Press Release

EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

Federated Investors, Inc. Reports First Quarter 2010 Earnings

•

Equity and fixed-income assets increase $17.2 billion to $65.6 billion since Q1 2009

•

Board declares quarterly dividend of $0.24 per share

(PITTSBURGH, Pa., April 22, 2010) — Federated Investors, Inc. (NYSE: FII), one of the nation’s largest investment managers, today reported earnings per diluted share (EPS) of $0.38 for the quarter ended March 31, 2010 compared to $0.34 for the same quarter last year. Q1 2010 EPS reflects a $0.04 reduction due to the application of the two-class method of computing EPS in connection with the Q1 2010 dividend including the previously announced special dividend. Q1 2009 results included non-cash impairment charges of $20.1 million or $0.13 per diluted share mainly related to intangible assets associated with certain acquisitions. Net income was $42.0 million for Q1 2010 compared to $35.1 million for Q1 2009.

Federated’s board of directors declared a quarterly dividend of $0.24 per share. The dividend is payable on May 14, 2010 to shareholders of record as of May 7, 2010. During Q1 2010, Federated purchased 111,000 shares of Federated class B common stock for $2.7 million.

Federated’s total managed assets were nearly $350 billion at March 31, 2010, down $59.3 billion or 14 percent from $409.2 billion at March 31, 2009 and down $39.4 billion or 10 percent from $389.3 billion reported at Dec. 31, 2009. Average managed assets for Q1 2010 were $366.9 billion, down $44.8 billion or 11 percent from $411.7 billion reported for Q1 2009 and down $21.2 billion or 5 percent from $388.1 billion reported for Q4 2009. As the equity and fixed income markets contracted in 2007 and 2008, Federated’s money market assets increased by $182 billion and as markets recovered in 2009 and Q1 2010, $88 billion flowed out of money market products. Industry money market assets flowed in a similar manner as investors gained more confidence in broader market conditions leading to, among other things, increased interest in bond products.

“Federated continued to see strong flows into our fixed-income mutual funds, with gross sales topping $4.5 billion for the quarter,” said J. Christopher Donahue, president and chief executive officer. “In addition, Federated’s consistent performance over the full market cycle has allowed the company to compete for and win larger institutional fixed-income mandates over the past several quarters.”

Federated’s fixed-income assets were $35.5 billion at March 31, 2010, up $10.5 billion or 42 percent from $25.0 billion at March 31, 2009 and up $1.7 billion or 5 percent from $33.8 billion at Dec. 31, 2009. Federated experienced continued positive flows into its bond funds with $1.2 billion during Q1 2010. Net sales were driven by strong flows into Federated Total Return Bond Fund and the company’s ultrashort and short-duration bond funds.


MEDIA:	MEDIA:	ANALYSTS:
Meghan McAndrew 412-288-8103	J.T. Tuskan 412-288-7895	Ray Hanley 412-288-1920


Federated Reports Q1 2010 Earnings		Page 2 of 8

Federated’s equity assets were $30.1 billion at March 31, 2010, up $6.7 billion or 29 percent from $23.4 billion at March 31, 2009 and up $0.4 billion or 1 percent from $29.7 billion at Dec. 31, 2009. Net sales were led by Federated Prudent Bear Fund and Federated Strategic Value Fund.

Money market assets in both funds and separate accounts were $272.3 billion at March 31, 2010, down $87.8 billion or 24 percent from $360.1 billion at March 31, 2009 and down $41.0 billion or 13 percent from $313.3 billion at Dec. 31, 2009. Money market mutual fund assets were $240.2 billion at March 31, 2010, down $88.6 billion or 27 percent from $328.8 billion at March 31, 2009 and down $41.4 billion or 15 percent from $281.6 billion at Dec. 31, 2009.

Financial Summary

Q1 2010 vs. Q1 2009

For Q1 2010, revenue decreased by $77.6 million or 25 percent from the same quarter last year. The decrease in revenue primarily reflects a $59.8 million increase (to $69.5 million from $9.7 million for Q1 2009) in voluntary fee waivers related to certain money market funds in order to maintain positive or zero net yields. This increase in fee waivers was largely offset by a related decrease in distribution expenses of $47.1 million (to $51.7 million from $4.6 million) such that the net impact on operating income was a decrease of $12.7 million (to $17.8 million from $5.1 million). In addition, revenue decreased due to lower average money market managed assets, partially offset by the impact of increased average equity and fixed-income managed assets.

In Q1 2010, Federated derived 50 percent of its revenue from money market assets, 49 percent from equity and fixed income assets (32 percent from equity assets and 17 percent from fixed-income assets) and 1 percent from other sources.

Operating expenses for Q1 2010 were $161.2 million compared to $250.6 million for Q1 2009. This change was primarily a result of lower distribution expenses due to the aforementioned fee-waiver-related reductions and lower average money market managed assets and the aforementioned impairment charges recorded in Q1 2009.

Q1 2010 vs. Q4 2009

Compared to the prior quarter, revenue decreased by $31.8 million or 12 percent. The decrease in revenue primarily reflects a $12.0 million increase (to $69.5 million from $57.5 million for Q4 2009) in voluntary fee waivers on certain money market funds in order to maintain positive or zero net yields. This increase in fee waivers was largely offset by a related decrease in distribution expenses of $9.1 million (to $51.7 million from $42.6 million) such that the net impact on operating income was a decrease of $2.9 million (to $17.8 million from $14.9 million) compared to the prior quarter. In addition, revenue decreased due to lower average money market managed assets and the impact of two fewer days in Q1 2010 compared to Q4 2009. These decreases were partially offset by the impact of increased average fixed-income and equity managed assets.

Compared to Q4 2009, operating expenses decreased by $17.3 million or 10 percent. Changes from the prior period include a decrease in distribution expenses primarily as a result of the aforementioned fee-waiver-related reductions and lower average money market fund assets.


Federated Reports Q1 2010 Earnings		Page 3 of 8

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 produce positive or zero net yields in Q2 2010 are expected to begin to decrease, but could vary significantly based on market conditions. The amount of these waivers will be determined by a variety of factors including available yields on instruments held by the money market funds, changes in assets within money market funds, actions by the Federal Reserve and the U.S. Department of the Treasury, changes in the mix of money market customer assets, changes in expenses of the money market funds and Federated’s willingness to continue these waivers.

Federated will host an earnings conference call at 9 a.m. Eastern on Friday, April 23, 2010. 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 Us section of FederatedInvestors.com. A replay will be available after 12:30 p.m. and until April 30, 2010 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering codes 286 and 348713.

Federated Investors, Inc. is one of the largest investment managers in the United States, managing nearly $350 billion in assets as of March 31, 2010. With 137 funds and a variety of separately managed account options, Federated provides comprehensive investment management to nearly 5,300 institutions and intermediaries including corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Federated ranks in the top 2 percent of money market fund managers in the industry, the top 6 percent of fixed-income fund managers and the top 8 percent of equity fund managers¹. For more information, visit FederatedInvestors.com.

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1 Strategic Insight, Feb. 28, 2010. 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 advisor.

Certain statements in this press release, such as those related to the level of fee waivers incurred by the company, asset flows and new mandates 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 asset flows and to win new mandates, both of 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 2010 Earnings		Page 4 of 8

Unaudited Condensed Consolidated Statements of Income

(in thousands, except per share data)


	Quarter Ended March 31,						% Change Q1 2009 to Q1 2010		Quarter Ended Dec. 31, 2009			% Change Q4 2009 to Q1 2010
	2010			2009			% Change Q1 2009 to Q1 2010		Quarter Ended Dec. 31, 2009			% Change Q4 2009 to Q1 2010
Revenue
Investment advisory fees, net	$	154,493		$	190,469		(19	)%	$	175,586		(12	)%
Administrative service fees, net		56,249			66,945		(16	)		61,884		(9	)
Other service fees, net		21,254			51,332		(59	)		26,124		(19	)
Other, net		974			1,897		(49	)		1,216		(20	)

Total Revenue		232,970			310,643		(25	)		264,810		(12	)


Operating Expenses
Compensation and related		64,396			66,227		(3	)		62,359		3
General and administrative
Distribution		58,490			122,772		(52	)		76,718		(24	)
Professional service fees		10,079			10,007		1			8,260		22
Office and occupancy		6,296			6,666		(6	)		6,194		2
Systems and communications		5,758			5,962		(3	)		5,599		3
Travel and related		2,429			2,443		(1	)		3,743		(35	)
Advertising and promotional		2,156			2,650		(19	)		2,847		(24	)
Other		4,569			8,264		(45	)		5,274		(13	)

Total general and administrative		89,777			158,764		(43	)		108,635		(17	)
Amortization of deferred sales commissions		3,172			4,873		(35	)		3,526		(10	)
Intangible asset impairment and amortization		3,815			20,730		(82	)		3,909		(2	)

Total Operating Expenses		161,160			250,594		(36	)		178,429		(10	)

Operating Income		71,810			60,049		20			86,381		(17	)


Nonoperating Income (Expenses)
Investment (loss) income, net		26			(402	)	(106	)		814		(97	)
Debt expense––recourse		(620	)		(1,112	)	(44	)		(975	)	(36	)
Debt expense––nonrecourse		(167	)		(432	)	(61	)		(253	)	(34	)
Other, net		(12	)		20		(160	)		41		(129	)

Total Nonoperating Expenses, net		(773	)		(1,926	)	(60	)		(373	)	107

Income before income taxes		71,037			58,123		22			86,008		(17	)
Income tax provision		26,842			20,654		30			31,308		(14	)

Net income including noncontrolling interests in subsidiaries		44,195			37,469		18			54,700		(19	)
Less: Net income attributable to noncontrolling interests in subsidiaries		2,188			2,334		(6	)		2,803		(22	)

Net Income	$	42,007		$	35,135		20	%	$	51,897		(19	)%


Amounts Attributable to Federated
Earnings Per Share¹
Basic and Diluted	$	0.38		$	0.34		12	%	$	0.51		(25	)%

Weighted-average shares outstanding
Basic		99,862			99,927					99,763
Diluted		100,022			100,035					99,938

Dividends declared per share	$	1.50		$	0.24				$	0.24

Unvested share-based payment awards that receive non-forfeitable dividend rights are considered participating securities and are required to be included in the computation of earnings per share under the “two-class method.” Total income available to participating restricted shareholders was $4.3 million, $0.7 million and $1.4 million for the quarterly periods ended March 31, 2010, March 31, 2009 and Dec. 31, 2009, respectively.


Federated Reports Q1 2010 Earnings		Page 5 of 8

Unaudited Condensed Consolidated Balance Sheets

(in thousands)


	March 31, 2010			Dec. 31, 2009
Assets
Cash and other short-term investments	$	75,756		$	121,990
Other current assets		44,286			62,797
Deferred sales commissions, net		13,139			15,318
Intangible assets, net and goodwill		664,056			662,996
Other long-term assets		48,246			49,332

Total Assets	$	845,483		$	912,433

Liabilities and Equity
Current liabilities	$	248,656		$	196,998
Long-term debt—recourse		98,000			105,000
Long-term debt—nonrecourse		11,231			13,556
Other long-term liabilities		51,060			54,151
Equity excluding treasury stock		1,225,850			1,338,117
Treasury stock		(789,314	)		(795,389	)

Total Liabilities and Equity	$	845,483		$	912,433


Federated Reports Q1 2010 Earnings		Page 6 of 8

Changes in Equity and Fixed-Income Fund Managed Assets

(in millions)


	Quarter Ended
	March 31, 2010			Dec. 31, 2009			March 31, 2009
Equity Funds
Beginning assets	$	20,960		$	20,350		$	17,562

Sales		1,484			1,555			1,325
Redemptions		(1,671	)		(1,488	)		(1,591	)

Net (redemptions) sales		(187	)		67			(266	)
Net exchanges		(10	)		(11	)		(75	)
Market gains and losses/reinvestments¹		682			554			(1,319	)

Ending assets	$	21,445		$	20,960		$	15,902


Fixed-Income Funds
Beginning assets	$	28,427		$	26,960		$	19,321

Sales		4,548			4,355			3,151
Redemptions		(3,302	)		(3,095	)		(2,010	)

Net sales		1,246			1,260			1,141
Net exchanges		23			27			42
Market gains/ reinvestments¹		311			180			248

Ending assets	$	30,007		$	28,427		$	20,752

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

Changes in Equity and Fixed-Income Separate Account Assets²

(in millions)


	Quarter Ended
	March 31, 2010			Dec. 31, 2009			March 31, 2009
Equity Separate Accounts
Beginning assets	$	8,713		$	8,774		$	9,099

Net customer flows³		(353	)		(403	)		(561	)
Market gains and losses/reinvestments⁴		261			342			(1,029	)

Ending assets	$	8,621		$	8,713		$	7,509


Fixed-Income Separate Accounts
Beginning assets	$	5,360		$	5,079		$	4,165

Net customer flows³		97			241			7
Market gains and losses/reinvestments⁴		63			40			47

Ending assets	$	5,520		$	5,360		$	4,219

2)	Includes separately managed accounts, institutional accounts and sub-advised funds (both variable annuity and other) and other managed products. Flows for liquidation portfolios have been removed from Changes in Equity and Fixed-Income Separate Account Assets and are detailed on the following page.

3)	For certain accounts, Net customer flows are calculated as the remaining difference between beginning and ending assets after the calculation of Market gains and losses/reinvestments.

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


Federated Reports Q1 2010 Earnings		Page 7 of 8

Changes in Liquidation Portfolios¹

(in millions)


	Quarter Ended
	March 31, 2010			Dec. 31, 2009			March 31, 2009
Liquidation Portfolios
Beginning assets	$	12,596		$	13,073		$	1,505

Net customer flows²		(666	)		(478	)		(802	)
Market gains and losses/reinvestments³		0			1			(3	)

Ending assets	$	11,930		$	12,596		$	700

Liquidation portfolios include portfolios of distressed fixed-income securities and liquidating collateralized debt obligation (CDO) products. In the distressed security category, 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. In the case of liquidating CDOs, the CDO structure has unwound earlier than expected due to events of default related to certain distressed securities in the portfolio. Management fee rates earned from these portfolios are significantly different than those of traditional separate account mandates.

2)	For certain accounts, Net customer flows are calculated as the remaining difference between beginning and ending assets after the calculation of Market gains and losses/reinvestments.

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


Federated Reports Q1 2010 Earnings		Page 8 of 8

(in millions)


MANAGED ASSETS	March 31, 2010		Dec. 31, 2009		Sept. 30, 2009		June 30, 2009		March 31, 2009
By Asset Class
Equity	$	30,066	$	29,673	$	29,124	$	26,211	$	23,411
Fixed-income		35,527		33,787		32,039		28,683		24,971
Money market		272,344		313,260		318,064		346,354		360,127
Liquidation portfolios¹		11,930		12,596		13,073		556		700

Total Managed Assets	$	349,867	$	389,316	$	392,300	$	401,804	$	409,209

By Product Type
Mutual Funds:
Equity	$	21,445	$	20,960	$	20,350	$	17,966	$	15,902
Fixed-income		30,007		28,427		26,960		24,100		20,752
Money market		240,160		281,569		287,634		312,808		328,780

Total Fund Assets	$	291,612	$	330,956	$	334,944	$	354,874	$	365,434

Separate Accounts:
Equity	$	8,621	$	8,713	$	8,774	$	8,245	$	7,509
Fixed-income		5,520		5,360		5,079		4,583		4,219
Money market		32,184		31,691		30,430		33,546		31,347

Total Separate Accounts	$	46,325	$	45,764	$	44,283	$	46,374	$	43,075

Total Liquidation Portfolios¹	$	11,930	$	12,596	$	13,073	$	556	$	700

Total Managed Assets	$	349,867	$	389,316	$	392,300	$	401,804	$	409,209


	Quarter Ended
AVERAGE MANAGED ASSETS	March 31, 2010		Dec. 31, 2009		Sept. 30, 2009		June 30, 2009		March 31, 2009
By Asset Class
Equity	$	29,493	$	29,343	$	27,872	$	25,287	$	24,219
Fixed-income		34,962		33,164		30,376		26,978		24,218
Money market		290,094		312,761		336,530		361,502		362,269
Liquidation portfolios¹		12,320		12,881		13,370		637		975

Total Avg. Assets	$	366,869	$	388,149	$	408,148	$	414,404	$	411,681

By Product Type
Mutual Funds:
Equity	$	20,971	$	20,625	$	19,215	$	17,220	$	16,240
Fixed-income		29,329		27,903		25,499		22,545		20,009
Money market		255,985		283,353		304,959		326,280		330,294

Total Avg. Fund Assets	$	306,285	$	331,881	$	349,673	$	366,045	$	366,543

Separate Accounts:
Equity	$	8,522	$	8,718	$	8,657	$	8,067	$	7,979
Fixed-income		5,633		5,261		4,877		4,433		4,209
Money market		34,109		29,408		31,571		35,222		31,975

Total Avg. Separate Accts.	$	48,264	$	43,387	$	45,105	$	47,722	$	44,163

Total Avg. Liquidation Portfolios¹	$	12,320	$	12,881	$	13,370	$	637	$	975

Total Avg. Managed Assets	$	366,869	$	388,149	$	408,148	$	414,404	$	411,681