Form: 8-K

Current report filing

July 21, 2010

Documents

Exhibit 99.1

NEWS FROM SEI

 

Investor Contact:    Media Contact:

Murray Louis

    Dana Grosser

SEI

    SEI

(610) 676-1932

    (610) 676-2459

mlouis@seic.com

    dgrosser@seic.com

Pages:                10

   

FOR IMMEDIATE RELEASE

SEI REPORTS SECOND-QUARTER 2010 FINANCIAL RESULTS

OAKS, Pa., July 21, 2010 — SEI Investments Company (NASDAQ:SEIC) today announced financial results for second-quarter 2010, reporting an increase in net income attributable to SEI and diluted earnings per share compared to second-quarter 2009. Diluted earnings per share were $0.28. Effective January 1, 2010, company results reflect the deconsolidation of LSV Asset Management (LSV), returning to the equity method of accounting. This change in accounting treatment had no impact on net income attributable to SEI. Without LSV, revenues grew $25.5 million or 13 percent compared to second-quarter 2009 (see Proforma Consolidated Overview below).

 

Consolidated Overview   

For the Three Months

     For the Six Months  

(In thousands, except earnings per share)

    Ended June 30,     Ended June 30,  
     2010    2009    %     2010    2009    %  

Revenues

    $ 228,388    $ 252,009    (9 %)    $ 449,923    $ 500,620    (10 %) 

Net Income attributable to SEI

      53,478      41,571    29 %      112,898      75,771    49 % 

Diluted Earnings Per Share

    $ 0.28    $ 0.22    27 %    $ 0.59    $ 0.40    48 % 

“Compared to year ago, our second-quarter results reflect somewhat improved capital markets and the effects of last year’s cost reduction initiatives,” said Alfred P. West, Jr., SEI Chairman and CEO.

“While our new sales activities are a positive sign, we believe the ongoing volatility of the capital markets represents a continuing challenge. Longer term, we believe we are well positioned in all business segments to achieve growth. We continue to make key investments that will create growth opportunities for us and for our clients.”

 

Proforma Consolidated Overview    For the Three Months     For the Six Months  

(In thousands, except earnings per share)

    Ended June 30,     Ended June 30,  
     2010    2009    %     2010    2009    %  
     (Actual)    (Proforma)          (Actual)    (Proforma)       

Revenues

    $ 228,388    $ 202,931    13 %    $ 449,923    $ 411,352    9 % 

Net Income attributable to SEI

      53,478      41,571    29 %      112,898      75,771    49 % 

Diluted Earnings Per Share

    $ 0.28    $ 0.22    27 %    $ 0.59    $ 0.40    48 % 

 

1

Summary of Second-Quarter and Year to Date Results by Business Segment

 

(In thousands)

    For the Three Month Period
Ended June 30, 		    For the Six Month Period
Ended June 30, 		 
     2010     2009     %     2010     2009     %  

Private Banks:

             

Revenues

    $ 90,091      $ 86,645      4 %    $ 177,212      $ 183,593      (3 %) 

Expenses

      78,612        70,761      11 %      156,211        149,559      4 % 
                                    

Operating Profit

    $ 11,479      $ 15,884      (28 %)    $ 21,001      $ 34,034      (38 %) 

Operating Margin

      13 %      18 %        12 %      19 %   

Investment Advisors:

             

Revenues

      46,398        39,582      17 %      91,861        77,090      19 % 

Expenses

      28,120        25,939      8 %      55,703        53,048      5 % 
                                    

Operating Profit

      18,278        13,643      34 %      36,158        24,042      50 % 

Operating Margin

      39 %      34 %        39 %      31 %   

Institutional Investors:

             

Revenues

      51,446        42,164      22 %      101,785        81,543      25 % 

Expenses

      26,576        23,264      14 %      52,956        47,434      12 % 
                                    

Operating Profit

      24,870        18,900      32 %      48,829        34,109      43 % 

Operating Margin

      48 %      45 %        48 %      42 %   

Investment Managers:

             

Revenues

      39,440        33,371      18 %      77,050        66,703      16 % 

Expenses

      25,596        22,245      15 %      50,155        45,112      11 % 
                                    

Operating Profit

      13,844        11,126      24 %      26,895        21,591      25 % 

Operating Margin

      35 %      33 %        35 %      32 %   

Investments in New Businesses:

             

Revenues

      1,013        1,169      (13 %)      2,015        2,423      (17 %) 

Expenses

      2,739        2,325      18 %      5,400        5,618      (4 %) 
                                    

Operating Loss

      (1,726 )      (1,156 )    (49 %)      (3,385 )      (3,195 )    (6 %) 

Operating Margin

      N/A        N/A          N/A        N/A     

LSV:

             

Revenues

      —          49,078      N/A        —          89,268      N/A   

Expenses (1)

      —          31,709      N/A        —          58,155      N/A   
                                    

Operating Profit

      —          17,369      N/A        —          31,113      N/A   

Operating Margin

      —          35 %        —          35 %   

Totals:

             

Revenues

    $ 228,388      $ 252,009      (9 %)    $ 449,923      $ 500,620      (10 %) 

Expenses

      161,643        176,243      (8 %)      320,425        358,926      (11 %) 

Corporate overhead expenses

      9,941        8,697      14 %      19,658        18,338      7 % 

Noncontrolling interest reflected in segments

      (368 )      (24,737 )    N/A        (677 )      (43,800 )    N/A   

LSV Employee Group expenses

      —          1,820      N/A        —          3,640      N/A   
                                    

Income from operations

    $ 57,172      $ 89,986      (36 %)    $ 110,517      $ 163,516      (32 %) 

 

(1) Includes $24,429 and $43,291 for the three and six month periods ended June 30, 2009, of noncontrolling interest to the other partners of LSV.

 

2

Second-Quarter Business Commentary:

 

  •  

In January 2010, LSV was deconsolidated due to the adoption of newly issued accounting guidance. Our ownership interest in LSV was unchanged and our proportionate share in the earnings of LSV is reflected in “Equity in earnings of unconsolidated affiliate” on our Consolidated Statements of Operations. The deconsolidation of LSV had no impact on net income attributable to SEI or diluted earnings per share.

 

  •  

Revenues in second-quarter 2009 include $49.1 million from LSV. Excluding these revenues, revenues in second-quarter 2010 increased $25.5 million or 13 percent compared to second-quarter 2009. This increase was primarily due to higher average asset balances under management and administration from existing clients because of improved capital markets.

 

  •  

Second-quarter 2010 revenues and profits in the Private Banks segment include $5.0 million of one-time contract termination fees from a previously announced bank client lost as a result of an acquisition.

 

  •  

Second-quarter revenues and profits were up in all other major business segments compared to both second-quarter 2009 and first-quarter 2010.

 

  •  

The second-quarter 2010 net income attributable to SEI and diluted earnings per share results include gains of $3.9 million associated with SIVs primarily due to cash distributions received for note principal payments, whereas results in second-quarter 2009 included losses of $2.3 million. Additional information pertaining to SIVs is contained in SEI’s 2009 Form 10-K filed February 25, 2010.

 

  •  

Assets under management decreased by $13.0 billion during the second-quarter 2010 to $148.9 billion at June 30, 2010, as compared to $161.9 billion at March 31, 2010, primarily due to the decline in the market.

 

  •  

In the second quarter, SEI purchased 1,401,000 shares of its common stock for $30.2 million.

 

3

Proforma Consolidated Statement of Operations

The following proforma Consolidated Statements of Operations presents second quarter 2009 and Year to Date June 2009 for comparative purposes only as if LSV and LSV Employee Group was deconsolidated on January 1, 2009. This report is being provided for informational purposes only and is not a restatement or reclassification of previously filed reports. Our interest in LSV is presented as a single line item in the Consolidated Statements of Operations titled “Equity in earnings of unconsolidated affiliate.” For additional information, we refer you to Note 2 to the Consolidated Financial Statements included in our 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2010.

SEI INVESTMENTS COMPANY

PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended June 30,  
     As Reported
SEI
Consolidated
2010		     Proforma
SEI without
LSV and LSVEG
2009		     %  

Total revenues

      228,388        202,931      13 % 

Total expenses

      171,216        152,923      12 % 
                  

Income from operations

      57,172        50,008      14 % 

Net gain (loss) from investments

      3,594        (2,533 )    n/a   

Interest, net

      1,087        1,258      (14 %) 

Other income

      1,070        —        n/a   

Equity in earnings of unconsolidated affiliate

      23,519        17,376      35 % 
                  

Income before taxes

      86,442        66,109      31 % 

Income taxes

      32,603        24,212      35 % 
                  

Net income

      53,839        41,897      29 % 
                  

Less Net Income attributable to noncontrolling interest

      (361 )      (326 )    11 % 
                  

Net income attributable to SEI

    $ 53,478      $ 41,571      29 % 
                  

Diluted earnings per share

    $ 0.28      $ 0.22      27 % 
                  

Diluted shares outstanding

      191,500        191,933      —     
                  

 

4

SEI INVESTMENTS COMPANY

PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

     Six Months Ended June 30,  
     As Reported
SEI
Consolidated
2010		     Proforma
SEI without
LSV and LSVEG
2009		     %  

Total revenues

      449,923        411,352      9 % 

Total expenses

      339,406        318,600      7 % 
                  

Income from operations

      110,517        92,752      19 % 

Net gain (loss) from investments

      21,073        (16,983 )    n/a   

Interest, net

      2,316        2,576      (10 %) 

Other income

      1,070        —        n/a   

Equity in earnings of unconsolidated affiliate

      47,593        31,130      53 % 
                  

Income before taxes

      182,569        109,475      67 % 

Income taxes

      68,872        33,141      108 % 
                  

Net income

      113,697        76,334      49 % 
                  

Less Net Income attributable to noncontrolling interest

      (799 )      (563 )    42 % 
                  

Net income attributable to SEI

    $ 112,898      $ 75,771      49 % 
                  

Diluted earnings per share

    $ 0.59      $ 0.40      48 % 
                  

Diluted shares outstanding

      191,281        191,671      —     
                  

 

5

Earnings Conference Call

A conference call to review earnings is scheduled for 2:00 PM ET on July 21, 2010. Investors may listen to the call at www.seic.com/investors or listen at www.earnings.com, a service of Thomson Streetevents. The call may also be accessed at numerous financial services web sites including AOL and Yahoo. Investors may also listen to replays at these web sites, or by telephone at (USA) 1-800-475-6701; (International) 320-365-3844, access code 165205.

About SEI

SEI (NASDAQ:SEIC) is a leading global provider of outsourced asset management, investment processing and investment operations solutions. The company’s innovative solutions help corporations, financial institutions, financial advisors, and affluent families create and manage wealth. As of June 30, 2010, through its subsidiaries and partnerships in which the company has a significant interest, SEI administers $380 billion in mutual fund and pooled assets and manages $149 billion in assets. SEI serves clients, conducts or is registered to conduct business and/or operations, from numerous offices worldwide. For more information, visit www.seic.com.

Many of the statements in this release may be considered “forward looking statements” and include discussions about future operations, strategies and financial results. Forward-looking statements are based upon estimates and assumptions that involve risks and uncertainties, many of which are beyond our control or are subject to change. Although we believe our assumptions are reasonable, they could be inaccurate. Our actual future revenues and income could differ materially from our expected results. We have no obligation to publicly update or revise any forward-looking statements.

 

6

SEI INVESTMENTS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended June 30,  
     2010     2009  

Asset management, admin. and distribution fees

    $ 154,774      $ 183,209   

Information processing and software servicing fees

      61,296        54,694   

Transaction–based and trade execution fees

      12,318        14,106   
                

Total revenues

      228,388        252,009   

Subadvisory, distribution and other asset mgmt costs

      21,671        20,645   

Brokerage commissions and royalties

      14,972        15,494   

Compensation, benefits and other personnel

      67,012        63,670   

Stock based compensation

      6,278        3,361   

Consulting, outsourcing and professional fees

      22,702        18,711   

Data processing and computer related

      10,417        11,177   

Facilities, supplies and other costs

      16,583        16,203   

Amortization

      5,997        7,398   

Depreciation

      5,584        5,364   
                

Total expenses

      171,216        162,023   

Income from operations

      57,172        89,986   

Net gain (loss) on investments

      3,594        (2,533 ) 

Interest and dividend income

      1,502        1,937   

Interest expense

      (415 )      (1,051 ) 

Other income

      1,070        —     

Equity in earnings of unconsolidated affiliate

      23,519        —     
                

Income before taxes

      86,442        88,339   

Income taxes

      32,603        24,212   
                

Net income

      53,839        64,127   
                

Less: Net income attributable to noncontrolling interest

      (361 )      (22,556 ) 
                

Net income attributable to SEI

    $ 53,478      $ 41,571   
                

Diluted earnings per common share

    $ 0.28      $ 0.22   
                

Shares used to calculate diluted earnings per common share

      191,500        191,933   
                

Basic earnings per common share

    $ 0.28      $ 0.22   
                

Shares used to calculate basic earnings per common share

      189,356        191,023   
                

 

7

SEI INVESTMENTS COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

     Six Months Ended June 30,  
     2010     2009  

Asset management, admin. and distribution fees

    $ 307,712      $ 352,573   

Information processing and software servicing fees

      119,922        116,911   

Transaction–based and trade execution fees

      22,289        31,136   
                

Total revenues

      449,923        500,620   

Commissions and fees

      44,926        40,468   

Brokerage commissions and royalties

      28,345        33,224   

Compensation, benefits and other personnel

      134,228        137,108   

Stock based compensation

      12,935        6,791   

Consulting, outsourcing and professional fees

      43,409        39,861   

Data processing and computer related

      20,345        22,692   

Facilities, supplies and other costs

      32,531        31,636   

Amortization

      11,897        14,451   

Depreciation

      10,790        10,873   
                

Total expenses

      339,406        337,104   

Income from operations

      110,517        163,516   

Net loss on investments

      21,073        (16,983 ) 

Interest and dividend income

      3,202        3,648   

Interest expense

      (886 )      (1,850 ) 

Other income

      1,070        —     

Equity in earnings of unconsolidated affiliate

      47,593        —     
                

Income before taxes

      182,569        148,331   

Income taxes

      68,872        33,141   
                

Net income

      113,697        115,190   
                

Less: Net income attributable to the noncontrolling interest

      (799 )      (39,419 ) 
                

Net income attributable to SEI

    $ 112,898      $ 75,771   
                

Diluted earnings per common share

    $ 0.59      $ 0.40   
                

Shares used to calculate diluted earnings per common share

      191,281        191,671   
                

Basic earnings per common share

    $ 0.60      $ 0.40   
                

Shares used to calculate basic earnings per common share

      189,652        191,053   
                

 

8

SEI INVESTMENTS COMPANY

CONDENSED BALANCE SHEETS

(In thousands)

 

     (Unaudited)
June 30,
2010 		   December 31,
2009		  

Assets

      

Cash and short-term investments

    $ 461,929    $ 590,877 (a) 

Restricted cash

      19,000      20,000   

Receivables

      164,870      212,451 (a) 

Other current assets

      16,001      18,075   
               

Total current assets

      661,800      841,403   

Property and equipment, net

      147,159      146,053   

Marketable securities

      177,379      181,897   

Capitalized software, net

      284,834      278,656   

Investment in unconsolidated affiliate

      61,370      —     

Goodwill

      —        22,842   

Intangible assets, net

      —        44,859   

Other assets, net

      17,579      18,098   
               

Total assets

    $ 1,350,121    $ 1,533,808   
               

Liabilities

      

Current liabilities

    $ 116,144    $ 163,055 (b) 

Long-term debt

      150,000      247,152 (b) 

Deferred income taxes

      86,417      86,257   

Long-term liabilities

      5,752      5,726   

Total SEI Investments Company shareholders’ equity

      978,966      909,723   

Noncontrolling interest

      12,842      121,895   
               

Total Equity

      991,808      1,031,618   

Total liabilities and equity

    $ 1,350,121    $ 1,533,808   
               

 

(a) Includes $57,061 of cash and cash equivalents and $66,392 of receivables of LSV Asset Management.
(b) Includes $20,552 of debt of LSV Employee Group of which $6,400 is included in Current liabilities and the remaining $14,152 is included in Long-term debt.

 

9

SEI INVESTMENTS COMPANY

ASSET BALANCES

(In millions)

(Unaudited)

 

     Jun. 30,
2009		    Sep. 30,
2009		    Dec. 31,
2009		    Mar. 31,
2010		    Jun. 30,
2010

Private Banks:

               

Equity/Fixed Income prgms.

    $ 10,892    $ 12,479    $ 12,690    $ 12,635    $ 11,769

Collective Trust Fund prgm.

      1,176      1,098      1,067      1,023      640

Liquidity funds

      7,581      6,524      6,035      5,329      5,175
                                  

Total assets under mgmt.

    $ 19,649    $ 20,101    $ 19,792    $ 18,987    $ 17,584

Client assets under admin.

      10,143      10,941      11,213      11,429      10,335
                                  

Total assets

    $ 29,792    $ 31,042    $ 31,005    $ 30,416    $ 27,919

Investment Advisors:

               

Equity/Fixed Income prgms.

    $ 21,705    $ 24,739    $ 25,392    $ 26,222    $ 23,699

Collective Trust Fund prgm.

      2,621      2,521      2,423      2,284      2,066

Liquidity funds

      2,469      2,243      1,929      1,731      2,635
                                  

Total assets under mgmt.

    $ 26,795    $ 29,503    $ 29,744    $ 30,237    $ 28,400

Institutional Investors:

               

Equity/Fixed Income prgms.

    $ 36,955    $ 43,672    $ 44,322    $ 45,891    $ 43,506

Collective Trust Fund prgm.

      755      707      684      657      643

Liquidity funds

      3,462      4,624      3,370      3,198      2,558
                                  

Total assets under mgmt.

    $ 41,172    $ 49,003    $ 48,376    $ 49,746    $ 46,707

Investment Managers:

               

Equity/Fixed Income prgms.

    $ 3    $ 4    $ 4    $ 2    $ 1

Collective Trust Fund prgm.

      6,794      7,075      7,428      7,639      7,366

Liquidity funds

      505      528      412      447      428
                                  

Total assets under mgmt.

    $ 7,302    $ 7,607    $ 7,844    $ 8,088    $ 7,795

Client assets under admin. (A)

      213,930      216,222      221,680      220,807      220,459
                                  

Total assets

    $ 221,232    $ 223,829    $ 229,524    $ 228,895    $ 228,254

Investments in New Businesses:

               

Equity/Fixed Income prgms.

    $ 473    $ 473    $ 520    $ 534    $ 496

Liquidity funds

      133      93      75      72      74
                                  

Total assets under mgmt.

    $ 606    $ 566    $ 595    $ 606    $ 570

LSV Asset Management

               

Equity/Fixed Income prgms.

    $ 40,210    $ 49,349    $ 52,488    $ 54,189    $ 47,822

Consolidated:

               

Equity/Fixed Income prgms (B)

    $ 110,238    $ 130,716    $ 135,416    $ 139,473    $ 127,293

Collective Trust Fund prgm.

      11,346      11,401      11,602      11,603      10,715

Liquidity funds

      14,150      14,012      11,821      10,777      10,870
                                  

Total assets under mgmt.

    $ 135,734    $ 156,129    $ 158,839    $ 161,853    $ 148,878

Client assets under admin. (C)

      224,073      227,163      232,893      232,236      230,794
                                  

Total assets

    $ 359,807    $ 383,292    $ 391,732    $ 394,089    $ 379,672

 

(A) Client assets under administration in the Investment Managers segment include $58,534 of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of June 30, 2010).
(B) Equity/Fixed Income programs include $2,215 of assets invested in various asset allocation funds at June 30, 2010.
(C) In addition to the numbers presented, SEI also administers an additional $8,478 in Funds of Funds assets (as of June 30, 2010) on which SEI does not earn an administration fee.

 

10