SEI Investments Reports Fourth-Quarter 2006 Results
Net Income up 24%
OAKS, Pa., Feb. 1 /PRNewswire-FirstCall/ -- SEI Investments Company (Nasdaq: SEIC) today announced financial results for fourth-quarter 2006, reporting increases in revenues, net income and earnings per share, compared to the corresponding period for the prior year. Revenues in the fourth- quarter 2006 include (in thousands) $80,358 from LSV Asset Management (LSV) due to the consolidation of its operations with SEI. Revenues in the fourth- quarter 2006 without LSV are (in thousands) $235,156, an increase of 16 percent.
Consolidated Overview For the Three Months For the Twelve Months
(In thousands, except Ended December 31, Ended December 31,
earnings per share) 2006 2005 % 2006 2005 %
Revenues $315,514 $203,587 55% $1,175,749 $773,007 52%
Net Income
Before Taxes 98,054 80,335 22% 358,756 295,209 22%
Net Income 63,624 51,255 24% 236,990 188,344 26%
Diluted Earnings
Per Share $.62 $.50 24% $2.33 $1.83 27%
"We are satisfied with the results for both the quarter and the year, especially since we are shifting into the execution stage of our new strategies," said Alfred P. West, Jr., SEI Chairman and CEO.
"We are encouraged by the successful beta of the global wealth platform. The investments we are making are on schedule and our transformation is well underway. In the long run, we remain firm in our belief that what we are doing will help us provide our clients with increased opportunities for success and allow us to grow our future revenues and profits more rapidly."
Summary of Fourth-Quarter and Year to Date Results by Business Segment
(In thousands) For the Three Month Period Ended
December 31,
2006 2005 %
Private Banking and Trust:
Revenues $70,803 $66,443 7%
Expenses 47,530 43,101 10%
Operating Profit $23,273 $23,342 --
Operating Margin 33% 35%
Investment Advisors:
Revenues 60,070 53,682 12%
Expenses 29,162 22,847 28%
Operating Profit 30,908 30,835 --
Operating Margin 51% 57%
Enterprises:
Revenues 45,796 36,958 24%
Expenses 28,563 24,461 17%
Operating Profit 17,233 12,497 38%
Operating Margin 38% 34%
Money Managers:
Revenues 32,826 27,156 21%
Expenses 23,641 22,201 6%
Operating Profit 9,185 4,955 85%
Operating Margin 28% 18%
Investments in New Businesses:
Revenues 25,661 19,348 33%
Expenses 32,941 25,785 28%
Operating Loss (7,280) (6,437) 13%
Operating Margin (28%) (33%)
LSV
Revenues 80,358 -- --
Expenses (1) 48,959 -- --
Operating profit (2) 31,399 -- --
39%
Consolidated Segment Totals:
Revenues $315,514 $203,587 55%
Expenses 210,796 138,395 52%
Operating Profit $104,718 $65,192 61%
Operating Margin 33% 32%
(In thousands) For the Twelve Month Period
Ended December 31,
2006 2005 %
Private Banking and Trust:
Revenues $283,191 $266,129 6%
Expenses 183,727 168,773 9%
Operating Profit $99,464 $97,356 2%
Operating Margin 35% 37%
Investment Advisors:
Revenues 225,716 203,423 11%
Expenses 111,907 87,857 27%
Operating Profit 113,809 115,566 (2%)
Operating Margin 50% 57%
Enterprises:
Revenues 164,962 132,013 25%
Expenses 106,377 89,022 19%
Operating Profit 58,585 42,991 36%
Operating Margin 36% 33%
Money Managers:
Revenues 118,964 103,272 15%
Expenses 90,799 85,595 6%
Operating Profit 28,165 17,677 59%
Operating Margin 24% 17%
Investments in New Businesses:
Revenues 91,795 68,170 35%
Expenses 118,253 95,909 23%
Operating Loss (26,458) (27,739) (5%)
Operating Margin (29%) (41%)
LSV
Revenues 291,121 -- --
Expenses (1) 178,727 -- --
Operating profit (2) 112,394 -- --
39%
Consolidated Segment Totals:
Revenues $1,175,749 $773,007 52%
Expenses 789,790 527,156 50%
Operating Profit $385,959 $245,851 57%
Operating Margin 33% 32%
(1) Includes $42,862 and $153,381 for the three and twelve month periods
ended December 31, 2006, respectively, of minority interest to the
other partners of LSV.
(2) Our proportionate share in the earnings of LSV for the three and
twelve month periods ending December 31, 2005 was $21,000 and
$74,818, respectively, and was reflected in Equity in the earnings of
unconsolidated affiliate.
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, 2006 are as follows:
Three months ended Twelve months ended
December 31, December 31,
2006 2005 2006 2005
Total operating profit
from business segments $104,718 $65,192 $385,959 $245,851
Corporate overhead
expenses (10,280) (8,567) (38,901) (33,898)
Equity in the earnings
of unconsolidated
affiliate -- 21,000 -- 74,818
Net (loss) gain from
investments (512) (132) (2,378) 87
Interest, net 2,986 2,275 8,057 6,843
Other income -- 567 1,588 1,508
LSV Employee Group (1) 1,142 -- 4,431 --
Income before taxes $98,054 $80,335 $358,756 $295,209
(1) LSV Employee Group includes $15 and $59 expense for the three and
twelve month periods ended December 31, 2006, respectively, included
in corporate overhead expenses, $15 and $57 for the three and twelve
month periods ended December 31, 2006, respectively, included in
interest income, and $1,142 and $4,429 for the three and twelve month
periods ended December 31, 2006, respectively, included in interest
expense. These items are offset through Minority interest since SEI
does not have any ownership in LSV Employee Group LLC.
Fourth-Quarter Business Commentary:
-- As of the first-quarter 2006, SEI began to consolidate the operations
of LSV Asset Management and LSV Employee Group. As of the fourth-
quarter 2006, the company's percentage ownership in LSV remained at
43 percent. In the fourth-quarter 2006, the company recognized $31.4
million as its portion of the earnings from LSV versus $21.0 million
in fourth-quarter 2005.
-- All the other business segments reported revenue gains versus year
ago.
-- While Private Banking & Trust revenue was higher versus fourth-
quarter 2005, it was down versus third-quarter 2006. Third-quarter
2006 contained a previously reported $4.7 million one time revenue
event related to a contract buyout.
-- The Investment Advisors, Enterprises, Money Managers and Investments
in New Businesses segments all realized double digit revenue growth
versus year ago levels due to a combination of improved capital
markets and net new business.
-- The Money Managers segment continues to realize improved operating
margins as a result of continuing revenue growth.
-- The tax rate for the fourth-quarter 2006 was approximately 35%, vs.
31.8% in the third-quarter 2006.
-- Net income was negatively affected by option expense under
FAS 123 (R) of $9.8 million in the fourth-quarter 2006, versus $7.1
million in the third-quarter 2006.
-- Assets under management grew by $12.6 billion during the fourth-
quarter 2006 to $181.5 billion.
-- In the fourth-quarter 2006, SEI purchased 487,500 shares of its
common stock for $28.2 million.
Earnings Conference Call
A conference call to review earnings is scheduled for 2:00 PM EDT on February 1, 2007. Investors may listen to the call at http://www.seic.com, or listen at http://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 859989.
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 the period ending December 31, 2006, through its subsidiaries and partnerships in which the company has a significant interest, SEI administers $366.6 billion in mutual fund and pooled assets and manages $181.5 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 http://www.seic.com.
Many of our responses 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,
2006 2005
Asset Management, admin. and
distribution fees (1) $249,810 $142,963
Information processing and software
servicing fees 53,693 48,572
Transaction-based and trade execution fees 12,011 12,052
Total Revenues 315,514 203,587
Commissions and Fees 39,937 34,094
Compensation, benefits and other personnel 84,128 62,416
Consulting, outsourcing and professional fees 20,827 16,985
Data processing and computer related 10,319 7,980
Facilities, supplies and other costs 16,321 21,339
Depreciation and amortization 5,493 4,148
Total Expenses (1) 177,025 146,962
Income before interest and taxes 138,489 56,625
Minority Interest (42,909) --
Equity in earnings of unconsolidated affiliate -- 21,000
Net loss on investments (512) (132)
Interest income (1) 4,372 2,628
Interest expense (1) (1,386) (353)
Other income -- 567
Income before taxes 98,054 80,335
Income taxes 34,430 29,080
Net income $63,624 $51,255
Diluted earnings per common share $.62 $.50
Shares used to calculate diluted
earnings per common share 102,330 101,872
Basic earnings per common share $.64 $.52
Shares used to calculate basic
earnings per common share 98,904 99,105
(1) Includes the operations of LSV and LSV Employee Group for the fourth-
quarter 2006. Revenues include $80,358 from LSV, Expenses includes
$6,097 from LSV, Interest income includes $425 from LSV and LSV
Employee Group, and Interest expense includes $1,142 from LSV
Employee Group. The portion of ownership of LSV and LSV Employee
Group by non-affiliated SEI entities is reflected through Minority
interest. Our proportionate share in the earnings of LSV for fourth-
quarter 2005 was reflected in Equity in the earnings of
unconsolidated affiliate.
SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Twelve Months Ended December 31,
2006 2005
(unaudited)
Asset Management, admin. and
distribution fees (1) $918,142 $531,594
Information processing and
software servicing fees 213,066 197,992
Transaction-based and trade execution fees 44,541 43,421
Total Revenues 1,175,749 773,007
Commissions and Fees 147,835 129,303
Compensation, benefits and other personnel 315,502 242,453
Consulting, outsourcing and professional
fees 77,753 70,612
Data processing and computer related 37,755 30,409
Facilities, supplies and other costs 69,306 71,129
Depreciation and amortization 21,925 17,148
Total Expenses (1) 670,076 561,054
Income before interest and taxes 505,673 211,953
Minority Interest (154,184) --
Equity in earnings of unconsolidated
affiliate -- 74,818
Net (loss) gain on investments (2,378) 87
Interest income (1) 13,521 8,367
Interest expense (1) (5,464) (1,524)
Other income 1,588 1,508
Income before taxes 358,756 295,209
Income taxes 121,766 106,865
Net income $236,990 $188,344
Diluted earnings per common share $2.33 $1.83
Shares used to calculate diluted
earnings per common share 101,633 103,138
Basic earnings per common share $2.40 $1.88
Shares used to calculate basic
earnings per common share 98,682 100,371
(1) Includes the operations of LSV and LSV Employee Group for the twelve
months in 2006. Revenues include $291,121 from LSV, Expenses
includes $25,346 from LSV, Interest income includes $1,444 from LSV
and LSV Employee Group, and Interest expense includes $4,429 from LSV
Employee Group. The portion of ownership of LSV and LSV Employee
Group by non-affiliated SEI entities is reflected through Minority
interest. Our proportionate share in the earnings of LSV for twelve-
months in 2005 was reflected in Equity in the earnings of
unconsolidated affiliate.
SEI INVESTMENTS COMPANY
CONDENSED BALANCE SHEETS
(In thousands)
(unaudited)
December 31, December 31,
2006 2005
Assets
Cash and short-term investments (1) $286,948 $130,128
Restricted Cash 10,250 10,250
Receivables (1) 244,599 128,545
Securities owned 16,431 19,709
Other current assets 28,245 17,344
Total current assets 586,473 305,976
Property and Equipment, net 130,732 114,505
Investments available for sale 71,690 54,632
Capitalized Software, net 180,014 116,670
Goodwill (2) (3) 95,062 --
Investment in unconsolidated affiliate (1) -- 51,941
Other assets 22,956 13,423
Total assets $1,086,927 $657,147
Liabilities
Current liabilities (1) (2) (3) $196,127 $167,470
Long-term debt (2) (3) 67,538 9,000
Deferred income taxes 76,148 58,989
Minority Interest 116,602 --
Shareholders' Equity 630,512 421,688
Total liabilities and shareholders'
equity $1,086,927 $657,147
(1) Includes the accounts of LSV as of December 31, 2006. Cash includes
$71,457, Receivables includes $85,092, and Current Liabilities
includes $6,432 from LSV. Prior to 2006, our investment in the net
assets of LSV was recorded in Investment in unconsolidated affiliate.
(2) Primarily relates to LSV Employee Group. Goodwill was primarily
generated as a result of LSV Employee Group buying an equity
investment of LSV for $92,000. LSV Employee Group financed the
purchase price, of which $9,100 is classified as a current liability
and the remaining $62,538 is reflected as Long-term debt at December
31, 2006.
(3) The Company provided an unsecured loan guarantee to LSV Employee
Group which resulted in consolidating the accounts of LSV and LSV
Employee Group.
SEI INVESTMENTS COMPANY
ASSET BALANCES
(In millions)
Dec. 31, Mar. 31, Jun. 30, Sep. 30, Dec. 31,
2005 2006 2006 2006 2006
Private Banking
and Trust:
Equity/Fixed
Income prgms. $2,363 $2,404 $2,109 $2,101 $2,093
Collective
Trust Fund
prgm. 1,657 1,581 1,459 1,460 1,251
Liquidity
funds 7,485 7,139 7,627 7,707 8,513
Total assets
under mgmt. $11,505 $11,124 $11,195 $11,268 $11,857
Client assets
under admin. 10,275 15,279 15,157 14,449 14,461
Total assets $21,780 $26,403 $26,352 $25,717 $26,318
Investment
Advisors:
Equity/Fixed
Income prgms. $29,553 $31,569 $30,709 $31,977 $33,888
Collective
Trust Fund
prgm. 2,479 2,482 2,473 2,425 2,480
Liquidity
funds 1,103 1,017 1,306 1,263 1,421
Total assets
under mgmt. $33,135 $35,068 $34,488 $35,665 $37,789
Enterprises:
Equity/Fixed
Income prgms. $30,203 $32,083 $32,709 $34,674 $37,720
Collective
Trust Fund
prgm. 1,172 1,157 1,147 1,150 1,081
Liquidity
funds 3,153 4,076 3,823 4,167 3,371
Total assets
under mgmt. $34,528 $37,316 $37,679 $39,991 $42,172
Money Managers:
Equity/Fixed
Income prgms. $11 $33 $34 $34 $30
Collective
Trust Fund
prgm. 8,770 9,096 8,923 9,009 8,675
Liquidity
funds 412 505 363 253 215
Total assets
under mgmt. $9,193 $9,634 $9,320 $9,296 $8,920
Client assets
under admin. 147,357 151,688 153,406 161,000 170,344
Total assets $156,550 $161,322 $162,726 $170,296 $179,264
Investments in
New Businesses:
Equity/Fixed
Income prgms. $12,396 $12,848 $13,322 $13,931 $15,779
Total assets
under mgmt. $12,396 $12,848 $13,322 $13,931 $15,779
Client assets
under admin. 5,894 4,496 4,053 552 277
Total assets $18,290 $17,344 $17,375 $14,483 $16,056
LSV Asset
Management
Equity/Fixed
Income
prgms. $47,781 $54,128 $55,687 $58,785 $64,970
Consolidated:
Equity/Fixed
Income prgms
(A,B) $122,307 $133,065 $134,570 $141,502 $154,480
Collective
Trust Fund
prgm. 14,078 14,316 14,002 14,044 13,487
Liquidity
funds (B) 12,153 12,737 13,119 13,390 13,520
Total assets
under mgmt. $148,538 $160,118 $161,691 $168,936 $181,487
Client assets
under admin. 163,526 171,463 172,616 176,001 185,082
Total assets $312,064 $331,581 $334,307 $344,937 $366,569
(A) Equity/Fixed Income programs include $3,457 of assets invested in
SEI's Asset Allocation Funds at 12/31/06
(B) In addition to the numbers presented, SEI also administers an
additional $8,772 in Funds of Funds assets (as of December 31, 2006)
on which SEI does not earn an administration fee.
SOURCE SEI Investments Company
Released February 1, 2007