SEI Reports Third-Quarter 2010 Financial Results

Oct 20, 2010, 08:00 ET from SEI Investments Company

OAKS, Pa., Oct. 20 /PRNewswire-FirstCall/ -- SEI Investments Company (Nasdaq: SEIC) today announced financial results for third-quarter 2010, reporting an increase in net income attributable to SEI and diluted earnings per share compared to third-quarter 2009.  Diluted earnings per share were $0.30.  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 $3.7 million or two percent compared to third-quarter 2009 (see Proforma Consolidated Overview below).


Consolidated Overview

For the Three Months


For the Nine Months

(In thousands, except earnings per share)

Ended September 30,


Ended September 30,


2010

2009

%


2010

2009

%









Revenues

$219,513

$275,933

(20%)


$669,436

$776,553

(14%)

Net Income attributable to SEI

56,389

52,727

7%


169,287

128,498

32%

Diluted Earnings Per Share

$0.30

$0.27

11%


$0.89

$0.67

33%



"Compared to a year ago, our third-quarter results reflect improved capital markets, improved markets for our services, and the ongoing management of our costs," said Alfred P. West, Jr., SEI Chairman and CEO.

"While our new sales activities are yielding positive results, lengthy sales and installation cycles remain a challenge for the short term.  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 Nine Months

(In thousands, except earnings per share)

Ended September 30,


Ended September 30,


2010

2009

%


2010

2009

%


(Actual)

(Proforma)



(Actual)

(Proforma)










Revenues

$219,513

$215,773

2%


$669,436

$627,125

7%

Net Income attributable to SEI

56,389

52,727

7%


169,287

128,498

32%

Diluted Earnings Per Share

$0.30

$0.27

11%


$0.89

$0.67

33%



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


(In thousands)

For the Three Month Period


For the Nine Month Period


Ended  September 30,


Ended  September 30,


2010

2009

%


2010

2009

%

Private Banks:








  Revenues    

$83,518

$88,561

(6%)


$260,730

$272,154

(4%)

  Expenses

73,463

79,549

(8%)


229,674

229,108

-

  Operating Profit

$10,055

$9,012

12%


$31,056

$43,046

(28%)

  Operating Margin

12%

10%



12%

16%










Investment Advisors:








  Revenues

43,422

43,467

-


135,283

120,557

12%

  Expenses

26,426

28,001

(6%)


82,129

81,049

1%

  Operating Profit

16,996

15,466

10%


53,154

39,508

35%

  Operating Margin

39%

36%



39%

33%










Institutional Investors:








  Revenues

51,036

47,458

8%


152,821

129,001

18%

  Expenses

25,940

27,369

(5%)


78,896

74,803

5%

  Operating Profit

25,096

20,089

25%


73,925

54,198

36%

  Operating Margin

49%

42%



48%

42%










Investment Managers:








  Revenues

40,548

35,208

15%


117,598

101,911

15%

  Expenses

25,763

23,047

12%


75,918

68,159

11%

  Operating Profit

14,785

12,161

22%


41,680

33,752

23%

  Operating Margin

36%

35%



35%

33%










Investments in New Businesses:








  Revenues

989

1,079

(8%)


3,004

3,502

(14%)

  Expenses

4,080

3,171

29%


9,480

8,789

8%

  Operating Loss

(3,091)

(2,092)

(48%)


(6,476)

(5,287)

(22%)

  Operating Margin

N/A

N/A



N/A

N/A










LSV:








  Revenues

-

60,160

N/A


-

149,428

N/A

  Expenses (1)

-

38,928

N/A


-

97,083

N/A

  Operating Profit

-

21,232

N/A


-

52,345

N/A

  Operating Margin

-

35%



-

35%










Totals:








  Revenues

$219,513

$275,933

(20%)


$669,436

$776,553

(14%)

  Expenses

155,672

200,065

(22%)


476,097

558,991

(15%)

  Corporate overhead expenses

8,981

8,897

1%


28,639

27,235

5%

  Noncontrolling interest reflected in segments

(279)

(30,168)

N/A


(956)

(73,968)

N/A

  LSV Employee Group expenses

-

1,836

N/A


-

5,476

N/A

  Income from operations

$    55,139

$    95,303

(42%)


$   165,656

$   258,819

(36%)


(1) Includes $29,829 and $73,120 for the three and nine month periods ended September 30, 2009, of noncontrolling interest to the other partners of LSV.



Third-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 third-quarter 2009 include $60.2 million from LSV.  Excluding these revenues, revenues in third-quarter 2010 increased $3.7 million or two percent compared to third-quarter 2009.  This increase was primarily due to higher average asset balances under management and administration from existing clients because of improved capital markets.
  • Stock-based compensation costs in third-quarter 2010 reflect the reversal of $6.3 million of previously recognized stock-based compensation costs and the acceleration of $3.1 million of stock-based compensation costs due to a change in management's estimates of the attainment of certain performance vesting targets. The net effect of these two items was a reduction of $3.2 million of stock-based compensation costs in third-quarter 2010.
  • Third-quarter 2010 includes $2.1 million in costs associated with operational errors, of which, approximately $1.0 million is recognized in the Investment Advisors segment and $900K is recognized in the Investments in New Businesses segment.  Also, third-quarter 2009 includes $2.2 million in costs associated with operational errors which was recognized in the Institutional Investors segment.
  • The third-quarter 2010 net income attributable to SEI and diluted earnings per share results include gains of $8.7 million associated with SIVs, whereas results in third-quarter 2009 included gains of $14.9 million.  Additional information pertaining to SIVs is contained in SEI's 2009 Form 10-K filed February 25, 2010.
  • Assets under management increased by $15.1 billion during the third-quarter 2010 to $164.0 billion at September 30, 2010, as compared to $148.9 billion at June 30, 2010, primarily due to market driven appreciation.
  • In the third-quarter 2010, SEI purchased 1,989,000 shares of its common stock for $38.6 million.

Proforma Consolidated Statement of Operations

The following proforma Consolidated Statements of Operations presents third quarter 2009 and Year to Date September 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 September 30,


As Reported


Proforma




SEI


SEI without




Consolidated


LSV and LSVEG




2010


2009


%







Total revenues

219,513


215,773


2%

Total expenses

164,374


169,694


(3%)







Income from operations

55,139


46,079


20%







Net gain from investments

9,362


15,616


(40%)

Interest, net

1,285


1,219


5%

Equity in earnings of unconsolidated affiliate

25,246


21,240


19%







Income before taxes

91,032


84,154


8%







Income taxes

34,311


31,109


10%







Net income

56,721


53,045


7%







Less Net Income attributable to noncontrolling interest

(332)


(318)


4%







Net income attributable to SEI

$56,389


$52,727


7%







Diluted earnings per share

$0.30


$0.27


11%







Diluted shares outstanding

189,521


192,325


(1%)



SEI INVESTMENTS COMPANY

PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


Nine Months Ended September 30,


As Reported


Proforma




SEI


SEI without




Consolidated


LSV and LSVEG




2010


2009


%







Total revenues

669,436


627,125


7%

Total expenses

503,780


488,294


3%







Income from operations

165,656


138,831


19%







Net gain (loss) from investments

30,435


(1,367)


N/A

Interest, net

3,601


3,795


(5%)

Other income

1,070


-


N/A

Equity in earnings of unconsolidated affiliate

72,839


52,370


39%







Income before taxes

273,601


193,629


41%







Income taxes

103,183


64,250


61%







Net income

170,418


129,379


32%







Less Net Income attributable to noncontrolling interest

(1,131)


(881)


28%







Net income attributable to SEI

$169,287


$128,498


32%







Diluted earnings per share

$0.89


$0.67


33%







Diluted shares outstanding

190,694


191,905


(1%)



Earnings Conference Call

A conference call to review earnings is scheduled for 2:00 PM ET on October 20, 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 174401.

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 September 30, 2010, through its subsidiaries and partnerships in which the company has a significant interest, SEI administers $402 billion in mutual fund and pooled assets and manages $164 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.

SEI INVESTMENTS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended September 30,

2010

2009

Asset management, admin. and distribution fees

$155,799

$206,235

Information processing and software servicing fees

55,226

56,241

Transaction–based and trade execution fees

8,488

13,457

Total revenues

219,513

275,933

Subadvisory, distribution and other asset mgmt costs

21,900

21,998

Brokerage commissions and royalties

12,402

14,421

Compensation, benefits and other personnel

64,694

70,204

Stock based compensation

3,468

3,418

Consulting, outsourcing and professional fees

21,841

20,173

Data processing and computer related

10,167

11,235

Facilities, supplies and other costs

18,302

18,817

Amortization

5,998

15,042

Depreciation

5,602

5,322

Total expenses

164,374

180,630

Income from operations

55,139

95,303

Net gain on investments

9,362

15,616

Interest and dividend income

1,621

1,897

Interest expense

(336)

(1,034)

Equity in earnings of unconsolidated affiliate

25,246

-

Income before taxes

91,032

111,782

Income taxes

34,311

31,109

Net income

56,721

80,673

Less: Net income attributable to noncontrolling interest

(332)

(27,946)

Net income attributable to SEI

$56,389

$52,727

Diluted earnings per common share

$0.30

$0.27

Shares used to calculate diluted

  earnings per common share

189,521

192,325

Basic earnings per common share

$0.30

$0.28

Shares used to calculate basic

  earnings per common share

187,964

190,850

SEI INVESTMENTS COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

Nine Months Ended September 30,

2010

2009

Asset management, admin. and distribution fees

$463,511

$558,808

Information processing and software servicing fees

175,148

173,152

Transaction–based and trade execution fees

30,777

44,593

Total revenues

669,436

776,553

Subadvisory, distribution and other asset mgmt costs

66,826

62,466

Brokerage commissions and royalties

40,747

47,645

Compensation, benefits and other personnel

198,922

207,312

Stock based compensation

16,403

10,209

Consulting, outsourcing and professional fees

65,250

60,034

Data processing and computer related

30,512

33,927

Facilities, supplies and other costs

50,833

50,453

Amortization

17,895

29,493

Depreciation

16,392

16,195

Total expenses

503,780

517,734

Income from operations

165,656

258,819

Net gain (loss) on investments

30,435

(1,367)

Interest and dividend income

4,823

5,545

Interest expense

(1,222)

(2,884)

Other income

1,070

-

Equity in earnings of unconsolidated affiliate

72,839

-

Income before taxes

273,601

260,113

Income taxes

103,183

64,250

Net income

170,418

195,863

Less: Net income attributable to the noncontrolling interest

(1,131)

(67,365)

Net income attributable to SEI

$169,287

$128,498

Diluted earnings per common share

$0.89

$0.67

Shares used to calculate diluted

  earnings per common share

190,694

191,905

Basic earnings per common share

$0.90

$0.67

Shares used to calculate basic

  earnings per common share

189,090

190,986

SEI INVESTMENTS COMPANY

CONDENSED BALANCE SHEETS

(In thousands)

(Unaudited)

September 30,

December, 31

2010

2009

Assets

Cash and short-term investments

$451,778

$590,877

(a)

Restricted cash

19,000

20,000

Receivables

171,709

212,451

(a)

Other current assets

19,930

18,075

    Total current assets

662,417

841,403

Property and equipment, net

144,026

146,053

Marketable securities

177,889

181,897

Capitalized software, net

289,604

278,656

Investment in unconsolidated affiliate

63,096

-

Goodwill

-

22,842

Intangible assets, net

-

44,859

Other assets, net

16,993

18,098

    Total assets

$1,354,025

$1,533,808

Liabilities

Current liabilities

$116,340

$163,055

(b)

Long-term debt

120,000

247,152

(b)

Deferred income taxes

91,108

86,257

Long-term liabilities

5,836

5,726

Total SEI Investments Company shareholders’ equity

1,006,391

909,723

Noncontrolling interest

14,350

121,895

Total Equity

1,020,741

1,031,618

    Total liabilities and equity

$1,354,025

$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.

SEI INVESTMENTS COMPANY

ASSET BALANCES

(In millions)

(Unaudited)

Sep. 30,

Dec. 31,

Mar. 31,

Jun. 30,

Sep. 30,

2009

2009

2010

2010

2010

Private Banks:

  Equity/Fixed Income prgms.

$12,479

$12,690

$12,635

$11,769

$12,842

  Collective Trust Fund prgm.

1,098

1,067

1,023

640

615

  Liquidity funds

6,524

6,035

5,329

5,175

5,034

  Total assets under mgmt.

$20,101

$19,792

$18,987

$17,584

$18,491

  Client assets under admin.

10,941

11,213

11,429

10,335

10,557

  Total assets

$31,042

$31,005

$30,416

$27,919

$29,048

Investment Advisors:

  Equity/Fixed Income prgms.

$24,739

$25,392

$26,222

$23,699

$26,091

  Collective Trust Fund prgm.

2,521

2,423

2,284

2,066

2,028

  Liquidity funds

2,243

1,929

1,731

2,635

2,253

  Total assets under mgmt.

$29,503

$29,744

$30,237

$28,400

$30,372

Institutional Investors:

  Equity/Fixed Income prgms.

$43,672

$44,322

$45,891

$43,506

$47,667

  Collective Trust Fund prgm.

707

684

657

643

641

  Liquidity funds

4,624

3,370

3,198

2,558

3,475

  Total assets under mgmt.

$49,003

$48,376

$49,746

$46,707

$51,783

Investment Managers:

  Equity/Fixed Income prgms.

$4

$4

$2

$1

$1

  Collective Trust Fund prgm.

7,075

7,428

7,639

7,366

7,781

  Liquidity funds

528

412

447

428

423

  Total assets under mgmt.

$7,607

$7,844

$8,088

$7,795

$8,205

  Client assets under admin. (A)

216,222

221,680

220,807

220,459

227,777

  Total assets

$223,829

$229,524

$228,895

$228,254

$235,982

Investments in New Businesses:

  Equity/Fixed Income prgms.

$473

$520

$534

$496

$533

  Liquidity funds

93

75

72

74

82

  Total assets under mgmt.

$566

$595

$606

$570

$615

LSV Asset Management

  Equity/Fixed Income prgms.

$49,349

$52,488

$54,189

$47,822

$54,492

Consolidated:

  Equity/Fixed Income prgms (B)

$130,716

$135,416

$139,473

$127,293

$141,626

  Collective Trust Fund prgm.

11,401

11,602

11,603

10,715

11,065

  Liquidity funds

14,012

11,821

10,777

10,870

11,267

  Total assets under mgmt.

$156,129

$158,839

$161,853

$148,878

$163,958

  Client assets under admin. (C)

227,163

232,893

232,236

230,794

238,334

  Total assets

$383,292

$391,732

$394,089

$379,672

$402,292

(A) Client assets under administration in the Investment Managers segment include $59.6 billion of assets balances that require limited services and therefore are at fee levels below our normal full service assets (as of September 30, 2010).

(B) Equity/Fixed Income programs include $2,386 million of assets invested in various asset allocation funds at September 30, 2010.

(C) In addition to the numbers presented, SEI also administers an additional $4,534 million in Funds of Funds assets (as of September 30, 2010) on which SEI does not earn an administration fee.

SOURCE SEI Investments Company



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