x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Pennsylvania | 25-1111467 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Federated Investors Tower Pittsburgh, Pennsylvania | 15222-3779 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | x | Accelerated filer | o | |||
Non-accelerated filer | o | Smaller reporting company | o |
Table of Contents |
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 1A. | |||
Item 2. | |||
Item 6. | |||
Special Note Regarding Forward-Looking Information |
Consolidated Balance Sheets |
(dollars in thousands) |
(unaudited) |
June 30, 2013 | December 31, 2012 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 87,394 | $ | 67,585 | ||||
Investments—affiliates | 120,041 | 136,023 | ||||||
Investments—consolidated investment companies | 90,813 | 51,073 | ||||||
Investments—other | 4,697 | 3,947 | ||||||
Receivables, net of reserve of $36 and $50, respectively | 23,732 | 24,120 | ||||||
Prepaid expenses | 19,602 | 12,986 | ||||||
Other current assets | 4,959 | 4,328 | ||||||
Total current assets | 351,238 | 300,062 | ||||||
Long-Term Assets | ||||||||
Goodwill | 648,824 | 648,820 | ||||||
Renewable investment advisory rights | 68,455 | 68,455 | ||||||
Other intangible assets, net of accumulated amortization of $45,580 and $44,224, respectively | 9,226 | 10,582 | ||||||
Property and equipment, net of accumulated depreciation of $54,308 and $50,910, respectively | 40,921 | 38,912 | ||||||
Other long-term assets | 23,542 | 23,230 | ||||||
Total long-term assets | 790,968 | 789,999 | ||||||
Total assets | $ | 1,142,206 | $ | 1,090,061 | ||||
LIABILITIES | ||||||||
Current Liabilities | ||||||||
Short-term debt | $ | 42,500 | $ | 42,500 | ||||
Accounts payable and accrued expenses | 40,625 | 45,255 | ||||||
Accrued compensation and benefits | 40,037 | 68,172 | ||||||
Other current liabilities | 23,164 | 25,207 | ||||||
Total current liabilities | 146,326 | 181,134 | ||||||
Long-Term Liabilities | ||||||||
Long-term debt | 255,000 | 276,250 | ||||||
Long-term deferred tax liability, net | 112,891 | 99,399 | ||||||
Other long-term liabilities | 23,327 | 29,334 | ||||||
Total long-term liabilities | 391,218 | 404,983 | ||||||
Total liabilities | 537,544 | 586,117 | ||||||
Commitments and contingencies (Note (12)) | ||||||||
TEMPORARY EQUITY | ||||||||
Redeemable noncontrolling interest in subsidiaries | 69,539 | 7,268 | ||||||
PERMANENT EQUITY | ||||||||
Federated Investors shareholders’ equity | ||||||||
Common stock: | ||||||||
Class A, no par value, 20,000 shares authorized, 9,000 shares issued and outstanding | 189 | 189 | ||||||
Class B, no par value, 900,000,000 shares authorized, 129,505,456 shares issued | 284,878 | 273,697 | ||||||
Retained earnings | 1,006,271 | 984,505 | ||||||
Treasury stock, at cost, 24,874,735 and 25,064,280 shares Class B common stock, respectively | (754,194 | ) | (760,022 | ) | ||||
Accumulated other comprehensive loss, net of tax | (2,343 | ) | (2,937 | ) | ||||
Total Federated Investors, Inc. shareholders’ equity | 534,801 | 495,432 | ||||||
Nonredeemable noncontrolling interest in subsidiary | 322 | 1,244 | ||||||
Total permanent equity | 535,123 | 496,676 | ||||||
Total liabilities, temporary equity and permanent equity | $ | 1,142,206 | $ | 1,090,061 |
Consolidated Statements of Income |
(dollars in thousands, except per share data) |
(unaudited) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenue | ||||||||||||||||
Investment advisory fees, net—affiliates | $ | 126,897 | $ | 137,634 | $ | 259,025 | $ | 271,152 | ||||||||
Investment advisory fees, net—other | 20,618 | 16,733 | 39,253 | 32,562 | ||||||||||||
Administrative service fees, net—affiliates | 55,253 | 54,986 | 112,081 | 112,278 | ||||||||||||
Other service fees, net—affiliates | 16,747 | 18,981 | 32,934 | 38,624 | ||||||||||||
Other service fees, net—other | 3,109 | 3,026 | 6,253 | 6,039 | ||||||||||||
Other, net | 1,182 | 772 | 2,231 | 1,758 | ||||||||||||
Total revenue | 223,806 | 232,132 | 451,777 | 462,413 | ||||||||||||
Operating Expenses | ||||||||||||||||
Compensation and related | 67,855 | 65,215 | 134,792 | 129,280 | ||||||||||||
Distribution | 53,809 | 62,328 | 112,048 | 124,021 | ||||||||||||
Professional service fees | 9,293 | 9,932 | 18,137 | 20,240 | ||||||||||||
Office and occupancy | 6,543 | 6,119 | 12,975 | 12,371 | ||||||||||||
Systems and communications | 6,087 | 6,773 | 12,710 | 13,084 | ||||||||||||
Advertising and promotional | 3,936 | 3,316 | 7,358 | 6,244 | ||||||||||||
Travel and related | 3,533 | 3,336 | 6,219 | 6,087 | ||||||||||||
Intangible asset related | 654 | 822 | 1,417 | 843 | ||||||||||||
Other | 6,068 | 5,271 | 11,894 | 10,876 | ||||||||||||
Total operating expenses | 157,778 | 163,112 | 317,550 | 323,046 | ||||||||||||
Operating income | 66,028 | 69,020 | 134,227 | 139,367 | ||||||||||||
Nonoperating Income (Expenses) | ||||||||||||||||
Investment income, net | 1,708 | 1,520 | 3,243 | 2,816 | ||||||||||||
Gain on securities, net | 2,351 | 752 | 5,244 | 2,802 | ||||||||||||
Debt expense | (3,137 | ) | (3,690 | ) | (6,390 | ) | (7,401 | ) | ||||||||
Other, net | (30 | ) | (128 | ) | (70 | ) | (166 | ) | ||||||||
Total nonoperating income (expenses), net | 892 | (1,546 | ) | 2,027 | (1,949 | ) | ||||||||||
Income before income taxes | 66,920 | 67,474 | 136,254 | 137,418 | ||||||||||||
Income tax provision | 25,059 | 24,401 | 49,705 | 49,938 | ||||||||||||
Net income including noncontrolling interests in subsidiaries | 41,861 | 43,073 | 86,549 | 87,480 | ||||||||||||
Less: Net income attributable to the noncontrolling interests in subsidiaries | 1,453 | 2,663 | 3,147 | 4,745 | ||||||||||||
Net income | $ | 40,408 | $ | 40,410 | $ | 83,402 | $ | 82,735 | ||||||||
Amounts attributable to Federated Investors, Inc. | ||||||||||||||||
Earnings per common share—Basic and Diluted | $ | 0.39 | $ | 0.39 | $ | 0.80 | $ | 0.80 | ||||||||
Cash dividends per share | $ | 0.24 | $ | 0.24 | $ | 0.48 | $ | 0.48 |
Consolidated Statements of Comprehensive Income |
(dollars in thousands) |
(unaudited) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net income including noncontrolling interests in subsidiaries | $ | 41,861 | $ | 43,073 | $ | 86,549 | $ | 87,480 | ||||||||
Other comprehensive income, net of tax | ||||||||||||||||
Permanent equity | ||||||||||||||||
Unrealized gain (loss) on interest rate swap | 11 | (637 | ) | (6 | ) | (1,417 | ) | |||||||||
Reclassification adjustment related to interest rate swap | 1,043 | 1,136 | 2,109 | 2,360 | ||||||||||||
Unrealized (loss) gain on securities available for sale | (1,389 | ) | (1,209 | ) | 1,604 | 3,052 | ||||||||||
Reclassification adjustment related to securities available for sale | (1,302 | ) | (958 | ) | (2,812 | ) | (1,248 | ) | ||||||||
Foreign currency items | (270 | ) | (368 | ) | (301 | ) | (351 | ) | ||||||||
Temporary equity | ||||||||||||||||
Foreign currency translation loss | (1 | ) | (303 | ) | (36 | ) | (279 | ) | ||||||||
Other comprehensive (loss) income | (1,908 | ) | (2,339 | ) | 558 | 2,117 | ||||||||||
Comprehensive income including noncontrolling interests in subsidiaries | 39,953 | 40,734 | 87,107 | 89,597 | ||||||||||||
Less: Comprehensive income (loss) attributable to redeemable noncontrolling interest in subsidiaries | 250 | (280 | ) | 253 | (242 | ) | ||||||||||
Less: Comprehensive income attributable to nonredeemable noncontrolling interest in subsidiary | 1,202 | 2,640 | 2,858 | 4,708 | ||||||||||||
Comprehensive income attributable to Federated Investors, Inc. | $ | 38,501 | $ | 38,374 | $ | 83,996 | $ | 85,131 |
Consolidated Statements of Changes in Equity |
(dollars in thousands) |
(unaudited) |
Federated Investors, Inc. Shareholders | ||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital from Treasury Stock Transactions | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss, Net of Tax | Total Shareholders’ Equity | Nonredeemable Noncontrolling Interest in Subsidiary | Total Permanent Equity | Redeemable Noncontrolling Interest in Subsidiaries/ Temporary Equity | ||||||||||||||||||||||||||||
Balance at December 31, 2011 | $ | 253,139 | $ | 0 | $ | 1,069,913 | $ | (772,481 | ) | $ | (8,612 | ) | $ | 541,959 | $ | 718 | $ | 542,677 | $ | 506 | ||||||||||||||||
Net income | 0 | 0 | 82,735 | 0 | 0 | 82,735 | 4,708 | 87,443 | 37 | |||||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | 0 | 0 | 0 | 0 | 2,396 | 2,396 | 0 | 2,396 | (279 | ) | ||||||||||||||||||||||||||
Subscriptions—redeemable noncontrolling interest holders | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 14,107 | |||||||||||||||||||||||||||
Stock award activity | 10,487 | 7 | (7,653 | ) | 7,655 | 0 | 10,496 | 0 | 10,496 | 0 | ||||||||||||||||||||||||||
Dividends declared/Distributions to noncontrolling interest in subsidiaries | 0 | 0 | (49,901 | ) | 0 | 0 | (49,901 | ) | (4,318 | ) | (54,219 | ) | (12,486 | ) | ||||||||||||||||||||||
Purchase of treasury stock | 0 | 0 | 0 | (2,259 | ) | 0 | (2,259 | ) | 0 | (2,259 | ) | 0 | ||||||||||||||||||||||||
Balance at June 30, 2012 | $ | 263,626 | $ | 7 | $ | 1,095,094 | $ | (767,085 | ) | $ | (6,216 | ) | $ | 585,426 | $ | 1,108 | $ | 586,534 | $ | 1,885 | ||||||||||||||||
Balance at December 31, 2012 | $ | 273,886 | $ | 0 | $ | 984,505 | $ | (760,022 | ) | $ | (2,937 | ) | $ | 495,432 | $ | 1,244 | $ | 496,676 | $ | 7,268 | ||||||||||||||||
Net income | 0 | 0 | 83,402 | 0 | 0 | 83,402 | 2,858 | 86,260 | 289 | |||||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | 0 | 0 | 0 | 0 | 594 | 594 | 0 | 594 | (36 | ) | ||||||||||||||||||||||||||
Subscriptions—redeemable noncontrolling interest holders | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 9,839 | |||||||||||||||||||||||||||
Consolidation | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 54,919 | |||||||||||||||||||||||||||
Stock award activity | 11,181 | 0 | (11,314 | ) | 11,314 | 0 | 11,181 | 0 | 11,181 | 0 | ||||||||||||||||||||||||||
Dividends declared/Distributions to noncontrolling interest in subsidiaries | 0 | 0 | (50,192 | ) | 0 | 0 | (50,192 | ) | (3,780 | ) | (53,972 | ) | (2,740 | ) | ||||||||||||||||||||||
Purchase of treasury stock | 0 | 0 | 0 | (5,486 | ) | 0 | (5,486 | ) | 0 | (5,486 | ) | 0 | ||||||||||||||||||||||||
Other | 0 | 0 | (130 | ) | 0 | 0 | (130 | ) | 0 | (130 | ) | 0 | ||||||||||||||||||||||||
Balance at June 30, 2013 | $ | 285,067 | $ | 0 | $ | 1,006,271 | $ | (754,194 | ) | $ | (2,343 | ) | $ | 534,801 | $ | 322 | $ | 535,123 | $ | 69,539 |
Consolidated Statements of Cash Flows |
(dollars in thousands) |
(unaudited) |
Six Months Ended | ||||||||
June 30, | ||||||||
2013 | 2012 | |||||||
Operating Activities | ||||||||
Net income including noncontrolling interests in subsidiaries | $ | 86,549 | $ | 87,480 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities | ||||||||
Amortization of deferred sales commissions | 4,387 | 3,415 | ||||||
Depreciation and other amortization | 4,995 | 5,310 | ||||||
Share-based compensation expense | 10,758 | 10,382 | ||||||
Gain on disposal of assets | (5,579 | ) | (1,790 | ) | ||||
Provision for deferred income taxes | 13,312 | 13,798 | ||||||
Fair-value adjustments for contingent liabilities | (47 | ) | (1,000 | ) | ||||
Tax benefit from share-based compensation | 438 | 108 | ||||||
Excess tax benefits from share-based compensation | (780 | ) | (762 | ) | ||||
Net purchases of trading securities | (4,661 | ) | (2,279 | ) | ||||
Deferred sales commissions paid | (6,495 | ) | (6,044 | ) | ||||
Contingent deferred sales charges received | 783 | 752 | ||||||
Other changes in assets and liabilities: | ||||||||
Increase in receivables, net | (7 | ) | (3,082 | ) | ||||
(Increase) decrease in prepaid expenses and other assets | (1,882 | ) | 550 | |||||
Decrease in accounts payable and accrued expenses | (36,019 | ) | (23,250 | ) | ||||
Increase (decrease) in other liabilities | 1,727 | (298 | ) | |||||
Net cash provided by operating activities | 67,479 | 83,290 | ||||||
Investing Activities | ||||||||
Purchases of securities available for sale | (21,756 | ) | (29,784 | ) | ||||
Cash paid for business acquisitions | (3,365 | ) | (6,417 | ) | ||||
Proceeds from redemptions of securities available for sale | 55,810 | 69,543 | ||||||
Cash paid for property and equipment | (5,986 | ) | (3,684 | ) | ||||
Net cash provided by investing activities | 24,703 | 29,658 | ||||||
Financing Activities | ||||||||
Dividends paid | (50,208 | ) | (49,904 | ) | ||||
Purchases of treasury stock | (4,667 | ) | (2,558 | ) | ||||
Distributions to noncontrolling interest in subsidiaries | (6,520 | ) | (16,804 | ) | ||||
Contributions from noncontrolling interest in subsidiaries | 9,839 | 13,099 | ||||||
Proceeds from shareholders for share-based compensation | 0 | 9 | ||||||
Excess tax benefits from share-based compensation | 780 | 762 | ||||||
Payments on debt | (21,250 | ) | (21,250 | ) | ||||
Other financing activities | (347 | ) | (328 | ) | ||||
Net cash used by financing activities | (72,373 | ) | (76,974 | ) | ||||
Net increase in cash and cash equivalents | 19,809 | 35,974 | ||||||
Cash and cash equivalents, beginning of period | 67,585 | 49,273 | ||||||
Cash and cash equivalents, end of period | $ | 87,394 | $ | 85,247 |
Notes to the Consolidated Financial Statements | ||||
(unaudited) |
Six Months Ended | ||||||
June 30, | ||||||
2013 | 2012 | |||||
Money market assets | 42 | % | 47 | % | ||
Equity assets | 34 | % | 31 | % | ||
Fixed-income assets | 23 | % | 21 | % |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenue | $ | (91.9 | ) | $ | (70.3 | ) | $ | (179.3 | ) | $ | (150.7 | ) | ||||
Less: Reduction in Distribution expense | 66.9 | 53.1 | 131.7 | 110.6 | ||||||||||||
Operating income | (25.0 | ) | (17.2 | ) | (47.6 | ) | (40.1 | ) | ||||||||
Less: Reduction in Noncontrolling interest | 1.3 | 0.0 | 2.1 | 0.6 | ||||||||||||
Pre-tax impact | $ | (23.7 | ) | $ | (17.2 | ) | $ | (45.5 | ) | $ | (39.5 | ) |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
(in millions) | June 30, 2013 | December 31, 2012 | ||||||
Cash and cash equivalents | $ | 1.9 | $ | 1.0 | ||||
Investments—consolidated investment companies | 90.8 | 51.1 | ||||||
Receivables | 0.2 | 0.7 | ||||||
Less: Liabilities | 1.3 | 2.0 | ||||||
Less: Redeemable noncontrolling interest in subsidiaries | 69.5 | 7.3 | ||||||
Federated's net interest in consolidated investment companies | $ | 22.1 | $ | 43.5 |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
June 30, 2013 | December 31, 2012 | |||||||||
(in millions) | Total remaining carrying value of investment and maximum risk of loss | Total remaining carrying value of investment and maximum risk of loss | ||||||||
Investment companies1, 2 | $ | 195.4 | $ | 193.7 | ||||||
Equity investment3 | $ | 3.8 | $ | 3.8 |
1 | AUM for these unconsolidated investment companies totaled $272.3 billion and $295.4 billion at June 30, 2013 and December 31, 2012, respectively. |
2 | Accounts receivable from sponsored investment companies for advisory and other services totaled $12.0 million and $11.6 million at June 30, 2013 and December 31, 2012, respectively. |
3 | Total assets and liabilities of the equity investment were $2.1 million and $0.1 million, respectively, at June 30, 2013 and $2.8 million and $0.3 million, respectively, at December 31, 2012. |
June 30, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||
Gross Unrealized | Estimated Fair | Gross Unrealized | Estimated Fair | |||||||||||||||||||||||||||||
(in thousands) | Cost | Gains | (Losses) | Value | Cost | Gains | (Losses) | Value | ||||||||||||||||||||||||
Equity mutual funds | $ | 35,241 | $ | 4,764 | $ | 0 | $ | 40,005 | $ | 44,944 | $ | 4,814 | $ | (5 | ) | $ | 49,753 | |||||||||||||||
Fixed-income mutual funds | 80,819 | 476 | (1,259 | ) | 80,036 | 84,855 | 1,436 | (21 | ) | 86,270 | ||||||||||||||||||||||
Total fluctuating-value mutual funds | $ | 116,060 | $ | 5,240 | $ | (1,259 | ) | $ | 120,041 | $ | 129,799 | $ | 6,250 | $ | (26 | ) | $ | 136,023 |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Unrealized (loss) gain | ||||||||||||||||
Trading securities | $ | (467 | ) | $ | (565 | ) | $ | (231 | ) | $ | 694 | |||||
Derivatives1 | 124 | 112 | (156 | ) | 188 | |||||||||||
Realized gains2 | ||||||||||||||||
Available-for-sale securities3 | 3,835 | 1,605 | 6,157 | 2,108 | ||||||||||||
Trading securities | 279 | 197 | 627 | 551 | ||||||||||||
Derivatives1 | 521 | 0 | 598 | 226 | ||||||||||||
Realized losses2 | ||||||||||||||||
Available-for-sale securities3 | (939 | ) | 0 | (939 | ) | 0 | ||||||||||
Trading securities | (687 | ) | (147 | ) | (497 | ) | (347 | ) | ||||||||
Derivatives1 | (315 | ) | (450 | ) | (315 | ) | (618 | ) | ||||||||
Gain on securities, net4 | $ | 2,351 | $ | 752 | $ | 5,244 | $ | 2,802 |
1 | Amounts related to economic derivatives held by certain consolidated investment companies. |
2 | Realized gains and losses are computed on a specific-identification basis. |
3 | Amounts related to sales of available-for-sale securities resulting in proceeds of $44.1 million and $55.8 million for the three and six months ended June 30, 2013, respectively, and $51.6 million and $69.5 million for the three and six months ended June 30, 2012, respectively. |
4 | Amounts related to consolidated investment companies totaled $(0.5) million and $(0.1) million for the three and six months ended June 30, 2013, respectively, and $(0.8) million and $0.6 million for the three and six months ended June 30, 2012, respectively. |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
June 30, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||||
Fair Value Measurements Using | Fair Value Measurements Using | |||||||||||||||||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Financial Assets | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 87,394 | $ | 0 | $ | 0 | $ | 87,394 | $ | 67,585 | $ | 0 | $ | 0 | $ | 67,585 | ||||||||||||||||
Available-for-sale equity securities | 85,912 | 34,129 | 0 | 120,041 | 102,493 | 33,530 | 0 | 136,023 | ||||||||||||||||||||||||
Trading securities—equity | 22,813 | 5,642 | 0 | 28,455 | 9,808 | 16,776 | 0 | 26,584 | ||||||||||||||||||||||||
Trading securities—debt | 0 | 67,055 | 0 | 67,055 | 0 | 28,436 | 0 | 28,436 | ||||||||||||||||||||||||
Foreign currency forward contract | 0 | 44 | 0 | 44 | 0 | 158 | 0 | 158 | ||||||||||||||||||||||||
Total financial assets | $ | 196,119 | $ | 106,870 | $ | 0 | $ | 302,989 | $ | 179,886 | $ | 78,900 | $ | 0 | $ | 258,786 | ||||||||||||||||
Financial Liabilities | ||||||||||||||||||||||||||||||||
Interest rate swap | $ | 0 | $ | 7,854 | $ | 0 | $ | 7,854 | $ | 0 | $ | 11,178 | $ | 0 | $ | 11,178 | ||||||||||||||||
Acquisition-related future consideration liabilities | 0 | 0 | 11,712 | 11,712 | 0 | 0 | 11,759 | 11,759 | ||||||||||||||||||||||||
Other1 | 971 | 77 | 0 | 1,048 | 1,015 | 0 | 0 | 1,015 | ||||||||||||||||||||||||
Total financial liabilities | $ | 971 | $ | 7,931 | $ | 11,712 | $ | 20,614 | $ | 1,015 | $ | 11,178 | $ | 11,759 | $ | 23,952 |
1 | Amounts include investments sold short within one of the consolidated investment companies and/or foreign currency forward contracts recorded within Other current liabilities on the Consolidated Balance Sheets. |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Beginning balance | $ | 11,711 | $ | 12,404 | $ | 11,759 | $ | 13,404 | ||||||||
New acquisition adjustment1 | 0 | 1,500 | 0 | 1,500 | ||||||||||||
Changes in fair value2 | 1 | 0 | (47 | ) | (1,000 | ) | ||||||||||
Ending balance | $ | 11,712 | $ | 13,904 | $ | 11,712 | $ | 13,904 |
1 | Amounts include the preliminary fair value estimate of the contingent payment liability recorded in connection with a new acquisition or the revision thereof upon finalization of the valuation process related to initial purchase accounting. |
2 | For the six months ended June 30, 2013, the amount was primarily included as Other expense on the Consolidated Statements of Income and primarily represented a foreign currency loss. For the six months ended June 30, 2012, the amount was included as a decrease to Intangible asset related expense on the Consolidated Statements of Income. |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
(dollars in thousands) | Weighted-Average Interest Rate1 | June 30, 2013 | December 31, 2012 | |||||||||
Term Loan | 3.646% | $ | 297,500 | $ | 318,750 | |||||||
Less: Short-term debt | 42,500 | 42,500 | ||||||||||
Long-term debt | $ | 255,000 | $ | 276,250 |
1 | See additional information below regarding the interest rate fixed at 3.646% in connection with the Swap. |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(in thousands, except per share data) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Numerator – Basic and Diluted | ||||||||||||||||
Net income attributable to Federated Investors, Inc. | $ | 40,408 | $ | 40,410 | $ | 83,402 | $ | 82,735 | ||||||||
Less: Total income available to participating unvested restricted shareholders1 | (1,539 | ) | (1,476 | ) | (3,195 | ) | (3,016 | ) | ||||||||
Total net income attributable to Federated Common Stock2 | $ | 38,869 | $ | 38,934 | $ | 80,207 | $ | 79,719 | ||||||||
Denominator | ||||||||||||||||
Basic weighted-average common shares outstanding | 100,716 | 100,347 | 100,617 | 100,229 | ||||||||||||
Dilutive potential shares from stock options | 1 | 0 | 1 | 0 | ||||||||||||
Diluted weighted-average common shares outstanding | 100,717 | 100,347 | 100,618 | 100,229 | ||||||||||||
Earnings per Share | ||||||||||||||||
Net income attributable to Federated Common Stock – Basic and Diluted2 | $ | 0.39 | $ | 0.39 | $ | 0.80 | $ | 0.80 |
1 | Income available to participating restricted shareholders includes dividends paid on unvested restricted shares and their proportionate share of undistributed earnings. |
2 | Federated Common Stock excludes unvested restricted stock which are deemed participating securities in accordance with the two-class method of computing earnings per share. |
Notes to the Consolidated Financial Statements (continued) | ||
(unaudited) |
(in thousands) | Unrealized Loss on Interest Rate Swap1 | Unrealized Gain on Securities Available for Sale2 | Unrealized Loss on Foreign Currency Hedge | Foreign Currency Translation Gain (Loss) | Total | ||||||||||||||
Balance at December 31, 2011 | $ | (9,634 | ) | $ | 325 | $ | 368 | $ | 329 | $ | (8,612 | ) | |||||||
Other comprehensive (loss) income before reclassifications and tax | (2,242 | ) | 5,154 | (758 | ) | 466 | 2,620 | ||||||||||||
Tax impact | 825 | (2,102 | ) | 104 | (163 | ) | (1,336 | ) | |||||||||||
Reclassification adjustments, before tax | 3,734 | (2,108 | ) | 0 | 0 | 1,626 | |||||||||||||
Tax impact | (1,374 | ) | 860 | 0 | 0 | (514 | ) | ||||||||||||
Net current-period other comprehensive income (loss) | 943 | 1,804 | (654 | ) | 303 | 2,396 | |||||||||||||
Balance at June 30, 2012 | $ | (8,691 | ) | $ | 2,129 | $ | (286 | ) | $ | 632 | $ | (6,216 | ) | ||||||
Balance at December 31, 2012 | $ | (7,071 | ) | $ | 3,644 | $ | 0 | $ | 490 | $ | (2,937 | ) | |||||||
Other comprehensive (loss) income before reclassifications and tax | (9 | ) | 2,975 | 0 | (461 | ) | 2,505 | ||||||||||||
Tax impact | 3 | (1,371 | ) | 0 | 160 | (1,208 | ) | ||||||||||||
Reclassification adjustments, before tax | 3,334 | (5,218 | ) | 0 | 0 | (1,884 | ) | ||||||||||||
Tax impact | (1,225 | ) | 2,406 | 0 | 0 | 1,181 | |||||||||||||
Net current-period other comprehensive income (loss) | 2,103 | (1,208 | ) | 0 | (301 | ) | 594 | ||||||||||||
Balance at June 30, 2013 | $ | (4,968 | ) | $ | 2,436 | $ | 0 | $ | 189 | $ | (2,343 | ) |
1 | Amounts reclassified from Accumulated other comprehensive loss, net of tax were recorded in Debt expense on the Consolidated Statements of Income. |
2 | Amounts reclassified from Accumulated other comprehensive loss, net of tax were recorded in Gain on securities, net on the Consolidated Statements of Income. |
Part I, Item 2. Management’s Discussion and Analysis |
Management's Discussion and Analysis (continued) | ||
of Financial Condition and Results of Operations (unaudited) |
Management's Discussion and Analysis (continued) | ||
of Financial Condition and Results of Operations (unaudited) |
Management's Discussion and Analysis (continued) | ||
of Financial Condition and Results of Operations (unaudited) |
Three Months Ended | ||||||||||||||||||||
June 30, 2013 | March 31, 2013 | December 31, 2012 | September 30, 2012 | June 30, 2012 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Investment advisory fees | $ | (59.4 | ) | $ | (54.9 | ) | $ | (40.0 | ) | $ | (41.2 | ) | $ | (43.0 | ) | |||||
Other service fees | (32.5 | ) | (32.4 | ) | (30.7 | ) | (28.3 | ) | (27.3 | ) | ||||||||||
Total Revenue | (91.9 | ) | (87.3 | ) | (70.7 | ) | (69.5 | ) | (70.3 | ) | ||||||||||
Less: Reduction in Distribution expense | 66.9 | 64.8 | 54.9 | 52.9 | 53.1 | |||||||||||||||
Operating income | (25.0 | ) | (22.5 | ) | (15.8 | ) | (16.6 | ) | (17.2 | ) | ||||||||||
Less: Reduction in Noncontrolling interest | 1.3 | 0.8 | 0.3 | 0.3 | 0.0 | |||||||||||||||
Pre-tax impact | $ | (23.7 | ) | $ | (21.7 | ) | $ | (15.5 | ) | $ | (16.3 | ) | $ | (17.2 | ) |
Management's Discussion and Analysis (continued) | ||
of Financial Condition and Results of Operations (unaudited) |
June 30, | Percent Change | ||||||||||
(in millions) | 2013 | 2012 | |||||||||
By Asset Class | |||||||||||
Money market | $ | 268,532 | $ | 265,548 | 1 | % | |||||
Fixed-income | 50,005 | 48,968 | 2 | % | |||||||
Equity | 38,705 | 33,221 | 17 | % | |||||||
Liquidation portfolio1 | 6,561 | 8,124 | (19 | )% | |||||||
Total managed assets | $ | 363,803 | $ | 355,861 | 2 | % | |||||
By Product Type | |||||||||||
Mutual Funds: | |||||||||||
Money market | $ | 232,874 | $ | 238,610 | (2 | )% | |||||
Fixed-income | 40,188 | 39,494 | 2 | % | |||||||
Equity | 25,030 | 22,671 | 10 | % | |||||||
Total mutual fund assets | $ | 298,092 | $ | 300,775 | (1 | )% | |||||
Separate Accounts: | |||||||||||
Money market | $ | 35,658 | $ | 26,938 | 32 | % | |||||
Fixed-income | 9,817 | 9,474 | 4 | % | |||||||
Equity | 13,675 | 10,550 | 30 | % | |||||||
Total separate account assets | $ | 59,150 | $ | 46,962 | 26 | % | |||||
Liquidation Portfolio1 | $ | 6,561 | $ | 8,124 | (19 | )% | |||||
Total managed assets | $ | 363,803 | $ | 355,861 | 2 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||
June 30, | Percent Change | June 30, | Percent Change | |||||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
By Asset Class | ||||||||||||||||||||||
Money market | $ | 274,899 | $ | 271,507 | 1 | % | $ | 279,743 | $ | 277,154 | 1 | % | ||||||||||
Fixed-income | 52,375 | 47,747 | 10 | % | 52,553 | 46,769 | 12 | % | ||||||||||||||
Equity | 38,762 | 32,993 | 17 | % | 37,724 | 32,910 | 15 | % | ||||||||||||||
Liquidation portfolio1 | 6,834 | 8,353 | (18 | )% | 7,025 | 8,528 | (18 | )% | ||||||||||||||
Total average managed assets | $ | 372,870 | $ | 360,600 | 3 | % | $ | 377,045 | $ | 365,361 | 3 | % | ||||||||||
By Product Type | ||||||||||||||||||||||
Mutual Funds: | ||||||||||||||||||||||
Money market | $ | 237,790 | $ | 243,454 | (2 | )% | $ | 244,221 | $ | 247,640 | (1 | )% | ||||||||||
Fixed-income | 42,258 | 38,901 | 9 | % | 42,419 | 38,514 | 10 | % | ||||||||||||||
Equity | 25,094 | 22,642 | 11 | % | 24,566 | 22,859 | 7 | % | ||||||||||||||
Total average mutual fund assets | $ | 305,142 | $ | 304,997 | 0 | % | $ | 311,206 | $ | 309,013 | 1 | % | ||||||||||
Separate Accounts: | ||||||||||||||||||||||
Money market | $ | 37,109 | $ | 28,053 | 32 | % | $ | 35,522 | $ | 29,514 | 20 | % | ||||||||||
Fixed-income | 10,117 | 8,846 | 14 | % | 10,134 | 8,255 | 23 | % | ||||||||||||||
Equity | 13,668 | 10,351 | 32 | % | 13,158 | 10,051 | 31 | % | ||||||||||||||
Total average separate account assets | $ | 60,894 | $ | 47,250 | 29 | % | $ | 58,814 | $ | 47,820 | 23 | % | ||||||||||
Liquidation Portfolio1 | $ | 6,834 | $ | 8,353 | (18 | )% | $ | 7,025 | $ | 8,528 | (18 | )% | ||||||||||
Total average managed assets | $ | 372,870 | $ | 360,600 | 3 | % | $ | 377,045 | $ | 365,361 | 3 | % |
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's Discussion and Analysis (continued) | ||
of Financial Condition and Results of Operations (unaudited) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Fixed-Income Funds | ||||||||||||||||
Beginning assets | $ | 42,612 | $ | 38,526 | $ | 42,478 | $ | 37,241 | ||||||||
Sales | 5,232 | 5,636 | 10,380 | 10,458 | ||||||||||||
Redemptions | (6,877 | ) | (3,639 | ) | (11,886 | ) | (7,626 | ) | ||||||||
Net (redemptions) sales | (1,645 | ) | 1,997 | (1,506 | ) | 2,832 | ||||||||||
Net exchanges | (80 | ) | (1,510 | ) | (122 | ) | (1,569 | ) | ||||||||
Market gains and losses/reinvestments1 | (699 | ) | 481 | (662 | ) | 990 | ||||||||||
Ending assets | $ | 40,188 | $ | 39,494 | $ | 40,188 | $ | 39,494 | ||||||||
Fixed-Income Separate Accounts | ||||||||||||||||
Beginning assets | $ | 10,158 | $ | 7,695 | $ | 10,233 | $ | 7,573 | ||||||||
Sales2 | 562 | 624 | 1,093 | 844 | ||||||||||||
Redemptions2 | (725 | ) | (521 | ) | (1,370 | ) | (801 | ) | ||||||||
Net (redemptions) sales2 | (163 | ) | 103 | (277 | ) | 43 | ||||||||||
Net exchanges | 7 | 1,592 | 7 | 1,592 | ||||||||||||
Market gains and losses/reinvestments1 | (185 | ) | 84 | (146 | ) | 266 | ||||||||||
Ending assets | $ | 9,817 | $ | 9,474 | $ | 9,817 | $ | 9,474 | ||||||||
Total Fixed-Income | ||||||||||||||||
Beginning assets | $ | 52,770 | $ | 46,221 | $ | 52,711 | $ | 44,814 | ||||||||
Sales2 | 5,794 | 6,260 | 11,473 | 11,302 | ||||||||||||
Redemptions2 | (7,602 | ) | (4,160 | ) | (13,256 | ) | (8,427 | ) | ||||||||
Net (redemptions) sales2 | (1,808 | ) | 2,100 | (1,783 | ) | 2,875 | ||||||||||
Net exchanges | (73 | ) | 82 | (115 | ) | 23 | ||||||||||
Market gains and losses/reinvestments1 | (884 | ) | 565 | (808 | ) | 1,256 | ||||||||||
Ending assets | $ | 50,005 | $ | 48,968 | $ | 50,005 | $ | 48,968 | ||||||||
Equity Funds | ||||||||||||||||
Beginning assets | $ | 24,491 | $ | 23,612 | $ | 23,152 | $ | 21,930 | ||||||||
Sales | 1,918 | 1,529 | 3,670 | 3,352 | ||||||||||||
Redemptions | (1,629 | ) | (1,797 | ) | (4,017 | ) | (3,984 | ) | ||||||||
Net sales (redemptions) | 289 | (268 | ) | (347 | ) | (632 | ) | |||||||||
Net exchanges | 43 | 3 | 90 | (9 | ) | |||||||||||
Market gains and losses/reinvestments1 | 207 | (676 | ) | 2,135 | 1,382 | |||||||||||
Ending assets | $ | 25,030 | $ | 22,671 | $ | 25,030 | $ | 22,671 | ||||||||
Equity Separate Accounts | ||||||||||||||||
Beginning assets | $ | 13,361 | $ | 10,505 | $ | 11,858 | $ | 8,957 | ||||||||
Sales2 | 1,031 | 836 | 2,137 | 2,297 | ||||||||||||
Redemptions2 | (937 | ) | (697 | ) | (1,505 | ) | (1,183 | ) | ||||||||
Net sales2 | 94 | 139 | 632 | 1,114 | ||||||||||||
Net exchanges | 0 | (9 | ) | 0 | (9 | ) | ||||||||||
Market gains and losses/reinvestments1 | 220 | (85 | ) | 1,185 | 488 | |||||||||||
Ending assets | $ | 13,675 | $ | 10,550 | $ | 13,675 | $ | 10,550 | ||||||||
Total Equity | ||||||||||||||||
Beginning assets | $ | 37,852 | $ | 34,117 | $ | 35,010 | $ | 30,887 | ||||||||
Sales2 | 2,949 | 2,365 | 5,807 | 5,649 | ||||||||||||
Redemptions2 | (2,566 | ) | (2,494 | ) | (5,522 | ) | (5,167 | ) | ||||||||
Net sales (redemptions)2 | 383 | (129 | ) | 285 | 482 | |||||||||||
Net exchanges | 43 | (6 | ) | 90 | (18 | ) | ||||||||||
Market gains and losses/reinvestments1 | 427 | (761 | ) | 3,320 | 1,870 | |||||||||||
Ending assets | $ | 38,705 | $ | 33,221 | $ | 38,705 | $ | 33,221 |
1 | Reflects 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 | 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. |
Management's Discussion and Analysis (continued) | ||
of Financial Condition and Results of Operations (unaudited) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Liquidation Portfolio | ||||||||||||||||
Beginning assets | $ | 7,019 | $ | 8,583 | $ | 7,346 | $ | 8,856 | ||||||||
Net redemptions | (458 | ) | (458 | ) | (785 | ) | (731 | ) | ||||||||
Market gains and losses/reinvestments | 0 | (1 | ) | 0 | (1 | ) | ||||||||||
Ending assets | $ | 6,561 | $ | 8,124 | $ | 6,561 | $ | 8,124 |
Percent of Total Average Managed Assets | Percent of Total Revenue | |||||||||||
Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
By Asset Class | ||||||||||||
Money market assets | 74 | % | 76 | % | 42 | % | 47 | % | ||||
Fixed-income assets | 14 | % | 13 | % | 23 | % | 21 | % | ||||
Equity assets | 10 | % | 9 | % | 34 | % | 31 | % | ||||
Liquidation portfolio | 2 | % | 2 | % | 0 | % | 0 | % | ||||
Other activities | -- | -- | 1 | % | 1 | % | ||||||
By Product Type | ||||||||||||
Funds: | ||||||||||||
Money market assets | 65 | % | 68 | % | 40 | % | 46 | % | ||||
Fixed-income assets | 11 | % | 11 | % | 21 | % | 20 | % | ||||
Equity assets | 7 | % | 6 | % | 28 | % | 27 | % | ||||
Separate Accounts: | ||||||||||||
Money market assets | 9 | % | 8 | % | 2 | % | 1 | % | ||||
Fixed-income assets | 3 | % | 2 | % | 2 | % | 1 | % | ||||
Equity assets | 3 | % | 3 | % | 6 | % | 4 | % | ||||
Liquidation Portfolio | 2 | % | 2 | % | 0 | % | 0 | % | ||||
Other activities | -- | -- | 1 | % | 1 | % |
Management's Discussion and Analysis (continued) | ||
of Financial Condition and Results of Operations (unaudited) |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||
(in millions) | 2013 | 2012 | Change | Percent Change | 2013 | 2012 | Change | Percent Change | ||||||||||||||||||||||
Revenue from managed assets | $ | 221.5 | $ | 230.1 | $ | (8.6 | ) | (4 | )% | $ | 447.3 | $ | 458.5 | $ | (11.2 | ) | (2 | )% | ||||||||||||
Revenue from sources other than managed assets | 2.3 | 2.0 | 0.3 | 15 | % | 4.5 | 3.9 | 0.6 | 15 | % | ||||||||||||||||||||
Total revenue | $ | 223.8 | $ | 232.1 | $ | (8.3 | ) | (4 | )% | $ | 451.8 | $ | 462.4 | $ | (10.6 | ) | (2 | )% |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||
(in millions) | 2013 | 2012 | Change | Percent Change | 2013 | 2012 | Change | Percent Change | ||||||||||||||||||||||
Compensation and related | $ | 67.9 | $ | 65.2 | $ | 2.7 | 4 | % | $ | 134.8 | $ | 129.3 | $ | 5.5 | 4 | % | ||||||||||||||
Distribution | 53.8 | 62.3 | (8.5 | ) | (14 | )% | 112.0 | 124.0 | (12.0 | ) | (10 | )% | ||||||||||||||||||
All other | 36.1 | 35.6 | 0.5 | 1 | % | 70.8 | 69.7 | 1.1 | 2 | % | ||||||||||||||||||||
Total operating expenses | $ | 157.8 | $ | 163.1 | $ | (5.3 | ) | (3 | )% | $ | 317.6 | $ | 323.0 | $ | (5.4 | ) | (2 | )% |
Management's Discussion and Analysis (continued) | ||
of Financial Condition and Results of Operations (unaudited) |
Management's Discussion and Analysis (continued) | ||
of Financial Condition and Results of Operations (unaudited) |
Management's Discussion and Analysis (continued) | ||
of Financial Condition and Results of Operations (unaudited) |
Management's Discussion and Analysis (continued) | ||
of Financial Condition and Results of Operations (unaudited) |
Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk | ||
(unaudited) |
Part I, Item 4. Controls and Procedures | ||
(unaudited) |
(a) | Federated carried out an evaluation, under the supervision and with the participation of management, including Federated’s President and Chief Executive Officer and Chief Financial Officer, of the effectiveness of Federated’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2013. Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that Federated’s disclosure controls and procedures were effective at June 30, 2013. |
(b) | There has been no change in Federated’s internal control over financial reporting that occurred during the quarter ended June 30, 2013 that has materially affected, or is reasonably likely to materially affect, Federated’s internal control over financial reporting. |
Part II. Other Information | ||
(unaudited) |
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1 | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs1 | ||||||||||
April2 | 28,448 | $ | 0.56 | 0 | 1,749,834 | ||||||||
May | 30,000 | 23.71 | 30,000 | 1,719,834 | |||||||||
June2 | 99,685 | 20.55 | 75,000 | 1,644,834 | |||||||||
Total | 158,133 | $ | 17.55 | 105,000 | 1,644,834 |
1 | Federated’s share repurchase program was authorized in August 2008 by the board of directors and permits the purchase of up to 5.0 million shares of Federated Class B common stock with no stated expiration date. No other plans existed as of June 30, 2013. |
2 | In April and June 2013, 28,448 and 24,685 shares, respectively, of restricted stock with a weighted-average price of $0.56 and $2.25 per share, respectively, were repurchased in connection with employee separations. |
Part II, Item 6. Exhibits | ||
(unaudited) |
Federated Investors, Inc. | ||||||
(Registrant) | ||||||
Date | July 26, 2013 | By: | /s/ J. Christopher Donahue | |||
J. Christopher Donahue | ||||||
President and | ||||||
Chief Executive Officer | ||||||
Date | July 26, 2013 | By: | /s/ Thomas R. Donahue | |||
Thomas R. Donahue | ||||||
Chief Financial Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Federated Investors, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date | July 26, 2013 | By: | /s/ J. Christopher Donahue | ||
J. Christopher Donahue | |||||
President and | |||||
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Federated Investors, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date | July 26, 2013 | By: | /s/ Thomas R. Donahue | ||
Thomas R. Donahue | |||||
Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date | July 26, 2013 | By: | /s/ J. Christopher Donahue | ||
J. Christopher Donahue | |||||
President and | |||||
Chief Executive Officer | |||||
Date | July 26, 2013 | By: | /s/ Thomas R. Donahue | ||
Thomas R. Donahue | |||||
Chief Financial Officer |
Equity
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Equity [Abstract] | |
Equity | Equity During 2008, the board of directors authorized a share repurchase program that allows Federated to buy back as many as 5 million shares of Class B common stock. The program has no stated expiration date and no other programs existed as of June 30, 2013. The program authorizes executive management to determine the timing and the amount of shares for each purchase. The repurchased stock is held in treasury for employee share-based compensation plans, potential acquisitions and other corporate activities. During the first six months of 2013, Federated repurchased 0.3 million shares of common stock for $5.5 million ($0.8 million of which was accrued in Other current liabilities as of June 30, 2013), nearly all of which were repurchased in the open market. The remaining shares were repurchased in connection with employee separations and are not counted against the board-approved share repurchase program. At June 30, 2013, approximately 1.6 million shares remained available to be purchased under the current buyback program. |
Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|||||||||
Revenue | ||||||||||||
Investment advisory fees, net—affiliates | $ 126,897 | $ 137,634 | $ 259,025 | $ 271,152 | ||||||||
Investment advisory fees, net—other | 20,618 | 16,733 | 39,253 | 32,562 | ||||||||
Administrative service fees, net—affiliates | 55,253 | 54,986 | 112,081 | 112,278 | ||||||||
Other service fees, net—affiliates | 16,747 | 18,981 | 32,934 | 38,624 | ||||||||
Other service fees, net—other | 3,109 | 3,026 | 6,253 | 6,039 | ||||||||
Other, net | 1,182 | 772 | 2,231 | 1,758 | ||||||||
Total revenue | 223,806 | 232,132 | 451,777 | 462,413 | ||||||||
Operating Expenses | ||||||||||||
Compensation and related | 67,855 | 65,215 | 134,792 | 129,280 | ||||||||
Distribution | 53,809 | 62,328 | 112,048 | 124,021 | ||||||||
Professional service fees | 9,293 | 9,932 | 18,137 | 20,240 | ||||||||
Office and occupancy | 6,543 | 6,119 | 12,975 | 12,371 | ||||||||
Systems and communications | 6,087 | 6,773 | 12,710 | 13,084 | ||||||||
Advertising and promotional | 3,936 | 3,316 | 7,358 | 6,244 | ||||||||
Travel and related | 3,533 | 3,336 | 6,219 | 6,087 | ||||||||
Intangible asset related | 654 | 822 | 1,417 | 843 | ||||||||
Other | 6,068 | 5,271 | 11,894 | 10,876 | ||||||||
Total operating expenses | 157,778 | 163,112 | 317,550 | 323,046 | ||||||||
Operating income | 66,028 | 69,020 | 134,227 | 139,367 | ||||||||
Nonoperating Income (Expenses) | ||||||||||||
Investment income, net | 1,708 | 1,520 | 3,243 | 2,816 | ||||||||
Gain on securities, net | 2,351 | [1] | 752 | [1] | 5,244 | [1] | 2,802 | [1] | ||||
Debt expense | (3,137) | (3,690) | (6,390) | (7,401) | ||||||||
Other, net | (30) | (128) | (70) | (166) | ||||||||
Total nonoperating income (expenses), net | 892 | (1,546) | 2,027 | (1,949) | ||||||||
Income before income taxes | 66,920 | 67,474 | 136,254 | 137,418 | ||||||||
Income tax provision | 25,059 | 24,401 | 49,705 | 49,938 | ||||||||
Net income including noncontrolling interests in subsidiaries | 41,861 | 43,073 | 86,549 | 87,480 | ||||||||
Less: Net income attributable to the noncontrolling interests in subsidiaries | 1,453 | 2,663 | 3,147 | 4,745 | ||||||||
Net income | $ 40,408 | $ 40,410 | $ 83,402 | $ 82,735 | ||||||||
Amounts attributable to Federated Investors, Inc. | ||||||||||||
Earnings per common share—Basic and Diluted | $ 0.39 | [2] | $ 0.39 | [2] | $ 0.80 | [2] | $ 0.80 | [2] | ||||
Cash dividends per share | $ 0.24 | $ 0.24 | $ 0.48 | $ 0.48 | ||||||||
|
Recent Accounting Pronouncements
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Comprehensive Income Effective January 1, 2013, Federated adopted a Financial Accounting Standards Board (FASB) accounting standards update relating to the presentation of comprehensive income. The update requires disclosure of the changes in accumulated other comprehensive income balances by component as well as additional disclosure related to amounts reclassified out of accumulated other comprehensive income. See Note (13) for this new disclosure. As the update affected disclosure only, the adoption of the update did not have a financial impact on Federated’s Consolidated Financial Statements. Investment Companies On June 7, 2013, the FASB issued a final accounting standards update amending the criteria for an entity to qualify as an investment company under GAAP. Any entity regulated under the Investment Company Act of 1940 is automatically an investment company under the new definition. The update also amends certain disclosure requirements and measurement criteria. The update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2013 and prohibits early adoption. Management is currently evaluating the impact of adoption on Federated's financial statement but does not expect the impact to be material. |
Variable Interest Entities (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Variable Interest Entities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated and Unconsolidated VIEs | The following table presents the balances related to the consolidated investment companies that were included on the Consolidated Balance Sheets as well as Federated's net interest in the investment companies for each period presented:
Federated’s investment and maximum risk of loss related to these unconsolidated VIEs were as follows:
|
Earnings Per Share Attributable to Federated Investors, Inc. Shareholders
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share Attributable to Federated Investors, Inc. Shareholders | Earnings Per Share Attributable to Federated Investors, Inc. Shareholders The following table sets forth the computation of basic and diluted earnings per share for amounts attributable to Federated Investors, Inc. using the two-class method:
For both the three- and six-month periods ended June 30, 2013, fewer than 50 thousand stock option awards were not included in the computation of diluted earnings per share for each period. For both the three- and six-month periods ended June 30, 2012, approximately 300 thousand stock option awards were not included in the computation of diluted earnings per share for each period. In all cases, these awards were antidilutive because the exercise price was greater than the average market price of Federated Class B common stock for each respective period. In the event the awards become "in-the-money," these shares would be included in the calculation of diluted earnings per share and would result in additional dilution. |
Commitments and Contingencies (Details) (USD $)
|
3 Months Ended | 3 Months Ended | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Dec. 31, 2012
|
Dec. 31, 2012
SunTrust Acquisition [Member]
|
Dec. 31, 2011
SunTrust Acquisition [Member]
|
Sep. 30, 2010
SunTrust Acquisition [Member]
|
Jun. 30, 2013
SunTrust Acquisition [Member]
|
Mar. 31, 2013
Clover Capital Acquisition [Member]
|
Mar. 31, 2012
Clover Capital Acquisition [Member]
|
Mar. 31, 2011
Clover Capital Acquisition [Member]
|
Mar. 31, 2010
Clover Capital Acquisition [Member]
|
Dec. 31, 2008
Clover Capital Acquisition [Member]
|
Jun. 30, 2013
Clover Capital Acquisition [Member]
|
Jun. 30, 2013
Series of Individually Immaterial Business Acquisitions [Member]
|
Jun. 30, 2013
Other Current Liabilities [Member]
|
Jun. 30, 2013
Other Current Liabilities [Member]
SunTrust Acquisition [Member]
|
Jun. 30, 2013
Other Current Liabilities [Member]
Series of Individually Immaterial Business Acquisitions [Member]
|
Jun. 30, 2013
Other Noncurrent Liabilities [Member]
|
Jun. 30, 2013
Other Noncurrent Liabilities [Member]
SunTrust Acquisition [Member]
|
Jun. 30, 2013
Other Noncurrent Liabilities [Member]
Series of Individually Immaterial Business Acquisitions [Member]
|
|
Business Acquisition Contingent Consideration Payable Period | 5 years | 5 years | |||||||||||||||||
Contingent purchase price payments | $ 4,200,000 | $ 5,000,000 | $ 3,400,000 | $ 5,900,000 | $ 0 | $ 0 | |||||||||||||
Estimated remaining contingent payments | 10,000,000 | 9,000,000 | |||||||||||||||||
Remaining Business Acquisition Contingent Consideration Payable Period | 3 years | ||||||||||||||||||
Fair value of future consideration payments liability | 11,712,000 | 11,759,000 | 8,200,000 | 3,500,000 | 4,400,000 | 3,500,000 | 900,000 | 7,300,000 | 4,700,000 | 2,600,000 | |||||||||
Business Acquisition Contingent Consideration Accrued Liability | 0 | ||||||||||||||||||
Maximum bonus payable over remaining terms | 43,000,000 | ||||||||||||||||||
Employee Incentive Compensation Maximum Bonus Payable Succeeding Fiscal Year | 0 | ||||||||||||||||||
Bonus payable related to the Fund Bonus | $ 1,000,000 |
Investments Gain on Securities, Net of Investment Income (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|||||||||||||
(Loss) Gain on Investments [Line Items] | ||||||||||||||||
Proceeds from redemptions of securities avaliable for sale | $ 44,100 | $ 51,600 | $ 55,810 | $ 69,543 | ||||||||||||
Gain on securities, net | 2,351 | [1] | 752 | [1] | 5,244 | [1] | 2,802 | [1] | ||||||||
Consolidated Investment Companies [Member]
|
||||||||||||||||
(Loss) Gain on Investments [Line Items] | ||||||||||||||||
Gain on securities, net | (500) | (800) | (100) | 600 | ||||||||||||
Trading Securities [Member]
|
||||||||||||||||
(Loss) Gain on Investments [Line Items] | ||||||||||||||||
Unrealized gain on trading securities | (467) | (565) | (231) | 694 | ||||||||||||
Realized gains | 279 | [2] | 197 | [2] | 627 | [2] | 551 | [2] | ||||||||
Realized losses | (687) | [2] | (147) | [2] | (497) | [2] | (347) | [2] | ||||||||
Derivatives [Member]
|
||||||||||||||||
(Loss) Gain on Investments [Line Items] | ||||||||||||||||
Unrealized (loss) gain on derivatives | 124 | [3] | 112 | [3] | (156) | [3] | 188 | [3] | ||||||||
Realized gains | 521 | [2],[3] | 0 | [2],[3] | 598 | [2],[3] | 226 | [2],[3] | ||||||||
Realized losses | (315) | [2],[3] | (450) | [2],[3] | (315) | [2],[3] | (618) | [2],[3] | ||||||||
Available-for-sale Securities [Member]
|
||||||||||||||||
(Loss) Gain on Investments [Line Items] | ||||||||||||||||
Realized gains | 3,835 | [2],[4] | 1,605 | [2],[4] | 6,157 | [2],[4] | 2,108 | [2],[4] | ||||||||
Realized losses | $ (939) | [2],[4] | $ 0 | [2],[4] | $ (939) | [2],[4] | $ 0 | [2],[4] | ||||||||
|
Debt and Interest Rate Swap (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Debt And Interest Rate Swap [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt consisted of the following:
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Fair Value Measurements (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Classes of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table presents fair value measurements for classes of Federated’s financial assets and liabilities measured at fair value on a recurring basis:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of the beginning and ending fair value measurements of a Level 3 financial liability | The following table presents a reconciliation of the beginning and ending fair value measurements of Federated’s liability for future consideration payments related to these acquisitions for each period presented:
|
Earnings Per Share Attributable to Federated Investors, Inc. Shareholders Narrative (Details)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Earnings Per Share [Abstract] | ||||
Stock option awards excluded from calculation of diluted EPS | 50 | 300 | 50 | 300 |
Variable Interest Entities Consolidated Investment Companies (Details) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Variable Interest Entity [Line Items] | ||
Investments—consolidated investment companies | $ 90,813,000 | $ 51,073,000 |
Less: Liabilities | 1,300,000 | 2,000,000 |
Less: Redeemable noncontrolling interest in subsidiaries | 69,539,000 | 7,268,000 |
Federated's net interest in consolidated investment companies | 22,100,000 | 43,500,000 |
Cash and cash equivalents [Member]
|
||
Variable Interest Entity [Line Items] | ||
Consolidated assets | 1,900,000 | 1,000,000 |
Receivables [Member]
|
||
Variable Interest Entity [Line Items] | ||
Consolidated assets | $ 200,000 | $ 700,000 |
Accumulated Other Comprehensive Loss attributable to Federated Shareholders (Details) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
|||||||
Balance | $ (2,937) | $ (8,612) | ||||||
Other comprehensive (loss) income, before reclassifications and tax | 2,505 | 2,620 | ||||||
Other comprehensive (loss) income before reclassifications, tax total | (1,208) | (1,336) | ||||||
Reclassification adjustments, before tax | (1,884) | 1,626 | ||||||
Reclassification adjustment, tax total | 1,181 | (514) | ||||||
Net current-period other comprehensive income (loss) | 594 | 2,396 | ||||||
Balance | (2,343) | (6,216) | ||||||
Unrealized Losson Interest Rate Swap [Member]
|
||||||||
Balance | (7,071) | [1] | (9,634) | [1] | ||||
Other comprehensive (loss) income, before reclassifications and tax | (9) | [1] | (2,242) | [1] | ||||
Other comprehensive (loss) income before reclassifications, tax total | 3 | [1] | 825 | [1] | ||||
Reclassification adjustments, before tax | 3,334 | [1] | 3,734 | [1] | ||||
Reclassification adjustment, tax total | (1,225) | [1] | (1,374) | [1] | ||||
Net current-period other comprehensive income (loss) | 2,103 | [1] | 943 | [1] | ||||
Balance | (4,968) | [1] | (8,691) | [1] | ||||
Unrealized Gain on Securities Available for Sale [Member]
|
||||||||
Balance | 3,644 | [2] | 325 | [2] | ||||
Other comprehensive (loss) income, before reclassifications and tax | 2,975 | [2] | 5,154 | [2] | ||||
Other comprehensive (loss) income before reclassifications, tax total | (1,371) | [2] | (2,102) | [2] | ||||
Reclassification adjustments, before tax | (5,218) | [2] | (2,108) | [2] | ||||
Reclassification adjustment, tax total | 2,406 | [2] | 860 | [2] | ||||
Net current-period other comprehensive income (loss) | (1,208) | [2] | 1,804 | [2] | ||||
Balance | 2,436 | [2] | 2,129 | [2] | ||||
Unrealized Loss on Foreign Currency Hedge [Member]
|
||||||||
Balance | 0 | 368 | ||||||
Other comprehensive (loss) income, before reclassifications and tax | 0 | (758) | ||||||
Other comprehensive (loss) income before reclassifications, tax total | 0 | 104 | ||||||
Reclassification adjustments, before tax | 0 | 0 | ||||||
Reclassification adjustment, tax total | 0 | 0 | ||||||
Net current-period other comprehensive income (loss) | 0 | (654) | ||||||
Balance | 0 | (286) | ||||||
Foreign CurrencyTranslation Gain (Loss) [Member]
|
||||||||
Balance | 490 | 329 | ||||||
Other comprehensive (loss) income, before reclassifications and tax | (461) | 466 | ||||||
Other comprehensive (loss) income before reclassifications, tax total | 160 | (163) | ||||||
Reclassification adjustments, before tax | 0 | 0 | ||||||
Reclassification adjustment, tax total | 0 | 0 | ||||||
Net current-period other comprehensive income (loss) | (301) | 303 | ||||||
Balance | $ 189 | $ 632 | ||||||
|
Concentration Risk Schedule of Revenue Concentration (Details) (Revenue Concentration by Asset Class [Member])
|
6 Months Ended | |
---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Money market assets [Member]
|
||
Concentration Risk [Line Items] | ||
Concentration Risk, Percentage | 42.00% | 47.00% |
Equity assets [Member]
|
||
Concentration Risk [Line Items] | ||
Concentration Risk, Percentage | 34.00% | 31.00% |
Fixed-income assets [Member]
|
||
Concentration Risk [Line Items] | ||
Concentration Risk, Percentage | 23.00% | 21.00% |
Debt and Interest Rate Swap Debt (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
|||
---|---|---|---|---|---|
Debt And Interest Rate Swap [Abstract] | |||||
Term Loan, Weighted-Average Interest Rate | 3.646% | [1] | |||
Term Loan | $ 297,500 | $ 318,750 | |||
Less: Short-term debt | 42,500 | 42,500 | |||
Long-term debt | $ 255,000 | $ 276,250 | |||
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Investments (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-For-Sale Securities | Available-for-sale securities were as follows:
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Gains and losses on investments | The following table presents gains and losses recognized in Gain on securities, net on the Consolidated Statements of Income in connection with investments and economic derivatives held by certain consolidated investment companies:
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Consolidated Statements of Changes in Equity (USD $)
In Thousands |
Total
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Common Stock [Member]
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Additional Paid-in Capital from Treasury Stock Transactions [Member]
|
Retained Earnings [Member]
|
Treasury Stock [Member]
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Accumulated Other Comprehensive Loss, Net of Tax [Member]
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Total Shareholders' Equity [Member]
|
Nonredeemable Noncontrolling Interest in Subsidiary [Member]
|
Redeemable Noncontrolling Interest in Subsidiaries/Temporary Equity [Member]
|
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Balance at Dec. 31, 2011 | $ 542,677 | $ 253,139 | $ 0 | $ 1,069,913 | $ (772,481) | $ (8,612) | $ 541,959 | $ 718 | $ 506 |
Net Income | 87,443 | 0 | 0 | 82,735 | 0 | 0 | 82,735 | 4,708 | 37 |
Other comprehensive income (loss), net of tax | 2,396 | 0 | 0 | 0 | 0 | 2,396 | 2,396 | 0 | (279) |
Subscriptions—redeemable noncontrolling interest holders | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 14,107 |
Stock award activity | 10,496 | 10,487 | 7 | (7,653) | 7,655 | 0 | 10,496 | 0 | 0 |
Dividends declared/Distributions to noncontrolling interest in subsidiaries | (54,219) | 0 | 0 | (49,901) | 0 | 0 | (49,901) | (4,318) | (12,486) |
Purchase of treasury stock | (2,259) | 0 | 0 | 0 | (2,259) | 0 | (2,259) | 0 | 0 |
Balance at Jun. 30, 2012 | 586,534 | 263,626 | 7 | 1,095,094 | (767,085) | (6,216) | 585,426 | 1,108 | 1,885 |
Balance at Dec. 31, 2012 | 496,676 | 273,886 | 0 | 984,505 | (760,022) | (2,937) | 495,432 | 1,244 | 7,268 |
Net Income | 86,260 | 0 | 0 | 83,402 | 0 | 0 | 83,402 | 2,858 | 289 |
Other comprehensive income (loss), net of tax | 594 | 0 | 0 | 0 | 0 | 594 | 594 | 0 | (36) |
Subscriptions—redeemable noncontrolling interest holders | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 9,839 |
Consolidation | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 54,919 |
Stock award activity | 11,181 | 11,181 | 0 | (11,314) | 11,314 | 0 | 11,181 | 0 | 0 |
Dividends declared/Distributions to noncontrolling interest in subsidiaries | (53,972) | 0 | 0 | (50,192) | 0 | 0 | (50,192) | (3,780) | (2,740) |
Purchase of treasury stock | (5,486) | 0 | 0 | 0 | (5,486) | 0 | (5,486) | 0 | 0 |
Other | (130) | 0 | 0 | (130) | 0 | 0 | (130) | 0 | 0 |
Balance at Jun. 30, 2013 | $ 535,123 | $ 285,067 | $ 0 | $ 1,006,271 | $ (754,194) | $ (2,343) | $ 534,801 | $ 322 | $ 69,539 |
Basis of Presentation
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6 Months Ended |
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Jun. 30, 2013
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Basis of Accounting [Abstract] | |
Basis of Accounting [Text Block] | Basis of Presentation The interim consolidated financial statements of Federated Investors, Inc. and its subsidiaries (collectively, Federated) included herein have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). In the opinion of management, the financial statements reflect all adjustments that are of a normal recurring nature and necessary for a fair presentation of the results for the interim periods presented. In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may differ from such estimates and such differences may be material to the Consolidated Financial Statements. These financial statements should be read in conjunction with Federated’s Annual Report on Form 10-K for the year ended December 31, 2012. Certain items previously reported have been reclassified to conform to the current period’s presentation. |
Concentration Risk
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Risks and Uncertainties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentration Risk | Concentration Risk (a) Revenue Concentration by Asset Class The following table summarizes the percentage of total revenue earned from Federated's asset classes for the periods presented:
The decline in the relative proportion of Federated's revenue attributable to money market assets for the first six months of 2013 as compared to the same period in 2012 was primarily the result of increases in fee waivers for certain money market funds to maintain positive or zero net yields. A significant change in Federated’s money market business or a significant reduction in money market assets due to regulatory changes, changes in the financial markets including significant and rapid increases in interest rates over a short period of time causing certain investors to prefer direct investments in interest-bearing securities, significant deterioration in investor confidence, further persistent declines in or additional prolonged periods of historically low short-term interest rates and resulting fee waivers or other circumstances, could have a material adverse effect on Federated’s results of operations. Current Regulatory Environment - Domestic In January 2010, the Securities and Exchange Commission (SEC) adopted extensive amendments to Rule 2a-7 of the Investment Company Act of 1940 (Rule 2a-7) aimed at enhancing the resiliency of money market funds. These amendments included a series of enhancements including rules that require all money market funds to meet specific portfolio liquidity standards and rules that significantly enhance the public disclosure and regulatory reporting obligations of these funds. In Federated's view, the amendments of 2010 meaningfully and sufficiently strengthened money market funds. Recent experience demonstrated that the amendments of 2010 were effective in meeting heightened requests for redemptions occurring in connection with the U.S. credit rating downgrade in 2011 and the ongoing European debt crisis. Since then, the SEC undertook another project to develop a proposal for additional reforms related to money market funds. On June 5, 2013, the SEC issued such a rule proposal for public comment. The SEC's proposal is lengthy (approximately 700 pages) and includes two principal alternative reforms that could be adopted alone or in combination. One alternative would require a floating net asset value (NAV) for institutional prime money market funds. The other alternative would allow the funds' boards to use liquidity fees and redemption gates when a fund fails to maintain the prescribed liquidity threshold. In addition, in the case of either alternative, the proposal would eliminate the amortized cost method of valuation of securities maturing in more than 60 days while permitting the use of the penny rounding method to maintain a stable share price for money market funds not required to have a floating NAV. The proposal also includes additional diversification and disclosure measures that would apply under either alternative. Although Federated supports redemption gates and liquidity fees in certain contexts, Federated believes the floating NAV, if enacted, would significantly reduce the utility and attractiveness of money market funds for investors who, in Federated's view, value money market funds in their current form as an efficient and effective cash management investment product offering daily liquidity at par. The elimination of the amortized cost method of valuation of securities also could impact the usefulness of money market funds as a cash management product. If ultimately enacted, the floating NAV would be detrimental to Federated's money market fund business and could materially and adversely affect Federated's operations. The elimination of the amortized cost method of valuation of securities, if ultimately enacted, also could be detrimental to Federated's money market fund business and could materially and adversely affect Federated's operations. Management is carefully reviewing the SEC proposal and plans to actively participate both individually and with industry groups in the public comment process. The public comment period currently runs through September 17, 2013, and management does not expect final rules to be adopted prior to 2014 given, among other things, the number of anticipated industry comments and the complexity of the proposed rule amendments. Federated is unable to assess the degree of any potential impact the SEC proposed reforms may have on its business and operations until the final version of any rule amendment are known, as the final amendments could vary significantly from the form in which proposed. Moreover, the SEC's proposal also contemplates that, once the final amendments become effective, there would be staggered compliance dates: (1) if the fluctuating NAV alternative is adopted, an additional two years after the effective date for any reforms relating to that alternative; (2) if the liquidity fee and redemption gate alternative is adopted, an additional one year after the effective date for any reforms relating to that alternative; and (3) any reforms not specifically related to either the fluctuating NAV nor liquidity fee and redemption gate alternatives would have a compliance date of nine months after the final amendments become effective. The Financial Stability Oversight Council (FSOC) may recommend new or heightened regulation for “nonbank financial companies” under Section 120 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). On April 3, 2013, the Board of Governors of the Federal Reserve System (the Governors) issued a final regulation, which became effective on May 6, 2013, that defines the term “predominantly engaged in financial activities” for purposes of identifying “nonbank financial companies” under the Dodd-Frank Act. In the adopting release for the regulation, the Governors stated that it believes “that it is clear that open-end investment companies, such as mutual funds including money market funds, . . . engage in financial activities.” Federated is unable to assess whether, or the degree to which, any of Federated's sponsored investment companies, including money market funds, could ultimately be designated a nonbank financial company by FSOC. In management's view, the issuance of the final regulation is, and any reforms ultimately put into effect would be, detrimental to Federated's money market fund business and could materially and adversely affect Federated's operations. Federated is unable to assess the degree of any potential impact any reforms or other actions by the Governors, FSOC or other governmental entities may have on its business or operations at this time. Current Regulatory Environment - International European-based money market funds face regulatory reform pressure in Europe similar to that faced in the U.S. The European Commission has reportedly prepared a draft reform proposal which could include a floating NAV for money market funds and/or capital requirements. The European Commission has announced its intention to release its proposed money market fund reform proposal on September 4, 2013. The financial transactions tax (FTT) proposal that is being developed by eleven European countries is not expected to be agreed upon in 2013 as the participating countries continue to debate its scope, the allocation of taxes collected and certain other fundamental principles. Once agreed, final terms of the proposed FTT also will be subject to additional government approval prior to enactment. European money market reform and the imposition of the FTT, particularly with its initially proposed broad application, would each be detrimental to Federated's fund business and could materially and adversely affect Federated's operations. Federated is unable to assess the degree of any potential impact that European money market reform proposals or the FTT may have on its business and operations until such proposals are issued or the FTT is enacted. Historically Low Short-Term Interest Rates For several years, the Governors have kept the near-zero federal funds rate unchanged and short-term interest rates continue at all-time low levels. In certain money market funds, the gross yield earned by the fund is not sufficient to cover all of the fund’s operating expenses due to these historically low short-term interest rates. Since the fourth quarter 2008, Federated has voluntarily waived fees in order for certain funds to maintain positive or zero net yields. These fee waivers have been partially offset by related reductions in distribution expense and net income attributable to noncontrolling interests as a result of Federated's mutual understanding and agreement with third-party intermediaries to share the impact of the waivers. These voluntary fee waivers are calculated as a percent of assets under management (AUM or managed assets) in certain money market funds and thus will vary dependent upon the asset levels in such funds. In addition, the level of waivers are dependent on several other factors including, but not limited to, available yields on instruments held by the money market funds, changes in expenses of the money market funds and changes in the mix of money market assets. In any given period, a combination of these factors drives the amount of fee waivers necessary in order for certain funds to maintain positive or zero net yields. As an isolated variable, an increase in yields on instruments held by the money market funds will cause the pre-tax impact of fee waivers to decrease. Conversely, as an isolated variable, an increase in expenses of the money market fund would cause the pre-tax impact of fee waivers to increase. With regard to asset mix, changes in the relative amount of money market fund assets in prime and government money market funds as well as the distribution among certain share classes that vary in pricing structure will impact the level of fee waivers. Generally, prime money market funds waive less than government money market funds as a result of higher gross yields on the underlying investments. As such, as an isolated variable, an increase in the relative proportion of average managed assets invested in prime money market funds as compared to total average money market fund assets should typically result in lower waivers to maintain positive or zero net yields. Conversely, the opposite would also be true. The impact of such fee waivers on various components of Federated's Consolidated Statements of Income was as follows for the periods presented:
The negative pre-tax impact of fee waivers to maintain positive or zero net yields on certain money market funds increased for both the three and six months ended June 30, 2013 as compared to the same periods in 2012 primarily as a result of lower yields on instruments held by the money market funds. Based on recent commentary from the Governors in its June 19, 2013 press release, “a highly accommodative stance of monetary policy will remain appropriate for a considerable time…,” Federated is unable to predict when the Governors will increase its target for the federal funds rate. As such, fee waivers to maintain positive or zero net yields on certain money market funds and the related reduction in distribution expense and net income attributable to noncontrolling interests could continue for the foreseeable future. Assuming asset levels and mix remain constant and based on recent market conditions, fee waivers for the third quarter 2013 may result in a negative pre-tax impact on income of approximately $28 million. See Management's Discussion and Analysis for additional information on management’s expectations regarding fee waivers. While the level of fee waivers are impacted by various factors, increases in short-term interest rates that result in higher yields on securities purchased in money market fund portfolios would reduce the negative pre-tax impact of these waivers. The actual amount of future fee waivers 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 Governors, the U.S. Department of the Treasury, the SEC, FSOC 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. (b) Revenue Concentration by Investment Fund A significant portion of Federated's total revenue for both the three- and six-month periods ended June 30, 2013 was derived from services provided to two sponsored funds, the Federated Kaufmann Fund (11% and 10% for the three- and six-month periods ended June 30, 2013, respectively) and the Federated Prime Obligations Fund (10% for both the three- and six-month periods ended June 30, 2013). A significant and prolonged decline in the AUM in these funds could have a material adverse effect on Federated’s future revenues and, to a lesser extent, net income, due to a related reduction to distribution expenses associated with these funds. A listing of Federated’s risk factors is included in Federated’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012. |
Significant Accounting Policies
|
6 Months Ended |
---|---|
Jun. 30, 2013
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Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies For a listing of Federated’s significant accounting policies, please refer to Federated’s Annual Report on Form 10-K for the year ended December 31, 2012. |
Fair Value Measurements Reconciliation of Fair Value Measurements of Liability for Future Consideration Payments (Details) (Acquisition-related Future Consideration Liabilities [Member], Fair Value, Inputs, Level 3 [Member], USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||
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Jun. 30, 2013
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Jun. 30, 2012
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Jun. 30, 2013
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Jun. 30, 2012
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Acquisition-related Future Consideration Liabilities [Member] | Fair Value, Inputs, Level 3 [Member]
|
||||||||||||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||||||||||
Beginning balance | $ 11,711 | $ 12,404 | $ 11,759 | $ 13,404 | ||||||||
New acquisition adjustment | 0 | [1] | 1,500 | [1] | 0 | [1] | 1,500 | [1] | ||||
Changes in fair value | 1 | [2] | 0 | [2] | (47) | [2] | (1,000) | [2] | ||||
Ending balance | $ 11,712 | $ 13,904 | $ 11,712 | $ 13,904 | ||||||||
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Earnings Per Share Attributable to Federated Investors, Inc. Shareholders (Tables)
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Jun. 30, 2013
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted earnings per share for amounts attributable to Federated Investors, Inc. using the two-class method:
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Concentration Risk Voluntary Fee Waivers (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Concentration Risk [Line Items] | ||||
Revenue | $ (91.9) | $ (70.3) | $ (179.3) | $ (150.7) |
Less: Reduction in Distribution expense | 66.9 | 53.1 | 131.7 | 110.6 |
Operating income | (25.0) | (17.2) | (47.6) | (40.1) |
Less: Reduction in Noncontrolling interest | 1.3 | 0 | 2.1 | 0.6 |
Pre-tax impact | $ (23.7) | $ (17.2) | $ (45.5) | $ (39.5) |
Investments Available-For-Sale Securities (Details) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2013
|
Dec. 31, 2012
|
|
Schedule of Available-for-sale Securities [Line Items] | ||
Cost | $ 116,060 | $ 129,799 |
Gross Unrealized Gains | 5,240 | 6,250 |
Gross Unrealized Losses | (1,259) | (26) |
Available-for-sale equity securities | 120,041 | 136,023 |
Equity Mutual Funds [Member]
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Cost | 35,241 | 44,944 |
Gross Unrealized Gains | 4,764 | 4,814 |
Gross Unrealized Losses | 0 | (5) |
Available-for-sale equity securities | 40,005 | 49,753 |
Fixed-Income Mutual Funds [Member]
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Cost | 80,819 | 84,855 |
Gross Unrealized Gains | 476 | 1,436 |
Gross Unrealized Losses | (1,259) | (21) |
Available-for-sale equity securities | $ 80,036 | $ 86,270 |