Exhibit 99.1
| | |
| | Press Release |
Federated Investors, Inc. Reports Second Quarter 2004 Earnings
| | • | Diluted Earnings Per Share Increases to $0.46, up 5% Compared to Q2 2003 |
| | • | Equity Assets Reach Record High of $26.6 Billion |
| | • | Quarterly Dividend of $0.102 Per Share Declared |
(PITTSBURGH, PA, July 26, 2004) – Federated Investors, Inc. (NYSE: FII), one of the nation’s largest investment management companies, today reported earnings per diluted share (EPS) of $0.46 for the quarter ended June 30, 2004, an increase of five percent from $0.44 per share for Q2 2003 and equal to EPS of $0.46 reported for Q1 2004. Federated reported YTD 2004 EPS of $0.92 compared to $0.87 for the first six months of 2003. Net income for Q2 2004 was $50.6 million compared to net income of $49.1 million for Q2 2003. For the six months ended June 30, 2004, net income was $102.4 million compared to $97.8 million for the same period in 2003.
Federated’s Q2 2004 net income includes expenses of $5.0 million associated with various legal, regulatory and compliance matters. Of this amount, $2.9 million represents additional costs for the company’s internal review of past mutual fund trading practices and $2.1 million for expenses including: legal fees from ongoing related lawsuits, legal fees for responses to additional regulatory requests for information, costs associated with the sale of Federated’s transfer agency business, new compliance-related costs and other related expenses.
Federated’s assets under management were $183.8 billion at June 30, 2004, down nine percent from $202.4 billion at June 30, 2003, and down five percent from the $193.9 billion reported at March 31, 2004. Average managed assets for the quarter were $190.5 billion, $8.9 billion lower than the $199.4 billion reported for Q2 2003 and $9.6 billion lower than the $200.1 billion in average managed assets reported for Q1 2004.
“Federated’s diverse revenue stream during the second quarter demonstrates the value of our broad product mix,” said J. Christopher Donahue, president and CEO. “As the anticipation and occurrence of a rising rate environment challenged the fixed-income market, and in particular money markets, Federated continued to grow equity assets and increase revenue over last year.”
| | | | |
Contacts: | | | | |
| | |
MEDIA | | MEDIA | | ANALYSTS |
Meghan McAndrew | | J.T. Tuskan | | Ray Hanley |
(412) 288-8103 | | (412) 288-7895 | | (412) 288-1920 |
mmcandrew@federatedinv.com | | jtuskan@federatedinv.com | | rhanley@federatedinv.com |
Federated Reports Q2 2004 Earnings
July 26, 2004
Page 2 of 11
The company also announced today that its board of directors declared a quarterly dividend of $0.102 per share. This dividend is payable on August 13, 2004, to shareholders of record as of August 6, 2004. Federated continued its share buyback program in the second quarter by purchasing 1,403,000 shares of Federated Investors, Inc. class B common stock for $41.3 million in the open market.
Through its mutual funds and separate accounts, Federated managed $52.5 billion in equity and fixed-income assets as of June 30, 2004, up $1.5 billion or three percent from Q2 2003 and down $3.4 billion or six percent from Q1 2004. Equity assets ended the quarter at a record high of $26.6 billion, up $5.8 billion or 28 percent from Q2 2003 and up slightly from Q1 2004. Fixed-income assets ended the quarter at $25.9 billion, down $4.3 billion or 14 percent from Q2 2003 and down $3.6 billion or 12 percent from the end of Q1 2004.
Federated’s equity mutual fund sales continued to be positive at $22 million on a net basis from $1.4 billion on a gross basis for Q2 2004. The company continued to produce strong flows into the Federated Kaufmann Fund, Federated Kaufmann Small Cap Fund and Federated Market Opportunity Fund during the quarter. Federated’s fixed-income mutual funds had net redemptions of $1.8 billion for the quarter.
Consistent with industry trends, and due largely to the rise in market interest rates in anticipation of a rate increase by the Federal Reserve during the period, Federated’s money market assets declined from both the prior quarter and on a year-over-year basis. Money market assets in both funds and separate accounts totaled $131.4 billion at June 30, 2004, down $20.0 billion or 13 percent from Q2 2003 and down $6.6 billion or five percent from Q1 2004. Average money market assets in both funds and separate accounts totaled $137.0 billion for Q2 2004, down $13.3 billion or nine percent from Q2 2003 and down $7.1 billion or five percent from Q1 2004.
Financial Highlights
For the quarter ended June 30, 2004, total revenue increased nine percent to $213.1 million from the same period in 2003. For Q2 2004, Federated derived 40 percent of its revenue from money market assets, 36 percent from equity assets, 19 percent from fixed-income assets and five percent from other products. Total revenue for the first half of 2004 increased 13 percent to $433.8 million from $383.1 million for the first half of 2003. Operating expenses increased 11 percent for Q2 2004 to $129.9 million from $117.0 million for Q2 2003. For the first half of 2004, operating expenses increased 16 percent to $262.3 million compared to $226.6 million for the same period last year.
Increases in revenue, operating expense and debt expense—nonrecourse include the result of applying financing treatment in 2004 to account for all B-share distribution-related funding arrangements. The impact of financing treatment in Q2 2004 was approximately $12.2 million of additional revenue, $9.2 million of additional operating expense and $4.3 million of additional debt expense—nonrecourse. For YTD 2004, the impact of financing treatment was approximately $25.0 million of additional
Federated Reports Q2 2004 Earnings
July 26, 2004
Page 3 of 11
revenue, $18.7 million of additional operating expense and $8.8 million of additional debt expense—nonrecourse. As a result of contractual changes in 2004, the increases in Federated’s revenue and operating income were partially offset by the elimination of portfolio accounting revenue and expenses related to Federated-sponsored funds. Second quarter and the first six months of 2003 included $4.1 million and $8.2 million, respectively, of revenue and $3.4 million and $6.8 million respectively, of operating expenses that, due to the portfolio accounting contract changes, are no longer recorded effective for Q1 2004. Refer to the Unaudited Condensed Consolidated Statements of Income contained herein for the specific line items affected.
Federated’s financial results also reflect the sale of Federated’s mutual fund transfer agency business to Boston Financial Data Services and have reclassified the results of this activity as discontinued operations. Federated’s income from discontinued operations, net of tax, was $0.02 per diluted share for the first half of 2004. Federated’s arrangement with Boston Financial allows the firm to concentrate on its core competencies—providing competitive investment results, powerful product distribution and top-quality customer service. Included in this release are statements of income showing the impact of the discontinued operations on the results for the four quarters of 2003 and the years 2003, 2002, 2001.
Federated will host an earnings conference call at 9 a.m. Eastern on Tuesday, July 27, 2004. Investors are invited to listen to Federated’s Q2 earnings teleconference by calling 888-412-9259 (domestic) or 706-679-0848 (international) prior to the 9 a.m. Eastern start time. The call may also be accessed in real time on the Internet via theAbout Us section ofwww.federatedinvestors.com. A replay will be available after 1 p.m. and until August 3, 2004, by calling 800-642-1687 (domestic) or 706-645-9291 (international) and entering code 8350746.
Federated Investors, Inc. is one of the largest investment managers in the United States, managing $183.8 billion in assets as of June 30, 2004. With more than 135 mutual funds, various separately managed accounts and closed-end funds, Federated provides comprehensive investment management to more than 5,800 institutions and intermediaries including corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Federated ranks in the top two percent of money market fund managers in the industry, the top four percent of fixed-income fund managers and the top six percent of equity fund managers1.
###
| 1. | Strategic Insight, May 2004. Based on assets in open-end funds. |
Certain statements in this press release, such as those related to the value of a broad product mix and a concentration on core competencies, constitute forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that may cause the actual results, levels of activity, performance, or achievements of the company, or industry results, to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Such factors
Federated Reports Q2 2004 Earnings
July 26, 2004
Page 4 of 11
include those discussed in the company’s annual and quarterly reports as filed with the Securities and Exchange Commission. Many of these factors may be more likely to occur as a result of the ongoing threat of terrorism. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither the company nor any other person assumes responsibility for the accuracy and completeness of such statements in the future.
For more complete information on Federated funds, please visitwww.federatedinvestors.com for prospectuses. You should consider the fund’s investment objectives, risks, charges, and expenses carefully before you invest. Information about these and other important subjects is in the fund’s prospectus, which investors should read carefully before investing.
Federated Securities Corp., Distributor of the Federated funds. Separately managed accounts available through Federated Investment Counseling, a registered investment advisor.
Federated Reports Q2 2004 Earnings
July 26, 2004
Page 5 of 11
Unaudited Condensed Consolidated Statements of Income1
(in thousands, except per share data)
| | | | | | | | | | | | | | | | | | |
| | | Quarter Ended June 30,
| | | % Change
Q2 2003 to
Q2 2004
| | | Quarter
Ended March 31,
2004
| | | % Change
Q1 2004 to
Q2 2004
| |
| | | 2004
| | | 2003
| | | | |
Revenue | | | | | | | | | | | | | | | | | | |
Investment advisory fees, net | | $ | 137,137 | | | $ | 129,348 | | | 6 | % | | $ | 141,565 | | | (3 | )% |
Administrative service fees, net | | | 34,543 | | | | 35,956 | | | (4 | ) | | | 35,739 | | | (3 | ) |
Other service fees, net2 | | | 39,624 | | | | 28,395 | | | 40 | | | | 41,473 | | | (4 | ) |
Other, net | | | 1,780 | | | | 2,036 | | | (13 | ) | | | 1,903 | | | (6 | ) |
| | |
|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
Total Revenue | | | 213,084 | | | | 195,735 | | | 9 | | | | 220,680 | | | (3 | ) |
| | |
|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
Operating Expenses | | | | | | | | | | | | | | | | | | |
Compensation and related | | | 41,852 | | | | 43,297 | | | (3 | ) | | | 46,273 | | | (10 | ) |
General and administrative | | | | | | | | | | | | | | | | | | |
Marketing and distribution | | | 40,544 | | | | 37,851 | | | 7 | | | | 41,499 | | | (2 | ) |
Professional service fees2 | | | 10,206 | | | | 8,261 | | | 24 | | | | 8,839 | | | 15 | |
Office and occupancy | | | 5,660 | | | | 5,953 | | | (5 | ) | | | 4,966 | | | 14 | |
Systems and communications | | | 4,761 | | | | 5,127 | | | (7 | ) | | | 5,153 | | | (8 | ) |
Advertising and promotional | | | 4,277 | | | | 4,222 | | | 1 | | | | 3,788 | | | 13 | |
Travel and related | | | 3,184 | | | | 3,216 | | | (1 | ) | | | 2,515 | | | 27 | |
Other | | | 2,774 | | | | 3,049 | | | (9 | ) | | | 2,410 | | | 15 | |
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|
|
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|
| |
|
|
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|
Total general and administrative | | | 71,406 | | | | 67,679 | | | 6 | | | | 69,170 | | | 3 | |
Amortization of deferred sales commissions2 | | | 13,964 | | | | 3,404 | | | 310 | | | | 14,313 | | | (2 | ) |
Amortization of intangible assets | | | 2,692 | | | | 2,610 | | | 3 | | | | 2,659 | | | 1 | |
| | |
|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
Total Operating Expenses | | | 129,914 | | | | 116,990 | | | 11 | | | | 132,415 | | | (2 | ) |
| | |
|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
Operating Income | | | 83,170 | | | | 78,745 | | | 6 | | | | 88,265 | | | (6 | ) |
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|
|
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|
|
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|
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|
|
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|
|
Nonoperating Income (Expenses) | | | | | | | | | | | | | | | | | | |
Investment income, net | | | 633 | | | | 382 | | | 66 | | | | 693 | | | (9 | ) |
Debt expense — recourse | | | (90 | ) | | | (124 | ) | | (27 | ) | | | (92 | ) | | (2 | ) |
Debt expense — nonrecourse2 | | | (5,246 | ) | | | (1,065 | ) | | 393 | | | | (5,446 | ) | | (4 | ) |
Other, net | | | (34 | ) | | | (102 | ) | | (67 | ) | | | (89 | ) | | (62 | ) |
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|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
Total Nonoperating Expenses, net | | | (4,737 | ) | | | (909 | ) | | 421 | | | | (4,934 | ) | | (4 | ) |
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|
|
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|
|
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|
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|
|
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|
|
Minority interest | | | 2,478 | | | | 2,578 | | | (4 | ) | | | 2,511 | | | (1 | ) |
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|
|
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|
|
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|
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|
|
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|
|
Income from continuing operations before income taxes | | | 75,955 | | | | 75,258 | | | 1 | | | | 80,820 | | | (6 | ) |
Income tax provision | | | 27,306 | | | | 27,048 | | | 1 | | | | 29,633 | | | (8 | ) |
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|
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|
Income from continuing operations | | | 48,649 | | | | 48,210 | | | 1 | | | | 51,187 | | | (5 | ) |
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|
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|
|
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|
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|
|
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|
|
Discontinued operations, net of tax | | | 2,000 | | | | 850 | | | 135 | | | | 546 | | | 266 | |
| | |
|
|
| |
|
|
| |
|
| |
|
|
| |
|
|
Net Income | | $ | 50,649 | | | $ | 49,060 | | | 3 | % | | $ | 51,733 | | | (2 | )% |
| | |
|
|
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|
|
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|
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|
|
| |
|
|
Earnings Per Share—Basic | | | | | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.45 | | | $ | 0.45 | | | — | | | $ | 0.47 | | | (4 | )% |
Income from discontinued operations | | $ | 0.02 | | | $ | 0.01 | | | 100 | % | | $ | 0.01 | | | 100 | % |
Net Income | | $ | 0.47 | | | $ | 0.46 | | | 2 | % | | $ | 0.48 | | | (2 | )% |
| | |
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|
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|
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|
Earnings Per Share—Diluted | | | | | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.44 | | | $ | 0.43 | | | 2 | % | | $ | 0.46 | | | (4 | )% |
Income from discontinued operations | | $ | 0.02 | | | $ | 0.01 | | | 100 | % | | $ | 0.00 | | | — | |
Net Income | | $ | 0.46 | | | $ | 0.44 | | | 5 | % | | $ | 0.46 | | | — | |
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|
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|
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|
|
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|
Weighted-average shares outstanding | | | | | | | | | | | | | | | | | | |
Basic | | | 107,654 | | | | 107,307 | | | | | | | 108,397 | | | | |
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|
|
| |
|
|
| | | | |
|
|
| | | |
Diluted | | | 110,919 | | | | 111,703 | | | | | | | 111,945 | | | | |
| | |
|
|
| |
|
|
| | | | |
|
|
| | | |
Dividends declared per share | | $ | 0.102 | | | $ | 0.070 | | | | | | $ | 0.085 | | | | |
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|
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| | | | |
|
|
| | | |
| * | Please see the accompanying Notes numbered One and Two. |
Federated Reports Q2 2004 Earnings
July 26, 2004
Page 6 of 11
Unaudited Condensed Consolidated Statements of Income1
(in thousands, except per share data)
| | | | | | | | | | | |
| | | Six Months Ended June 30,
| | | % Change
| |
| | | 2004
| | | 2003
| | |
Revenue | | | | | | | | | | | |
Investment advisory fees, net | | $ | 278,703 | | | $ | 253,407 | | | 10 | % |
Administrative service fees, net | | | 70,281 | | | | 71,704 | | | (2 | ) |
Other service fees, net3 | | | 81,097 | | | | 54,371 | | | 49 | |
Other, net | | | 3,683 | | | | 3,617 | | | 2 | |
| | |
|
|
| |
|
|
| |
|
|
Total Revenue | | | 433,764 | | | | 383,099 | | | 13 | |
| | |
|
|
| |
|
|
| |
|
|
Operating Expenses | | | | | | | | | | | |
Compensation and related | | | 88,125 | | | | 82,280 | | | 7 | |
General and administrative | | | | | | | | | | | |
Marketing and distribution | | | 82,043 | | | | 74,352 | | | 10 | |
Professional service fees3 | | | 19,045 | | | | 16,304 | | | 17 | |
Office and occupancy | | | 10,626 | | | | 12,276 | | | (13 | ) |
Systems and communications | | | 9,914 | | | | 10,252 | | | (3 | ) |
Advertising and promotional | | | 8,065 | | | | 8,116 | | | (1 | ) |
Travel and related | | | 5,699 | | | | 6,017 | | | (5 | ) |
Other | | | 5,184 | | | | 5,142 | | | 1 | |
| | |
|
|
| |
|
|
| |
|
|
Total general and administrative | | | 140,576 | | | | 132,459 | | | 6 | |
Amortization of deferred sales commissions3 | | | 28,277 | | | | 6,642 | | | 326 | |
Amortization of intangible assets | | | 5,351 | | | | 5,217 | | | 3 | |
| | |
|
|
| |
|
|
| |
|
|
Total Operating Expenses | | | 262,329 | | | | 226,598 | | | 16 | |
| | |
|
|
| |
|
|
| |
|
|
Operating Income | | | 171,435 | | | | 156,501 | | | 10 | |
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|
|
| |
|
|
| |
|
|
Nonoperating Income (Expenses) | | | | | | | | | | | |
Investment income, net | | | 1,326 | | | | 825 | | | 61 | |
Debt expense — recourse | | | (182 | ) | | | (252 | ) | | (28 | ) |
Debt expense — nonrecourse3 | | | (10,692 | ) | | | (2,121 | ) | | 404 | |
Other, net | | | (123 | ) | | | (103 | ) | | 19 | |
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|
|
| |
|
|
| |
|
|
Total Nonoperating Expenses, net | | | (9,671 | ) | | | (1,651 | ) | | 486 | |
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|
|
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|
|
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|
|
Minority interest | | | 4,989 | | | | 5,096 | | | (2 | ) |
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|
|
| |
|
|
| |
|
|
Income from continuing operations before income taxes | | | 156,775 | | | | 149,754 | | | 5 | |
Income tax provision | | | 56,939 | | | | 53,550 | | | 6 | |
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|
|
| |
|
|
| |
|
|
Income from continuing operations | | | 99,836 | | | | 96,204 | | | 4 | |
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|
|
| |
|
|
| |
|
|
Discontinued operations, net of tax | | | 2,546 | | | | 1,567 | | | 62 | |
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|
|
| |
|
|
| |
|
|
Net Income | | $ | 102,382 | | | $ | 97,771 | | | 5 | % |
| | |
|
|
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|
|
| |
|
|
Earnings Per Share—Basic | | | | | | | | | | | |
Income from continuing operations | | $ | 0.92 | | | $ | 0.89 | | | 3 | % |
Income from discontinued operations | | $ | 0.02 | | | $ | 0.01 | | | 100 | % |
Net Income** | | $ | 0.95 | | | $ | 0.90 | | | 6 | % |
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|
|
Earnings Per Share—Diluted | | | | | | | | | | | |
Income from continuing operations | | $ | 0.90 | | | $ | 0.85 | | | 6 | % |
Income from discontinued operations | | $ | 0.02 | | | $ | 0.01 | | | 100 | % |
Net Income** | | $ | 0.92 | | | $ | 0.87 | | | 6 | % |
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| |
|
|
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|
Weighted-average shares outstanding | | | | | | | | | | | |
Basic | | | 108,025 | | | | 108,490 | | | | |
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|
|
| |
|
|
| | | |
Diluted | | | 111,432 | | | | 112,831 | | | | |
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| | | |
Dividends declared per share | | $ | 0.187 | | | $ | 0.127 | | | | |
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| * | Please see the accompanying Notes numbered One and Three. |
| ** | May not sum due to rounding. |
Federated Reports Q2 2004 Earnings
July 26, 2004
Page 7 of 11
Notes
| 1) | Current and prior period financial results reflect the sale of Federated’s mutual fund transfer agency business to Boston Financial Data Services as discontinued operations. |
| 2) | Due to the application of financing treatment in 2004 to account for all B-share funding arrangements, Q2 2004 “Other service fees, net” includes $12.2 million of additional B-share-related distribution revenue, “Amortization of deferred sales commissions” includes $9.2 million of additional amortization expense and “Debt expense—nonrecourse” includes $4.3 million of additional debt expense that were not present in Q2 2003. Due to portfolio accounting contractual changes effective for 2004, Q2 2003 “Other service fees, net” includes $4.1 million of portfolio accounting revenue and “Professional service fees” includes $3.4 million of related expenses that were not incurred in 2004. |
| 3) | Due to the application of financing treatment in 2004 to account for all B-share funding arrangements for the first half of 2004, “Other service fees, net” includes $25.0 million of additional B-share-related distribution revenue, “Amortization of deferred sales commissions” includes $18.7 million of additional amortization expense and “Debt expense—nonrecourse” includes $8.8 million of additional debt expense that were not present in the first half of 2003. Due to portfolio accounting contractual changes effective for 2004, for the first half of 2004 “Other service fees, net” includes $8.2 million of portfolio accounting revenue and “Professional service fees” includes $6.8 million of related expenses that were not incurred in 2004. |
Federated Reports Q2 2004 Earnings
July 26, 2004
Page 8 of 11
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
| | | | | | | | |
| | | June 30, 2004
| | | Dec. 31, 2003
| |
Assets | | | | | | | | |
Cash and other short-term investments | | $ | 191,528 | | | $ | 233,990 | |
Other current assets | | | 74,161 | | | | 57,342 | |
Deferred sales commissions, net | | | 309,092 | | | | 327,717 | |
Intangible assets, net | | | 286,569 | | | | 226,268 | |
Other long-term assets | | | 35,067 | | | | 33,911 | |
| | |
|
|
| |
|
|
|
Total Assets | | $ | 896,417 | | | $ | 879,228 | |
| | |
|
|
| |
|
|
|
Liabilities, Minority Interest and Shareholders’ Equity | | | | | | | | |
Current liabilities | | $ | 116,271 | | | $ | 130,401 | |
Long-term debt—recourse | | | 103 | | | | 542 | |
Long-term debt—nonrecourse | | | 301,583 | | | | 327,142 | |
Other long-term liabilities and minority interest | | | 30,406 | | | | 25,290 | |
Shareholders’ equity excluding treasury stock | | | 944,169 | | | | 841,006 | |
Treasury stock | | | (496,115 | ) | | | (445,153 | ) |
| | |
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| |
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|
|
Total Liabilities, Minority Interest and Shareholders’ Equity | | $ | 896,417 | | | $ | 879,228 | |
| | |
|
|
| |
|
|
|
Changes in Equity and Fixed-Income Fund Managed Assets
(in millions)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended June 30,
| | | Six Months Ended
June 30,
| |
| | | 2004
| | | 2003
| | | 2004
| | | 2003
| |
Equity Funds | | | | | | | | | | | | | | | | |
Beginning Assets | | $ | 23,994 | | | $ | 15,606 | | | $ | 22,817 | | | $ | 16,240 | |
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|
|
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|
Sales | | | 1,422 | | | | 1,444 | | | | 3,385 | | | | 2,949 | |
Redemptions | | | (1,400 | ) | | | (1,331 | ) | | | (2,933 | ) | | | (2,665 | ) |
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Net sales | | | 22 | | | | 113 | | | | 452 | | | | 284 | |
Net exchanges | | | 49 | | | | 50 | | | | 113 | | | | 41 | |
Other* | | | 9 | | | | 2,894 | | | | 692 | | | | 2,098 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Ending Assets | | $ | 24,074 | | | $ | 18,663 | | | $ | 24,074 | | | $ | 18,663 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Fixed-Income Funds | | | | | | | | | | | | | | | | |
Beginning Assets | | $ | 23,824 | | | $ | 23,769 | | | $ | 24,004 | | | $ | 22,169 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Sales | | | 1,884 | | | | 3,824 | | | | 4,508 | | | | 8,296 | |
Redemptions | | | (3,713 | ) | | | (3,344 | ) | | | (6,758 | ) | | | (6,330 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Net (redemptions) sales | | | (1,829 | ) | | | 480 | | | | (2,250 | ) | | | 1,966 | |
Net exchanges | | | (171 | ) | | | (89 | ) | | | (195 | ) | | | (273 | ) |
Other* | | | (351 | ) | | | 549 | | | | (86 | ) | | | 847 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Ending Assets | | $ | 21,473 | | | $ | 24,709 | | | $ | 21,473 | | | $ | 24,709 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| * | Includes changes in the market value of securities held by the funds, reinvested dividends and distributions and net investment income. |
Federated Reports Q2 2004 Earnings
July 26, 2004
Page 9 of 11
(in millions)
| | | | | | | | | | | | | | | |
MANAGED ASSETS
| | June 30, 2004
| | March 31, 2004
| | Dec. 31, 2003
| | Sept. 30, 2003
| | June 30, 2003
|
By Asset Class | | | | | | | | | | | | | | | |
Equity | | $ | 26,598 | | $ | 26,399 | | $ | 25,627 | | $ | 22,354 | | $ | 20,786 |
Fixed-income | | | 25,858 | | | 29,498 | | | 29,517 | | | 29,421 | | | 30,169 |
Money market | | | 131,385 | | | 138,005 | | | 142,773 | | | 142,294 | | | 151,398 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Total Managed Assets | | $ | 183,841 | | $ | 193,902 | | $ | 197,917 | | $ | 194,069 | | $ | 202,353 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
By Market | | | | | | | | | | | | | | | |
Trust | | $ | 91,507 | | $ | 91,951 | | $ | 96,131 | | $ | 93,685 | | $ | 100,350 |
Broker/dealer* | | | 45,570 | | | 47,982 | | | 48,023 | | | 46,912 | | | 46,449 |
Institutional* | | | 24,418 | | | 28,220 | | | 30,330 | | | 30,994 | | | 31,740 |
International | | | 2,486 | | | 2,658 | | | 2,452 | | | 2,219 | | | 2,240 |
Other | | | 19,860 | | | 23,091 | | | 20,981 | | | 20,259 | | | 21,574 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Total Managed Assets | | $ | 183,841 | | $ | 193,902 | | $ | 197,917 | | $ | 194,069 | | $ | 202,353 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
By Product Type | | | | | | | | | | | | | | | |
Mutual Funds: | | | | | | | | | | | | | | | |
Equity | | $ | 24,074 | | $ | 23,994 | | $ | 22,817 | | $ | 20,064 | | $ | 18,663 |
Fixed-income | | | 21,473 | | | 23,824 | | | 24,004 | | | 24,088 | | | 24,709 |
Money market | | | 117,543 | | | 121,788 | | | 128,878 | | | 128,583 | | | 135,922 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Total Fund Assets | | $ | 163,090 | | $ | 169,606 | | $ | 175,699 | | $ | 172,735 | | $ | 179,294 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Separate Accounts: | | | | | | | | | | | | | | | |
Equity | | $ | 2,524 | | $ | 2,405 | | $ | 2,810 | | $ | 2,290 | | $ | 2,123 |
Fixed-income | | | 4,385 | | | 5,674 | | | 5,513 | | | 5,333 | | | 5,460 |
Money market | | | 13,842 | | | 16,217 | | | 13,895 | | | 13,711 | | | 15,476 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Total Separate Accounts | | $ | 20,751 | | $ | 24,296 | | $ | 22,218 | | $ | 21,334 | | $ | 23,059 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Total Managed Assets | | $ | 183,841 | | $ | 193,902 | | $ | 197,917 | | $ | 194,069 | | $ | 202,353 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
| |
| | | Quarter Ended
|
AVERAGE MANAGED ASSETS
| | June 30, 2004
| | March 31, 2004
| | Dec. 31, 2003
| | Sept. 30, 2003
| | June 30, 2003
|
By Asset Class | | | | | | | | | | | | | | | |
Equity | | $ | 26,104 | | $ | 26,394 | | $ | 24,250 | | $ | 21,860 | | $ | 19,622 |
Fixed-income | | | 27,366 | | | 29,533 | | | 29,601 | | | 29,271 | | | 29,433 |
Money market | | | 137,022 | | | 144,157 | | | 145,287 | | | 147,587 | | | 150,307 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Total Avg. Assets | | $ | 190,492 | | $ | 200,084 | | $ | 199,138 | | $ | 198,718 | | $ | 199,362 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
By Product Type | | | | | | | | | | | | | | | |
Mutual Funds: | | | | | | | | | | | | | | | |
Equity | | $ | 23,686 | | $ | 23,623 | | $ | 21,676 | | $ | 19,658 | | $ | 17,606 |
Fixed-income | | | 22,461 | | | 23,874 | | | 24,145 | | | 24,049 | | | 24,336 |
Money market | | | 122,089 | | | 127,767 | | | 131,972 | | | 133,228 | | | 134,027 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Total Avg. Fund Assets | | $ | 168,236 | | $ | 175,264 | | $ | 177,793 | | $ | 176,935 | | $ | 175,969 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Separate Accounts: | | | | | | | | | | | | | | | |
Equity | | $ | 2,418 | | $ | 2,771 | | $ | 2,574 | | $ | 2,202 | | $ | 2,017 |
Fixed-income | | | 4,905 | | | 5,659 | | | 5,456 | | | 5,222 | | | 5,097 |
Money market | | | 14,933 | | | 16,390 | | | 13,315 | | | 14,359 | | | 16,279 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Total Avg. Separate Acct. | | $ | 22,256 | | $ | 24,820 | | $ | 21,345 | | $ | 21,783 | | $ | 23,393 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
Total Avg. Assets | | $ | 190,492 | | $ | 200,084 | | $ | 199,138 | | $ | 198,718 | | $ | 199,362 |
| | |
|
| |
|
| |
|
| |
|
| |
|
|
| |
| | | Quarter Ended
|
ADMINISTERED ASSETS
| | June 30, 2004
| | March 31, 2004
| | Dec. 31, 2003
| | Sept. 30, 2003
| | June 30, 2003
|
Period End | | $ | 43,566 | | $ | 43,660 | | $ | 43,428 | | $ | 43,274 | | $ | 37,612 |
Average | | $ | 43,331 | | $ | 43,920 | | $ | 43,754 | | $ | 40,527 | | $ | 36,982 |
| * | Certain amounts previously reported have been reclassified to conform with current year’s presentation. |
Federated Reports Q2 2004 Earnings
July 26, 2004
Page 10 of 11
Unaudited Condensed Consolidated Statements of Income Reclassified for Discontinued Operations*
(in thousands, except per share data)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
| |
| | | March 31,
2003
| | | June 30,
2003
| | | Sept. 30,
2003
| | | Dec. 31,
2003
| |
| Revenue | | | | | | | | | | | | | | | | |
Investment advisory fees | | $ | 124,059 | | | $ | 129,348 | | | $ | 135,368 | | | $ | 139,595 | |
Administrative service fees | | | 35,748 | | | | 35,956 | | | | 36,462 | | | | 36,706 | |
Other service fees, net | | | 25,976 | | | | 28,395 | | | | 29,307 | | | | 31,170 | |
Other, net | | | 1,581 | | | | 2,036 | | | | 1,937 | | | | 2,129 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total Revenue | | | 187,364 | | | | 195,735 | | | | 203,074 | | | | 209,600 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Operating Expenses | | | | | | | | | | | | | | | | |
Compensation and related | | | 38,984 | | | | 43,297 | | | | 44,490 | | | | 42,980 | |
General and administrative | | | | | | | | | | | | | | | | |
Marketing and distribution | | | 36,501 | | | | 37,851 | | | | 40,832 | | | | 40,910 | |
Professional service fees | | | 8,042 | | | | 8,261 | | | | 9,302 | | | | 19,648 | |
Office and occupancy | | | 6,323 | | | | 5,953 | | | | 5,850 | | | | 6,381 | |
Systems and communications | | | 5,126 | | | | 5,127 | | | | 4,764 | | | | 4,310 | |
Advertising and promotional | | | 3,895 | | | | 4,222 | | | | 4,228 | | | | 5,093 | |
Travel and related | | | 2,801 | | | | 3,216 | | | | 3,137 | | | | 3,710 | |
Other | | | 2,092 | | | | 3,049 | | | | 2,310 | | | | 10,311 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total general and administrative | | | 64,780 | | | | 67,679 | | | | 70,423 | | | | 90,363 | |
Amortization of deferred sales commissions | | | 3,238 | | | | 3,404 | | | | 3,910 | | | | 4,358 | |
Amortization of intangible assets | | | 2,607 | | | | 2,610 | | | | 2,630 | | | | 2,647 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total Operating Expenses | | | 109,609 | | | | 116,990 | | | | 121,453 | | | | 140,348 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Operating Income | | | 77,755 | | | | 78,745 | | | | 81,621 | | | | 69,252 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| Nonoperating Expenses | | | | | | | | | | | | | | | | |
Investment income, net | | | 443 | | | | 382 | | | | 415 | | | | 727 | |
Debt expense — recourse | | | (128 | ) | | | (124 | ) | | | (110 | ) | | | (129 | ) |
Debt expense — nonrecourse | | | (1,056 | ) | | | (1,065 | ) | | | (1,062 | ) | | | (1,032 | ) |
Other, net | | | — | | | | (102 | ) | | | — | | | | 7 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total Nonoperating Expenses, net | | | (741 | ) | | | (909 | ) | | | (757 | ) | | | (427 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Minority interest | | | 2,518 | | | | 2,578 | | | | 2,547 | | | | 2,563 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Income from continuing operations before income taxes | | | 74,496 | | | | 75,258 | | | | 78,317 | | | | 66,262 | |
Income tax provision | | | 26,502 | | | | 27,048 | | | | 28,412 | | | | 24,310 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Income from continuing operations | | | 47,994 | | | | 48,210 | | | | 49,905 | | | | 41,952 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Discontinued operations, net of tax | | | 717 | | | | 850 | | | | 1,035 | | | | 822 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Net Income | | $ | 48,711 | | | $ | 49,060 | | | $ | 50,940 | | | $ | 42,774 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Earnings Per Share—Basic | | | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.44 | | | $ | 0.45 | | | $ | 0.47 | | | $ | 0.39 | |
Income from discontinued operations | | $ | 0.01 | | | $ | 0.01 | | | $ | 0.01 | | | $ | 0.01 | |
Net Income** | | $ | 0.44 | | | $ | 0.46 | | | $ | 0.48 | | | $ | 0.40 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Earnings Per Share—Diluted | | | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.42 | | | $ | 0.43 | | | $ | 0.45 | | | $ | 0.38 | |
Income from discontinued operations | | $ | 0.01 | | | $ | 0.01 | | | $ | 0.01 | | | $ | 0.01 | |
Net Income** | | $ | 0.43 | | | $ | 0.44 | | | $ | 0.46 | | | $ | 0.38 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Weighted-average shares outstanding | | | | | | | | | | | | | | | | |
Basic | | | 109,685 | | | | 107,307 | | | | 106,900 | | | | 107,502 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Diluted | | | 113,973 | | | | 111,703 | | | | 111,320 | | | | 111,278 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Dividends declared per share | | $ | 0.057 | | | $ | 0.070 | | | $ | 0.085 | | | $ | 0.085 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
| * | Prior year financial results reflect the sale of Federated’s transfer agency business to Boston Financial Data Services as discontinued operations. |
| ** | May not sum due to rounding. |
Federated Reports Q2 2004 Earnings
July 26, 2004
Page 11 of 11
Unaudited Condensed Consolidated Statements of Income Reclassified for Discontinued Operations*
(in thousands, except per share data)
| | | | | | | | | | | | |
| | | Year Ended December 31,
| |
| | | 2003
| | | 2002
| | | 2001
| |
| Revenue | | | | | | | | | | | | |
Investment advisory fees, net | | $ | 528,370 | | | $ | 516,409 | | | $ | 482,212 | |
Administrative service fees, net | | | 144,872 | | | | 145,406 | | | | 134,606 | |
Other service fees, net | | | 114,848 | | | | 112,024 | | | | 162,047 | |
Other, net | | | 7,683 | | | | 5,132 | | | | 5,239 | |
| | |
|
|
| |
|
|
| |
|
|
|
Total Revenue | | | 795,773 | | | | 778,971 | | | | 784,104 | |
| | |
|
|
| |
|
|
| |
|
|
|
| Operating Expenses | | | | | | | | | | | | |
Compensation and related | | | 169,749 | | | | 165,417 | | | | 161,457 | |
General and administrative | | | | | | | | | | | | |
Marketing and distribution | | | 156,093 | | | | 146,235 | | | | 131,850 | |
Professional service fees | | | 45,254 | | | | 27,530 | | | | 31,736 | |
Office and occupancy | | | 24,507 | | | | 24,029 | | | | 25,165 | |
Systems and communications | | | 19,326 | | | | 20,555 | | | | 22,489 | |
Advertising and promotional | | | 17,437 | | | | 21,323 | | | | 25,443 | |
Travel and related | | | 12,864 | | | | 12,655 | | | | 12,754 | |
Other | | | 17,764 | | | | 11,199 | | | | 7,236 | |
| | |
|
|
| |
|
|
| |
|
|
|
Total general and administrative | | | 293,245 | | | | 263,526 | | | | 256,673 | |
Amortization of deferred sales commissions | | | 14,911 | | | | 14,513 | | | | 43,860 | |
Amortization of intangible assets | | | 10,494 | | | | 11,215 | | | | 17,081 | |
| | |
|
|
| |
|
|
| |
|
|
|
Total Operating Expenses | | | 488,399 | | | | 454,671 | | | | 479,071 | |
| | |
|
|
| |
|
|
| |
|
|
|
Operating Income | | | 307,374 | | | | 324,300 | | | | 305,033 | |
| | |
|
|
| |
|
|
| |
|
|
|
| Nonoperating Expenses | | | | | | | | | | | | |
Investment income (loss), net | | | 1,966 | | | | (490 | ) | | | (13,695 | ) |
Debt expense — recourse | | | (491 | ) | | | (484 | ) | | | (13,162 | ) |
Debt expense — nonrecourse | | | (4,215 | ) | | | (4,304 | ) | | | (23,121 | ) |
Other, net | | | (95 | ) | | | (134 | ) | | | 8,540 | |
| | |
|
|
| |
|
|
| |
|
|
|
Total Nonoperating Expenses, net | | | (2,835 | ) | | | (5,412 | ) | | | (41,438 | ) |
| | |
|
|
| |
|
|
| |
|
|
|
Minority interest | | | 10,206 | | | | 10,852 | | | | 10,880 | |
| | |
|
|
| |
|
|
| |
|
|
|
Income from continuing operations before income taxes | | | 294,333 | | | | 308,036 | | | | 252,715 | |
Income tax provision | | | 106,272 | | | | 109,267 | | | | 90,976 | |
| | |
|
|
| |
|
|
| |
|
|
|
Income from continuing operations | | | 188,061 | | | | 198,769 | | | | 161,739 | |
| | |
|
|
| |
|
|
| |
|
|
|
Discontinued operations, net of tax | | | 3,424 | | | | 4,991 | | | | 6,708 | |
| | |
|
|
| |
|
|
| |
|
|
|
Net Income | | $ | 191,485 | | | $ | 203,760 | | | $ | 168,447 | |
| | |
|
|
| |
|
|
| |
|
|
|
Earnings Per Share—Basic | | | | | | | | | | | | |
Income from continuing operations | | $ | 1.74 | | | $ | 1.77 | | | $ | 1.41 | |
Income from discontinued operations | | $ | 0.03 | | | $ | 0.04 | | | $ | 0.06 | |
Net Income** | | $ | 1.78 | | | $ | 1.81 | | | $ | 1.46 | |
| | |
|
|
| |
|
|
| |
|
|
|
Earnings Per Share—Diluted | | | | | | | | | | | | |
Income from continuing operations | | $ | 1.68 | | | $ | 1.69 | | | $ | 1.35 | |
Income from discontinued operations | | $ | 0.03 | | | $ | 0.04 | | | $ | 0.06 | |
Net Income** | | $ | 1.71 | | | $ | 1.74 | | | $ | 1.40 | |
| | |
|
|
| |
|
|
| |
|
|
|
Weighted-average shares outstanding | | | | | | | | | | | | |
Basic | | | 107,839 | | | | 112,375 | | | | 115,012 | |
| | |
|
|
| |
|
|
| |
|
|
|
Diluted | | | 112,059 | | | | 117,304 | | | | 119,992 | |
| | |
|
|
| |
|
|
| |
|
|
|
Dividends declared per share | | $ | 0.297 | | | $ | 0.217 | | | $ | 0.175 | |
| | |
|
|
| |
|
|
| |
|
|
|
| * | Prior year financial results reflect the sale of Federated’s transfer agency business to Boston Financial Data Services as discontinued operations. |
| ** | May not sum due to rounding. |
