FEDERATED HERMES, INC. 
By - Money market assets increase 50 percent to
- 2008 earnings increase 3 percent over 2007
- Board declares quarterly dividend of
For the year ended
Federated's total managed assets reached a record
"As investors sought haven from unprecedented market conditions, demand for our money market funds and fixed-income investments during 2008 enabled Federated to reach record highs in managed assets," said
Federated's board of directors declared a quarterly dividend of
Money market assets in both funds and separate accounts were
Federated's fixed-income assets were
Federated's equity assets were
Financial Summary
Q4 2008 vs. Q4 2007
For Q4 2008, revenue increased to
Fee waivers to produce positive or zero net yields are expected to increase and these increases could be significant. The specific level of these waivers will be determined by a variety of factors including market yield levels for money market investments, asset levels within money market funds, changes in the mix of money market assets by type of fund, changes in the expense levels of money market funds, and the willingness of the fund adviser to sustain these waivers.
For Q4 2008, Federated derived 69 percent of its revenue from money market assets, 21 percent from equity assets, 9 percent from fixed-income assets and 1 percent from other products and services.
Operating expenses for Q4 2008 increased
Nonoperating expenses for Q4 2008 increased
Q4 2008 vs. Q3 2008
Compared to the prior quarter, revenue decreased by
Compared to Q3 2008, operating expenses increased by
Nonoperating expenses increased
2008 vs. 2007
Revenue for 2008 increased
Operating expenses for 2008 increased
Nonoperating expenses for 2008 decreased slightly compared to 2007. Nonoperating expenses in 2008 were impacted by lower non-recourse debt expense offset by higher recourse debt expense.
The Q4 2008 results included a favorable impact of
Federated's level of business activity and financial results are dependent upon many factors including market conditions, investment performance and investor behavior. These factors and others can impact Federated's activity levels and financial results significantly including asset levels, product sales and redemptions, market appreciation or depreciation, revenues, fee waivers, expenses and earnings. Risk factors and uncertainties that can influence Federated's financial results are discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission.
Federated will host an earnings conference call at
Federated Investors, Inc. is one of the largest investment managers in
1) Strategic Insight,
Federated Securities Corp. is distributor of the Federated funds.
Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling and Federated MDTA LLC, each a registered investment advisor.
Certain statements in this press release, such as those related to the level of fee waivers incurred by the Company, asset flows, and asset and revenue levels, constitute or may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Other risks and uncertainties include the ability of the company to predict the level of fee waivers in future quarters, which could vary significantly depending on a variety of factors identified above, and include the ability of the company to sustain asset flows, and asset and revenue levels, which could vary significantly depending on market conditions, investment performance and investor behavior. Other risks and uncertainties also include the risk factors discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither the company nor any other person assumes responsibility for the accuracy and completeness of such statements in the future.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
% %
Change Quarter Change
Quarter Ended Q4 2007 Ended Q3 2008
Dec. 31, to Sept. 30, to
2008 2007 Q4 2008 2008 Q4 2008
Revenue
Investment advisory
fees, net $187,684 $195,002 (4)% $194,653 (4)%
Administrative service
fees, net 61,669 47,541 30 54,369 13
Other service fees,
net 50,889 56,480 (10) 56,007 (9)
Other, net 1,526 1,269 20 884 73
Total Revenue 301,768 300,292 0 305,913 (1)
Operating Expenses
Compensation and
related 56,219 71,212 (21) 60,482 (7)
General and
administrative
Marketing and
distribution 115,518 96,078 20 106,742 8
Professional service
fees 9,945 8,788 13 10,259 (3)
Office and occupancy 6,276 5,895 6 5,619 12
Systems and
communications 5,721 5,943 (4) 5,996 (5)
Travel and related 3,883 3,519 10 3,228 20
Advertising and
promotional 3,323 3,688 (10) 3,787 (12)
Other 4,958 3,231 53 4,409 12
Total general and
administrative 149,624 127,142 18 140,040 7
Amortization of
deferred sales
commissions 5,453 10,826 (50) 7,762 (30)
Amortization of
intangible assets 4,715 4,814 (2) 4,369 8
Total Operating
Expenses 216,011 213,994 1 212,653 2
Operating Income 85,757 86,298 (1) 93,260 (8)
Nonoperating Income
(Expenses)
Investment (loss)
income, net (1,115) 704 (258) 190 (687)
Debt expense--recourse (1,464) (97) 1,409 (757) 93
Debt expense--nonrecourse (518) (1,039) (50) (622) (17)
Other, net (100) (217) (54) (152) (34)
Total Nonoperating
Expenses, net (3,197) (649) 393 (1,341) 138
Minority interest 1,256 1,519 (17) 2,455 (49)
Income before income
taxes 81,304 84,130 (3) 89,464 (9)
Income tax provision 27,041 31,426 (14) 33,253 (19)
Net Income $54,263 $52,704 3% $56,211 (3)%
Earnings Per Share
Net income per share -
Basic $0.54 $0.53 2% $0.57 (5)%
Net income per share -
Diluted 0.54 0.52 4 0.56 (4)
Weighted-average
shares outstanding
Basic 99,891 99,764 99,367
Diluted 100,332 101,653 100,442
Dividends declared per
share $0.24 $0.21 $3.00
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
Year Ended Dec. 31, %
2008 2007 Change
Revenue
Investment advisory fees, net $775,381 $726,459 7%
Administrative service fees, net 222,053 171,847 29
Other service fees, net 221,327 223,761 (1)
Other, net 4,919 5,577 (12)
Total Revenue 1,223,680 1,127,644 9
Operating Expenses
Compensation and related 237,186 229,088 4
General and administrative
Marketing and distribution 440,317 354,407 24
Professional service fees 40,301 33,262 21
Office and occupancy 24,342 22,069 10
Systems and communications 23,648 23,409 1
Advertising and promotional 14,819 14,391 3
Travel and related 14,048 12,852 9
Other 18,080 14,815 22
Total general and administrative 575,555 475,205 21
Amortization of deferred sales
commissions 31,376 46,456 (32)
Amortization of intangible assets 18,388 19,702 (7)
Total Operating Expenses 862,505 770,451 12
Operating Income 361,175 357,193 1
Nonoperating Income (Expenses)
Investment income, net 1,250 1,379 (9)
Debt expense--recourse (2,425) (371) 554
Debt expense--nonrecourse (2,750) (5,101) (46)
Other, net (457) (657) (30)
Total Nonoperating Expenses, net (4,382) (4,750) (8)
Minority interest 7,116 5,765 23
Income before income taxes 349,677 346,678 1
Income tax provision 128,168 129,207 (1)
Income from continuing operations 221,509 217,471 2
Discontinued operations, net of tax 2,808 - -
Net Income $224,317 $217,471 3%
Earnings Per Share-Basic
Income from continuing
operations $2.22 $2.16 3%
Income from discontinued
operations 0.03 - -
Net Income $2.25 $2.16 4%
Earnings Per Share-Diluted
Income from continuing
operations $2.20 $2.12 4%
Income from discontinued
operations 0.03 - -
Net Income* $2.22 $2.12 5%
Weighted-average shares outstanding
Basic 99,605 100,855
Diluted 100,855 102,606
Dividends declared per share $3.69 $0.81
*May not sum due to rounding.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
Dec. 31, Dec. 31,
2008 2007
Assets
Cash and other short-term investments $58,647 $146,271
Other current assets 58,185 60,020
Deferred sales commissions, net 30,261 64,227
Intangible assets, net and goodwill 657,321 534,603
Other long-term assets 42,196 35,850
Total Assets $846,610 $840,971
Liabilities, Minority Interest and Shareholders'
Equity
Current liabilities $222,484 $164,571
Long-term debt--recourse 126,000 71
Long-term debt--nonrecourse 30,497 62,701
Other long-term liabilities and minority interest 44,255 39,613
Shareholders' equity excluding treasury stock 1,227,855 1,367,963
Treasury stock (804,481) (793,948)
Total Liabilities, Minority Interest and
Shareholders' Equity $846,610 $840,971
Changes in Equity and Fixed-Income Fund Managed Assets
(in millions)
Quarter Ended Year Ended Dec. 31,
Dec. 31, Dec. 31, Sept. 30,
2008 2007 2008 2008 2007
Equity Funds
Beginning assets $21,583 $30,095 $25,569 $29,145 $28,666
Sales 1,031 1,328 1,060 5,040 5,468
Redemptions (1,752) (1,992) (2,031) (7,205) (7,763)
Net redemptions (721) (664) (971) (2,165) (2,295)
Net exchanges (103) (34) (68) (266) (86)
Acquisition related 1,149 0 0 1,191 366
Other(1) (4,346) (252) (2,947) (10,343) 2,494
Ending assets $17,562 $29,145 $21,583 $17,562 $29,145
Fixed-Income Funds
Beginning assets $19,136 $17,775 $19,065 $17,943 $18,113
Sales 2,172 1,240 2,354 8,681 4,911
Redemptions (2,331) (1,312) (1,826) (7,242) (5,651)
Net (redemptions)
sales (159) (72) 528 1,439 (740)
Net exchanges 13 15 26 92 6
Acquisition related 658 0 0 658 0
Other(1) (327) 225 (483) (811) 564
Ending assets $19,321 $17,943 $19,136 $19,321 $17,943
(1) Includes changes in the market value of securities held by the funds,
reinvested dividends and distributions and net investment income.
Changes in Equity and Fixed-Income Separate Account Assets*
(in millions)
Quarter Ended Year Ended Dec. 31,
Dec. 31, Dec. 31, Sept. 30,
2008 2007 2008 2008 2007
Equity Separate Accounts
Beginning assets $10,068 $13,422 $11,712 $13,017 $12,228
Net customer flows** (754) (200) (426) (1,375) 96
Acquisition related 1,537 0 0 1,537 0
Other** (1,752) (205) (1,218) (4,080) 693
Ending assets $9,099 $13,017 $10,068 $9,099 $13,017
Fixed-Income Separate
Accounts
Beginning assets $5,379 $4,977 $6,007 $4,881 $4,789
Net customer flows** (25) (210) (372) 738 (290)
Acquisition related 444 0 0 444 0
Other** (128) 114 (256) (393) 382
Ending assets $5,670 $4,881 $5,379 $5,670 $4,881
* Includes separately managed accounts, institutional accounts and sub-
Advised funds (both variable annuity and other) and other managed
products.
** For certain accounts, Net customer flows are calculated as the
Remaining difference between beginning and ending assets after the
calculation of Other. Other includes the approximate effect of changes
in the market value of securities held in the portfolios, reinvested
dividends and distributions and net investment income.
(in millions)
MANAGED ASSETS Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2008 2008 2008 2008 2007
By Asset Class
--------------
Equity $26,661 $31,651 $37,281 $37,518 $42,162
Fixed-income 24,991 24,515 25,072 23,416 22,824
Money market 355,658 287,836 271,131 277,527 236,630
Total Managed Assets $407,310 $344,002 $333,484 $338,461 $301,616
By Market*
----------
Wealth Management & Trust $233,444 $173,284 $162,991 $162,865 $143,881
Broker/Dealer 121,073 120,014 116,840 119,268 114,854
Global Institutional 41,453 37,374 40,408 43,976 30,830
Other 11,340 13,330 13,245 12,352 12,051
Total Managed Assets $407,310 $344,002 $333,484 $338,461 $301,616
By Product Type
---------------
Mutual Funds:
Equity $17,562 $21,583 $25,569 $25,880 $29,145
Fixed-income 19,321 19,136 19,065 18,339 17,943
Money market 327,267 259,172 240,646 242,280 215,003
Total Fund Assets $364,150 $299,891 $285,280 $286,499 $262,091
Separate Accounts:
Equity $9,099 $10,068 $11,712 $11,638 $13,017
Fixed-income 5,670 5,379 6,007 5,077 4,881
Money market 28,391 28,664 30,485 35,247 21,627
Total Separate Accounts $43,160 $44,111 $48,204 $51,962 $39,525
Total Managed Assets $407,310 $344,002 $333,484 $338,461 $301,616
AVERAGE MANAGED ASSETS Quarter Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2008 2008 2008 2008 2007
By Asset Class
--------------
Equity $24,870 $35,136 $38,974 $38,471 $42,890
Fixed-income 24,196 25,087 24,525 23,220 22,969
Money market 320,684 274,840 279,776 260,306 224,285
Total Avg. Assets $369,750 $335,063 $343,275 $321,997 $290,144
By Product Type
---------------
Mutual Funds:
Equity $16,904 $24,180 $26,762 $26,696 $29,741
Fixed-income 18,674 19,347 18,672 18,186 17,893
Money market 293,428 245,304 246,868 231,719 203,957
Total Avg. Fund Assets $329,006 $288,831 $292,302 $276,601 $251,591
Separate Accounts:
Equity $7,966 $10,956 $12,212 $11,775 $13,149
Fixed-income 5,522 5,740 5,853 5,034 5,076
Money market 27,256 29,536 32,908 28,587 20,328
Total Avg. Separate
Accts. $40,744 $46,232 $50,973 $45,396 $38,553
Total Avg. Assets $369,750 $335,063 $343,275 $321,997 $290,144
ADMINISTERED ASSETS Quarter Ended
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2008 2008 2008 2008 2007
Period End $8,373 $8,723 $8,886 $9,921 $9,565
Average $9,142 $8,889 $9,781 $9,694 $16,125
*Federated's market definitions changed as of April 1, 2008. The
insurance channel had been included in the Broker/Dealer market and is
now included in the Global Institutional market. Previous periods were
adjusted to reflect the change.
SOURCE Federated Investors, Inc.
