total Liabilities and Equity
$
1,137,268

$
1,090,061




  
Federated Reports Q1 2013 Earnings
Page 6 of 8

Changes in Equity and Fixed-Income Fund and Separate Account Assets
(in millions)
 
Quarter Ended
 
March 31, 2013
Dec. 31, 2012
March 31, 2012
Equity Funds
 
 
 
Beginning assets
$
23,152

$
23,658

$
21,930

Sales
1,752

1,415

1,823

Redemptions
(2,388
)
(1,866
)
(2,187
)
Net redemptions
(636
)
(451
)
(364
)
Net exchanges
47

(47
)
(12
)
Market gains and losses/reinvestments1
1,928

(8
)
2,058

Ending assets
$
24,491

$
23,152

$
23,612


 
 
 
Equity Separate Accounts2
 
 
 
Beginning assets
$
11,858

$
11,697

$
8,957

Sales3
1,106

893

1,461

Redemptions3
(568
)
(605
)
(486
)
Net sales3
538

288

975

Net exchanges
0

1

0

Market gains and losses/reinvestments1
965

(128
)
573

Ending assets
$
13,361

$
11,858

$
10,505

 
 
 
 
Total Equity2
 
 
 
Beginning assets
$
35,010

$
35,355

$
30,887

Sales3
2,858

2,308

3,284

Redemptions3
(2,956
)
(2,471
)
(2,673
)
Net (redemptions) sales3
(98
)
(163
)
611

Net exchanges
47

(46
)
(12
)
Market gains and losses/reinvestments1
2,893

(136
)
2,631

Ending assets
$
37,852

$
35,010

$
34,117

 
 
 
 
Fixed-Income Funds
 
 
 
Beginning assets
$
42,478

$
41,547

$
37,241

Sales
5,148

4,848

4,822

Redemptions
(5,009
)
(4,268
)
(3,987
)
Net sales
139

580

835

Net exchanges
(42
)
141

(59
)
Market gains and losses/reinvestments1
37

210

509

Ending assets
$
42,612

$
42,478

$
38,526

 
 
 
 
Fixed-Income Separate Accounts2
 
 
 
Beginning assets
$
10,233

$
9,842

$
7,573

Sales3
531

393

220

Redemptions3
(645
)
(125
)
(280
)
Net (redemptions) sales3
(114
)
268

(60
)
Market gains and losses/reinvestments1
39

123

182

Ending assets
$
10,158

$
10,233

$
7,695

 
 
 
 
Total Fixed Income2
 
 
 
Beginning assets
$
52,711

$
51,389

$
44,814

Sales3
5,679

5,241

5,042

Redemptions3
(5,654
)
(4,393
)
(4,267
)
Net sales3
25

848

775

Net exchanges
(42
)
141

(59
)
Market gains and losses/reinvestments1
76

333

691

Ending assets
$
52,770

$
52,711

$
46,221

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/reinvestments.



  
Federated Reports Q1 2013 Earnings
Page 7 of 8

Changes in Liquidation Portfolio
(in millions)
 
Quarter Ended
 
March 31, 2013
Dec. 31, 2012
March 31, 2012
Liquidation Portfolio1
 
 
 
Beginning assets
$
7,346

$
7,718

$
8,856

Net redemptions
(327
)
(372
)
(273
)
Ending Assets
$
7,019

$
7,346

$
8,583

1) Liquidation portfolio represents a portfolio of distressed bonds. 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 these portfolios are lower than those of traditional separate account mandates.




  
Federated Reports Q1 2013 Earnings
Page 8 of 8


 
 
 
 
 
 
MANAGED ASSETS
(in millions)
March 31, 2013
Dec. 31, 2012
Sept. 30, 2012
June 30, 2012
March 31, 2012
By Asset Class
 
 
 
 
 
Equity
$
37,852

$
35,010

$
35,355

$
33,221

$
34,117

Fixed-income
52,770

52,711

51,389

48,968

46,221

Money market
279,668

284,704

269,622

265,548

274,704

Liquidation portfolio1
7,019

7,346

7,718

8,124

8,583

Total Managed Assets
$
377,309

$
379,771

$
364,084

$
355,861

$
363,625

By Product Type
 
 
 
 
 
Funds:
 
 
 
 
 
Equity
$
24,491

$
23,152

$
23,658

$
22,671

$
23,612

Fixed-income
42,612

42,478

41,547

39,494

38,526

Money market
242,734

255,689

244,826

238,610

245,232

Total Fund Assets
$
309,837

$
321,319

$
310,031

$
300,775

$
307,370

Separate Accounts:
 
 
 
 
 
Equity
$
13,361

$
11,858

$
11,697

$
10,550

$
10,505

Fixed-income
10,158

10,233

9,842

9,474

7,695

Money market
36,934

29,015

24,796

26,938

29,472

Total Separate Accounts
$
60,453

$
51,106

$
46,335

$
46,962

$
47,672

Total Liquidation Portfolio1
$
7,019

$
7,346

$
7,718

$
8,124

$
8,583

Total Managed Assets
$
377,309

$
379,771

$
364,084

$
355,861

$
363,625

 
AVERAGE MANAGED ASSETS
Quarter Ended
(in millions)
March 31, 2013
Dec. 31, 2012
Sept. 30, 2012
June 30, 2012
March 31, 2012
By Asset Class
 
 
 
 
 
Equity
$
36,685

$
35,016

$
34,429

$
32,993

$
32,827

Fixed-income
52,732

52,211

50,195

47,747

45,792

Money market
284,588

273,943

268,573

271,507

282,801

Liquidation portfolio1
7,215

7,559

7,948

8,353

8,703

Total Avg. Assets
$
381,220

$
368,729

$
361,145

$
360,600

$
370,123

By Product Type
 
 
 
 
 
Funds:
 
 
 
 
 
Equity
$
24,037

$
23,209

$
23,133

$
22,642

$
23,075

Fixed-income
42,581

42,156

40,579

38,901

38,128

Money market
250,652

248,534

243,111

243,454

251,825

Total Avg. Fund Assets
$
317,270

$
313,899

$
306,823

$
304,997

$
313,028

Separate Accounts:
 
 
 
 
 
Equity
$
12,648

$
11,807

$
11,296

$
10,351

$
9,752

Fixed-income
10,151

10,055

9,616

8,846

7,664

Money market
33,936

25,409

25,462

28,053

30,976

Total Avg. Separate Accounts
$
56,735

$
47,271

$
46,374

$
47,250

$
48,392

Total Avg. Liquidation Portfolio1
$
7,215

$
7,559

$
7,948

$
8,353

$
8,703

Total Avg. Managed Assets
$
381,220

$
368,729

$
361,145

$
360,600

$
370,123

1) Liquidation portfolio represents a portfolio of distressed bonds. 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 these portfolios are lower than those of traditional separate account mandates.