SEI Reports Fourth-Quarter Revenues of $268.4 million, Net Income of $9.6 million
Net income negatively affected by $64.3 million in SIV-related charges
OAKS, Pa., Jan. 29 /PRNewswire-FirstCall/ -- SEI Investments Company (Nasdaq: SEIC) today announced financial results for fourth-quarter 2008, reporting decreases in revenues, net income and earnings per share compared to fourth-quarter 2007. Net income during the fourth-quarter 2008 was negatively affected by a $64.3 million pre-tax charge (approximately $.20 per share post-tax) for previously-disclosed structured investment vehicle-related issues involving SEI-sponsored money market funds. The total SIV-related loss recognized during 2008 is $158.2 million and the total cumulative loss recognized is $183.3 million.
Consolidated Overview For the Three Months For the Twelve Months
(In thousands, except Ended December 31, Ended December 31,
earnings per share) 2008 2007 % 2008 2007 %
---- ---- - ---- ---- -
Revenues $268,402 $353,409 (24%) $1,247,919 $1,369,028 (9%)
Net Income Before
Taxes 19,477 84,792 (77%) 224,974 409,540 (45%)
Net Income 9,649 53,632 (82%) 139,254 259,809 (46%)
Diluted Earnings Per
Share $.05 $.27 (81%) $.71 $1.28 (45%)
"The severe downturn in the capital markets made the fourth-quarter a particularly challenging one and had a significant negative impact on both our quarterly and annual results," said Alfred P. West, Jr., SEI Chairman and CEO.
"Furthermore, the current market and economic environment promises to make 2009 challenging as well. In light of this, our current focus is on maintaining a strong capital base and balance sheet. Fortunately, we continue to produce positive cash flow which permits us to stay the course in the implementation of our strategies.
"During these times, we will work hard to improve our business and its results and to focus on our clients' well-being. We are firm in our belief that what we are doing will provide our clients with opportunities for success and position us to prosper as times get better."
Summary of Fourth-Quarter and Year to Date Results by Business Segment
(In thousands) For the Three Month Period For the Twelve Month Period
Ended December 31, Ended December 31,
2008 2007 % 2008 2007 %
---- ---- - ---- ---- -
Private Banks:
Revenues $97,962 $111,814 (12%) $408,500 $413,922 (1%)
Expenses 75,582 89,255 (15%) 326,661 330,923 (1%)
------ ------ ------- -------
Operating Profit $22,380 $22,559 (1%) $81,839 $82,999 (1%)
Operating Margin 23% 20% 20% 20%
Investment Advisors:
Revenues 41,951 66,564 (37%) 223,164 259,288 (14%)
Expenses 28,529 33,392 (15%) 122,231 124,942 (2%)
------ ------ ------- -------
Operating Profit 13,422 33,172 (60%) 100,933 134,346 (25%)
Operating Margin 32% 50% 45% 52%
Institutional
Investors:
Revenues 43,408 52,778 (18%) 198,154 199,593 (1%)
Expenses 22,873 32,031 (29%) 112,866 121,365 (7%)
------ ------ ------- -------
Operating Profit 20,535 20,747 (1%) 85,288 78,228 9%
Operating Margin 47% 39% 43% 39%
Investment Managers:
Revenues 35,966 38,244 (6%) 147,968 143,375 3%
Expenses 23,536 26,752 (12%) 101,078 101,401 --
------ ------ ------- -------
Operating Profit 12,430 11,492 8% 46,890 41,974 12%
Operating Margin 35% 30% 32% 29%
Investments in New
Businesses:
Revenues 1,356 1,858 (27%) 6,865 7,205 (5%)
Expenses 2,973 5,073 (41%) 15,795 19,670 (20%)
----- ----- ------ ----
Operating Loss (1,617) (3,215) (50%) (8,930) (12,465) (28%)
Operating Margin n/a n/a n/a n/a
LSV:
Revenues 47,759 82,151 (42%) 263,268 345,645 (24%)
Expenses(1) 30,833 51,515 (40%) 164,783 213,926 (23%)
------ ------ ------- -------
Operating Profit 16,926 30,636 (45%) 98,485 131,719 (25%)
Operating Margin 35% 37% 37% 38%
Consolidated Segment
Totals:
Revenues $268,402 $353,409 (24%)$1,247,919 $1,369,028 (9%)
Expenses 184,326 238,018 (23%) 843,414 912,227 (8%)
------- ------- ------- -------
Operating Profit $84,076 $115,391 (27%) $404,505 $456,801 (11%)
Operating Margin 31% 33% 32% 33%
(1) Includes $23,200 and $42,387 for the three-month period ended December
31, 2008 and 2007, respectively, and $135,251 and $181,591 for the
twelve-month period ended December 31, 2008 and 2007, respectively, of
minority interest to the other partners of LSV.
A reconciliation of the totals reported for the business segments to the applicable line items in the Consolidated Statements of Income for the three and twelve-month periods ended December 31, 2008 and 2007 is as follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
---- ---- ---- ----
Total Operating profit
from business segments $84,076 $115,391 $404,505 $456,801
Corporate overhead
expenses (8,079) (11,586) (38,955) (42,045)
Minority interest
reflected in segments 23,518 43,859 138,079 186,500
LSV Employee Group
Expenses (1) (1,820) (1,821) (7,280) (7,281)
------- ------- ------- -------
Income from operations $97,695 $145,843 $496,349 $593,975
(1) Includes $1,806 for the three-month period ending December 31, 2008
and 2007, and $7,222 for the twelve-month period ended December 31,
2008 and 2007 of amortization expense related to intangible assets
owned by LSV Employee Group LLC. The amortization is offset through
Minority interest since SEI does not have any ownership in LSV
Employee Group LLC.
Fourth-Quarter Business Commentary:
-- Revenues were down across all segments due to the severe decline in the
capital markets. The Institutional Investors and Investment Managers
segments partially offset the negative capital market impact with new
business growth.
-- Operating results were positively affected by reduced compensation costs
in all segments except LSV. Other income represents a one-time benefit
related to interest expense previously recorded.
-- The company's percentage ownership in LSV remained at approximately
43 percent. In the fourth-quarter 2008, the company recognized $16.9
million as its portion of the earnings from LSV versus $30.6 million in
the fourth-quarter 2007.
-- Assets under management declined by $27.5 billion during the
fourth-quarter 2008 to $134.3 billion, primarily due to market
depreciation.
-- The fourth-quarter 2008 results include a $61.6 million non-cash charge
related to money market funds support agreements and a $2.7 million
charge related to the decline in fair value for SIV securities purchased
from an SEI-sponsored money market fund. SEI has recognized losses of
$158.2 million during 2008 and cumulative losses of $183.3 million
associated with SIV- related issues involving SEI-sponsored money market
funds. Additional information about the capital support agreements,
including the total principal amount as of December 31, 2008, is
attached to this release and is also contained in SEI's 2007 Form
10-K filed February 26, 2008 and SEI's 2008 third-quarter Form 10-Q
filed November 10, 2008, and SEI's current report on form 8-K filed
December 2, 2008.
-- In the fourth-quarter 2008, SEI's effective tax rate was about 50
percent. The effective tax rate was affected by a higher than usual
state tax rate of about 14 percent due to the uncertainty of the future
use of the SIV losses for Pennsylvania state tax purposes because of net
operating loss carryforward limitations.
-- In the fourth-quarter, SEI purchased 1,110,000 shares of its common
stock for $16.6 million.
Earnings Conference Call
A conference call to review earnings is scheduled for 2:00 PM ET on January 29, 2009. Investors may listen to the call at www.seic.com (Investor Information section), 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 983434.
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 December 31, 2008, 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 $134 billion in assets. SEI serves clients, conducts or is registered to conduct business and/or operations, from more than 20 offices in over a dozen countries. 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.
SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended December 31,
2008 2007
Asset management, admin. and distribution
fees $191,247 $278,086
Information processing and software
servicing fees 56,003 62,170
Transaction-based and trade execution fees 21,152 13,153
Total revenues 268,402 353,409
Commissions and fees 41,296 46,666
Compensation, benefits and other personnel 61,517 88,857
Consulting, outsourcing and professional fees 24,208 27,443
Data processing and computer related 11,500 10,785
Facilities, supplies and other costs 19,920 22,546
Depreciation and amortization 12,266 11,269
Total expenses 170,707 207,566
Income from operations 97,695 145,843
Minority interest (21,419) (41,440)
Net loss on investments (1) (2) (64,631) (23,880)
Interest and dividend income 2,995 5,282
Interest expense (740) (1,013)
Other income 5,577 -
Income before taxes 19,477 84,792
Income taxes 9,828 31,160
Net income $9,649 $53,632
Diluted earnings per common share $.05 $.27
Shares used to calculate diluted earnings per
common share 192,030 200,297
Basic earnings per common share $.05 $.28
Shares used to calculate basic earnings
per common share 190,858 194,321
(1) Includes $61,559 and $25,122 for the three month period ended
December 31, 2008 of a non-cash charge related to money market
funds support agreements.
(2) Includes $2,733 for the three month period ended December 31, 2008 of
a loss related to the purchase of structured investment vehicles from
a SEI-sponsored money market fund.
SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Twelve Months Ended December 31,
2008 2007
Asset management, admin. and distribution
fees $955,399 $1,091,424
Information processing and software
servicing fees 229,807 230,301
Transaction-based and trade execution fees 62,713 47,303
Total revenues 1,247,919 1,369,028
Commissions and fees 171,972 176,523
Compensation, benefits and other personnel 309,870 350,150
Consulting, outsourcing and professional
fees 103,789 94,642
Data processing and computer related 44,602 42,189
Facilities, supplies and other costs 74,378 74,413
Depreciation and amortization 46,959 37,136
Total expenses 751,570 775,053
Income from operations 496,349 593,975
Minority interest (129,256) (175,879)
Net loss on investments (1) (2) (158,018) (25,395)
Interest and dividend income 13,740 18,596
Interest expense (3,418) (4,709)
Other income 5,577 2,952
Income before taxes 224,974 409,540
Income taxes 85,720 149,731
Net income $139,254 $259,809
Diluted earnings per common share $.71 $1.28
Shares used to calculate diluted earnings
per common share 195,233 202,231
Basic earnings per common share $.73 $1.32
Shares used to calculate basic earnings per
common share 192,057 196,120
(1) Includes $148,861 for the twelve month period ended December 31,
2008 of a non-cash charge related to money market funds support
agreements.
(2) Includes $9,321 for the twelve month period ended December 31, 2008
of a loss related to the purchase of structured investment vehicles
from a SEI-sponsored money market fund.
SEI INVESTMENTS COMPANY
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, December 31,
2008 2007
Assets
Cash and short-term investments $416,643 $360,921
Restricted cash 14,000 10,250
Receivables 208,209 275,109
Securities owned - 16,777
Other current assets 100,819 31,877
Total current assets 739,671 694,934
Property and equipment, net 148,124 143,516
Marketable securities 86,693 77,169
Capitalized software, net 270,606 231,684
Goodwill 22,842 22,842
Intangible assets, net 52,518 60,177
Other assets, net 21,261 22,043
Total assets $1,341,715 $1,252,365
Liabilities
Current liabilities (1) $329,894 $230,367
Long-term debt 24,332 43,971
Deferred income taxes 104,548 73,600
Long term liabilities 4,067 11,895
Minority interest 112,870 136,149
Shareholders' Equity 766,004 756,383
Total liabilities and shareholders'
equity $1,341,715 $1,252,365
(1) Includes $173,983 and $25,122 at December 31, 2008 and December 31,
2007, respectively, of an accrual related to money market funds
support agreements.
SEI INVESTMENTS COMPANY
ASSET BALANCES
(In millions)
(Unaudited)
Dec. 31, Mar. 31, Jun. 30, Sep. 30, Dec. 31,
2007 2008 2008 2008 2008
Private Banks:
Equity/Fixed Income
prgms. $21,160 $18,904 $18,163 $14,436 $10,573
Collective Trust
Fund prgm. 1,007 1,008 955 1,028 1,145
Liquidity funds 8,886 9,198 8,345 9,253 9,194
----- ----- ----- ----- -----
Total assets under
mgmt. $31,053 $29,110 $27,463 $24,717 $20,912
Client assets under
admin. 14,235 13,897 13,242 12,301 10,622
------ ------ ------ ------ ------
Total assets $45,288 $43,007 $40,705 $37,018 $31,534
Investment Advisors:
Equity/Fixed Income
prgms. $36,378 $32,736 $31,938 $27,817 $21,631
Collective Trust
Fund prgm. 2,295 2,310 2,259 2,471 2,606
Liquidity funds 2,079 2,461 2,410 2,859 3,436
----- ----- ----- ----- -----
Total assets under
mgmt. $40,752 $37,507 $36,607 $33,147 $27,673
Institutional
Investors:
Equity/Fixed
Income prgms. $44,833 $43,134 $43,608 $39,775 $34,966
Collective Trust
Fund prgm. 897 924 947 1,001 942
Liquidity funds 3,629 4,077 3,950 3,930 4,582
----- ----- ----- ----- -----
Total assets under
mgmt. $49,359 $48,135 $48,505 $44,706 $40,490
Investment
Managers:
Equity/Fixed Income
prgms. $24 $20 $19 $10 $8
Collective Trust
Fund prgm. 6,651 6,571 6,572 6,453 5,974
Liquidity funds 325 571 438 699 869
--- --- --- --- ---
Total assets under
mgmt. $7,000 $7,162 $7,029 $7,162 $6,851
Client assets under
admin. ( C ) 215,124 225,005 228,722 256,553 234,628
------- ------- ------- ------- -------
Total assets $222,124 $232,167 $235,751 $263,715 $241,479
Investments
in New
Businesses:
Equity/Fixed Income
prgms. $929 $869 $838 $704 $519
Liquidity funds 74 77 98 115 153
-- -- -- --- ---
Total assets under
mgmt. $1,003 $946 $936 $819 $672
LSV Asset
Management
Equity/Fixed Income
prgms. $67,599 $61,765 $57,692 $51,296 $37,714
Consolidated:
Equity/Fixed Income
Prgms (A) $170,923 $157,428 $152,258 $134,038 $105,411
Collective Trust
Fund prgm. 10,850 10,813 10,733 10,953 10,667
Liquidity funds 14,993 16,384 15,241 16,856 18,234
------ ------ ------ ------ ------
Total assets under
mgmt. $196,766 $184,625 $178,232 $161,847 $134,312
Client assets under
admin. (B) 229,359 238,902 241,964 268,854 245,250
------- ------- ------- ------- -------
Total assets $426,125 $423,527 $420,196 $430,701 $379,562
(A) Equity/Fixed Income programs include $2,377 of assets invested in
various asset allocation funds at December 31, 2008.
(B) In addition to the numbers presented, SEI also administers an
additional $7,424 in Funds of Funds assets (as of December 31,
2008) on which SEI does not earn an administration fee.
( C ) Client assets under administration in the Investment Managers
segment include $78.6 billion of assets balances that require
limited services and therefore are at fee levels below our normal
service assets.
SEI Investments Company
Impact of Support Provided to Sponsored Money Market Funds
Fourth-Quarter 2008 and Cumulative as of December 31, 2008
(in thousands)
Par Value
of Support Required
Securities Amount Collateral
---------- ------- ----------
Securities currently
held by funds:
Capital Support
Agreement (1) $257,737 $257,737 $158,080
Capital Support
Agreement (2) 68,109 30,000 30,000
------ ------ ------
Total of securities
currently held by funds 325,846 287,737 188,080
Securities purchased from
funds:
Gryphon (formerly Cheyne) 15,034 - -
------ --- ---
Total of all Securities $340,880 $287,737 $188,080
Fourth Quarter 2008 Cumulative
---------------------- --------------------
Gross After-Tax Gross After-Tax
Charge Charge Charge Charge
------ --------- ------ ---------
Securities currently
held by funds:
Capital Support
Agreement (1)
Capital Support
Agreement (2) $53,348 $31,898 $147,007 $90,997
Total of securities
Currently held by
funds 8,211 4,857 26,976 16,698
----- ----- ------ ------
61,559 36,775 173,983 107,695
Securities purchased from
funds:
Gryphon (formerly Cheyne) 2,733 1,613 9,321 5,770
----- ----- ----- -----
Total of all Securities $64,292 $38,368 $183,304 $113,465
(1) Pertains to the Amended and Restated Capital Support Agreement for
the SEI Daily Income Trust Prime Obligation Fund
(2) Pertains to the Amended and Restated Capital Support Agreement for
the SEI Liquid Asset Trust Prime Obligation Fund
SOURCE SEI Investments Company
Released January 29, 2009