Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | ||
Jun. 30, 2014 | Jul. 21, 2014 | Jul. 21, 2014 | |
Class A [Member] | Class B [Member] | ||
Entity Registrant Name | 'FEDERATED INVESTORS INC /PA/ | ' | ' |
Entity Central Index Key | '0001056288 | ' | ' |
Trading Symbol | 'FII | ' | ' |
Document Type | '10-Q | ' | ' |
Document Period End Date | 30-Jun-14 | ' | ' |
Document Fiscal Period Focus | 'Q2 | ' | ' |
Document Fiscal Year Focus | '2014 | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Entity Filer Category | 'Large Accelerated Filer | ' | ' |
Amendment Flag | 'false | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 9,000 | 104,888,526 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current Assets | ' | ' |
Cash and cash equivalents | $61,081 | $104,443 |
Investmentsbaffiliates | 141,895 | 129,413 |
Investmentsbconsolidated investment companies | 55,596 | 53,476 |
Investmentsbother | 5,023 | 4,846 |
Receivables, net of reserve of $37 and $59, respectively | 27,972 | 29,320 |
Prepaid expenses | 12,265 | 12,860 |
Other current assets | 4,891 | 4,960 |
Total current assets | 308,723 | 339,318 |
Long-Term Assets | ' | ' |
Goodwill | 658,837 | 658,743 |
Renewable investment advisory contracts | 68,970 | 68,595 |
Other intangible assets, net of accumulated amortization of $43,505 and $42,453, respectively | 6,954 | 8,007 |
Property and equipment, net of accumulated depreciation of $59,618 and $54,791, respectively | 37,205 | 40,088 |
Other long-term assets | 24,449 | 21,046 |
Total long-term assets | 796,415 | 796,479 |
Total assets | 1,105,138 | 1,135,797 |
Current Liabilities | ' | ' |
Short-term debt | 25,500 | 77,917 |
Accounts payable and accrued expenses | 37,228 | 36,364 |
Accrued compensation and benefits | 41,817 | 70,272 |
Other current liabilities | 14,177 | 29,652 |
Total current liabilities | 118,722 | 214,205 |
Long-Term Liabilities | ' | ' |
Long-term debt | 229,500 | 198,333 |
Long-term deferred tax liability, net | 133,262 | 121,203 |
Other long-term liabilities | 18,820 | 20,195 |
Total long-term liabilities | 381,582 | 339,731 |
Total liabilities | 500,304 | 553,936 |
Commitments and contingencies (Note (12)) | ' | ' |
TEMPORARY EQUITY | ' | ' |
Redeemable noncontrolling interest in subsidiaries | 17,302 | 15,517 |
PERMANENT EQUITY | ' | ' |
Retained earnings | 1,029,014 | 1,022,608 |
Treasury stock, at cost, 24,615,180 and 24,715,473 shares Class B common stock, respectively | -751,004 | -751,239 |
Accumulated other comprehensive income (loss), net of tax | 122 | -1,208 |
Total Federated Investors, Inc. shareholders' equity | 587,249 | 566,119 |
Nonredeemable noncontrolling interest in subsidiary | 283 | 225 |
Total permanent equity | 587,532 | 566,344 |
Total liabilities, temporary equity and permanent equity | 1,105,138 | 1,135,797 |
Class A [Member] | ' | ' |
PERMANENT EQUITY | ' | ' |
Common stock | 189 | 189 |
Class B [Member] | ' | ' |
PERMANENT EQUITY | ' | ' |
Common stock | $308,928 | $295,769 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
Receivables, reserve | $37 | $59 |
Other intangible assets, accumulated amortization | 43,505 | 42,453 |
Property and equipment, accumulated depreciation | $59,618 | $54,791 |
Treasury stock, shares | 24,615,180 | 24,715,473 |
Class A [Member] | ' | ' |
Common stock, no par value | $0 | $0 |
Common stock, shares authorized | 20,000 | 20,000 |
Common stock, shares issued | 9,000 | 9,000 |
Common stock, shares outstanding | 9,000 | 9,000 |
Class B [Member] | ' | ' |
Common stock, no par value | $0 | $0 |
Common stock, shares authorized | 900,000,000 | 900,000,000 |
Common stock, shares issued | 129,505,456 | 129,505,456 |
Consolidated_Statements_of_Inc
Consolidated Statements of Income (USD $) | 3 Months Ended | 6 Months Ended | ||||||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | ||||
Revenue | ' | ' | ' | ' | ||||
Investment advisory fees, netbaffiliates | $114,193 | $126,897 | $226,630 | $259,025 | ||||
Investment advisory fees, netbother | 23,360 | 20,618 | 46,016 | 39,253 | ||||
Administrative service fees, netbaffiliates | 52,738 | 55,253 | 107,465 | 112,081 | ||||
Other service fees, netbaffiliates | 18,070 | 16,747 | 35,612 | 32,934 | ||||
Other service fees, netbother | 3,377 | 3,109 | 6,615 | 6,253 | ||||
Other, net | 1,243 | 1,182 | 2,139 | 2,231 | ||||
Total revenue | 212,981 | 223,806 | 424,477 | 451,777 | ||||
Operating Expenses | ' | ' | ' | ' | ||||
Compensation and related | 70,693 | 67,855 | 142,452 | 134,792 | ||||
Distribution | 49,256 | 53,809 | 97,814 | 112,048 | ||||
Professional service fees | 8,177 | 9,293 | 16,558 | 18,137 | ||||
Office and occupancy | 7,286 | 6,543 | 14,201 | 12,975 | ||||
Systems and communications | 6,225 | 6,087 | 12,629 | 12,710 | ||||
Travel and related | 3,538 | 3,533 | 6,399 | 6,219 | ||||
Advertising and promotional | 2,959 | 3,936 | 6,398 | 7,358 | ||||
Other | 6,005 | 6,722 | 12,539 | 13,311 | ||||
Total operating expenses | 154,139 | 157,778 | 308,990 | 317,550 | ||||
Operating income | 58,842 | 66,028 | 115,487 | 134,227 | ||||
Nonoperating Income (Expenses) | ' | ' | ' | ' | ||||
Investment income, net | 1,802 | 1,708 | 3,502 | 3,243 | ||||
Gain on securities, net | 2,509 | [1] | 2,351 | [1] | 4,422 | [1] | 5,244 | [1] |
Debt expense | -2,849 | -3,137 | -5,662 | -6,390 | ||||
Other, net | -5 | -30 | -9 | -70 | ||||
Total nonoperating income, net | 1,457 | 892 | 2,253 | 2,027 | ||||
Income before income taxes | 60,299 | 66,920 | 117,740 | 136,254 | ||||
Income tax provision | 22,985 | 25,059 | 44,781 | 49,705 | ||||
Net income including the noncontrolling interests in subsidiaries | 37,314 | 41,861 | 72,959 | 86,549 | ||||
Less: Net income attributable to the noncontrolling interests in subsidiaries | 445 | 1,453 | 896 | 3,147 | ||||
Net income | $36,869 | $40,408 | $72,063 | $83,402 | ||||
Amounts attributable to Federated Investors, Inc. | ' | ' | ' | ' | ||||
Earnings per common sharebBasic and Diluted | $0.35 | [2] | $0.39 | [2] | $0.69 | [2] | $0.80 | [2] |
Cash dividends per share | $0.25 | $0.24 | $0.50 | $0.48 | ||||
[1] | Amounts related to consolidated investment companies totaled $0.8 million and $1.1 million for the three and six months ended JuneB 30, 2014, respectively, and $(0.5) million and $(0.1) million for the three and six months ended JuneB 30, 2013, respectively. | |||||||
[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. |
Consolidated_Statements_of_Com
Consolidated Statements of Comprehensive Income (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Net income including the noncontrolling interests in subsidiaries | $37,314 | $41,861 | $72,959 | $86,549 |
Permanent Equity | ' | ' | ' | ' |
Unrealized (loss) gain on interest rate swap | -20 | 11 | -99 | -6 |
Reclassification adjustment related to interest rate swap | 912 | 1,043 | 1,833 | 2,109 |
Unrealized gain (loss) on securities available for sale | 889 | -1,389 | 1,308 | 1,604 |
Reclassification adjustment related to securities available for sale | -942 | -1,302 | -1,874 | -2,812 |
Foreign currency items | 71 | -270 | 162 | -301 |
Temporary Equity | ' | ' | ' | ' |
Foreign currency translation loss | 0 | -1 | 0 | -36 |
Other comprehensive income (loss) | 910 | -1,908 | 1,330 | 558 |
Comprehensive income including the noncontrolling interests in subsidiaries | 38,224 | 39,953 | 74,289 | 87,107 |
Less: Comprehensive income attributable to redeemable noncontrolling interest in subsidiaries | 313 | 250 | 794 | 253 |
Less: Comprehensive income attributable to nonredeemable noncontrolling interest in subsidiary | 132 | 1,202 | 102 | 2,858 |
Comprehensive income attributable to Federated Investors, Inc. | $37,779 | $38,501 | $73,393 | $83,996 |
Consolidated_Statements_of_Cha
Consolidated Statements of Changes in Equity (USD $) | Total | Common Stock [Member] | Retained Earnings [Member] | Treasury Stock [Member] | Accumulated Other Comprehensive (Loss) Income, Net of Tax [Member] | Total Shareholders' Equity [Member] | Nonredeemable Noncontrolling Interest in Subsidiary [Member] | Redeemable Noncontrolling Interest in Subsidiaries/Temporary Equity [Member] |
In Thousands | ||||||||
Balance at Dec. 31, 2012 | $496,676 | $273,886 | $984,505 | ($760,022) | ($2,937) | $495,432 | $1,244 | $7,268 |
Net Income | 86,260 | 0 | 83,402 | 0 | 0 | 83,402 | 2,858 | 289 |
Other comprehensive income (loss), net of tax | 594 | 0 | 0 | 0 | 594 | 594 | 0 | -36 |
Subscriptionsbredeemable noncontrolling interest holders | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 9,839 |
Consolidation | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 54,919 |
Stock award activity | 11,181 | 11,181 | -11,314 | 11,314 | 0 | 11,181 | 0 | 0 |
Dividends declared/Distributions to noncontrolling interest holders | -53,972 | 0 | -50,192 | 0 | 0 | -50,192 | -3,780 | -2,740 |
Purchase of treasury stock | -5,486 | 0 | 0 | -5,486 | 0 | -5,486 | 0 | 0 |
Other | -130 | 0 | -130 | 0 | 0 | -130 | 0 | 0 |
Balance at Jun. 30, 2013 | 535,123 | 285,067 | 1,006,271 | -754,194 | -2,343 | 534,801 | 322 | 69,539 |
Balance at Dec. 31, 2013 | 566,344 | 295,958 | 1,022,608 | -751,239 | -1,208 | 566,119 | 225 | 15,517 |
Net Income | 72,165 | 0 | 72,063 | 0 | 0 | 72,063 | 102 | 794 |
Other comprehensive income (loss), net of tax | 1,330 | 0 | 0 | 0 | 1,330 | 1,330 | 0 | 0 |
Subscriptionsbredeemable noncontrolling interest holders | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 3,217 |
Stock award activity | 13,665 | 13,184 | -13,192 | 13,673 | 0 | 13,665 | 0 | 0 |
Dividends declared/Distributions to noncontrolling interest holders | -52,509 | 0 | -52,465 | 0 | 0 | -52,465 | -44 | -2,226 |
Stock option activity | -25 | -25 | 0 | 0 | 0 | -25 | 0 | 0 |
Purchase of treasury stock | -13,438 | 0 | 0 | -13,438 | 0 | -13,438 | 0 | 0 |
Balance at Jun. 30, 2014 | $587,532 | $309,117 | $1,029,014 | ($751,004) | $122 | $587,249 | $283 | $17,302 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 |
Operating Activities | ' | ' |
Net income including the noncontrolling interests in subsidiaries | $72,959 | $86,549 |
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities | ' | ' |
Amortization of deferred sales commissions | 5,576 | 4,387 |
Depreciation and other amortization | 5,430 | 4,995 |
Share-based compensation expense | 11,847 | 10,758 |
Gain on disposal of assets | -5,142 | -5,579 |
Provision for deferred income taxes | 11,520 | 13,312 |
Fair-value adjustments for contingent liabilities | -579 | -47 |
Net purchases of trading securities | -937 | -4,661 |
Deferred sales commissions paid | -8,051 | -6,495 |
Contingent deferred sales charges received | 887 | 783 |
Other changes in assets and liabilities: | ' | ' |
Decrease (increase) in receivables, net | 1,347 | -7 |
Decrease (increase) in prepaid expenses and other assets | 311 | -1,882 |
Decrease in accounts payable and accrued expenses | -30,480 | -36,019 |
Increase in other liabilities | 550 | 1,385 |
Net cash provided by operating activities | 65,238 | 67,479 |
Investing Activities | ' | ' |
Purchases of securities available for sale | -52,080 | -21,756 |
Cash paid for business acquisitions | -9,697 | -3,365 |
Proceeds from redemptions of securities avaliable for sale | 41,693 | 55,810 |
Cash paid for property and equipment | -2,357 | -5,986 |
Net cash (used) provided by investing activities | -22,441 | 24,703 |
Financing Activities | ' | ' |
Dividends paid | -52,466 | -50,208 |
Purchases of treasury stock | -14,629 | -4,667 |
Distributions to noncontrolling interest in subsidiaries | -2,270 | -6,520 |
Contributions from noncontrolling interest in subsidiaries | 3,217 | 9,839 |
Proceeds from shareholders for share-based compensation | 480 | 0 |
Excess tax benefits from share-based compensation | 1,368 | 780 |
Payments on debt | -21,250 | -21,250 |
Other financing activities | -609 | -347 |
Net cash used by financing activities | -86,159 | -72,373 |
Net (decrease) increase in cash and cash equivalents | -43,362 | 19,809 |
Cash and cash equivalents, beginning of period | 104,443 | 67,585 |
Cash and cash equivalents, end of period | $61,081 | $87,394 |
Basis_of_Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2014 | |
Basis of Accounting [Abstract] | ' |
Basis of Accounting | ' |
Basis of Presentation | |
The interim Consolidated Financial Statements of Federated Investors, Inc. and its consolidated 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 those 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, 2013. Certain items previously reported have been reclassified to conform to the current period’s presentation, including, but not limited to, the combination of an immaterial line item into Operating Expenses - Other on the Consolidated Statements of Income and the combination of certain items included on the Consolidated Statements of Cash Flows. |
Significant_Accounting_Policie
Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2014 | |
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, 2013. |
Recent_Accounting_Pronouncemen
Recent Accounting Pronouncements | 6 Months Ended |
Jun. 30, 2014 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | ' |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements | |
Effective January 1, 2014, Federated adopted the Financial Accounting Standards Board (FASB) accounting standards update (ASU) 2013-08, Financial Services-Investment Companies (Topic 946) 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 adoption of the update did not have a material impact on Federated's Consolidated Financial Statements. | |
On May 28, 2014, the FASB issued as final, ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which supersedes virtually all existing revenue recognition guidance under GAAP. The update's core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016 and prohibits early adoption. The update allows for the use of either the retrospective or modified retrospective approach of adoption. Management is currently evaluating the available transition methods and the potential impact of adoption on Federated's Consolidated Financial Statements. |
Concentration_Risk
Concentration Risk | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
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: | |||||||||||||||||
Six Months Ended | |||||||||||||||||
June 30, | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Money market assets | 33 | % | 42 | % | |||||||||||||
Equity assets | 43 | % | 34 | % | |||||||||||||
Fixed-income assets | 23 | % | 23 | % | |||||||||||||
The decline in the relative proportion of Federated's revenue attributable to money market assets for the first six months of 2014 as compared to the same period in 2013 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 business, results of operations, financial condition and/or cash flows. | |||||||||||||||||
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) to enhance the resiliency of money market funds. These amendments included 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 2010 and 2011, Federated dedicated internal resources to comply with these amendments including efforts to enhance our information systems and improve related reporting capabilities. These efforts were internally sourced and not material to Federated's results of operations, financial condition or cash flows for those years. In Federated's view, the amendments of 2010 meaningfully and sufficiently strengthened money market funds as demonstrated in meeting heightened requests for redemptions occurring in connection with the U.S. debt ceiling debate and subsequent downgrade of the country's credit rating in 2011, the European debt crisis in 2011/2012 and its ongoing fallout as well as the U.S. debt ceiling debate in 2013. | |||||||||||||||||
On July 23, 2014, by a three to two vote of the SEC Commissioners, the SEC adopted lengthy final rules (through an over 860 page release) on money market fund reform (Final Rules). The Final Rules were adopted after a lengthy and voluminous public comment process, which one SEC Commissioner called, in remarks made at the Sunshine Act Meeting at which the SEC Commissioners adopted the Final Rules, “perhaps one of the most flawed and controversial rulemaking processes the [SEC] has undertaken.” The Final Rules will impose additional money market fund reforms that require any institutional prime money market fund and any institutional municipal (or tax-exempt) money market fund to maintain a floating net asset value (NAV). The Final Rules will permit a money market fund, or, in certain circumstances, require a money market fund (other than a government money market fund), to impose liquidity fees on all redemptions, and permit a money market fund to limit (or gate) redemptions for up to 10 business days in any 90-day period. The Final Rules also will impose certain current event disclosure requirements on a new Form N-CR and certain other enhanced disclosure and reporting (including on Form N-MFP and Form PF), diversification, and stress-testing requirements on a money market fund. The Final Rules will become effective 60 days after the date on which the Final Rules are published in the Federal Register (Publication Date). The mandatory compliance dates for the Final Rules are: (1) two years after the Publication Date for the floating NAV requirements, liquidity fees and gates requirements and related disclosure requirements; (2) nine months after the Publication Date for the current event disclosure requirements on new Form N-CR and related website disclosure requirements; and (3) 18 months after the Publication Date for other requirements not related to either the floating NAV or fees or gates, including the enhanced disclosure and reporting on Form N-MFP and Form PF, diversification and stress-testing requirements, and certain clarifying amendments to relevant SEC rules. | |||||||||||||||||
In response to the SEC’s adoption of the Final Rules, the U.S. Treasury Department (Treasury Department) and the Internal Revenue Service (IRS) also issued on July 23, 2014 proposed rules, which money market fund shareholders may immediately rely upon, aimed at relieving tax burdens for shareholders that frequently purchase or redeem shares of a money market fund (such as through a broker-dealer or bank “sweep arrangement”) and that may experience a high volume of small capital gains and losses if they invest in an institutional prime money market fund or an institutional municipal (or tax-exempt) money market fund with a floating NAV. The IRS also issued on July 23, 2014 final guidance in the form of Revenue Procedure 2014-45 addressing applicable wash sale rules and describing the circumstances in which the IRS will not treat a redemption of shares in a money market fund as part of a wash sale. | |||||||||||||||||
Floating NAV Requirement | |||||||||||||||||
The Final Rules will require any institutional prime money market fund and any institutional municipal (or tax-exempt) money market fund to value its holdings utilizing market-based valuations to maintain a floating NAV rounded to the nearest 1/100th of one percent, or the fourth decimal place, rather than use the amortized cost method of valuation of securities maturing in more than 60 days to seek to maintain a stable NAV. A government money market fund or a retail money market fund will be allowed to continue using the amortized cost method (and/or the penny rounding method of pricing) to seek to maintain a stable NAV. Under the Final Rules, a “government money market fund” will include any money market fund that invests 99.5% (rather than 80%) or more of its total assets in cash, government securities and/or repurchase agreements that are collateralized solely by government securities or cash. A “retail money market fund” will include any money market fund that has policies and procedures reasonably designed to limit all beneficial owners of the money market fund to natural persons. | |||||||||||||||||
Liquidity Fee and Gate Requirements | |||||||||||||||||
The Final Rules also will permit the board of directors/trustees of a money market fund to impose liquidity fees of up to two percent on all redemptions if the money market fund’s level of weekly liquid assets (which generally include cash, U.S. Treasury securities, certain other government securities with remaining maturities of 60 days or less, and securities that convert to cash within one week) falls below 30% of its total assets and the board determines that such liquidity fees are in the best interests of the money market fund. Under the Final Rules, if a money market fund’s level of weekly liquid assets falls below 10%, the money market fund (other than a government money market fund) would be required to impose a liquidity fee of one percent on all redemptions, unless the board of directors/trustees of the money market fund determines that such a liquidity fee is not in the best interests of the money market fund or that a lower or higher (up to two percent) liquidity fee on all redemptions is in the best interests of the money market fund. | |||||||||||||||||
Under the Final Rules, the board of directors/trustees of a money market fund also will have the discretion to temporarily suspend (or gate) redemptions for up to 10 days if a money market fund’s level of weekly liquid assets falls below 30% and the board determines that imposing a gate is in the best interests of the money market fund. A money market fund will not be able to impose a gate on redemptions for more than 10 business days in any 90-day period. | |||||||||||||||||
A government money market fund will not be subject to the liquidity fee and redemption gate requirements adopted under the Final Rules, but may voluntarily opt into them, if previously disclosed to the government money market fund’s investors. | |||||||||||||||||
Current Event Disclosure Requirements and Other Requirements | |||||||||||||||||
Under the Final Rules, a money market fund will be required to disclose certain current events on a new Form N-CR, including (A) the imposition or removal of liquidity fees or gates and the primary considerations or factors taken into account by the board of directors/trustees of the money market fund in making its decision related to fees and gates, (B) portfolio security defaults, (C) sponsor or affiliate support of the money market fund, including the amount of support and a brief description of the reason for the support, and (D) for a government money market fund or a retail money market fund, a reduction in the money market fund’s market-based (or shadow) NAV per share below $0.9975. | |||||||||||||||||
In addition to certain clarifying amendments and other changes to SEC rules implemented by the Final Rules, the Final Rules also will impose certain other enhanced disclosure and reporting, diversification, and stress-testing requirements on a money market fund. The other enhanced disclosure and reporting requirements appear to be aimed at further increasing transparency. Under the Final Rules, in addition to the current event disclosures that will be required on new Form N-CR, a money market fund will be required to disclose in its statement of additional information any occasion during the last 10 years (excluding occasions that occurred before the compliance date) in which the money market fund received sponsor or affiliate support. On a daily basis, a money market fund also will be required to disclose on its website its levels of daily liquid assets and weekly liquid assets, net shareholder inflows or outflows, market-based (or shadow) NAV per share, impositions of liquidity fees or gates, and any use of sponsor or affiliate support. The Final Rules also amend Form N-MFP, a form required under SEC rules to be filed by a money market fund with the SEC within five business days after the end of each month, to require reporting of certain additional information relating to assessing money market fund risk and will make the information filed on Form N-MFP public immediately upon filing (rather than 60 days after filing). The Final Rules also require an adviser of a private “liquidity fund” to report certain additional information regarding this type of private fund on Form PF. | |||||||||||||||||
Regarding diversification, the Final Rules will require a money market fund to treat certain affiliated entities as single issuers for purposes of determining whether the money market fund is complying with the five percent issuer diversification requirement under Rule 2a-7, which, as revised, will generally restrict a money market fund from investing more than five percent of its assets in any one issuer or group of affiliated issuers. Rule 2a-7 currently provides for a "25% basket,” under which up to 25% of the value of securities held in a money market fund’s portfolio may be subject to guarantees or demand features from a single institution. The Final Rules will require that a money market fund (other than a municipal or tax-exempt money market fund) meet a 10% diversification limit for guarantors and demand feature providers. For a municipal or tax-exempt money market fund, no more than 15% of the value of its securities will be able to be held in securities subject to guarantees or demand features from a single institution. Under the Final Rules, a money market fund also will be required to treat the sponsor of an asset-backed security as a guarantor subject to the diversification limit applicable to guarantees and demand features, unless the board of directors/trustees of the money market fund (or its delegate) determines that the money market fund is not relying on the sponsor’s financial strength or its ability or willingness to provide liquidity, credit or other support to determine the asset-backed security’s quality or liquidity. | |||||||||||||||||
Regarding stress testing, the Final Rules will further enhance the stress testing, and related board reporting, requirements adopted by the SEC in 2010. For example, the Final Rules will require a money market fund to test its ability to maintain weekly liquid assets of at least 10% and to minimize principal volatility in response to certain specified hypothetical stress scenarios. | |||||||||||||||||
Related SEC Proposals | |||||||||||||||||
Along with the Final Rules, the SEC also issued on July 23, 2014, a Notice of Proposed Rule 10b-10 Exemptive Relief, in which the SEC solicited comment on a proposal to exempt broker-dealers from the immediate confirmation delivery requirements under the Securities Exchange Act of 1934 (Exchange Act) for transactions effected in shares of floating NAV institutional prime money market funds and institutional municipal (or tax-exempt) money market funds. The SEC also issued separate proposals re-proposing amendments to Rule 2a-7 and Form N-MFP to remove any references to or requirement of reliance on credit ratings and to establish alternative standards of creditworthiness in place of credit ratings and proposing amendments to Rule 2a-7 to eliminate an exclusion from the issuer diversification provisions for securities with certain guarantees. | |||||||||||||||||
Treasury Department and IRS Tax Guidance | |||||||||||||||||
Under the proposed rules issued by the Treasury Department and IRS on July 23, 2014, shareholders that frequently purchase or redeem shares of a money market fund (such as through a broker-dealer or bank “sweep arrangement”) and that may experience a high volume of small capital gains and losses if they invest in an institutional prime money market fund or an institutional municipal (or tax-exempt) money market fund with a floating NAV may adopt a simplified, aggregate method of tax accounting for these gains and losses. Money market fund shareholders that invest in floating NAV money market funds can immediately rely on these proposed rules. Under the proposed rules, floating NAV money market fund shareholders can measure net gain or net loss without transaction-by-transaction calculations and determine their net gain or loss using certain information provided to them by the money market fund for non-tax purposes. The net gain (or loss) can be determined as the increase (or decrease) in the value of the shareholder’s shares during a period (such as the tax year), minus the net investment in those holdings (purchases minus sales) during the period. Under the proposed rules, floating NAV money market funds also receive the same waiver of gross-proceeds reporting, basis reporting and holding-period reporting that now applies to stable-value money market funds. | |||||||||||||||||
Under Revenue Procedure 2014-45, which also was issued on July 23, 2014, the IRS describes the circumstances in which the IRS will not treat a redemption of shares in a money market fund as part of a wash sale. (A wash sale generally occurs when a shareholder sells a security at a loss, and within 30 days before or after the sale, acquires a substantially identical security.) If shareholders of floating NAV money market funds choose not to adopt the simplified, aggregate method of tax accounting described above, Revenue Procedure 2014-45 provides relief from the wash sale rules for any losses on shares of a floating NAV money market fund. In addition, this guidance clarifies that the wash sale rules do not affect shareholders who do adopt the simplified, aggregate method of tax accounting described above. | |||||||||||||||||
The Final Rules and related guidance issued by the Treasury Department and IRS, on July 23, 2014, represent the culmination of a lengthy and voluminous public comment process on the SEC’s prior proposed rule on money market fund reforms. Since January 2010, the SEC worked to develop a proposal for additional reforms related to money market funds. On June 5, 2013, the SEC issued its rule proposal for public comment. The SEC's proposal was lengthy (approximately 700 pages) and included two principal alternative reforms that could be adopted alone or in combination. Similar to the Final Rules adopted by the SEC, one alternative was a floating NAV for institutional prime money market funds and other money market funds (such as, for example, municipal money market funds) other than government and retail money market funds, and the other alternative involved use of liquidity fees and redemption gates when a fund failed to maintain a prescribed liquidity threshold. Unlike the Final Rules adopted by the SEC, in the case of either alternative, the proposal would have eliminated 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 included additional diversification and disclosure measures that would apply under either alternative. | |||||||||||||||||
When the SEC's proposal was issued in June 2013, management reviewed the SEC proposal and actively participated in the public comment process both individually through the filing of 18 comment letters and with industry groups. While the public comment period formally closed on September 17, 2013, comments on the SEC's proposal continued to be submitted, including additional comment letters submitted on behalf of Federated. Comment letters are available on the SEC's website at http://www.sec.gov/comments/s7-03-13/s70313.shtml. | |||||||||||||||||
On March 24, 2014, the SEC published a series of four analyses conducted by the SEC's Division of Economic and Risk Analysis, which the SEC staff believed "have the potential to be informative for evaluating final rule amendments for the regulation of money market funds." The analyses examined (1) the spread between same-day buy and sell transaction prices for certain corporate bonds from January 2, 2008 to January 31, 2009, (2) the extent of government money market fund exposure to non-government securities, (3) academic literature reviewing recent evidence on the availability of "safe assets" in the U.S. and global economies and (4) the extent various types of money market funds are holding in their portfolios guarantees and demand features from a single institution. The SEC staff requested comments on this supplemental information be submitted to the comment file to the SEC’s June 5, 2013 money market fund reform proposal (discussed above) by April 23, 2014. Federated filed three comment letters with respect to this supplemental information published by the Division of Economic and Risk Analysis. One comment letter addressed the analysis regarding the spread between same-day buy and sell transaction prices for certain money market eligible securities from January 2, 2008 to January 31, 2009. In that comment letter, Federated expressed its view that, while Federated generally agreed with the SEC staff's methodology for considering the cost of liquidity in evaluating an appropriate liquidity fee, the staff’s use of Trade Reporting and Compliance Engine (TRACE) bond data as the basis for spread analysis led the staff to find significantly larger spreads than it would have found had it based its analysis on the short-term instruments in which money market funds actually invest. Management believed, and continues to believe, that the staff’s analysis overstated the spreads for Rule 2a-7 eligible securities during crisis periods by several multiples of actual spreads, and thus could have led the SEC to adopt a far larger-than-necessary liquidity fee requirement as part of its Final Rules. Another comment letter addressed the analysis regarding municipal money market funds' exposure to parents of guarantors. In that comment letter, Federated expressed its view that it did not believe that the SEC staff’s analysis supported the conclusion that elimination of the "25% basket" in Rule 2a-7 would not increase the credit risks of municipal and other money market funds. Management did not believe, and continues not to believe, that there is a basis for concluding that elimination of the 25% basket would protect investors, or promote efficiency, competition, and capital formation. The third comment letter addressed the SEC staff’s analyses regarding the demand and supply of safe assets in the economy and government money market fund exposure to non-government securities. In that comment letter, Federated expressed its reservations about the data and analysis underlying both analyses on the basis that neither analysis appeared focused on the market sector that the SEC's June 5, 2013 money market fund reform proposal would have most directly affected, namely, the market for short-term U.S. government securities and repurchase agreements for U.S. government securities (the government money market). Management believed, and continues to believe, that any money market reform proposal that would have the effect of shifting large amounts of capital into the government money market would certainly create problems for investors who are required to invest in government securities or who cannot afford the risks associated with other classes of "safe assets" included in the SEC staff's analysis (such as gold, investment grade bonds, securitized assets and foreign sovereign obligations). | |||||||||||||||||
In April, 2014, the Federal Reserve Bank of New York (FRBNY) published a paper entitled “Gates, Fees and Preemptive Runs” in which the FRBNY purported to show that the possibility of suspending convertibility, including the imposition of gates or fees for redemptions, can create runs that would not otherwise occur. As reflected in Federated’s comment letter, dated April 25, 2014, management believed, and continues to believe, that publicly available data shows that roughly 91% of large bank deposits are subject to the banks' ability to refuse early withdrawal requests from time deposits, defer for seven days requests for withdrawals from savings accounts, and impose early withdrawal fees on time deposits. Management believed, and continues to believe, therefore, that the FRBNY’s paper was based on a flawed assumption that banks are currently prohibited from imposing gates or fees on withdrawals from bank deposits and that, as evidenced by the relative stability of these assets, it was erroneous to claim that gates and fees cause assets to be prone to runs. To the contrary, management believed, and continues to believe, that gates and fees will achieve the SEC’s stated money market fund reform goals while promoting efficiency, competition and capital formation. | |||||||||||||||||
In a final comment letter on the SEC’s June 5, 2013 proposal submitted on July 16, 2014, Federated conveyed its views to the SEC that a combination of a floating NAV for institutional prime money market funds and liquidity fees and gates would be an onerous regulatory alternative that would significantly reduce the utility of money market funds for a large segment of investors, particularly when less burdensome alternatives exist that would achieve the SEC's stated money market reform goals while enhancing transparency for investors. In that comment letter, Federated listed and examined the less burdensome alternatives that management believed, and continues to believe, exist for achieving the SEC's goals, including, among other alternatives, allowing for the imposition of gates and fees (without requiring a floating NAV) and enhanced disclosures. | |||||||||||||||||
Federated supported throughout the public comment process, and continues to support, liquidity fees and redemption gates in certain contexts. Federated believed, and continues to believe, the floating NAV will 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. Management believes the Final Rules appropriately continue to allow a government money market fund or a retail money market fund to use the amortized cost method to seek to maintain a stable NAV. However, management believes that the Final Rules’ combination of a floating NAV for institutional prime money market funds and institutional municipal (or tax-exempt) money market funds with liquidity fees and gates could be an onerous regulatory alternative that could significantly reduce the utility of money market funds for a large segment of investors, with further adverse consequences for issuers who rely upon money market funds as an important alternative to bank financing, particularly when less burdensome alternatives exist that would achieve the SEC's stated money market reform goals while enhancing transparency for investors. | |||||||||||||||||
Management believes that the floating NAV will be detrimental to Federated's money market fund business and could materially and adversely affect Federated’s business, results of operations, financial condition and/or cash flows. Given the recent adoption of the SEC’s Final Rules, the extended compliance dates under the Final Rules, and the recent issuance of Treasury Department and IRS guidance on related tax reforms, Federated is unable at this time to assess the degree of any potential impact the SEC's Final Rules may have on its business, results of operations, financial condition and/or cash flows until the Final Rules, and related Treasury Department and IRS guidance, are fully reviewed and analyzed. In connection with the review and analysis of the Final Rules, the related tax guidance, and their impact on Federated's business, results of operations, financial condition and/or cash flows, Federated will consider its legislative, regulatory, legal, product structure and development, business and certain other options that may be available to seek to minimize the potential impact of any adverse consequences of the Final Rules. Federated also is unable to assess at this time whether, or the degree to which, any potential options ultimately may be pursued or be successful. | |||||||||||||||||
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 they believe "that it is clear that open-end investment companies, such as mutual funds including money market funds, ... engage in financial activities" for the purpose of asserting regulatory jurisdiction. Management respectfully disagrees with this position. Management believes that (1) the final regulation is inconsistent with the clear language and intent of the Dodd-Frank Act, (2) the conclusion that mutual funds, including money market mutual funds, fall within the scope of "financial activities" is without a valid statutory basis and (3) Congress intended the scope of "financial activities" for Dodd-Frank Act regulation to be strictly limited to specific lines of business previously defined under the Bank Holding Company Act, which historically have not been viewed as including mutual funds as a specific line of business. | |||||||||||||||||
In a Congressional Appropriations Committee conference report that accompanied the Consolidated Appropriations Act, 2014, which was signed into law by President Obama on January 17, 2014, Congress instructed the SEC to undertake a “rigorous economic analysis” before promulgating its final money market fund proposal, and indicated that the “Committee expects that the final rules will take into account the substantive concerns of stakeholders who use these products for short-term financing needs.” In the conference report, Congress also expressed that “[i]mpairing or restricting the use of money market funds could potentially result in a decrease in the ability of these products to provide liquidity, potentially resulting in hundreds of market participants issuing longer-term debt, significantly increasing their funding costs, slowing expansion rates, and depressing jobs and economic growth.” In a House of Representatives’ Appropriations Committee conference report accompanying a House appropriations bill, the Financial Services and General Government Appropriations Bill, 2015, the House Appropriations Committee indicated that the “Committee remains concerned with the [SEC’s] proposal to further regulate money market funds” and reiterated many of the above statements from the Congressional Appropriations Committee conference report. In addition to underscoring the importance to the capital markets of money market funds as currently structured, management believes that these conference reports reflect Congress’ view that the regulation of money market funds is within the purview of the SEC, not FSOC. | |||||||||||||||||
On November 1, 2013, Federated also responded to the SEC’s request for comment on a September 2013 report of the U.S. Department of the Treasury's (Treasury Department) Office of Financial Research entitled “Asset Management and Financial Stability” (the OFR Report), which was prepared at the request of FSOC. Federated believes that the OFR Report is lacking in both substance and depth of analysis in its effort to justify FSOC’s and the Governors' role in fundamentally changing the structure and operation of investment managers, investors and the markets. While the SEC requested comments to be submitted by November 1, 2013, comments have continued to be submitted. Comment letters are available on the SEC's website at http://www.sec.gov/comments/am-1/am-1.shtml. | |||||||||||||||||
Federated is unable to assess whether, or the degree to which, any of the Federated Funds, including money market funds, could ultimately be designated a systematically important nonbank financial company by FSOC. In management's view, the issuance of final regulations 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 business, results of operations, financial condition and/or cash flows. 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, results of operations, financial condition and/or cash flows at this time. | |||||||||||||||||
International | |||||||||||||||||
European-based money market funds face regulatory reform pressure in Europe similar to that faced in the U.S. The European Commission released its money market fund reform proposal on September 4, 2013. The proposal would have permitted either floating NAV money market funds or constant NAV money market funds subject to capital requirements. Under the proposal, a constant NAV money market fund generally would have had to either build a capital buffer of 3% or convert to a floating NAV money market fund. On March 10, 2014, the European Parliament's economic and monetary affairs committee postponed a vote on the proposal until the next European Parliament, which will convene after parliamentary elections. Any proposal must be approved by the European Parliament and European Council and any final regulation could vary materially from that of any proposal. Management does not anticipate agreement on a final regulation before late fourth quarter 2014. | |||||||||||||||||
A proposal to implement a European financial transactions tax (FTT) continues to be developed. Notwithstanding challenges to its legality, discussions have continued regarding the scope, application and allocation of the FTT. On May 6, 2014, a Declaration was signed by 10 of the 11 original participating European countries confirming their support for the FTT, clarifying that the FTT would be introduced on a step-by-step basis, with the progressive implementation focusing first on the taxation of equities and certain derivatives, noting that individual countries could impose the FTT on additional products not included in the initial progressive implementation (for example, in order to maintain existing taxes) at their discretion and indicating that the initial phase of the FTT should be implemented by no later than January 1, 2016. Management does not expect the FTT to be effective until 2015 or early 2016. | |||||||||||||||||
European money market reform and the imposition of the FTT, particularly if enacted with broad application, would each be detrimental to Federated's fund business and could materially and adversely affect Federated’s business, results of operations, financial condition and/or cash flows. 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, results of operations, financial condition and/or cash flows until such proposals are finalized and approved or the FTT is enacted. | |||||||||||||||||
On January 8, 2014, the Financial Stability Board (FSB) also published for comment as a consultative document “Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions” (Consultation). The FSB is an international organization, of which the Governors, the SEC and the Treasury Department are members, that was established to coordinate, at the international level, the work of national authorities and bodies in developing and promoting the implementation of regulatory policies. The Consultation sets forth proposed methodologies for identifying systemically important non-bank, non-insurance company financial institutions, including, among others, “market intermediaries” which the Consultation appears to define as including investment advisers, brokers and certain other intermediaries, and “investment funds,” which the Consultation appears to define as including money market funds, other open-end or closed-end mutual funds, and hedge funds and other private funds. The proposed methodologies include consideration of size (U.S. $100 billion is a proposed materiality threshold), exposures, complexity, interconnectedness, leverage and other factors. The Consultation specifically notes that, in addition to individual funds, it may also be necessary to consider families of funds following the same or similar investment strategies. The deadline for the formal comment period on the Consultation ended on April 7, 2014. On April 4, 2014, Federated filed a comment letter addressing various aspects of the Consultation. Management generally agrees with the Consultation’s approach of developing specific, measurable, published criteria for designating systemically important non-bank, non-insurance company financial institutions, and believes that (1) the proposed criteria or methodologies, to the extent applied to the investment fund sector, should focus on individual funds and not investment managers or fund families, and that a size criteria for investment funds that is based on net assets under management at a fixed amount that is not tied to the overall size of the investment market in which the fund participates is flawed, and (2) key aspects of investment funds, particularly money market funds, such as lack of leverage and their substitutability, simplicity and transparency, and applicable legal requirements and risk mitigation practices, weigh strongly against listing them as systemically important non-bank, non-insurance company financial institutions. Federated concluded in its comment letter that it does not believe that money market funds should be designated as systemically important non-bank, non-insurance company financial institutions under the Consultation. Federated is unable to assess whether, or the degree to which Federated, any of its investment management subsidiaries or any of the Federated Funds, including money market funds, could ultimately be determined to be a systemically important non-bank, non-insurance company financial institution. | |||||||||||||||||
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 continued 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 (either through fee waivers or reimbursements or assumptions of expenses) in order for certain money market 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 depending upon the asset levels in such funds. In addition, the level of waivers are dependent on several other factors including, but not limited to, yields on instruments available for purchase 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 funds 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: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenue | $ | (102.3 | ) | $ | (91.9 | ) | $ | (209.0 | ) | $ | (179.3 | ) | |||||
Less: Reduction in Distribution expense | 70.2 | 66.9 | 144.5 | 131.7 | |||||||||||||
Operating income | (32.1 | ) | (25.0 | ) | (64.5 | ) | (47.6 | ) | |||||||||
Less: Reduction in Noncontrolling interest | 2.5 | 1.3 | 5.2 | 2.1 | |||||||||||||
Pre-tax impact | $ | (29.6 | ) | $ | (23.7 | ) | $ | (59.3 | ) | $ | (45.5 | ) | |||||
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-month periods ended June 30, 2014 as compared to the same periods in 2013 primarily as a result of lower yields on instruments held by the money market funds. | |||||||||||||||||
Based on recent commentary from the Governors in a June 18, 2014 press release, "a highly accommodative stance of monetary policy remains appropriate," Federated is unable to predict when the Governors will increase their 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 2014 may result in a negative pre-tax impact on income of approximately $31 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 and the resulting negative impact of these 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 Treasury Department, the SEC, FSOC and other governmental entities, changes in expenses of the money market funds, changes in the mix of money market customer assets, changes in the distribution fee arrangements with third parties, Federated's willingness to continue the fee waivers and changes in the extent to which the impact of the waivers is shared by third parties. | |||||||||||||||||
(b) Revenue Concentration by Investment Fund | |||||||||||||||||
A significant portion of Federated's total revenue for the three- and six-month periods ended June 30, 2014 was derived from services provided to a sponsored fund, the Federated Kaufmann Fund (11% for both the three- and six-month periods ended June 30, 2014, respectively). A significant and prolonged decline in the AUM in this fund 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 this fund. | |||||||||||||||||
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, 2013. |
Variable_Interest_Entities
Variable Interest Entities | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Variable Interest Entities [Abstract] | ' | ||||||||
Variable Interest Entities | ' | ||||||||
Variable Interest Entities | |||||||||
Federated is involved with various entities in the normal course of business that may be deemed to be voting rights entities (VREs) or variable interest entities (VIEs). In accordance with Federated’s consolidation accounting policy, Federated first determines whether the entity being evaluated is a VRE or a VIE. Once this determination is made, Federated proceeds with its evaluation of whether or not to consolidate the entity. The disclosures below represent the results of such evaluations pertaining to June 30, 2014 and December 31, 2013. | |||||||||
(a) Consolidated Variable Interest Entities | |||||||||
From time to time, Federated invests in investment companies that meet the definition of a VIE for general corporate investment purposes or, in the case of newly launched products, in order to provide investable cash to establish a performance history. Most of Federated’s sponsored investment companies meet the definition of a VIE primarily due to their typical series fund structure in which the shareholders of each participating portfolio underlying the series fund generally lack the ability as an individual group to make decisions through voting rights regarding the board of directors/trustees of the fund. Federated’s investment in investment companies represents its maximum exposure to loss. Federated’s conclusion to consolidate an investment company may vary from period to period, most commonly as a result of changes in its percentage interest in the entity resulting from changes in the number of shares held by either Federated or third parties. Given that the entities follow investment company accounting, which prescribes fair-value accounting, a deconsolidation generally does not result in gains or losses for Federated. | |||||||||
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: | |||||||||
(in millions) | June 30, 2014 | December 31, 2013 | |||||||
Cash and cash equivalents | $ | 1.8 | $ | 1.1 | |||||
Investments—consolidated investment companies | 55.6 | 53.5 | |||||||
Receivables | 0.6 | 0.9 | |||||||
Less: Liabilities | 2.2 | 1.6 | |||||||
Less: Redeemable noncontrolling interest in subsidiaries | 17.3 | 15.5 | |||||||
Federated's net interest in consolidated investment companies | $ | 38.5 | $ | 38.4 | |||||
Federated's net interest in the consolidated investment companies of $38.5 million and $38.4 million at June 30, 2014 and December 31, 2013, respectively, represents the value of Federated's economic ownership interest in these sponsored investment companies. The assets of the consolidated investment companies are restricted for use by the respective investment company. The liabilities of the consolidated investment companies primarily represent investments sold short and operating liabilities of the entities. The liabilities are primarily classified as Other current liabilities on Federated’s Consolidated Balance Sheets. | |||||||||
Federated did not deconsolidate any investment companies during the six-month period ended June 30, 2014. | |||||||||
Neither creditors nor equity investors in the investment companies have any recourse to Federated’s general credit. In the ordinary course of business, from time to time, Federated may choose to waive certain fees or assume operating expenses of sponsored investment companies for competitive, regulatory or contractual reasons (see Note (1)(o) of Federated’s Annual Report on Form 10-K for the year ended December 31, 2013 for information regarding fee waivers). Federated has not provided financial support to any of these entities outside the ordinary course of business. | |||||||||
(b) Non-Consolidated Variable Interest Entities | |||||||||
Federated's involvement with certain investment companies that are deemed to be VIEs includes serving as the investment manager, or at times, holding a minority interest or both. Federated’s variable interest in these entities is not deemed to absorb the majority of the variability of the entity’s net assets. Therefore, Federated is not the primary beneficiary of these VIEs and has not consolidated these entities. | |||||||||
At June 30, 2014 and December 31, 2013, Federated’s investment and maximum risk of loss related to unconsolidated VIEs were entirely related to investment companies and totaled $193.3 million and $220.5 million, respectively. AUM for these unconsolidated investment companies totaled $257.6 billion and $280.3 billion at June 30, 2014 and December 31, 2013, respectively. Accounts receivable from sponsored investment companies for advisory and other services totaled $12.9 million and $13.5 million at June 30, 2014 and December 31, 2013, respectively. | |||||||||
In the ordinary course of business Federated may choose to waive certain fees or assume operating expenses of these sponsored investment companies for competitive, regulatory or contractual reasons (see Note (1)(o) of Federated’s Annual Report on Form 10-K for the year ended December 31, 2013 for information regarding fee waivers). Federated has not provided financial support to any of these entities outside the ordinary course of business. |
Investments
Investments | 6 Months Ended | ||||||||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ' | ||||||||||||||||||||||||||||||||
Investments | ' | ||||||||||||||||||||||||||||||||
Investments | |||||||||||||||||||||||||||||||||
Investments on the Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013 included available-for-sale and trading securities. At June 30, 2014 and December 31, 2013, Federated held investments totaling $141.9 million and $129.4 million, respectively, in fluctuating-value Federated-sponsored mutual funds that were classified as available-for-sale securities and were included in Investments—affiliates on the Consolidated Balance Sheets. | |||||||||||||||||||||||||||||||||
Available-for-sale securities were as follows: | |||||||||||||||||||||||||||||||||
June 30, 2014 | December 31, 2013 | ||||||||||||||||||||||||||||||||
Gross Unrealized | Estimated | Gross Unrealized | Estimated | ||||||||||||||||||||||||||||||
Fair | Fair | ||||||||||||||||||||||||||||||||
(in thousands) | Cost | Gains | (Losses) | Value | Cost | Gains | (Losses) | Value | |||||||||||||||||||||||||
Equity mutual funds | $ | 25,949 | $ | 1,742 | $ | 0 | $ | 27,691 | $ | 24,737 | $ | 2,423 | $ | 0 | $ | 27,160 | |||||||||||||||||
Fixed-income mutual funds | 114,250 | 394 | (440 | ) | 114,204 | 102,072 | 786 | (605 | ) | 102,253 | |||||||||||||||||||||||
Total fluctuating-value mutual funds | $ | 140,199 | $ | 2,136 | $ | (440 | ) | $ | 141,895 | $ | 126,809 | $ | 3,209 | $ | (605 | ) | $ | 129,413 | |||||||||||||||
The increase in available-for-sale securities at June 30, 2014 as compared to December 31, 2013, was primarily due to purchases of $52.1 million of fixed-income and equity mutual funds during the first six months of 2014, partially offset by $41.7 million in redemptions of equity and fixed-income mutual funds during the same period. | |||||||||||||||||||||||||||||||||
Federated’s trading securities totaled $60.6 million and $58.3 million at June 30, 2014 and December 31, 2013, respectively. Federated consolidates certain investment companies into its Consolidated Financial Statements as a result of Federated’s controlling financial interest in the companies (see Note (5)). All investments held by these investment companies, which primarily represented Federated-sponsored investment companies, were included in Investments—consolidated investment companies on Federated’s Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013. Investments—other on the Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013 represented other trading investments held in separate accounts for which Federated is the beneficiary. | |||||||||||||||||||||||||||||||||
Federated’s trading securities as of June 30, 2014 were primarily composed of domestic and foreign debt securities ($39.3 million) and stocks of large international and U.S. companies ($16.2 million). Federated's trading securities as of December 31, 2013 were primarily composed of domestic and foreign debt securities ($36.5 million) and stocks of large U.S. and international companies ($17.0 million). | |||||||||||||||||||||||||||||||||
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: | |||||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||||||||||
(in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||
Unrealized (loss) gain | |||||||||||||||||||||||||||||||||
Trading securities | $ | (919 | ) | $ | (467 | ) | $ | (570 | ) | $ | (231 | ) | |||||||||||||||||||||
Derivatives1 | (89 | ) | 124 | (150 | ) | (156 | ) | ||||||||||||||||||||||||||
Realized gains2 | |||||||||||||||||||||||||||||||||
Available-for-sale securities3 | 1,477 | 3,835 | 3,005 | 6,157 | |||||||||||||||||||||||||||||
Trading securities | 2,148 | 279 | 3,101 | 627 | |||||||||||||||||||||||||||||
Derivatives1 | 95 | 521 | 161 | 598 | |||||||||||||||||||||||||||||
Realized losses2 | |||||||||||||||||||||||||||||||||
Available-for-sale securities3 | 0 | (939 | ) | 0 | (939 | ) | |||||||||||||||||||||||||||
Trading securities | (181 | ) | (687 | ) | (1,095 | ) | (497 | ) | |||||||||||||||||||||||||
Derivatives1 | (22 | ) | (315 | ) | (30 | ) | (315 | ) | |||||||||||||||||||||||||
Gain on securities, net4 | $ | 2,509 | $ | 2,351 | $ | 4,422 | $ | 5,244 | |||||||||||||||||||||||||
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 redemptions of available-for-sale securities resulting in proceeds of $32.3 million and $41.7 million for the three and six months ended June 30, 2014, respectively, and $44.1 million and $55.8 million for the three and six months ended June 30, 2013, respectively. | ||||||||||||||||||||||||||||||||
4 | Amounts related to consolidated investment companies totaled $0.8 million and $1.1 million for the three and six months ended June 30, 2014, respectively, and $(0.5) million and $(0.1) million for the three and six months ended June 30, 2013, respectively. |
Fair_Value_Measurements
Fair Value Measurements | 6 Months Ended | ||||||||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||||||||||||||||
Fair Value Measurements | ' | ||||||||||||||||||||||||||||||||
Fair Value Measurements | |||||||||||||||||||||||||||||||||
Fair value is the price that would be received to sell an asset or the price paid to transfer a liability as of the measurement date. A three-tier, fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The three levels are: | |||||||||||||||||||||||||||||||||
Level 1 – Quoted prices for identical instruments in active markets. Level 1 assets may include equity and debt securities that are traded in an active exchange market, including shares of mutual funds. | |||||||||||||||||||||||||||||||||
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 assets and liabilities may include debt and equity securities, purchased loans and over-the-counter derivative contracts whose fair value is determined using a pricing model without significant unobservable data inputs in active exchange markets. | |||||||||||||||||||||||||||||||||
Level 3 – Fair values derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active exchange markets. | |||||||||||||||||||||||||||||||||
(a) Fair Value Measurements on a 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: | |||||||||||||||||||||||||||||||||
June 30, 2014 | December 31, 2013 | ||||||||||||||||||||||||||||||||
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 | $ | 61,081 | $ | 0 | $ | 0 | $ | 61,081 | $ | 104,443 | $ | 0 | $ | 0 | $ | 104,443 | |||||||||||||||||
Available-for-sale equity securities | 103,143 | 38,752 | 0 | 141,895 | 81,550 | 47,863 | 0 | 129,413 | |||||||||||||||||||||||||
Trading securities—equity | 18,779 | 2,569 | 0 | 21,348 | 11,925 | 9,906 | 0 | 21,831 | |||||||||||||||||||||||||
Trading securities—debt | 0 | 39,271 | 0 | 39,271 | 0 | 36,491 | 0 | 36,491 | |||||||||||||||||||||||||
Foreign currency forward contracts | 0 | 34 | 0 | 34 | 0 | 159 | 0 | 159 | |||||||||||||||||||||||||
Total financial assets | $ | 183,003 | $ | 80,626 | $ | 0 | $ | 263,629 | $ | 197,918 | $ | 94,419 | $ | 0 | $ | 292,337 | |||||||||||||||||
Financial Liabilities | |||||||||||||||||||||||||||||||||
Interest rate swap | $ | 0 | $ | 2,296 | $ | 0 | $ | 2,296 | $ | 0 | $ | 5,061 | $ | 0 | $ | 5,061 | |||||||||||||||||
Acquisition-related future consideration liabilities | 0 | 0 | 5,910 | 5,910 | 0 | 0 | 6,489 | 6,489 | |||||||||||||||||||||||||
Other1 | 1,755 | 14 | 0 | 1,769 | 1,118 | 2 | 0 | 1,120 | |||||||||||||||||||||||||
Total financial liabilities | $ | 1,755 | $ | 2,310 | $ | 5,910 | $ | 9,975 | $ | 1,118 | $ | 5,063 | $ | 6,489 | $ | 12,670 | |||||||||||||||||
1 | Amounts include investments sold short within one of the consolidated investment companies and foreign currency forward contracts recorded within Other current liabilities on the Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||
The following is a description of the valuation methodologies used for financial assets and liabilities measured at fair value on a recurring basis. Federated did not hold any nonfinancial assets or liabilities measured at fair value on a recurring basis at June 30, 2014 or December 31, 2013. | |||||||||||||||||||||||||||||||||
Cash and cash equivalents | |||||||||||||||||||||||||||||||||
Cash and cash equivalents include investments in money market funds and deposits with banks. Investments in Federated money market funds totaled $50.6 million and $94.4 million at June 30, 2014 and December 31, 2013, respectively. Cash investments in money market funds are valued under the market approach through the use of quoted market prices in an active market, which is the NAV of the funds, and are classified within Level 1 of the valuation hierarchy. | |||||||||||||||||||||||||||||||||
Available-for-sale equity securities | |||||||||||||||||||||||||||||||||
Available-for-sale equity securities include investments in sponsored fluctuating-value mutual funds and are included in Investments—affiliates on the Consolidated Balance Sheets. For investments in mutual funds that are publicly available, the securities are valued under the market approach through the use of quoted market prices available in an active market, which is the NAV of the funds, and are classified within Level 1 of the valuation hierarchy. For one investment in a mutual fund that is not publicly available but for which the NAV is calculated daily and for which there are no redemption restrictions, the security is valued using NAV as a practical expedient and is classified as Level 2. There is no modeling or additional information needed to arrive at the fair values of any of these investments. | |||||||||||||||||||||||||||||||||
Trading securities—equity | |||||||||||||||||||||||||||||||||
Trading securities - equity primarily include the equity securities held by consolidated investment companies (included in Investments—consolidated investment companies on the Consolidated Balance Sheets) as well as certain equity investments held in separate accounts for which Federated is the beneficiary (included in Investments—other on the Consolidated Balance Sheets). For the publicly traded equity securities available in an active market, whether domestic or foreign, the fair value of these securities is often classified as Level 1 and is based on unadjusted quoted market prices. From time to time, however, the fair value of certain equity securities traded principally in foreign markets and held by consolidated investment companies may be determined by third-party pricing services when a country's exchange is closed due to a holiday or when there has been a significant trend in the U.S. equity markets or in index futures trading between the time the foreign market closes and the pricing time of the consolidated investment company. The determination to use the third-party pricing service versus the unadjusted quoted market price is the cause for transfers between Level 1 and Level 2 for these securities. For the period between December 31, 2013 and June 30, 2014, there were $2.5 million of investments transferred from Level 2 to Level 1. For the period between December 31, 2012 and June 30, 2013, there were $4.1 million of investments transferred from Level 2 to Level 1. Transfers into and out of Levels 1 and 2 of the fair value hierarchy are reported at fair values as of the beginning of the period in which the transfers occur. | |||||||||||||||||||||||||||||||||
Trading securities—debt | |||||||||||||||||||||||||||||||||
Trading securities - debt primarily represent fixed-income securities held by consolidated Federated-sponsored investment companies at June 30, 2014 and December 31, 2013. The fair value of these securities may include observable market data such as valuations provided by independent pricing services after considering factors such as the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions (Level 2). | |||||||||||||||||||||||||||||||||
Foreign currency forward contracts | |||||||||||||||||||||||||||||||||
The fair value of foreign currency forward contracts is primarily included in Receivables, net or Other current liabilities on the Consolidated Balance Sheets, representing contracts held by certain consolidated Federated-sponsored investment companies as part of their investment strategy. Pricing is determined by interpolating a value by utilizing the spot foreign exchange rate and forward points (based on the spot rate and currency interest rate differentials), which are all inputs that are observable in active markets (Level 2). | |||||||||||||||||||||||||||||||||
Interest rate swap | |||||||||||||||||||||||||||||||||
The fair value of Federated's interest rate swap at June 30, 2014 is included in Other current liabilities on the Consolidated Balance Sheets. Pricing is determined based on a third-party, model-derived valuation in which all significant inputs are observable in active markets (Level 2) including the Eurodollar future rate and yields for three- and thirty-year Treasury securities. See Note (8) for more information. | |||||||||||||||||||||||||||||||||
Acquisition-related future consideration liabilities | |||||||||||||||||||||||||||||||||
From time to time, pursuant to purchase and sale agreements entered into in connection with certain business combinations, Federated may be required to make future consideration payments if certain contingencies are met. See Note (12)(a) for additional information regarding the nature and timing of these payments. In connection with these arrangements entered into after January 1, 2009, Federated records a liability representing the estimated fair value of future consideration payments as of the acquisition date. The liability is subsequently remeasured at fair value on a recurring basis with changes in fair value recorded in earnings. As of June 30, 2014, acquisition-related future consideration liabilities were recorded in Other current liabilities ($2.9 million) and Other long-term liabilities ($3.0 million) on the Consolidated Balance Sheets. Management estimated the fair value of future consideration payments based primarily upon expected future cash flows using an income approach valuation methodology with data inputs unobservable in active markets (Level 3). As of June 30, 2014, significant inputs involving unobservable market data included (1) an estimated rate of change for underlying AUM ranging from 0% - 6% per year (weighted average of 2%); (2) an estimate ranging from 0.02% - 0.03% per year of the impact of fee waivers to maintain positive or zero net yields on the contractually-derived net revenue per managed asset assumptions (weighted average of 0.02%); and (3) an estimated discount rate ranging from 16% - 18% based on the current estimated market rate of return (weighted average of 16%). Assuming no other changes in model inputs, the fair value of the future consideration liability will increase, resulting in additional expense recorded in Operating Expenses - Other in the period of change if: (1) the underlying AUM grow at a rate that is greater than the assumed rate, (2) the actual impact of fee waivers to maintain positive or zero net yields on the net revenue is less than the assumed amount or (3) the discount rate decreases. Conversely, the fair value of the future consideration liability will decrease, resulting in a reduction to expense, if the inverse occurs for any of these inputs, assuming no other changes. | |||||||||||||||||||||||||||||||||
The following table presents a reconciliation of the beginning and ending balances for Federated’s liability for future consideration payments related to these acquisitions for each period presented: | |||||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||||||||||
(in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||
Beginning balance | $ | 6,489 | $ | 11,711 | $ | 6,489 | $ | 11,759 | |||||||||||||||||||||||||
Changes in fair value1 | (579 | ) | 1 | (579 | ) | (47 | ) | ||||||||||||||||||||||||||
Ending balance | $ | 5,910 | $ | 11,712 | $ | 5,910 | $ | 11,712 | |||||||||||||||||||||||||
1 | For all periods presented, the amounts were included as Operating Expenses - Other on the Consolidated Statements of Income. | ||||||||||||||||||||||||||||||||
Investments sold short | |||||||||||||||||||||||||||||||||
The fair value of investments sold short within a consolidated investment company is included in Other current liabilities on the Consolidated Balance Sheets. The investments primarily relate to domestic equity securities that are available in an active exchange market. The fair value of these investments is classified as Level 1 and is based on unadjusted quoted market prices. | |||||||||||||||||||||||||||||||||
(b) Fair Value Measurements on a Nonrecurring Basis | |||||||||||||||||||||||||||||||||
Federated did not hold any assets or liabilities measured at fair value on a nonrecurring basis at June 30, 2014. | |||||||||||||||||||||||||||||||||
(c) Fair Value Measurements of Other Financial Instruments | |||||||||||||||||||||||||||||||||
The fair value of Federated’s debt is estimated by management based upon expected future cash flows utilizing a discounted cash flow methodology under the income approach. The fair value of the liability is estimated using observable market data (Level 2) in estimating inputs including the discount rate. Based on this fair value estimate, the carrying value of debt appearing on the Consolidated Balance Sheets approximates fair value. |
Debt_and_Interest_Rate_Swap
Debt and Interest Rate Swap | 6 Months Ended | ||||||||||||||
Jun. 30, 2014 | |||||||||||||||
Debt And Interest Rate Swap [Abstract] | ' | ||||||||||||||
Debt and Interest Rate Swap | ' | ||||||||||||||
Debt and Interest Rate Swap | |||||||||||||||
Debt consisted of the following: | |||||||||||||||
Weighted-Average Interest Rates | |||||||||||||||
(dollars in thousands) | 20141 | 20132 | June 30, 2014 | December 31, 2013 | |||||||||||
Term Loan | 3.521 | % | 3.646 | % | $ | 255,000 | $ | 276,250 | |||||||
Less: Short-term debt | 25,500 | 77,917 | |||||||||||||
Long-term debt | $ | 229,500 | $ | 198,333 | |||||||||||
1 | As of June 30, 2014. See additional information below regarding the interest rate fixed at 3.521% in connection with the Swap. | ||||||||||||||
2 | As of December 31, 2013. | ||||||||||||||
On June 24, 2014, Federated entered into an unsecured Second Amended and Restated Credit Agreement by and among Federated, certain of its subsidiaries as guarantors party thereto, a syndicate of 13 banks as Lenders party thereto led by PNC Bank, National Association as administrative agent, PNC Capital Markets LLC as sole bookrunner and joint lead arranger, Citigroup Global Markets, Inc. as joint lead arranger, Citibank, N.A. as syndication agent, and TD Bank, N.A. as documentation agent (Credit Agreement). The Credit Agreement amends and restates Federated's prior unsecured Amended and Restated Credit Agreement, which was dated June 10, 2011 and scheduled to mature on June 10, 2016 (Prior Credit Agreement). The borrowings under the Credit Agreement's term loan facility of $255 million equaled the remaining principal balance from the Prior Credit Agreement's term loan facility. The term loan facility bears interest based on the London Interbank Offering Rate (LIBOR) plus a spread, currently 112.5 basis points. The Credit Agreement qualified for modification accounting treatment. | |||||||||||||||
The Credit Agreement also refinanced the $200 million revolving credit facility under the Prior Credit Agreement. Federated had no borrowings outstanding on the previous revolving credit facility. As of June 30, 2014, the entire $200 million revolving credit facility was available for borrowings. Similar to the Prior Credit Agreement, certain subsidiaries entered into an Amended and Restated Continuing Agreement of Guaranty and Suretyship whereby these subsidiaries guarantee payment of all obligations incurred through the Credit Agreement. Federated pays an annual facility fee, currently 12.5 basis points. Borrowings under the Credit Agreement's revolving credit facility bear interest at LIBOR plus a spread, currently 100 basis points. | |||||||||||||||
The Credit Agreement matures on June 24, 2019 and, with respect to the term loan facility, requires quarterly principal payments of $6.4 million per quarter beginning on July 1, 2014 through July 1, 2018 and $36.7 million per quarter from October 1, 2018 through April 1, 2019, with a final payment at maturity of $36.7 million. | |||||||||||||||
The interest rate swap (the Swap) that Federated entered into with PNC Bank, National Association and certain other banks during 2010 to hedge its interest rate risk associated with Federated's original term loan facility remains in effect. Under the Swap, Federated will receive payments based on LIBOR plus a spread and will make payments based on an annual fixed rate of 3.521% for the amount of the term loan covered by the Swap. As of June 30, 2014, the Swap covered $255 million of the term loan and will be reduced by $63.8 million per quarter, beginning July 1, 2014 through the expiration of the Swap on April 1, 2015. After July 1, 2014, the remaining amount of the term loan not covered by the Swap will bear interest at a spread, as previously noted, over LIBOR. | |||||||||||||||
The Swap requires monthly cash settlements of interest paid or received. The differential between the interest paid or interest received from the monthly settlements is recorded as adjustments to Debt expense on the Consolidated Statements of Income. The Swap is accounted for as a cash flow hedge and has been determined to be highly effective. Federated evaluates effectiveness using the long-haul method. Changes in the fair value of the Swap will likely be offset by an equal and opposite change in the fair value of the hedged item, therefore very little, if any, net impact on reported earnings is expected. The fair value of the Swap agreement at June 30, 2014 was a liability of $2.3 million which was recorded in Other current liabilities on the Consolidated Balance Sheets. The entire amount of this loss in fair value was recorded in Accumulated other comprehensive income (loss), net of tax on the Consolidated Balance Sheets at June 30, 2014. During the next nine months management expects to charge the entire $2.3 million loss to Debt expense on the Consolidated Statements of Income. This amount could differ from amounts actually recognized due to changes in interest rates subsequent to June 30, 2014. During the three- and six-month periods ended June 30, 2014, $1.4 million and $2.9 million, respectively were charged to Debt expense on the Consolidated Statements of Income as a component of Federated's fixed interest rate associated with the Swap. During the three- and six-month periods ended June 30, 2013, $1.6 million and $3.3 million, respectively, were charged to Debt expense on the Consolidated Statements of Income as a component of Federated’s fixed interest rate associated with the Swap. | |||||||||||||||
The Credit Agreement includes representations and warranties, affirmative and negative financial covenants, including an interest coverage ratio covenant and a leverage ratio covenant, reporting requirements and other non-financial covenants. Federated was in compliance with all covenants at and during the six months ended June 30, 2014. The Credit Agreement and the Swap also have certain stated events of default and cross default provisions which would permit the lenders/counterparties to accelerate the repayment of the debt or to terminate the Swap if not cured within the applicable grace periods. The events of default generally include breaches of contract, failure to make required loan payments, insolvency, cessation of business, deterioration in credit rating to below investment grade, notice of lien or assessment and other proceedings, whether voluntary or involuntary, that would require the repayment of amounts borrowed. |
ShareBased_Compensation_Plans
Share-Based Compensation Plans | 6 Months Ended |
Jun. 30, 2014 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' |
Share-Based Compensation Plans | ' |
Share-Based Compensation Plans | |
(a) Restricted Stock | |
During the first six months of 2014, Federated awarded 586,931 shares of restricted Federated Class B common stock, the majority of which were awarded in connection with a bonus program in which certain key employees received a portion of their bonus in the form of restricted stock under Federated’s Stock Incentive Plan. This restricted stock, which was granted on the bonus payment date and issued out of treasury, will generally vest over a three-year period. | |
Federated awarded 989,050 shares of restricted Federated Class B common stock under its Stock Incentive Plan during 2013. Of this amount, 474,050 shares of restricted Federated Class B common stock were awarded in connection with the aforementioned bonus program in 2013. The remaining shares were awarded to certain key employees and generally vest over a ten-year period. | |
(b) Stock Options | |
During the six months ended June 30, 2014 and the year ended December 31, 2013, there were no stock options issued or exercised. | |
(c) Non-Management Director Stock Award | |
There were 5,100 shares of Federated Class B common stock awarded to non-management directors during each of the second quarters of 2014 and 2013. There were no additional awards to non-management directors during 2014 or 2013. |
Equity
Equity | 6 Months Ended |
Jun. 30, 2014 | |
Equity [Abstract] | ' |
Equity | ' |
Equity | |
During 2008, the board of directors authorized a share repurchase program that allows Federated to buy back up to 5 million shares of Class B common stock. The program has no stated expiration date and no other programs existed as of June 30, 2014. The program authorizes executive management to determine the timing and the amount of shares for each purchase. The repurchased shares are held in treasury for employee share-based compensation plans, future acquisitions and other corporate activities. During the first six months of 2014, Federated repurchased 0.5 million shares of Class B common stock for $13.4 million, the majority 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, 2014, 0.9 million shares remained available to be purchased under the current buyback program. |
Earnings_Per_Share_Attributabl
Earnings Per Share Attributable to Federated Investors, Inc. Shareholders | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
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 using the two-class method for amounts attributable to Federated Investors, Inc.: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
(in thousands, except per share data) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Numerator – Basic and Diluted | |||||||||||||||||
Net income attributable to Federated Investors, Inc. | $ | 36,869 | $ | 40,408 | $ | 72,063 | $ | 83,402 | |||||||||
Less: Total income available to participating unvested restricted shareholders1 | (1,480 | ) | (1,539 | ) | (2,866 | ) | (3,195 | ) | |||||||||
Total net income attributable to Federated Common Stock2 | $ | 35,389 | $ | 38,869 | $ | 69,197 | $ | 80,207 | |||||||||
Denominator | |||||||||||||||||
Basic weighted-average common shares outstanding | 100,789 | 100,716 | 100,757 | 100,617 | |||||||||||||
Dilutive potential shares from stock options | 1 | 1 | 2 | 1 | |||||||||||||
Diluted weighted-average common shares outstanding | 100,790 | 100,717 | 100,759 | 100,618 | |||||||||||||
Earnings per share | |||||||||||||||||
Net income attributable to Federated Common Stock – Basic and Diluted2 | $ | 0.35 | $ | 0.39 | $ | 0.69 | $ | 0.8 | |||||||||
1 | Income available to participating unvested 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. | ||||||||||||||||
For both the three- and six- month periods ended June 30, 2014, 27 thousand awarded stock options were not included in the computation of diluted earnings per share. For the three- and six- month periods ended June 30, 2013, 44 thousand and 49 thousand stock options, respectively, were not included in the computation of diluted earnings per share. In all cases, these options 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 options become dilutive, these shares would be included in the calculation of diluted earnings per share and would result in a proportional amount of dilution. |
Commitments_and_Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Commitments and Contingencies | ' |
Commitments and Contingencies | |
(a) Contractual | |
In 2010, Federated acquired the money market management business of SunTrust Banks, Inc. (SunTrust Acquisition). As part of the SunTrust Acquisition, Federated is required to make annual contingent purchase price payments in the fourth quarters of each of the five years following the acquisition date. The contingent purchase price payments are calculated as a percentage of revenue less distribution expenses directly attributed to certain eligible assets. The first three contingent purchase price payments of $5.0 million, $4.2 million and $3.8 million were paid in the fourth quarters of 2011, 2012 and 2013, respectively. At June 30, 2014, management estimated remaining contingent payments could total $4 million over the two years that remain; however, the actual amount of the contingent payments will vary based on asset levels and related net revenues and is not limited by any maximum amount. A wide range of outcomes for actual payments is possible due to the extent of reasonably possible flow-rate volatility for the respective AUM. As of June 30, 2014, a liability of $3.8 million representing the estimated fair value of future consideration payments was recorded in Other current liabilities ($2.1 million) and Other long-term liabilities ($1.7 million) (see Note (7)(a) for a discussion regarding the valuation methodology). This liability is remeasured at each reporting date with changes in the fair value recognized in Operating Expenses - Other on the Consolidated Statements of Income. | |
In 2008, Federated completed the acquisition of certain assets of Clover Capital Management, Inc., an investment manager that specialized in value investing (Clover Capital Acquisition). As part of the Clover Capital Acquisition, Federated was required to make contingent purchase price payments based upon growth in revenues over the five-year period following the acquisition date. The contingent purchase price payments were recorded as additional goodwill at the time the contingency was resolved. The applicable growth targets were not met for the first two anniversary years and as such, no related payments were made. The final three payments of $9.2 million (recorded in Other current liabilities as of December 31, 2013), $3.4 million and $5.9 million were paid in the first quarters of 2014, 2013 and 2012, respectively. | |
Pursuant to other acquisition agreements, Federated may be required to make additional purchase price payments based on a percentage of revenue less certain direct expenses attributable to eligible AUM. The payments could occur annually through 2017. As of June 30, 2014, liabilities totaling $2.1 million, representing the estimated fair value of future consideration payments were recorded in Other current liabilities ($0.8 million) and Other long-term liabilities ($1.3 million) (see Note (7)(a) for a discussion regarding the valuation methodology). The liabilities are remeasured at each reporting date with changes in the fair value recognized in Operating Expenses - Other on the Consolidated Statements of Income. | |
Pursuant to various significant employment arrangements, Federated may be required to make certain incentive compensation-related payments through 2018. As of June 30, 2014, Federated may be required to pay up to $32 million over the remaining terms of the arrangements based on the achievement of performance goals. In addition, certain employees have incentive compensation opportunities related to the Federated Kaufman Large Cap Fund (the Fund Bonus). Assuming asset levels and other variable inputs at June 30, 2014 remain constant throughout the year, the Fund Bonus payment in 2015 may approximate $2 million. Management is unable to reasonably estimate a range of possible bonus payments for the Fund Bonus for subsequent years due to the wide-range of possible growth-rate scenarios. | |
(b) Guarantees and Indemnifications | |
On an intercompany basis, various wholly owned subsidiaries of Federated guarantee certain financial obligations of Federated Investors, Inc., and Federated Investors, Inc. guarantees certain financial and performance-related obligations of various wholly owned subsidiaries. In addition, in the normal course of business, Federated has entered into contracts that provide a variety of indemnifications. Typically, obligations to indemnify third parties arise in the context of contracts entered into by Federated, under which Federated agrees to hold the other party harmless against losses arising out of the contract, provided the other party's actions are not deemed to have breached an agreed upon standard of care. In each of these circumstances, payment by Federated is contingent on the other party making a claim for indemnity, subject to Federated's right to challenge the other party's claim. Further, Federated’s obligations under these agreements may be limited in terms of time and/or amount. It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of Federated’s obligations and the unique facts and circumstances involved in each particular agreement. Management believes that if Federated were to incur a loss in any of these matters, such loss should not have a material effect on its business, financial position, results of operations or cash flows. | |
(c) Legal Proceedings | |
CCM Rochester, Inc. (CCM). In December, 2008, Federated completed the acquisition of certain assets of CCM (f/k/a Clover Capital Management, Inc.), an investment manager that specialized in value investing. The purchase was consummated in the midst of the financial crisis. The payment terms under the Asset Purchase Agreement, dated September 12, 2008 (APA), included an upfront payment of $30 million paid by Federated Investors, Inc. at closing and the opportunity for contingent payments over a five year earn-out period following the acquisition date based on the growth in revenue associated with the acquired assets. Under the APA, in order to reach the maximum contingent payments totaling approximately $55 million, the revenue associated with the acquired assets would have had to have grown at a 30% compound annual growth rate. Under the APA, Federated Investors, Inc. paid CCM an additional $18 million, in the aggregate, in contingent payments for the last three years of the earn-out period. | |
Shortly after the final contingent payment was paid to CCM, Federated Investors, Inc. was named as the defendant in a case filed on May 20, 2014 by CCM in the United States District Court for the Southern District of New York (CCM Rochester, Inc., f/k/a Clover Capital Management, Inc. v. Federated Investors, Inc., Case No. 14-cv-3600 (S.D.N.Y.)). In this lawsuit, CCM has asserted claims against Federated Investors, Inc. for fraudulent inducement, breach of contract (including CCM’s allegations relating to implied duties of best efforts and good faith and fair dealing) and indemnification based on Federated’s alleged failure to effectively market and distribute the investment products associated with the acquired assets and to pay CCM the maximum contingent payments. CCM seeks approximately $37 million in alleged damages plus attorneys’ fees from Federated Investors, Inc. | |
Federated believes CCM’s claims are meritless, intends to vigorously defend this lawsuit and has filed a Motion to Dismiss the lawsuit on the basis that, among other reasons, CCM’s claims are implausible, contrary to the express terms of the APA and contrary to settled law. Federated believes that at all times it acted in good faith and complied with its contractual obligations contained in the APA. As of June 30, 2014, Federated believes a material loss related to this lawsuit is remote and as such, does not believe this pending lawsuit is material to Federated or its consolidated financial statements. Based on this assessment of the status and nature of CCM’s claims, no loss is estimable. | |
Other Litigation. Federated also has claims asserted and threatened against it in the ordinary course of business. Federated cannot assess or predict whether, when or what types of claims may be threatened or asserted, the types or amounts of damages or other remedies that may be sought (which may be material when threatened or asserted), whether claims that have been threatened will become formal asserted pending legal proceedings, or whether claims ultimately may be successful (whether through settlement or adjudication), entirely or in part, whether or not any such claims are threatened or asserted in or outside the ordinary course of business. Federated also may be initially unable to accurately assess a claim's impact. Given that the outcome of litigation is inherently unpredictable and uncertain, an adverse result may arise from time to time that adversely impacts, potentially in a material way, Federated’s business, results of operations, financial condition and/or cash flows. As of June 30, 2014, Federated does not believe that it has any pending legal proceedings asserted against Federated in the ordinary course of business that are material to Federated or its consolidated financial statements and, as such, does not believe that a material loss related to these claims is reasonably possible. |
Accumulated_Other_Comprehensiv
Accumulated Other Comprehensive Income (Loss) Attributable to Federated Investors, Inc. Shareholders | 6 Months Ended | |||||||||||||||
Jun. 30, 2014 | ||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ' | |||||||||||||||
Accumulated Other Comprehensive Income (Loss) attributable to Federated Investors, Inc. Shareholders | ' | |||||||||||||||
Accumulated Other Comprehensive Income (Loss) Attributable to Federated Investors, Inc. Shareholders | ||||||||||||||||
The components of Accumulated other comprehensive income (loss), net of tax attributable to Federated shareholders are as follows: | ||||||||||||||||
(in thousands) | Unrealized Loss | Unrealized | Foreign Currency | Total | ||||||||||||
on Interest Rate Swap1 | Gain on Securities | Translation (Loss) Gain | ||||||||||||||
Available for | ||||||||||||||||
Sale2 | ||||||||||||||||
Balance at December 31, 2012 | $ | (7,071 | ) | $ | 3,644 | $ | 490 | $ | (2,937 | ) | ||||||
Other comprehensive (loss) income before reclassifications and tax | (9 | ) | 2,975 | (461 | ) | 2,505 | ||||||||||
Tax impact | 3 | (1,371 | ) | 160 | (1,208 | ) | ||||||||||
Reclassification adjustments, before tax | 3,334 | (5,218 | ) | 0 | (1,884 | ) | ||||||||||
Tax impact | (1,225 | ) | 2,406 | 0 | 1,181 | |||||||||||
Net current-period other comprehensive income (loss) | 2,103 | (1,208 | ) | (301 | ) | 594 | ||||||||||
Balance at June 30, 2013 | $ | (4,968 | ) | $ | 2,436 | $ | 189 | $ | (2,343 | ) | ||||||
Balance at December 31, 2013 | $ | (3,185 | ) | $ | 1,586 | $ | 391 | $ | (1,208 | ) | ||||||
Other comprehensive (loss) income before reclassifications and tax | (157 | ) | 2,097 | 248 | 2,188 | |||||||||||
Tax impact | 58 | (789 | ) | (86 | ) | (817 | ) | |||||||||
Reclassification adjustments, before tax | 2,922 | (3,005 | ) | 0 | (83 | ) | ||||||||||
Tax impact | (1,089 | ) | 1,131 | 0 | 42 | |||||||||||
Net current-period other comprehensive income (loss) | 1,734 | (566 | ) | 162 | 1,330 | |||||||||||
Balance at June 30, 2014 | $ | (1,451 | ) | $ | 1,020 | $ | 553 | $ | 122 | |||||||
1 | Amounts reclassified from Accumulated other comprehensive income (loss), net of tax were recorded in Debt expense on the Consolidated Statements of Income. | |||||||||||||||
2 | Amounts reclassified from Accumulated other comprehensive income (loss), net of tax were recorded in Gain on securities, net on the Consolidated Statements of Income. |
Subsequent_Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2014 | |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
Subsequent Events | |
On July 24, 2014, the board of directors declared a $0.25 per share dividend to shareholders of record as of August 8, 2014 to be paid on August 15, 2014. |
Recent_Accounting_Pronouncemen1
Recent Accounting Pronouncements Recent Accounting Pronouncements (Policies) | 6 Months Ended |
Jun. 30, 2014 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | ' |
Recently adopted accounting standard | 'Effective January 1, 2014, Federated adopted the Financial Accounting Standards Board (FASB) accounting standards update (ASU) 2013-08, Financial Services-Investment Companies (Topic 946) 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 adoption of the update did not have a material impact on Federated's Consolidated Financial Statements. |
Accounting standard not yet adopted | ' |
On May 28, 2014, the FASB issued as final, ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which supersedes virtually all existing revenue recognition guidance under GAAP. The update's core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016 and prohibits early adoption. The update allows for the use of either the retrospective or modified retrospective approach of adoption. Management is currently evaluating the available transition methods and the potential impact of adoption on Federated's Consolidated Financial Statements. |
Concentration_Risk_Tables
Concentration Risk (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Risks and Uncertainties [Abstract] | ' | ||||||||||||||||
Schedule of Revenue Concentration | ' | ||||||||||||||||
The following table summarizes the percentage of total revenue earned from Federated's asset classes for the periods presented: | |||||||||||||||||
Six Months Ended | |||||||||||||||||
June 30, | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Money market assets | 33 | % | 42 | % | |||||||||||||
Equity assets | 43 | % | 34 | % | |||||||||||||
Fixed-income assets | 23 | % | 23 | % | |||||||||||||
Voluntary Fee Waivers | ' | ||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenue | $ | (102.3 | ) | $ | (91.9 | ) | $ | (209.0 | ) | $ | (179.3 | ) | |||||
Less: Reduction in Distribution expense | 70.2 | 66.9 | 144.5 | 131.7 | |||||||||||||
Operating income | (32.1 | ) | (25.0 | ) | (64.5 | ) | (47.6 | ) | |||||||||
Less: Reduction in Noncontrolling interest | 2.5 | 1.3 | 5.2 | 2.1 | |||||||||||||
Pre-tax impact | $ | (29.6 | ) | $ | (23.7 | ) | $ | (59.3 | ) | $ | (45.5 | ) | |||||
Variable_Interest_Entities_Tab
Variable Interest Entities (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Variable Interest Entities [Abstract] | ' | ||||||||
Consolidated 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: | |||||||||
(in millions) | June 30, 2014 | December 31, 2013 | |||||||
Cash and cash equivalents | $ | 1.8 | $ | 1.1 | |||||
Investments—consolidated investment companies | 55.6 | 53.5 | |||||||
Receivables | 0.6 | 0.9 | |||||||
Less: Liabilities | 2.2 | 1.6 | |||||||
Less: Redeemable noncontrolling interest in subsidiaries | 17.3 | 15.5 | |||||||
Federated's net interest in consolidated investment companies | $ | 38.5 | $ | 38.4 | |||||
Investments_Tables
Investments (Tables) | 6 Months Ended | ||||||||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ' | ||||||||||||||||||||||||||||||||
Available-For-Sale Securities | ' | ||||||||||||||||||||||||||||||||
Available-for-sale securities were as follows: | |||||||||||||||||||||||||||||||||
June 30, 2014 | December 31, 2013 | ||||||||||||||||||||||||||||||||
Gross Unrealized | Estimated | Gross Unrealized | Estimated | ||||||||||||||||||||||||||||||
Fair | Fair | ||||||||||||||||||||||||||||||||
(in thousands) | Cost | Gains | (Losses) | Value | Cost | Gains | (Losses) | Value | |||||||||||||||||||||||||
Equity mutual funds | $ | 25,949 | $ | 1,742 | $ | 0 | $ | 27,691 | $ | 24,737 | $ | 2,423 | $ | 0 | $ | 27,160 | |||||||||||||||||
Fixed-income mutual funds | 114,250 | 394 | (440 | ) | 114,204 | 102,072 | 786 | (605 | ) | 102,253 | |||||||||||||||||||||||
Total fluctuating-value mutual funds | $ | 140,199 | $ | 2,136 | $ | (440 | ) | $ | 141,895 | $ | 126,809 | $ | 3,209 | $ | (605 | ) | $ | 129,413 | |||||||||||||||
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: | |||||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||||||||||
(in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||
Unrealized (loss) gain | |||||||||||||||||||||||||||||||||
Trading securities | $ | (919 | ) | $ | (467 | ) | $ | (570 | ) | $ | (231 | ) | |||||||||||||||||||||
Derivatives1 | (89 | ) | 124 | (150 | ) | (156 | ) | ||||||||||||||||||||||||||
Realized gains2 | |||||||||||||||||||||||||||||||||
Available-for-sale securities3 | 1,477 | 3,835 | 3,005 | 6,157 | |||||||||||||||||||||||||||||
Trading securities | 2,148 | 279 | 3,101 | 627 | |||||||||||||||||||||||||||||
Derivatives1 | 95 | 521 | 161 | 598 | |||||||||||||||||||||||||||||
Realized losses2 | |||||||||||||||||||||||||||||||||
Available-for-sale securities3 | 0 | (939 | ) | 0 | (939 | ) | |||||||||||||||||||||||||||
Trading securities | (181 | ) | (687 | ) | (1,095 | ) | (497 | ) | |||||||||||||||||||||||||
Derivatives1 | (22 | ) | (315 | ) | (30 | ) | (315 | ) | |||||||||||||||||||||||||
Gain on securities, net4 | $ | 2,509 | $ | 2,351 | $ | 4,422 | $ | 5,244 | |||||||||||||||||||||||||
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 redemptions of available-for-sale securities resulting in proceeds of $32.3 million and $41.7 million for the three and six months ended June 30, 2014, respectively, and $44.1 million and $55.8 million for the three and six months ended June 30, 2013, respectively. | ||||||||||||||||||||||||||||||||
4 | Amounts related to consolidated investment companies totaled $0.8 million and $1.1 million for the three and six months ended June 30, 2014, respectively, and $(0.5) million and $(0.1) million for the three and six months ended June 30, 2013, respectively. |
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 6 Months Ended | ||||||||||||||||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||||||||||||||||
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: | |||||||||||||||||||||||||||||||||
June 30, 2014 | December 31, 2013 | ||||||||||||||||||||||||||||||||
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 | $ | 61,081 | $ | 0 | $ | 0 | $ | 61,081 | $ | 104,443 | $ | 0 | $ | 0 | $ | 104,443 | |||||||||||||||||
Available-for-sale equity securities | 103,143 | 38,752 | 0 | 141,895 | 81,550 | 47,863 | 0 | 129,413 | |||||||||||||||||||||||||
Trading securities—equity | 18,779 | 2,569 | 0 | 21,348 | 11,925 | 9,906 | 0 | 21,831 | |||||||||||||||||||||||||
Trading securities—debt | 0 | 39,271 | 0 | 39,271 | 0 | 36,491 | 0 | 36,491 | |||||||||||||||||||||||||
Foreign currency forward contracts | 0 | 34 | 0 | 34 | 0 | 159 | 0 | 159 | |||||||||||||||||||||||||
Total financial assets | $ | 183,003 | $ | 80,626 | $ | 0 | $ | 263,629 | $ | 197,918 | $ | 94,419 | $ | 0 | $ | 292,337 | |||||||||||||||||
Financial Liabilities | |||||||||||||||||||||||||||||||||
Interest rate swap | $ | 0 | $ | 2,296 | $ | 0 | $ | 2,296 | $ | 0 | $ | 5,061 | $ | 0 | $ | 5,061 | |||||||||||||||||
Acquisition-related future consideration liabilities | 0 | 0 | 5,910 | 5,910 | 0 | 0 | 6,489 | 6,489 | |||||||||||||||||||||||||
Other1 | 1,755 | 14 | 0 | 1,769 | 1,118 | 2 | 0 | 1,120 | |||||||||||||||||||||||||
Total financial liabilities | $ | 1,755 | $ | 2,310 | $ | 5,910 | $ | 9,975 | $ | 1,118 | $ | 5,063 | $ | 6,489 | $ | 12,670 | |||||||||||||||||
1 | Amounts include investments sold short within one of the consolidated investment companies and foreign currency forward contracts recorded within Other current liabilities on the Consolidated Balance Sheets. | ||||||||||||||||||||||||||||||||
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 balances for Federated’s liability for future consideration payments related to these acquisitions for each period presented: | |||||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||||||||||
(in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||
Beginning balance | $ | 6,489 | $ | 11,711 | $ | 6,489 | $ | 11,759 | |||||||||||||||||||||||||
Changes in fair value1 | (579 | ) | 1 | (579 | ) | (47 | ) | ||||||||||||||||||||||||||
Ending balance | $ | 5,910 | $ | 11,712 | $ | 5,910 | $ | 11,712 | |||||||||||||||||||||||||
1 | For all periods presented, the amounts were included as Operating Expenses - Other on the Consolidated Statements of Income. |
Debt_and_Interest_Rate_Swap_Ta
Debt and Interest Rate Swap (Tables) | 6 Months Ended | ||||||||||||||
Jun. 30, 2014 | |||||||||||||||
Debt And Interest Rate Swap [Abstract] | ' | ||||||||||||||
Debt | ' | ||||||||||||||
Debt consisted of the following: | |||||||||||||||
Weighted-Average Interest Rates | |||||||||||||||
(dollars in thousands) | 20141 | 20132 | June 30, 2014 | December 31, 2013 | |||||||||||
Term Loan | 3.521 | % | 3.646 | % | $ | 255,000 | $ | 276,250 | |||||||
Less: Short-term debt | 25,500 | 77,917 | |||||||||||||
Long-term debt | $ | 229,500 | $ | 198,333 | |||||||||||
1 | As of June 30, 2014. See additional information below regarding the interest rate fixed at 3.521% in connection with the Swap. | ||||||||||||||
2 | As of December 31, 2013. |
Earnings_Per_Share_Attributabl1
Earnings Per Share Attributable to Federated Investors, Inc. Shareholders (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
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 using the two-class method for amounts attributable to Federated Investors, Inc.: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
(in thousands, except per share data) | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Numerator – Basic and Diluted | |||||||||||||||||
Net income attributable to Federated Investors, Inc. | $ | 36,869 | $ | 40,408 | $ | 72,063 | $ | 83,402 | |||||||||
Less: Total income available to participating unvested restricted shareholders1 | (1,480 | ) | (1,539 | ) | (2,866 | ) | (3,195 | ) | |||||||||
Total net income attributable to Federated Common Stock2 | $ | 35,389 | $ | 38,869 | $ | 69,197 | $ | 80,207 | |||||||||
Denominator | |||||||||||||||||
Basic weighted-average common shares outstanding | 100,789 | 100,716 | 100,757 | 100,617 | |||||||||||||
Dilutive potential shares from stock options | 1 | 1 | 2 | 1 | |||||||||||||
Diluted weighted-average common shares outstanding | 100,790 | 100,717 | 100,759 | 100,618 | |||||||||||||
Earnings per share | |||||||||||||||||
Net income attributable to Federated Common Stock – Basic and Diluted2 | $ | 0.35 | $ | 0.39 | $ | 0.69 | $ | 0.8 | |||||||||
1 | Income available to participating unvested 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. |
Accumulated_Other_Comprehensiv1
Accumulated Other Comprehensive Income (Loss) Attributable to Federated Investors, Inc. Shareholders (Tables) | 6 Months Ended | |||||||||||||||
Jun. 30, 2014 | ||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ' | |||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | ' | |||||||||||||||
The components of Accumulated other comprehensive income (loss), net of tax attributable to Federated shareholders are as follows: | ||||||||||||||||
(in thousands) | Unrealized Loss | Unrealized | Foreign Currency | Total | ||||||||||||
on Interest Rate Swap1 | Gain on Securities | Translation (Loss) Gain | ||||||||||||||
Available for | ||||||||||||||||
Sale2 | ||||||||||||||||
Balance at December 31, 2012 | $ | (7,071 | ) | $ | 3,644 | $ | 490 | $ | (2,937 | ) | ||||||
Other comprehensive (loss) income before reclassifications and tax | (9 | ) | 2,975 | (461 | ) | 2,505 | ||||||||||
Tax impact | 3 | (1,371 | ) | 160 | (1,208 | ) | ||||||||||
Reclassification adjustments, before tax | 3,334 | (5,218 | ) | 0 | (1,884 | ) | ||||||||||
Tax impact | (1,225 | ) | 2,406 | 0 | 1,181 | |||||||||||
Net current-period other comprehensive income (loss) | 2,103 | (1,208 | ) | (301 | ) | 594 | ||||||||||
Balance at June 30, 2013 | $ | (4,968 | ) | $ | 2,436 | $ | 189 | $ | (2,343 | ) | ||||||
Balance at December 31, 2013 | $ | (3,185 | ) | $ | 1,586 | $ | 391 | $ | (1,208 | ) | ||||||
Other comprehensive (loss) income before reclassifications and tax | (157 | ) | 2,097 | 248 | 2,188 | |||||||||||
Tax impact | 58 | (789 | ) | (86 | ) | (817 | ) | |||||||||
Reclassification adjustments, before tax | 2,922 | (3,005 | ) | 0 | (83 | ) | ||||||||||
Tax impact | (1,089 | ) | 1,131 | 0 | 42 | |||||||||||
Net current-period other comprehensive income (loss) | 1,734 | (566 | ) | 162 | 1,330 | |||||||||||
Balance at June 30, 2014 | $ | (1,451 | ) | $ | 1,020 | $ | 553 | $ | 122 | |||||||
1 | Amounts reclassified from Accumulated other comprehensive income (loss), net of tax were recorded in Debt expense on the Consolidated Statements of Income. | |||||||||||||||
2 | Amounts reclassified from Accumulated other comprehensive income (loss), net of tax were recorded in Gain on securities, net on the Consolidated Statements of Income. |
Concentration_Risk_Narrative_D
Concentration Risk Narrative (Details) (USD $) | 3 Months Ended | 6 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 |
Federated Kaufmann Fund [Member] | Federated Kaufmann Fund [Member] | ||
Revenue Concentration By Investment Fund [Member] | Revenue Concentration By Investment Fund [Member] | ||
Estimated Net Impact On Future Pre-Tax Income | $31 | ' | ' |
Concentration Risk, Percentage | ' | 11.00% | 11.00% |
Concentration_Risk_Schedule_of
Concentration Risk Schedule of Revenue Concentration (Details) (Revenue Concentration by Asset Class [Member]) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Money market assets [Member] | ' | ' |
Concentration Risk [Line Items] | ' | ' |
Concentration Risk, Percentage | 33.00% | 42.00% |
Equity assets [Member] | ' | ' |
Concentration Risk [Line Items] | ' | ' |
Concentration Risk, Percentage | 43.00% | 34.00% |
Fixed-income assets [Member] | ' | ' |
Concentration Risk [Line Items] | ' | ' |
Concentration Risk, Percentage | 23.00% | 23.00% |
Concentration_Risk_Voluntary_F
Concentration Risk Voluntary Fee Waivers (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Millions, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Concentration Risk [Line Items] | ' | ' | ' | ' |
Revenue | ($102.30) | ($91.90) | ($209) | ($179.30) |
Less: Reduction in Distribution expense | 70.2 | 66.9 | 144.5 | 131.7 |
Operating income | -32.1 | -25 | -64.5 | -47.6 |
Less: Reduction in Noncontrolling interest | 2.5 | 1.3 | 5.2 | 2.1 |
Pre-tax impact | ($29.60) | ($23.70) | ($59.30) | ($45.50) |
Variable_Interest_Entities_Nar
Variable Interest Entities Narrative (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Variable Interest Entity [Line Items] | ' | ' |
Federated's net interest in consolidated investment companies | $38.50 | $38.40 |
Accounts Receivable from sponsored investment companies | 12.9 | 13.5 |
Investment Companies [Member] | ' | ' |
Variable Interest Entity [Line Items] | ' | ' |
Total Remaining Carrying Value Of Investment And Maximum Risk Of Loss In Variable Interest Entities | 193.3 | 220.5 |
Unconsolidated VIE assets | $257,600 | $280,300 |
Variable_Interest_Entities_Con
Variable Interest Entities Consolidated Investment Companies (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Variable Interest Entity [Line Items] | ' | ' |
Investmentsbconsolidated investment companies | $55,596,000 | $53,476,000 |
Less: Liabilities | 2,200,000 | 1,600,000 |
Less: Redeemable noncontrolling interest in subsidiaries | 17,302,000 | 15,517,000 |
Federated's net interest in consolidated investment companies | 38,500,000 | 38,400,000 |
Cash and cash equivalents [Member] | ' | ' |
Variable Interest Entity [Line Items] | ' | ' |
Consolidated assets | 1,800,000 | 1,100,000 |
Receivables [Member] | ' | ' |
Variable Interest Entity [Line Items] | ' | ' |
Consolidated assets | $600,000 | $900,000 |
Investments_Narrative_Details
Investments Narrative (Details) (USD $) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | |
Schedule of Investments [Line Items] | ' | ' | ' | ' | ' |
Available-for-sale securities | $141,895,000 | ' | $141,895,000 | ' | $129,413,000 |
Payments to purchase securities available for sale | ' | ' | 52,080,000 | 21,756,000 | ' |
Proceeds from redemptions of securities avaliable for sale | 32,300,000 | 44,100,000 | 41,693,000 | 55,810,000 | ' |
Trading Securities | 60,600,000 | ' | 60,600,000 | ' | 58,300,000 |
Corporate Debt Securities [Member] | ' | ' | ' | ' | ' |
Schedule of Investments [Line Items] | ' | ' | ' | ' | ' |
Trading Securities | 39,300,000 | ' | 39,300,000 | ' | 36,500,000 |
Stocks of large U.S. and international companies [Member] | ' | ' | ' | ' | ' |
Schedule of Investments [Line Items] | ' | ' | ' | ' | ' |
Trading Securities | $16,200,000 | ' | $16,200,000 | ' | $17,000,000 |
Investments_AvailableForSale_S
Investments Available-For-Sale Securities (Details) (USD $) | 6 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Jun. 30, 2014 | Dec. 31, 2013 |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Cost | $140,199 | $126,809 |
Gross Unrealized Gains | 2,136 | 3,209 |
Gross Unrealized Losses | -440 | -605 |
Available-for-sale securities | 141,895 | 129,413 |
Equity Mutual Funds [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Cost | 25,949 | 24,737 |
Gross Unrealized Gains | 1,742 | 2,423 |
Gross Unrealized Losses | 0 | 0 |
Available-for-sale securities | 27,691 | 27,160 |
Fixed-Income Mutual Funds [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Cost | 114,250 | 102,072 |
Gross Unrealized Gains | 394 | 786 |
Gross Unrealized Losses | -440 | -605 |
Available-for-sale securities | $114,204 | $102,253 |
Investments_Gain_on_Securities
Investments Gain on Securities, Net of Investment Income (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||||||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | ||||
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' | ||||
Proceeds from sales of available-for-sale securities | $32,300 | $44,100 | $41,693 | $55,810 | ||||
Gain on securities, net | 2,509 | [1] | 2,351 | [1] | 4,422 | [1] | 5,244 | [1] |
Consolidated Investment Companies [Member] | ' | ' | ' | ' | ||||
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' | ||||
Gain on securities, net | 800 | -500 | 1,100 | -100 | ||||
Trading Securities [Member] | ' | ' | ' | ' | ||||
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' | ||||
Unrealized loss on trading securities | -919 | -467 | -570 | -231 | ||||
Realized gains | 2,148 | [2] | 279 | [2] | 3,101 | [2] | 627 | [2] |
Realized losses | -181 | [2] | -687 | [2] | -1,095 | [2] | -497 | [2] |
Derivatives [Member] | ' | ' | ' | ' | ||||
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' | ||||
Unrealized (loss) gain on derivatives | -89 | [3] | 124 | [3] | -150 | [3] | -156 | [3] |
Realized gains | 95 | [2],[3] | 521 | [2],[3] | 161 | [2],[3] | 598 | [2],[3] |
Realized losses | -22 | [2],[3] | -315 | [2],[3] | -30 | [2],[3] | -315 | [2],[3] |
Available-for-sale Securities [Member] | ' | ' | ' | ' | ||||
Gain (Loss) on Investments [Line Items] | ' | ' | ' | ' | ||||
Realized gains | 1,477 | [2],[4] | 3,835 | [2],[4] | 3,005 | [2],[4] | 6,157 | [2],[4] |
Realized losses | $0 | [2],[4] | ($939) | [2],[4] | $0 | [2],[4] | ($939) | [2],[4] |
[1] | Amounts related to consolidated investment companies totaled $0.8 million and $1.1 million for the three and six months ended JuneB 30, 2014, respectively, and $(0.5) million and $(0.1) million for the three and six months ended JuneB 30, 2013, respectively. | |||||||
[2] | Realized gains and losses are computed on a specific-identification basis. | |||||||
[3] | Amounts related to economic derivatives held by certain consolidated investment companies. | |||||||
[4] | Amounts related to redemptions of available-for-sale securities resulting in proceeds of $32.3 million and $41.7 million for the three and six months ended JuneB 30, 2014, respectively, and $44.1 million and $55.8 million for the three and six months ended JuneB 30, 2013,B respectively. |
Fair_Value_Measurements_Narrat
Fair Value Measurements Narrative (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2013 | Apr. 13, 2017 | Apr. 13, 2017 | Apr. 13, 2017 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 |
Acquisition-related Future Consideration Liabilities [Member] | Acquisition-related Future Consideration Liabilities [Member] | Acquisition-related Future Consideration Liabilities [Member] | Other Current Liabilities [Member] | Other Noncurrent Liabilities [Member] | Money Market Funds [Member] | Money Market Funds [Member] | ||||
Minimum [Member] | Maximum [Member] | Weighted Average [Member] | ||||||||
Cash and cash equivalents | $61,081,000 | $104,443,000 | ' | ' | ' | ' | ' | ' | $50,600,000 | $94,400,000 |
Investments transferred from Level 2 to Level 1 | 2,500,000 | ' | 4,100,000 | ' | ' | ' | ' | ' | ' | ' |
Acquisition-related future consideration liabilities | $5,910,000 | $6,489,000 | ' | ' | ' | ' | $2,900,000 | $3,000,000 | ' | ' |
Fair Value Inputs Estimated Rate of Change for Underlying Assets Under Management | ' | ' | ' | 0.00% | 6.00% | 2.00% | ' | ' | ' | ' |
Fair Value Inputs Estimate of Impact of Fee Waivers | ' | ' | ' | 0.02% | 0.03% | 0.02% | ' | ' | ' | ' |
Fair Value Inputs, Discount Rate | ' | ' | ' | 16.00% | 18.00% | 16.00% | ' | ' | ' | ' |
Fair_Value_Measurements_Classe
Fair Value Measurements Classes of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | ||
In Thousands, unless otherwise specified | ||||
Cash and cash equivalents | $61,081 | $104,443 | ||
Available-for-sale securities | 141,895 | 129,413 | ||
Trading securitiesbequity | 21,348 | 21,831 | ||
Trading securitiesbdebt | 39,271 | 36,491 | ||
Foreign currency forward contracts | 34 | 159 | ||
Total financial assets | 263,629 | 292,337 | ||
Interest rate swap | 2,296 | 5,061 | ||
Acquisition-related future consideration liabilities | 5,910 | 6,489 | ||
Other | 1,769 | [1] | 1,120 | [1] |
Total financial liabilities | 9,975 | 12,670 | ||
Level 1 [Member] | ' | ' | ||
Cash and cash equivalents | 61,081 | 104,443 | ||
Available-for-sale securities | 103,143 | 81,550 | ||
Trading securitiesbequity | 18,779 | 11,925 | ||
Trading securitiesbdebt | 0 | 0 | ||
Foreign currency forward contracts | 0 | 0 | ||
Total financial assets | 183,003 | 197,918 | ||
Interest rate swap | 0 | 0 | ||
Acquisition-related future consideration liabilities | 0 | 0 | ||
Other | 1,755 | [1] | 1,118 | [1] |
Total financial liabilities | 1,755 | 1,118 | ||
Level 2 [Member] | ' | ' | ||
Cash and cash equivalents | 0 | 0 | ||
Available-for-sale securities | 38,752 | 47,863 | ||
Trading securitiesbequity | 2,569 | 9,906 | ||
Trading securitiesbdebt | 39,271 | 36,491 | ||
Foreign currency forward contracts | 34 | 159 | ||
Total financial assets | 80,626 | 94,419 | ||
Interest rate swap | 2,296 | 5,061 | ||
Acquisition-related future consideration liabilities | 0 | 0 | ||
Other | 14 | [1] | 2 | [1] |
Total financial liabilities | 2,310 | 5,063 | ||
Level 3 [Member] | ' | ' | ||
Cash and cash equivalents | 0 | 0 | ||
Available-for-sale securities | 0 | 0 | ||
Trading securitiesbequity | 0 | 0 | ||
Trading securitiesbdebt | 0 | 0 | ||
Foreign currency forward contracts | 0 | 0 | ||
Total financial assets | 0 | 0 | ||
Interest rate swap | 0 | 0 | ||
Acquisition-related future consideration liabilities | 5,910 | 6,489 | ||
Other | 0 | [1] | 0 | [1] |
Total financial liabilities | $5,910 | $6,489 | ||
[1] | Amounts include investments sold short within one of the consolidated investment companies and foreign currency forward contracts recorded within Other current liabilities on the Consolidated Balance Sheets. |
Fair_Value_Measurements_Reconc
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 $) | 3 Months Ended | 6 Months Ended | ||||||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | ||||
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 | $6,489 | $11,711 | $6,489 | $11,759 | ||||
Changes in fair value | -579 | [1] | 1 | [1] | -579 | [1] | -47 | [1] |
Ending balance | $5,910 | $11,712 | $5,910 | $11,712 | ||||
[1] | For all periods presented, the amounts were included as Operating Expenses - Other on the Consolidated Statements of Income. |
Debt_and_Interest_Rate_Swap_Na
Debt and Interest Rate Swap Narrative (Details) (USD $) | 3 Months Ended | 6 Months Ended | |||||||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 24, 2014 | Dec. 31, 2013 | ||||
Term Loan Spread Basis Points | 112.5 | ' | 112.5 | ' | ' | ' | |||
Line of Credit Facility, Maximum Borrowing Capacity | ' | ' | ' | ' | $200,000,000 | ' | |||
Line of Credit Facility, Current Borrowing Capacity | 200,000,000 | ' | 200,000,000 | ' | ' | ' | |||
Line of Credit Facility Facility Fee Basis Points | 12.5 | ' | 12.5 | ' | ' | ' | |||
Line of Credit Facility Spread Basis Points | 100 | ' | 100 | ' | ' | ' | |||
Term Loan, Weighted-Average Interest Rate | 3.52% | [1] | ' | 3.52% | [1] | ' | ' | 3.65% | [2] |
Term Loan Covered by the Swap | 255,000,000 | ' | 255,000,000 | ' | ' | ' | |||
Amortization of the Swap | 63,800,000 | ' | 63,800,000 | ' | ' | ' | |||
Liability on swap agreement | 2,296,000 | ' | 2,296,000 | ' | ' | 5,061,000 | |||
Amount of swap liability to be reclassified during next twelve months | 2,300,000 | ' | 2,300,000 | ' | ' | ' | |||
Amount of swap liability reclassified during the period | 1,400,000 | 1,600,000 | 2,900,000 | 3,300,000 | ' | ' | |||
Other Current Liabilities [Member] | ' | ' | ' | ' | ' | ' | |||
Liability on swap agreement | 2,300,000 | ' | 2,300,000 | ' | ' | ' | |||
Borrowings Under Credit Agreement At Date Of Amendment [Member] | ' | ' | ' | ' | ' | ' | |||
Borrowings Under Credit Agreement | ' | ' | ' | ' | 255,000,000 | ' | |||
Term loan quarterly payment first four years | ' | ' | ' | ' | ' | ' | |||
Required principal payments | ' | ' | 6,400,000 | ' | ' | ' | |||
Term loan quarterly payment year five | ' | ' | ' | ' | ' | ' | |||
Required principal payments | ' | ' | 36,700,000 | ' | ' | ' | |||
Debt instrument payment due upon expiration | ' | ' | ' | ' | ' | ' | |||
Required principal payments | ' | ' | $36,700,000 | ' | ' | ' | |||
[1] | As of JuneB 30, 2014. See additional information below regarding the interest rate fixed at 3.521% in connection with the Swap. | ||||||||
[2] | As of DecemberB 31, 2013. |
Debt_and_Interest_Rate_Swap_De
Debt and Interest Rate Swap Debt (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | ||
In Thousands, unless otherwise specified | ||||
Debt And Interest Rate Swap [Abstract] | ' | ' | ||
Term Loan, Weighted-Average Interest Rate | 3.52% | [1] | 3.65% | [2] |
Term Loan | $255,000 | $276,250 | ||
Less: Short-term debt | 25,500 | 77,917 | ||
Long-term debt | $229,500 | $198,333 | ||
[1] | As of JuneB 30, 2014. See additional information below regarding the interest rate fixed at 3.521% in connection with the Swap. | |||
[2] | As of DecemberB 31, 2013. |
ShareBased_Compensation_Plans_
Share-Based Compensation Plans (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | |
Restricted Stock Granted in Period | ' | ' | 586,931 | 989,050 |
Stock Options, Issued in Period | ' | ' | 0 | 0 |
Stock Options, Exercises in Period | ' | ' | 0 | 0 |
Shares of Federated Class B Common Stock to Non-Management Directors | 5,100 | 5,100 | ' | ' |
Class B Common Stock Bonus [Member] | ' | ' | ' | ' |
Restricted Stock Granted in Period | ' | ' | ' | 474,050 |
Restricted stock requisite service period | ' | ' | '3 years | ' |
Class B Common Stock Key Employees [Member] | ' | ' | ' | ' |
Restricted stock requisite service period | ' | ' | ' | '10 years |
Equity_Details
Equity (Details) (USD $) | 6 Months Ended | |||
In Thousands, except Share data in Millions, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Dec. 31, 2008 |
Class B [Member] | Class B [Member] | |||
Number of shares authorized under share repurchase program | ' | ' | ' | 5 |
Repurchased shares | 0.5 | ' | ' | ' |
Amount paid for repurchase of common stock | $13,438 | $5,486 | ' | ' |
Remaining number of shares authorized to be repurchased | ' | ' | 0.9 | ' |
Earnings_Per_Share_Attributabl2
Earnings Per Share Attributable to Federated Investors, Inc. Shareholders Narrative (Details) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 |
Earnings Per Share [Abstract] | ' | ' | ' | ' |
Stock option awards excluded from calculation of diluted EPS | 27 | 44 | 27 | 49 |
Earnings_Per_Share_Attributabl3
Earnings Per Share Attributable to Federated Investors, Inc. Shareholders Computation of Basic and Diluted Earnings Per Share (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||||||
In Thousands, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | ||||
Net income attributable to Federated Investors, Inc. | $36,869 | $40,408 | $72,063 | $83,402 | ||||
Less: Total income available to participating unvested restricted shareholders | -1,480 | [1] | -1,539 | [1] | -2,866 | [1] | -3,195 | [1] |
Total net income attributable to Federated Common Stock (Basic) | 35,389 | [2] | 38,869 | [2] | 69,197 | [2] | 80,207 | [2] |
Total net income attributable to Federated Common Stock (Diluted) | $35,389 | [2] | $38,869 | [2] | $69,197 | [2] | $80,207 | [2] |
Basic weighted-average common shares outstanding | 100,789 | 100,716 | 100,757 | 100,617 | ||||
Dilutive potential shares from stock options | 1 | 1 | 2 | 1 | ||||
Diluted weighted-average common shares outstanding | 100,790 | 100,717 | 100,759 | 100,618 | ||||
Net income attributable to Federated Common Stock - Basic and Diluted | $0.35 | [2] | $0.39 | [2] | $0.69 | [2] | $0.80 | [2] |
[1] | Income available to participating unvested 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. |
Commitments_and_Contingencies_
Commitments and Contingencies (Details) (USD $) | 3 Months Ended | 3 Months Ended | 17 Months Ended | 3 Months Ended | 25 Months Ended | |||||||||||||||||||
Jun. 30, 2014 | Dec. 31, 2008 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Sep. 30, 2010 | Nov. 26, 2015 | Jun. 30, 2014 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2012 | Mar. 31, 2011 | Mar. 31, 2010 | Dec. 31, 2008 | Jan. 31, 2014 | Dec. 01, 2008 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | |
SunTrust Acquisition [Member] | SunTrust Acquisition [Member] | SunTrust Acquisition [Member] | SunTrust Acquisition [Member] | SunTrust Acquisition [Member] | SunTrust Acquisition [Member] | Clover Capital Acquisition [Member] | Clover Capital Acquisition [Member] | Clover Capital Acquisition [Member] | Clover Capital Acquisition [Member] | Clover Capital Acquisition [Member] | Clover Capital Acquisition [Member] | Clover Capital Acquisition [Member] | Clover Capital Acquisition [Member] | Series of Individually Immaterial Business Acquisitions [Member] | Other Current Liabilities [Member] | Other Current Liabilities [Member] | Other Current Liabilities [Member] | Other Noncurrent Liabilities [Member] | Other Noncurrent Liabilities [Member] | Other Noncurrent Liabilities [Member] | ||||
SunTrust Acquisition [Member] | Series of Individually Immaterial Business Acquisitions [Member] | SunTrust Acquisition [Member] | Series of Individually Immaterial Business Acquisitions [Member] | |||||||||||||||||||||
Business Acquisition Contingent Consideration Payable Period | ' | ' | ' | ' | ' | ' | '5 years | ' | ' | ' | ' | ' | ' | ' | '5 years | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Contingent purchase price payments | ' | ' | ' | $3,800,000 | $4,200,000 | $5,000,000 | ' | ' | ' | $9,200,000 | $3,400,000 | $5,900,000 | $0 | $0 | ' | $18,000,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Estimated remaining contingent payments | ' | ' | ' | ' | ' | ' | ' | ' | 4,000,000 | ' | ' | ' | ' | ' | ' | ' | 55,000,000 | ' | ' | ' | ' | ' | ' | ' |
Remaining Business Acquisitions Contingent Consideration | ' | ' | ' | ' | ' | ' | ' | '2 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fair value of future consideration payments liability | 5,910,000 | ' | 6,489,000 | ' | ' | ' | ' | ' | 3,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | 2,100,000 | 2,900,000 | 2,100,000 | 800,000 | 3,000,000 | 1,700,000 | 1,300,000 |
Maximum performance incentive payable over remaining terms | 32,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Employee Incentive Compensation Fund Bonus Payable Succeeding Fiscal Year | 2,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Business Acquisition Cost Of Acquired Entity Upfront Cash Paid | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 30,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Prior Business Acquisition Required Compound Annual Growth Rate | ' | 30.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Alleged damages sought | $37,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Accumulated_Other_Comprehensiv2
Accumulated Other Comprehensive Income (Loss) Attributable to Federated Investors, Inc. Shareholders (Details) (USD $) | 6 Months Ended | |||
In Thousands, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | ||
Accumulated other comprehensive (loss) income, net of tax | ($1,208) | ($2,937) | ||
Other comprehensive (loss) income, before reclassifications and tax | 2,188 | 2,505 | ||
Other comprehensive (loss) income, before reclassifications, tax total | -817 | -1,208 | ||
Reclassification adjustments, before tax | -83 | -1,884 | ||
Reclassification adjustment, tax total | 42 | 1,181 | ||
Net current-period other comprehensive income (loss) | 1,330 | 594 | ||
Accumulated other comprehensive income (loss), net of tax | 122 | -2,343 | ||
Accumulated Net Loss from Designated or Qualifying Cash Flow Hedges [Member] | ' | ' | ||
Accumulated other comprehensive (loss) income, net of tax | -3,185 | [1] | -7,071 | [1] |
Other comprehensive (loss) income, before reclassifications and tax | -157 | [1] | -9 | [1] |
Other comprehensive (loss) income, before reclassifications, tax total | 58 | [1] | 3 | [1] |
Reclassification adjustments, before tax | 2,922 | [1] | 3,334 | [1] |
Reclassification adjustment, tax total | -1,089 | [1] | -1,225 | [1] |
Net current-period other comprehensive income (loss) | 1,734 | [1] | 2,103 | [1] |
Accumulated other comprehensive income (loss), net of tax | -1,451 | [1] | -4,968 | [1] |
Accumulated Net Unrealized Investment Gain (Loss) [Member] | ' | ' | ||
Accumulated other comprehensive (loss) income, net of tax | 1,586 | [2] | 3,644 | [2] |
Other comprehensive (loss) income, before reclassifications and tax | 2,097 | [2] | 2,975 | [2] |
Other comprehensive (loss) income, before reclassifications, tax total | -789 | [2] | -1,371 | [2] |
Reclassification adjustments, before tax | -3,005 | [2] | -5,218 | [2] |
Reclassification adjustment, tax total | 1,131 | [2] | 2,406 | [2] |
Net current-period other comprehensive income (loss) | -566 | [2] | -1,208 | [2] |
Accumulated other comprehensive income (loss), net of tax | 1,020 | [2] | 2,436 | [2] |
Accumulated Translation Adjustment [Member] | ' | ' | ||
Accumulated other comprehensive (loss) income, net of tax | 391 | 490 | ||
Other comprehensive (loss) income, before reclassifications and tax | 248 | -461 | ||
Other comprehensive (loss) income, before reclassifications, tax total | -86 | 160 | ||
Reclassification adjustments, before tax | 0 | 0 | ||
Reclassification adjustment, tax total | 0 | 0 | ||
Net current-period other comprehensive income (loss) | 162 | -301 | ||
Accumulated other comprehensive income (loss), net of tax | $553 | $189 | ||
[1] | Amounts reclassified from Accumulated other comprehensive income (loss), net of tax were recorded in Debt expense on the Consolidated Statements of Income. | |||
[2] | Amounts reclassified from Accumulated other comprehensive income (loss), net of tax were recorded in Gain on securities, net on the Consolidated Statements of Income. |
Subsequent_Events_Details
Subsequent Events (Details) (USD $) | Jul. 24, 2014 |
Dividend declared | $0.25 |