SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)*
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
---
Exchange Act of 1934 for the quarterly period ended June 30, 1997 or
_______ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to _________
0-10200
- --------------------------------------------------------------------------------
(Commission File Number)
SEI INVESTMENTS COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1707341
- ---------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1 FREEDOM VALLEY DRIVE, OAKS, PENNSYLVANIA 19456-1100
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(610) 676-1000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
---
*APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ___ No ___
*APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1997: 18,351,591 shares of common stock, par value
$.01 per share.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
(In thousands)
June 30, 1997 December 31, 1996
(unaudited)
Assets
- ------
Current assets:
Cash and cash equivalents $ 10,187 $ 13,167
Receivables from regulated investment companies 11,921 10,836
Receivables, net of allowance for doubtful
accounts of $1,539 and $1,350 26,622 19,558
Loans receivable available for sale 15,035 13,043
Deferred income taxes 5,161 4,527
Prepaid expenses 3,449 3,825
-------- --------
Total current assets 72,375 64,956
-------- --------
Investments available for sale 1,469 1,000
-------- --------
Property and equipment, net of accumulated
depreciation and amortization of $50,976
and $48,128 50,623 48,620
-------- --------
Capitalized software, net of accumulated
amortization of $6,975 and $5,193 16,921 13,577
-------- --------
Customer lists, net of accumulated
amortization of $135 and $0 2,465 2,000
-------- --------
Other assets, net 11,334 10,888
-------- --------
Total Assets $155,187 $141,041
======== ========
The accompanying notes are an integral part of these statements.
2
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
June 30, 1997 December 31, 1996
(unaudited)
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 4,580 $ 5,863
Accrued compensation 9,344 14,503
Accrued discontinued operations disposal costs 6,579 7,417
Accrued proprietary fund services 7,726 6,748
Other accrued liabilities 20,824 20,303
Line of credit -- 20,000
Current portion of long-term debt 2,000 --
Deferred revenue 5,485 5,123
------- -------
Total current liabilities 56,538 79,957
------- -------
Long-term debt 33,000 --
------- -------
Deferred income taxes 7,138 4,976
------- -------
Shareholders' equity:
Common stock, $.01 par value, 100,000 shares
authorized; 18,352 and 18,498 shares issued
and outstanding 184 185
Capital in excess of par value 58,391 54,959
Retained earnings -- 1,141
Cumulative translation adjustments (346) (177)
Unrealized holding gain on investments 282 --
-------- --------
Total shareholders' equity 58,511 56,108
-------- --------
Total Liabilities and Shareholders' Equity $155,187 $141,041
======== ========
The accompanying notes are an integral part of these statements.
3
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(In thousands, except per share data)
Three Months
-----------------------------
Ended June 30,
-----------------------------
1997 1996
---- ----
Revenues $70,730 $61,541
Expenses:
Operating and development 37,498 34,406
Sales and marketing 21,088 17,325
General and administrative 3,190 2,975
------- -------
Income before interest and income taxes 8,954 6,835
Gain on sale of investments available for sale -- 1,097
Interest income 272 72
Interest expense (658) (12)
------- -------
Income before income taxes 8,568 7,992
Income taxes 3,427 3,099
------- -------
Net income $ 5,141 $ 4,893
======= =======
Earnings per common and common equivalent share
(primary and fully diluted) $ .27 $ .25
======= =======
The accompanying notes are an integral part of these statements.
4
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(In thousands, except per share data)
Six Months
-------------------------
Ended June 30,
-------------------------
1997 1996
---- ----
Revenues $134,234 $124,780
Expenses:
Operating and development 69,760 68,221
Sales and marketing 40,656 33,871
General and administrative 6,584 6,132
-------- --------
Income before interest and income taxes 17,234 16,556
Gain on sale of investments available for sale -- 1,097
Interest income 484 181
Interest expense (1,149) (24)
-------- --------
Income before income taxes 16,569 17,810
Income taxes 6,627 7,124
-------- --------
Net income $ 9,942 $ 10,686
======== ========
Earnings per common and common equivalent share
(primary and fully diluted) $ .52 $ .55
======== ========
The accompanying notes are an integral part of these statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
Six Months
----------------------------
Ended June 30,
----------------------------
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 9,942 $ 10,686
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 7,653 5,380
Provision for losses on receivables 189 144
Discontinued operations -- (3,323)
Tax benefit on stock options exercised 821 1,553
Gain on sale of investments available for sale -- (1,097)
Other (718) 1,849
Change in current assets and liabilities:
Decrease (increase) in
Receivables from regulated investment companies (1,085) (1,034)
Receivables (7,253) (1,647)
Loans receivable available for sale (1,992) (9,069)
Prepaid expenses 376 509
Increase (decrease) in
Accounts payable (1,283) (372)
Accrued compensation (5,159) (6,076)
Accrued discontinued operations disposal costs (838) --
Accrued proprietary fund services 978 3,023
Other accrued liabilities 2,741 2,455
Deferred revenue 362 (1,065)
-------- --------
Net cash provided by operating activities 4,734 1,916
-------- --------
Cash flows from investing activities:
Additions to property and equipment (6,605) (11,388)
Additions to capitalized software (5,126) (3,982)
Deposit on property and equipment -- (1,398)
Investment in joint venture -- (1,658)
Proceeds from sale of investments available for sale -- 6,536
Other (290) (27)
-------- --------
Net cash used in investing activities (12,021) (11,917)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 35,000 --
Proceeds from (payment of) line of credit (20,000) 9,000
Purchase and retirement of common stock (11,020) (870)
Proceeds from issuance of common stock 5,110 3,032
Payment of dividends (4,783) (4,090)
-------- --------
Net cash provided by financing activities 4,307 7,072
-------- --------
Net decrease in cash and cash equivalents (2,980) (2,929)
Cash and cash equivalents, beginning of period 13,167 10,256
-------- --------
Cash and cash equivalents, end of period $ 10,187 $ 7,327
======== ========
The accompanying notes are an integral part of these statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
------------------------------------------
Nature of Operations
--------------------
SEI Investments Company (the "Company") is organized around two
product lines: Investment Technology and Services and Asset
Management. The Investment Technology and Services segment provides
trust accounting and management information services through the
Company's 3000 product line, administration and distribution services
to proprietary mutual funds, and back-office trust processing. The
principal market for these products and services are trust departments
of banks located in the United States. The Asset Management segment
provides investment solutions through various investment products and
services including the Company's Family of Funds, liquidity funds and
services, and other investment products and services distributed
directly or through professional investment advisors. Principal
markets for these products and services include trust departments of
banks, investment advisors, corporations, high-net-worth individuals,
and money managers located in the United States and Canada.
Summary Financial Information and Results of Operations
-------------------------------------------------------
In the opinion of the Company, the accompanying unaudited Consolidated
Financial Statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the
financial position as of June 30, 1997, the results of operations for
the three and six months ended June 30, 1997 and 1996, and the cash
flows for the six months ended June 30, 1997 and 1996.
Interim Financial Information
-----------------------------
While the Company believes that the disclosures presented are adequate
to make the information not misleading, these Consolidated Financial
Statements should be read in conjunction with the Consolidated
Financial Statements and the notes included in the Company's latest
annual report on Form 10-K.
Property and Equipment
----------------------
Property and equipment on the accompanying Consolidated Balance Sheets
consist of the following:
Estimated
Useful Lives
June 30, 1997 December 31, 1996 (In Years)
------------ ---------------- --------
Equipment $42,053,000 $40,390,000 3
Buildings 28,338,000 25,907,000 25 to 39
Land 6,980,000 6,730,000 N/A
Purchased software 9,557,000 9,397,000 3
Furniture and fixtures 9,439,000 9,030,000 3 to 5
Leasehold improvements 5,232,000 5,294,000 Lease Term
----------- -----------
101,599,000 96,748,000
Less: Accumulated depreciation
and amortization (50,976,000) (48,128,000)
----------- -----------
Property and Equipment, net $50,623,000 $48,620,000
=========== ===========
Property and equipment are stated at cost, which includes interest on
funds borrowed to finance the construction of the Company's corporate
campus. Depreciation and amortization are computed using the straight-
line method over the estimated useful life of each asset. Expenditures
for renewals and betterments are capitalized, while maintenance and
repairs are charged to expense when incurred.
7
Customer Lists
--------------
Customer Lists represent the value assigned to customer relationships
obtained in various acquisitions. Customer Lists are amortized on a
straight-line basis over 10 years. The Company evaluates the
realizability of intangible assets based on estimates of undiscounted
future cash flows over the remaining useful life of the asset. If the
amount of such estimated undiscounted cash flow is less than the net
book value of the asset, the asset is written down to its net
realizable value. As of June 30, 1997, no such write-down was
required.
Capitalized Software
--------------------
The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for
the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed" ("SFAS 86"). Under SFAS 86, costs incurred to create a
computer software product are charged to research and development
expense as incurred until technological feasibility has been
established. The Company establishes technological feasibility upon
completion of a detail program design. At that point, computer
software costs are capitalized until the product is available for
general release to customers. The establishment of technological
feasibility and the ongoing assessment of recoverability of
capitalized software development costs require considerable judgment
by management with respect to certain external factors, including, but
not limited to, anticipated future revenues, estimated economic life,
and changes in technology. Amortization begins when the product is
released. Capitalized software development costs are amortized on a
product-by-product basis using the straight-line method over the
estimated economic life of the product or enhancement, which is
primarily three to five years.
Earnings per Share
------------------
The Company computes earnings per share in accordance with Accounting
Principles Board Opinion No. 15, "Earnings per Share" ("APB 15"). In
accordance with APB 15, the Company utilizes the modified treasury
stock method to compute earnings per share since common share
equivalents at the end of the period exceeded 20 percent of the number
of common shares outstanding. Earnings per common and common
equivalent share (primary earnings per share) is computed using the
weighted average number of common shares and common share equivalents
(stock options) outstanding. Earnings per share, assuming full
dilution (fully diluted earnings per share), is based upon an
increased number of shares that would be outstanding assuming exercise
of stock options when the Company's stock price at the end of the
period is higher than the average price within the respective period.
If the inclusion of common stock equivalents has an anti-dilutive
effect in the aggregate, it is excluded from the earnings per share
calculation. For the three months ended June 30, 1997 and 1996, the
weighted average shares outstanding for primary earnings per share
were 19,167,000 and 19,526,000, respectively. For the six months ended
June 30, 1997 and 1996, the weighted average shares outstanding for
primary earnings per share were 19,216,000 and 19,505,000,
respectively. Shares used to calculate fully diluted earnings per
share were not materially different from those used to calculate
primary earnings per share.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS 128"), which supersedes APB 15. SFAS 128 requires dual
presentation of basic and diluted earnings per share for complex
capital structures on the face of the statements of income. According
to SFAS 128, basic earnings per share, which replaces primary earnings
per share, is calculated by dividing net income available to common
shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share, which replaces
fully diluted earnings per share, reflects the potential dilution from
the exercise or conversion of securities into common stock, such as
stock options. SFAS 128 is required to be adopted for the Company's
1997 year-end financial statements; earlier application is not
permitted.
8
Under SFAS 128, basic earnings per share for the three months ended
June 30, 1997 and 1996 would have been $.28 and $.26, respectively.
Basic earnings per share for the six months ended June 30, 1997 and
1996 would have been $.54 and $.57, respectively. Diluted earnings per
share for the three months ended June 30, 1997 and 1996 would have
been $.27 and $.25, respectively. Diluted earnings per share for the
six months ended June 30, 1997 and 1996 would have been $.52 and $.55,
respectively.
Statements of Cash Flows
------------------------
For purposes of the Consolidated Statements of Cash Flows, the Company
considers investment instruments purchased with an original maturity
of three months or less to be cash equivalents.
Supplemental disclosures of cash paid/received during the six months
ended June 30:
1997 1996
---- ----
Interest paid $ 231,000 $ 242,000
Interest and dividends received $ 474,000 $ 436,000
Income taxes paid $5,108,000 $5,100,000
Managements Use of Estimates
----------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Reclassifications
-----------------
The financial statements for prior periods have been reclassified to
conform with the current period's presentation.
Note 2. Receivables - Receivables on the accompanying Consolidated Balance
-----------
Sheets consist of the following:
June 30, 1997 December 31, 1996
------------- -----------------
Trade receivables $15,075,000 $10,124,000
Fees earned, not received. 2,790,000 3,511,000
Fees earned, not billed. 10,296,000 7,273,000
----------- -----------
28,161,000 20,908,000
Less: Allowance for doubtful accounts. (1,539,000) (1,350,000)
----------- -----------
$26,622,000 $19,558,000
=========== ===========
Fees earned, not received represent brokerage commissions earned but
not yet collected. Fees earned, not billed represent cash receivables
earned but unbilled and result from timing differences between
services provided and contractual billing schedules.
Receivables from regulated investment companies on the accompanying
Consolidated Balance Sheets represent fees collected from the
Company's wholly owned subsidiaries, SEI Investments Distribution
Company and SEI Investments Management Corporation, for distribution,
investment advisory, and administration services provided by these
subsidiaries to various regulated investment companies.
9
Note 3. Loans Receivable Available for Sale - Loans receivable available for
-----------------------------------
sale represent loans which were purchased through SEI Capital AG,
which is based in Zurich. These receivables are reported at the lower
of cost or market, and any difference between the purchase price and
the related loan principal amount is recognized as an adjustment of
the yield over the life of the loan using the effective interest
method. Each loan receivable involves various risks, including, but
not limited to, country, interest rate, credit, and liquidity risk.
Management evaluates and monitors these risks on a continuing basis to
ensure that these loan receivables are recorded at their realizable
value. This evaluation is based upon management's best estimates and
the amounts the Company will ultimately realize could differ from
these estimates.
Note 4. Investments Available for Sale - Investments available for sale
------------------------------
represent investments by the Company in mutual funds which are
primarily invested in equity securities. The Company accounts for
investments pursuant to Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). SFAS 115 requires that debt and equity
securities classified as available for sale be reported at market
value. Unrealized holding gains and losses on these investments are
reported as a separate component of Shareholders' equity. Realized
gains and losses are determined by the specific identification method
and are reported separately on the accompanying Consolidated
Statements of Income.
At June 30, 1997, Investments available for sale had an aggregate cost
of $1,000,000 and an aggregate market value of $1,469,000 with gross
unrealized gains of $469,000. At that date, the unrealized holding
gains of $282,000 (net of income taxes of $187,000) were reported as a
separate component of Shareholders' equity on the accompanying
Consolidated Balance Sheets. There were no unrealized losses as of
June 30, 1997.
At December 31, 1996, Investments available for sale had an aggregate
cost of $1,000,000. At that date, the fair value of these investments
approximated their original cost. There were no unrealized gains or
losses as of December 31, 1996.
Note 5. Line of Credit - The Company has a line of credit agreement (the
--------------
"Agreement") with its principal lending institution which provides for
borrowings of up to $50,000,000. The Agreement ends on May 31, 1998,
at which time the outstanding principal balance, if any, becomes due
unless the Agreement is extended. The line of credit, when utilized,
accrues interest at the Prime rate or three-tenths percent above the
London Interbank Offered Rate. The Company is obligated to pay a
commitment fee equal to one-tenth percent per annum on the average
daily unused portion of the commitment. Certain covenants under the
Agreement require the Company to maintain specified levels of net
worth and place certain restrictions on investments. The Company had
no outstanding borrowings on its line of credit at June 30, 1997.
Note 6. Long-term Debt - On February 24, 1997, the Company signed a Note
--------------
Purchase Agreement authorizing the issuance and sale of $20,000,000 of
7.20% Senior Notes, Series A, and $15,000,000 of 7.27% Senior Notes,
Series B, (collectively, the "Notes") in a private offering with
certain financial institutions. The Notes are unsecured with final
maturities ranging from 10 to 15 years with an average life of 7 to 10
years. The proceeds from the Notes were used to repay the outstanding
balance on the Company's line of credit. The Note Purchase Agreement
contains various covenants, including limitations on indebtedness,
maintenance of minimum net worth levels, and restrictions on certain
investments. In addition, the agreement limits the Company's ability
to merge or consolidate, and to sell certain assets. None of these
covenants negatively affect the Company's liquidity or capital
resources. Interest payments on the Notes will be made semi-annually
beginning in August 1997. Principal payments will be made annually
beginning one year from the date of issuance. The current portion of
the Notes amounted to $2,000,000 at June 30, 1997.
10
Note 7. Common Stock Buyback - The Board of Directors has authorized the
--------------------
purchase of the Company's common stock on the open market or through
private transactions, including an additional authorization of
$12,636,000 on May 14, 1997, of up to an aggregate of $188,365,000.
Through August 14, 1997, a total of 13,942,000 shares at an aggregate
cost of $182,594,000 have been purchased and retired. The Company
purchased 438,000 shares at a cost of $9,945,000 during the second
quarter of 1997 and 488,000 shares at a cost of $11,020,000 during the
first six months of 1997. The Company purchased 709,000 shares at a
cost of $17,092,000 through August 14, 1997.
The Company immediately retires its common stock when purchased. Upon
retirement, the Company reduces Capital in excess of par value for the
average capital per share outstanding and the remainder is charged
against Retained earnings. If the Company reduces its Retained
earnings to zero, any subsequent purchases of common stock will be
charged entirely to Capital in excess of par value.
Note 8. Dividend - On May 14, 1997, the Board of Directors declared a cash
--------
dividend of $.14 per share on the Company's common stock, which was
paid on June 27, 1997, to shareholders of record on June 12, 1997.
The Board of Directors has indicated its intention to pay future
dividends on a semiannual basis.
Note 9. Sale of Discontinued Operations - On July 25, 1997, the Company
-------------------------------
entered into a definitive agreement to sell the remaining net assets
of its Capital Resources Division ("CR") to the purchase group of
Notre Capital Ventures II, L.L.C. and William Nicholson, formerly
Senior Vice President and Head of Donaldson, Lufkin and Jenrette's
Asset Consulting Group. The Company's management believes that the
provision established in the fourth quarter of 1996 for the disposal
of discontinued operations is adequate to cover all costs during the
transfer of CR's operations. Based upon the terms of the agreement,
the Company may recognize a gain at closing which would be immaterial
to the Consolidated Financial Statements. Any future payments due the
Company will be realized when received. The deal is expected to close
in the third quarter of 1997.
Note 10. Segment Information - The Company defines its business segments to
-------------------
reflect the Company's focus around two product lines: Investment
Technology and Services and Asset Management. The Investment
Technology and Services segment consists of the Company's trust
technology, proprietary mutual fund, and back-office trust processing
businesses. The Asset Management segment provides investment solutions
through various investment products and services distributed directly
or through professional investment advisors to institutional and high-
net-worth markets.
The following tables highlight certain unaudited financial information
about each of the Company's segments for the three and six months
ended June 30, 1997 and 1996. Prior-period business segment
information has been restated to conform with current-period
presentation.
11
Investment
Technology and Asset General
Services Management and Admin. Consolidated
-------- ---------- ----------- ------------
For the Three-Month Period Ended June 30, 1997
------------------------------------------------------
Revenues $44,455,000 $26,275,000 $70,730,000
=========== =========== ===========
Operating profit $10,545,000 $ 1,599,000 $(3,190,000) $ 8,954,000
=========== =========== ===========
Interest income 272,000
Interest expense (658,000)
-----------
Income before income taxes $ 8,568,000
===========
Depreciation and amortization $ 2,843,000 $ 1,265,000 $ 181,000 $ 4,289,000
=========== =========== =========== ===========
Capital expenditures $ 1,893,000 $ 602,000 $ 461,000 $ 2,956,000
=========== =========== =========== ===========
For the Three-Month Period Ended June 30, 1996
------------------------------------------------------
Revenues $42,488,000 $19,053,000 $61,541,000
=========== =========== ===========
Operating profit $ 9,135,000 $ 675,000 $(2,975,000) $ 6,835,000
=========== =========== ===========
Gain on sale of investments available
for sale 1,097,000
Interest income 72,000
Interest expense (12,000)
-----------
Income before income taxes $ 7,992,000
===========
Depreciation and amortization $ 2,189,000 $ 575,000 $ 54,000 $ 2,818,000
=========== =========== =========== ===========
Capital expenditures $ 5,148,000 $ 1,429,000 $ 996,000 $ 7,573,000
=========== =========== =========== ===========
12
Investment
Technology and Asset General
Services Management and Admin. Consolidated
-------- ---------- ---------- ------------
For the Six-Month Period Ended June 30, 1997
-------------------------------------------------------
Revenues $84,418,000 $49,816,000 $134,234,000
=========== =========== ============
Operating profit $20,468,000 $ 3,350,000 $(6,584,000) $ 17,234,000
=========== =========== ===========
Interest income 484,000
Interest expense (1,149,000)
------------
Income before income taxes $ 16,569,000
============
Depreciation and amortization $ 5,113,000 $ 2,186,000 $ 354,000 $ 7,653,000
=========== =========== =========== ============
Capital expenditures $ 4,411,000 $ 1,473,000 $ 721,000 $ 6,605,000
=========== =========== =========== ============
For the Six-Month Period Ended June 30, 1996
-----------------------------------------------------
Revenues $88,851,000 $35,929,000 $124,780,000
=========== =========== ============
Operating profit $21,002,000 $ 1,686,000 $(6,132,000) $ 16,556,000
=========== =========== ===========
Gain on sale of investments available
for sale 1,097,000
Interest income 181,000
Interest expense (24,000)
------------
Income before income taxes $ 17,810,000
============
Depreciation and amortization $ 4,141,000 $ 1,131,000 $ 108,000 $ 5,380,000
=========== =========== =========== ============
Capital expenditures $ 8,036,000 $ 1,982,000 $ 1,370,000 $ 11,388,000
=========== =========== =========== ============
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
The Company is organized around two product lines: Investment Technology and
Services and Asset Management. Financial information for each of these segments
is reflected in Note 10 of the Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
- ---------------------
Second Quarter Ended June 30, 1997 Compared to Second Quarter Ended
June 30, 1996
The Company's results of operations for the second quarter of 1997 included
revenues of $70,730,000, compared to $61,541,000 for the same period of 1996, an
increase of 15 percent. Net income for the second quarter of 1997 was
$5,141,000, compared to $4,893,000 in the same period of 1996. Earnings per
share for the three months ended June 30, 1997 and 1996 was $.27 and $.25,
respectively, an increase of 8 percent. Net income in 1996 was boosted by a $1.1
million one-time realized gain, or $.03 per share, on the sale of investments
held by the Company. Fund balances continued to expand during the second quarter
of 1997. Total fund balances at June 30, 1997 were $100.5 billion compared to
$71.6 billion at June 30, 1996, an increase of 40 percent. Included in these
totals are proprietary fund balances of $72.0 billion at June 30, 1997 and $50.2
billion at June 30, 1996, an increase of 43 percent. The increase in revenues
and earnings in the second quarter of 1997 was primarily the result of
significant growth in fund balances and increased margins from both business
segments.
INVESTMENT TECHNOLOGY AND SERVICES - Revenues from Investment Technology and
- ----------------------------------
Services for the three months ended June 30, 1997 and 1996 were $44,455,000 and
$42,488,000, respectively.
INVESTMENT TECHNOLOGY AND SERVICES REVENUES
-------------------------------------------
2ND QTR 2ND QTR DOLLAR PERCENT
1997 1996 CHANGE CHANGE
---- ---- ------ ------
Trust technology services $24,684,000 $26,728,000 $(2,044,000) (8%)
Proprietary fund services 18,371,000 15,403,000 2,968,000 19%
Trust back-office processing services 1,400,000 357,000 1,043,000 292%
----------- ----------- -----------
Total $44,455,000 $42,488,000 $ 1,967,000 5%
=========== =========== ===========
The 8 percent decrease in trust technology services revenues from the prior-year
period was the result of several factors. Second quarter 1996 trust technology
services revenues included approximately $1.0 million of one-time deconversion
fees received from clients that terminated their relationships with the Company.
Additionally in the second quarter of 1996, the Company recognized $2.0 million
of one-time implementation fees associated with the expansion of services to
existing clients. The second quarter of 1997 included $1.0 million of one-time
implementation fees in connection with the contracting of new trust clients.
Proprietary fund services revenues increased 19 percent from the prior-year
period due to an increase in average proprietary fund balances over the past
year. Average proprietary fund balances increased $21.0 billion or 44 percent
from $47.4 billion during the second quarter of 1996 to $68.4 billion during the
second quarter of 1997. The increase in proprietary fund balances is primarily
due to growth from existing proprietary fund complexes. The Company is
experiencing significant growth in its trust back-office processing business
which is an extension of its trust technology business. The increase in trust
back-office processing services revenues was the result of an increase in
processing fees from the contracting of new clients. The Company expects
continued growth in its proprietary fund and trust back-office processing
businesses for the remainder of 1997. The Company is currently establishing new
trust technology client relationships that should have a favorable impact on
trust technology services revenues in the future.
14
INVESTMENT TECHNOLOGY AND SERVICES EXPENSES
-------------------------------------------
2ND QTR 2ND QTR DOLLAR PERCENT
1997 1996 CHANGE CHANGE
---- ---- ------ ------
Operating and development $24,765,000 $25,061,000 $(296,000) (1%)
Sales and marketing $ 9,145,000 $ 8,292,000 $ 853,000 10%
Operating and development expenses remained relatively flat in the second
quarter of 1997 compared to the second quarter of 1996. The 10 percent increase
in sales and marketing expenses was primarily due to an increase in personnel
and promotion expenses. Operating profit from Investment Technology and
Services for the three months ended June 30, 1997 was $10,545,000, an increase
of 15 percent from the $9,135,000 reported in the corresponding quarter of 1996.
Operating margins were 24 percent for the three months ended June 30, 1997,
compared to 22 percent for the same period of 1996. The increase in operating
margins can be attributed to increased operating efficiency across all product
groups. The Company is beginning to see positive results from the significant
investments made to its trust technology software, primarily through the open
architecture project. In addition, with the Year 2000 problem facing the
banking industry, there has been an increased interest in the Company's
products. The Company has recently contracted new trust clients that will add
substantial recurring revenues in the future.
ASSET MANAGEMENT - Revenues from Asset Management for the three months ended
- ----------------
June 30, 1997 and 1996 were $26,275,000 and $19,053,000, respectively.
ASSET MANAGEMENT REVENUES
-------------------------
2ND QTR 2ND QTR DOLLAR PERCENT
1997 1996 CHANGE CHANGE
---- ---- ------ ------
Investment management services $12,854,000 $ 9,252,000 $3,602,000 39%
Liquidity management services 5,418,000 4,905,000 513,000 10%
Other investment products and services 8,003,000 4,896,000 3,107,000 63%
----------- ----------- ----------
Total $26,275,000 $19,053,000 $7,222,000 38%
=========== =========== ==========
Investment management services revenues increased 39 percent from the prior-year
period due to an increase in average fund balances from the Company's Family of
Funds during the past year. This increase was primarily the result of increased
sales of the Company's Family of Funds to high-net-worth individuals through
various registered investment advisors. Average assets under management from
the Company's Family of Funds were $8.6 billion for the second quarter of 1997
compared to $5.4 billion for the second quarter of 1996, an increase of 59
percent. Liquidity management services revenues increased 10 percent due to an
increase in average fund balances invested in the Company's lower-fee liquidity
products. Average assets under management from the Company's liquidity funds
were $15.8 billion for the second quarter of 1997 compared to $14.2 billion for
the second quarter of 1996. Other investment products and services revenues
increased 63 percent from the prior-year period. This increase is the result of
an increase in revenues from the Company's new business ventures, in addition to
an increase in bank-related brokerage services. Revenues are expected to expand
in this segment as the Company continues to experience growth in its asset
management business.
15
ASSET MANAGEMENT EXPENSES
-------------------------
2ND QTR 2ND QTR DOLLAR PERCENT
1997 1996 CHANGE CHANGE
---- ---- ------ ------
Operating and development $12,733,000 $9,345,000 $3,388,000 36%
Sales and marketing $11,943,000 $9,033,000 $2,910,000 32%
Operating and development expenses increased 36 percent from the prior-year
period as a result of increases in direct expenses associated with the increase
in bank-related brokerage services revenues. Additionally, personnel expenses
increased in connection with the growth in the Company's asset management
business. The 32 percent increase in sales and marketing expenses was due
primarily to increases in personnel expenses and promotion expenses associated
with the Company's asset management business, as well as continued investments
in the Company's new business ventures to establish, maintain, and enhance its
distribution channels in non-U.S. markets. The Asset Management segment
recorded an operating profit of $1,599,000 for the three months ended June 30,
1997 compared to an operating profit of $675,000 in the corresponding period of
1996. The increase in operating profit is primarily attributable to increased
margins from the Company's asset management business, as well as a reduction in
losses incurred from the Company's new business ventures. The Company expects
continued growth in its asset management business for the remainder of 1997.
OTHER INCOME AND EXPENSES - General and administrative expenses for the three
- -------------------------
months ended June 30, 1997 and 1996 were $3,190,000 and $2,975,000,
respectively, an increase of 7 percent. This increase is attributed to
additional facility costs associated with the Company's new corporate campus.
Interest expense for the second quarter of 1997 relates to the Company's
issuance of long-term debt in early 1997 (See Note 6 of the Notes to
Consolidated Financial Statements). Interest costs associated with the
Company's borrowings under its line of credit in the second quarter of 1996 was
capitalized as it related to the construction of the Company's corporate campus.
The increase in interest income in the second quarter of 1997 compared to the
corresponding period in 1996 was primarily due to an increased average cash
balance.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
The Company's results of operations for the six month's ended June 30, 1997
included revenues of $134,234,000, compared to $124,780,000 for the same period
of 1996, an increase of 8 percent. Net income for the first six months of 1997
was $9,942,000, compared to $10,686,000 in the same period of 1996. Earnings
per share for the six months ended June 30, 1997 and 1996 was $.52 and $.55,
respectively. Revenues and earnings in 1996 were significantly augmented by the
Company's recognition of substantial one-time trust services revenues in the
first quarter of 1996 that had a direct impact on the Company's net income.
Additionally, the Company recognized a $1.1 million one-time realized gain, or
$.03 per share, in the second quarter of 1996 from the sale of investments the
Company held. Revenues increased in 1997 primarily due to substantial growth in
fund balances.
INVESTMENT TECHNOLOGY AND SERVICES - Revenues from Investment Technology and
- ----------------------------------
Services for the six months ended June 30, 1997 and 1996 were $84,418,000 and
$88,851,000, respectively.
INVESTMENT TECHNOLOGY AND SERVICES REVENUES
-------------------------------------------
SIX MONTHS SIX MONTHS DOLLAR PERCENT
1997 1996 CHANGE CHANGE
---- ---- ------ -------
Trust technology services $47,723,000 $58,946,000 $(11,223,000) (19%)
Proprietary fund services 34,514,000 29,224,000 5,290,000 18%
Trust back-office processing services 2,181,000 681,000 1,500,000 220%
----------- ----------- ------------
Total $84,418,000 $88,851,000 $ (4,433,000) (5%)
=========== =========== ============
16
Trust technology services revenues decreased 19 percent from the prior-year
period primarily due to the recognition of one-time trust services revenues
associated with the deconversion of clients that terminated their relationships
with the Company during the first six months of 1996. Subsequently, recurring
revenues in 1997 have been negatively affected by the deconversion of clients
that occurred in 1996. The Company also recognized one-time implementation fees
in the first six months of 1996 associated with the expansion of services to
existing clients which has directly resulted in additional recurring revenues in
1997. The Company has recently entered into new client trust contracts during
the second quarter of 1997. The Company recognized one-time implementation fees
related to these new contracts beginning late in the second quarter of 1997 and
will continue to recognize these implementation fees throughout the remainder of
the year and into 1998. Proprietary fund services revenues increased 18 percent
from the prior-year period due to an increase in average proprietary fund
balances over the past year despite the loss of two proprietary fund complexes
in early 1996. Average proprietary fund balances increased $21.2 billion or 46
percent from $45.7 billion during the first six months of 1996 to $66.9 billion
during the first six months of 1997. The increase in proprietary fund balances
is a result of growth from existing fund complexes, as well as the transfer of
common trust assets into proprietary mutual funds and the conversion of new fund
complexes during the past year. The increase in trust back-office processing
services revenues was the result of an increase in processing fees from the
contracting of new clients.
INVESTMENT TECHNOLOGY AND SERVICES EXPENSES
-------------------------------------------
SIX MONTHS SIX MONTHS DOLLAR PERCENT
1997 1996 CHANGE CHANGE
---- ---- ------ ------
Operating and development $46,008,000 $50,723,000 $(4,715,000) (9%)
Sales and marketing $17,942,000 $17,126,000 $ 816,000 5%
The 9 percent decrease in operating and development expenses was primarily due
to decreases in consulting and outsourcing expenses, in addition to a decrease
in direct expenses associated with trust technology services revenues. In the
first six months of 1997, the Company capitalized additional software
development costs relating to the Company's open architecture and Year 2000
projects compared to the corresponding period in 1996. Sales and marketing
expenses increased 5 percent during the first six months of 1997 compared to the
first six months of 1996 primarily due to an increase in personnel and promotion
expenses. Operating profit from Investment Technology and Services for the six
months ended June 30, 1997 was $20,468,000 compared to the $21,002,000 reported
in the corresponding period of 1996. Operating margins were 24 percent for the
six months ended June 30, 1997 and 1996.
ASSET MANAGEMENT - Revenues from Asset Management for the six months ended June
- ----------------
30, 1997 and 1996 were $49,816,000 and $35,929,000, respectively.
ASSET MANAGEMENT REVENUES
-------------------------
SIX MONTHS SIX MONTHS DOLLAR PERCENT
1997 1996 CHANGE CHANGE
---- ---- ------ ------
Investment management services $23,999,000 $17,582,000 $ 6,417,000 36%
Liquidity management services 10,903,000 10,202,000 701,000 7%
Other investment products and services 14,914,000 8,145,000 6,769,000 83%
----------- ----------- -----------
Total $49,816,000 $35,929,000 $13,887,000 39%
=========== =========== ===========
17
Investment management services revenues increased 36 percent from the prior-year
period due to an increase in average fund balances from the Company's Family of
Funds during the past year. This increase was primarily the result of increased
sales of the Company's Family of Funds to high-net-worth individuals through
various registered investment advisors. Average assets under management from
the Company's Family of Funds were $8.2 billion for the first six months of 1997
compared to $5.1 billion for the corresponding period of 1996, an increase of 61
percent. Liquidity management services revenues increased 7 percent due to an
increase in average fund balances invested in the Company's lower-fee liquidity
products. Average assets under management from the Company's liquidity funds
were $15.9 billion for the first six months of 1997 compared to $14.3 billion
for the first six months of 1996. Other investment products and services
revenues increased 83 percent primarily due to an increase in bank-related
brokerage services. Additionally, the Company has experienced revenue growth
from its new business ventures during the past six months.
ASSET MANAGEMENT EXPENSES
-------------------------
SIX MONTHS SIX MONTHS DOLLAR PERCENT
1997 1996 CHANGE CHANGE
---- ---- ------ ------
Operating and development $23,752,000 $17,498,000 $6,254,000 36%
Sales and marketing $22,714,000 $16,745,000 $5,969,000 36%
Operating and development expenses increased 36 percent from the prior-year
period due to increases in direct expenses associated with the increase in bank-
related brokerage services revenues. Additionally, personnel expenses increased
in connection with the growth in the Company's asset management business. The
36 percent increase in sales and marketing expenses was primarily due to
increases in personnel and promotion expenses associated with the Company's
asset management business, as well as continued investments in the Company's new
business ventures to establish, maintain, and enhance its distribution channels
in non-U.S. markets. The Asset Management segment recorded an operating profit
of $3,350,000 for the first six months ended June 30, 1997 compared to an
operating profit of $1,686,000 in the corresponding period of 1996. The
increase in operating profit is primarily attributable to increased margins from
the Company's asset management business, as well as a reduction in losses
incurred from the Company's new business ventures.
OTHER INCOME AND EXPENSES - General and administrative expenses for the six
- -------------------------
months ended June 30, 1997 and 1996 were $6,584,000 and $6,132,000,
respectively, an increase of 7 percent. This increase is attributed to
additional facility costs associated with the Company's new corporate campus in
addition to a marginal increase in personnel expenses in corporate overhead
areas.
Interest expense for the first six months of 1997 relates to the Company's
issuance of long-term debt in early 1997 (See Note 6 of the Notes to
Consolidated Financial Statements). Interest costs associated with the
Company's borrowings under its line of credit in 1996 was capitalized as it
related to the construction of the Company's corporate campus. The increase in
interest income in the second quarter of 1997 compared to the corresponding
period in 1996 was primarily due to an increased average cash balance.
18
DISCONTINUED OPERATIONS - In May 1995, the Company's Board of Directors
- -----------------------
approved a plan of disposal for the SEI Capital Resources Division ("CR") and
the SEI Defined Contribution Retirement Services Division ("DC"). CR provided
investment performance evaluation services, consulting services, and brokerage
services to employee benefit plan sponsors and investment advisors in the United
States. DC provided administrative and processing services, recordkeeping
services, and employee retirement planning materials for use by defined
contribution plans. DC's full-service recordkeeping operations were
transferred to KPMG Peat Marwick in 1996. CR and DC were being accounted for
together as discontinued operations with a measurement date of May 31, 1995.
The accompanying Consolidated Financial Statements reflect the operating results
and balance sheet items separately from continuing operations.
In the fourth quarter of 1996, management of the Company concluded that any
proceeds received from a possible sale of CR would not be sufficient to offset
the remaining net assets of CR and DC. The Company, therefore, recorded a
charge of $16,335,000 or $.85 per share. This charge included the operating
losses incurred by CR and DC from June 1, 1995 to December 31, 1996, the
complete write-off of CR and DC's non-recoverable assets, and a provision for
the disposal of discontinued operations. The provision for the disposal of
discontinued operations included accruals for future operating losses, future
commitments relating to leased facilities, severance, and an additional reserve
for doubtful accounts relating to CR's receivables.
On July 25, 1997, the Company entered into a definitive agreement to sell the
remaining net assets of CR to the purchase group of Notre Capital Ventures II,
L.L.C. and William Nicholson, formerly Senior Vice President and Head of
Donaldson, Lufkin and Jenrette's Asset Consulting Group. Mr. Nicholson will
serve as CEO of the acquired company. The Company's management believes that
the provision established in the fourth quarter of 1996 for the disposal of
discontinued operations is adequate to cover all costs during the transfer of
CR's operations. Based upon the terms of the agreement, the Company may
recognize a gain at closing which would be immaterial to the Consolidated
Financial Statements. Any future payments due the Company will be realized when
received. The deal is expected to close in the third quarter of 1997.
Discontinued operations in the second quarter of 1997 had revenues of $6,956,000
and pre-tax losses of $357,000 compared to revenues of $7,174,000 and pre-tax
losses of $3,285,000 for the second quarter of 1996. Discontinued operations
for the first six months of 1997 had revenues of $13,398,000 and pre-tax losses
of $1,978,000 compared to revenues of $17,295,000 and pre-tax losses of
$4,474,000 for the corresponding period in 1996. The 1997 losses are charged
against the provision which was established in the fourth quarter of 1996 and is
reflected in Accrued discontinued operations disposal costs on the accompanying
Consolidated Balance Sheets.
LIQUIDITY AND CAPITAL RESOURCES - The Company's ability to generate cash
- -------------------------------
adequate to meet its needs results primarily from cash flow from operations and
its capacity for additional borrowing. The Company has a line of credit
agreement which provides for borrowings of up to $50,000,000 (See Note 5 of the
Notes to Consolidated Financial Statements). At June 30, 1997, the Company's
sources of liquidity consisted primarily of cash and cash equivalents of
$10,187,000 and the unused balance on the line of credit of $50,000,000. The
availability of the line of credit is subject to the Company's compliance with
certain covenants set forth in the agreement. On February 24, 1997, the Company
issued $35,000,000 of medium-term notes (See Note 6 of the Notes to Consolidated
Financial Statements). The proceeds were used to repay the outstanding balance
on its line of credit which amounted to $30,000,000.
Cash flow provided by operations for the six months ended June 30, 1997 and 1996
was $4,734,000 and $1,916,000, respectively. Cash flow from operations in 1996
was negatively affected by the additional purchases of loans classified as Loans
receivable available for sale. Loans receivable available for sale represent
loans purchased through the Company's Swiss based subsidiary (See Note 3 of the
Notes to Consolidated Financial Statements). Additionally, a substantial amount
of cash was used to support the Company's discontinued operations during the
first six months of 1996. Cash flow provided by operations for the first six
months in 1997 was affected by a decrease in collections of accounts receivable
and an increase in unbilled receivables for implementation fees associated with
the contracting of new trust clients. These unbilled receivables represent
timing differences between services provided and contractual billing schedules
(See Note 2 of the Notes to Consolidated Financial Statements).
19
Capital expenditures, including capitalized software development costs, for the
six months ended June 30, 1997 and 1996 were $11,731,000 and $15,370,000,
respectively. The decrease in capital expenditures is primarily the result of
lower expenditures relating to the construction of the Company's corporate
campus but was partially offset by an increase in capitalized software
development costs relating to the Company's open architecture and Year 2000
projects (See Note 1 of the Notes to Consolidated Financial Statements). The
Company expects its capital expenditures to decrease in 1997 as expenditures
relating to the Company's new corporate campus decline. In the second quarter
of 1996, the Company received $6,536,000 from the sale of all of its investments
classified as Investments available for sale. In addition, the Company has
purchased 709,000 shares of its common stock at a cost of $17,092,000 during
1997.
The Company's operating cash flow, borrowing capacity, and liquidity should
provide adequate funds for continuing operations, continued investment in new
products and equipment, its common stock repurchase program, and the repayment
of its long-term debt.
20
PART II. OTHER INFORMATION
- ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON REPORT 8-K
- -------------------------------------------
(a) The following is a list of exhibits filed as part of the Form 10-Q
Exhibit 11. Earnings per share calculations.
Exhibit 27. Financial data schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three-month
period ended June 30, 1997.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEI INVESTMENTS COMPANY
Date. August 14, 1997 By /s/ Henry H. Greer
------------------- --------------------------------------
Henry H. Greer
President, Chief Operating
Officer, and Chief Financial Officer
22
SEI INVESTMENTS COMPANY AND SUBSIDIARIES
----------------------------------------
EXHIBIT 11 - EARNINGS PER SHARE CALCULATION
-------------------------------------------
FOR THE THREE-MONTH PERIOD ENDED JUNE 30,
-----------------------------------------
1997 1996
----------- -----------
Earnings per common and common
equivalent share (Primary EPS):
Net income $ 5,141,000 $ 4,893,000
=========== ===========
Weighted average number of
shares issued and outstanding 18,494,000 18,665,000
Dilutive effect (excess of
number of shares issuable over
number of shares assumed to be
repurchased with the proceeds,
using the average market price
during the period) of
outstanding options 673,000 861,000
----------- -----------
Adjusted weighted average number
of shares outstanding 19,167,000 19,526,000
=========== ===========
Earnings per common and common
equivalent share $ .27 $ .25
=========== ===========
23
SEI INVESTMENTS COMPANY AND SUBSIDIARIES
----------------------------------------
EXHIBIT 11 - EARNINGS PER SHARE CALCULATION
-------------------------------------------
FOR THE THREE-MONTH PERIOD ENDED JUNE 30,
-----------------------------------------
1997 1996
----------- -----------
Earnings per common and common
equivalent share, assuming full dilution
(Fully diluted EPS):
Net income $ 5,141,000 $ 4,893,000
=========== ===========
Weighted average number of
shares issued and outstanding 18,494,000 18,665,000
Dilutive effect (excess of
number of shares issuable over
number of shares assumed to be
repurchased with the proceeds,
using the higher of the average market price
or ending price during the period) of
outstanding options 850,000 861,000
----------- -----------
Adjusted weighted average number
of shares outstanding, assuming full dilution 19,344,000 19,526,000
=========== ===========
Earnings per common and common
equivalent share, assuming full dilution $ .27 $ .25
=========== ===========
24
SEI INVESTMENTS COMPANY AND SUBSIDIARIES
----------------------------------------
EXHIBIT 11 - EARNINGS PER SHARE CALCULATION
-------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED JUNE 30,
---------------------------------------
1997 1996
----------- -----------
Earnings per common and common
equivalent share (Primary EPS):
Net income $ 9,942,000 $10,686,000
=========== ===========
Weighted average number of
shares issued and outstanding 18,513,000 18,587,000
Dilutive effect (excess of
number of shares issuable over
number of shares assumed to be
repurchased with the proceeds,
using the average market price
during the period) of
outstanding options 703,000 918,000
----------- -----------
Adjusted weighted average number
of shares outstanding 19,216,000 19,505,000
=========== ===========
Earnings per common and common
equivalent share $ .52 $ .55
=========== ===========
25
SEI INVESTMENTS COMPANY AND SUBSIDIARIES
----------------------------------------
EXHIBIT 11 - EARNINGS PER SHARE CALCULATION
-------------------------------------------
FOR THE SIX-MONTH PERIOD ENDED JUNE 30,
---------------------------------------
1997 1996
----------- -----------
Earnings per common and common
equivalent share, assuming full dilution
(Fully diluted EPS):
Net income $ 9,942,000 $10,686,000
=========== ===========
Weighted average number of
shares issued and outstanding 18,513,000 18,587,000
Dilutive effect (excess of
number of shares issuable over
number of shares assumed to be
repurchased with the proceeds,
using the higher of the average market price
or ending price during the period) of
outstanding options 880,000 918,000
----------- -----------
Adjusted weighted average number
of shares outstanding, assuming full dilution 19,393,000 19,505,000
=========== ===========
Earnings per common and common
equivalent share, assuming full dilution $ .51 $ .55
=========== ===========
26
5
1,000
US DOLLARS
6-MOS
DEC-31-1997
JAN-01-1997
JUN-30-1997
1
10,187
0
28,161
(1,539)
0
72,375
101,599
(50,976)
155,187
56,538
33,000
0
0
184
58,327
155,187
0
134,234
0
110,416
6,584
189
665
16,569
6,627
9,942
0
0
0
9,942
.52
.52