UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
May 2, 2006
Date of report (Date of earliest event reported)
SEI Investments Company
(Exact name of registrant as specified in its charter)
| Pennsylvania | 0-10200 | 23-1707341 | ||
| (State or other jurisdiction of incorporation) |
(Commission File No.) | (I.R.S. Employer Identification No.) |
1 Freedom Valley Drive
Oaks, Pennsylvania 19456
(Address of principal executive offices) (Zip Code)
(610) 676-1000
(Registrants’ telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On Tuesday, May 2, 2006, SEI Investments Company issued a press release announcing its financial and operating results for the first quarter ended March 31, 2006. A copy of the press release is furnished as Exhibit 99.1 and incorporated in this Item 2.02 by reference.
As provided in General Instruction B.2 to Form 8-K, the information furnished in this Item 2.02 and in Exhibit 99.1 hereto shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing with the Securities and Exchange Commission, except as shall be expressly provided by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits. |
| 99.1 | Press Release dated May 2, 2006 of SEI Investments Company. |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SEI Investments Company | ||||
| Date: May 2, 2006 | By: | /s/ Dennis J. McGonigle | ||
| Dennis J. McGonigle | ||||
| Chief Financial Officer | ||||
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EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Press Release dated May 2, 2006 of SEI Investments Company. |
4
Exhibit 99.1
NEWS FROM SEI
For Immediate Release
| Contact: | Mark Samuels, SVP | Murray Louis, VP | Larry Wexler, Corp PR | |||
| Voice: | 610.676.2024 | 610.676.1932 | 610.676.1440 | |||
| msamuels@seic.com | mlouis@seic.com | lwexler@seic.com | ||||
| Pages: | Seven |
SEI Investments Reports First-Quarter 2006 Results
Net Income up 26%
OAKS, PA, May 2, 2006 — SEI Investments Company (NASDAQ:SEIC) today announced financial results for first-quarter 2006, reporting increases in revenues, net income and earnings per share, compared to the corresponding period for the prior year. Revenues in the first-quarter 2006 include $66,034 from LSV Asset Management (LSV) due to the consolidation of its operations with SEI. Revenues in the first-quarter 2006 without LSV are $211,099, an increase of 14 percent.
| Consolidated Overview (In thousands, except earnings per share) |
For the Three Months Ended March 31, |
||||||||
| 2006 | 2005 | % | |||||||
| Revenues |
$ | 277,133 | $ | 185,681 | 49 | % | |||
| Net Income Before Taxes |
86,740 | 68,833 | 26 | % | |||||
| Net Income |
54,906 | 43,709 | 26 | % | |||||
| Diluted Earnings Per Share |
$ | .54 | $ | .42 | 29 | % | |||
“We are satisfied with our first quarter results, especially since we are shifting into the execution stage of our new strategies,” said Alfred P. West, Jr., SEI Chairman and CEO.
“The investments we are making are on schedule, the market acceptance of our new solutions continues to be encouraging, and our transformation is well underway. In the long run, we remain firm in our belief that what we are doing will position us to provide our clients with increased opportunities for success and allow us to grow our future revenues and profits more rapidly.”
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Summary of First-Quarter Results by Business Segment
| For the Three Month Period Ended March 31, |
|||||||||||
| (In thousands) | 2006 | 2005 | % | ||||||||
| Private Banking and Trust: |
|||||||||||
| Revenues |
$ | 68,994 | 68,297 | 1 | % | ||||||
| Expenses |
45,103 | 42,673 | 6 | % | |||||||
| Operating Profit |
$ | 23,891 | $ | 25,624 | (7 | )% | |||||
| Operating Margin |
35 | % | 38 | % | |||||||
| Investment Advisors: |
|||||||||||
| Revenues |
55,297 | 48,378 | 14 | % | |||||||
| Expenses |
26,217 | 21,268 | 23 | % | |||||||
| Operating Profit |
29,080 | 27,110 | 7 | % | |||||||
| Operating Margin |
53 | % | 56 | % | |||||||
| Enterprises: |
|||||||||||
| Revenues |
38,528 | 29,758 | 29 | % | |||||||
| Expenses |
24,450 | 20,318 | 20 | % | |||||||
| Operating Profit |
14,078 | 9,440 | 49 | % | |||||||
| Operating Margin |
37 | % | 32 | % | |||||||
| Money Managers: |
|||||||||||
| Revenues |
27,285 | 24,228 | 13 | % | |||||||
| Expenses |
22,473 | 19,476 | 15 | % | |||||||
| Operating Profit |
4,812 | 4,752 | 1 | % | |||||||
| Operating Margin |
18 | % | 20 | % | |||||||
| Investments in New Businesses: |
|||||||||||
| Revenues |
20,995 | 15,020 | 40 | % | |||||||
| Expenses |
24,989 | 22,588 | 11 | % | |||||||
| Operating Loss |
(3,994 | ) | (7,568 | ) | 47 | % | |||||
| Operating Margin |
(19 | )% | (50 | )% | |||||||
| LSV |
|||||||||||
| Revenues |
66,034 | — | — | ||||||||
| Expenses (1) |
40,938 | — | — | ||||||||
| Operating profit (2) |
25,096 | — | — | ||||||||
| Operating Margin |
38 | % | |||||||||
| Consolidated Segment Totals: |
|||||||||||
| Revenues |
$ | 277,133 | $ | 185,681 | 49 | % | |||||
| Expenses |
$ | 184,170 | $ | 126,323 | 46 | % | |||||
| Operating Profit |
$ | 92,963 | $ | 59,358 | 57 | % | |||||
| Operating Margin |
34 | % | 32 | % | |||||||
| (1) | – Includes $34,293 of minority interest to the other partners of LSV. |
| (2) | - Our proportionate share in the earnings of LSV for first quarter 2005 was $15,226 and was reflected in Equity in the earnings of unconsolidated affiliate. |
2
A reconciliation of the totals reported for the business segments to the applicable line items in the Consolidated Statements of Income for the first-quarter 2006 is as follows:
| 2006 | 2005 | |||||||
| Total operating profit from business segments |
$ | 92,963 | $ | 59,358 | ||||
| Equity in the earnings of unconsolidated affiliate |
— | 15,226 | ||||||
| General and Administrative expenses |
(9,922 | ) | (7,729 | ) | ||||
| Net loss from investments |
(242 | ) | 427 | |||||
| Interest, net |
1,499 | 1,551 | ||||||
| Other income |
1,588 | — | ||||||
| LSV Employee Group (1) |
854 | — | ||||||
| Income before taxes |
$ | 86,740 | $ | 68,833 | ||||
| (1) | – LSV Employee Group includes $11 expense included in general and administrative, $7 included in interest income and $850 included in interest expense in the first-quarter 2006. These items are offset through Minority interest since SEI does not have any ownership in LSV Employee Group LLC. |
First-Quarter Business Commentary:
| • | In the first quarter, SEI began to consolidate the assets, liabilities and operations of LSV Asset Management and LSV Employee Group, as a result of an unsecured loan guaranty provided by SEI to LSV Employee Group. The company’s percentage ownership in LSV remained at 43 percent and was unchanged as a result of this transaction. The Company recognized $25.1 million in 2006 versus $15.2 million in 2005 as its portion of the net earnings from LSV. |
| • | SEI adopted the provision of the new accounting standard FAS 123 (R) in the first quarter 2006 that requires the recognition of stock-based compensation in the financial statements. SEI recognized approximately $4.5 million associated with its outstanding unvested stock options. This cost was spread across all segments, except LSV. |
| • | This report reflects the changes to the company’s financial reporting as a result of previously announced organization changes discussed in prior earnings calls and the Form 8-K on April 5, 2006. The Form 8-K reclassifies 2005 financial information for our business segments as a result of the organization changes. |
| • | Private Banking & Trust revenue was essentially flat versus year ago reflecting the stabilization discussed in recent earnings calls. |
| • | Revenue and profit growth in the Enterprises segment is a result of new business and market appreciation in assets under management. |
| • | Investments in New Businesses reported smaller losses versus a year ago. The company expects to continue to incur operating losses in this segment as it launches its Global Wealth Platform, enters new global markets and continues to develop its High Net Worth and franchise offerings. |
| • | Assets under management grew by $11.6 billion during the first quarter to $160.1 billion. This growth included $6.3 billion from LSV and $5.3 billion from the business segments. |
| • | In the first quarter, SEI purchased 789,000 shares of its common stock for $31.9 million. |
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Earnings Conference Call
A conference call to review earnings is scheduled for 2:00 PM EDT on May 2, 2006. Investors may listen to the call at www.seic.com, or listen at www.earnings.com, a service of CCBN. The call may also be accessed at numerous financial services web sites including AOL, Motley Fool 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 826148.
About SEI
SEI (NASDAQ:SEIC) is a leading global provider of asset management services and investment technology solutions. The company’s innovative solutions help corporations, financial institutions, financial advisors, and affluent families create and manage wealth. As of the period ending March 31, 2006, through its subsidiaries and partnerships in which the company has a significant interest, SEI administers $331.6 billion in mutual fund and pooled assets and manages $160.1 billion in assets. SEI serves clients, conducts or is registered to conduct business and/or operations, from more than 20 offices in over a dozen countries. For more information, visit www.seic.com.
Many of 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.
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SEI INVESTMENTS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
| Three Months Ended March 31, |
||||||||
| 2006 | 2005 | |||||||
| Revenues (1) |
$ | 277,133 | $ | 185,681 | ||||
| Operating and development expenses |
106,468 | 94,427 | ||||||
| Sales and marketing expenses (1) |
42,086 | 31,896 | ||||||
| General and administrative expenses |
9,922 | 7,729 | ||||||
| Income before interest and taxes |
118,657 | 51,629 | ||||||
| Minority Interest |
(34,762 | ) | — | |||||
| Equity in earnings of unconsolidated affiliate |
— | 15,226 | ||||||
| Net (loss) gain on investments |
(242 | ) | 427 | |||||
| Interest income (1) |
2,654 | 1,976 | ||||||
| Interest expense (1) |
(1,155 | ) | (425 | ) | ||||
| Other income |
1,588 | — | ||||||
| Income before taxes |
86,740 | 68,833 | ||||||
| Income taxes |
31,834 | 25,124 | ||||||
| Net income |
$ | 54,906 | $ | 43,709 | ||||
| Diluted earnings per common share |
$ | .54 | $ | .42 | ||||
| Shares used to calculate diluted earnings per common share |
101,311 | 104,695 | ||||||
| Basic earnings per common share |
$ | .56 | $ | .43 | ||||
| Shares used to calculate basic earnings per common share |
98,758 | 101,766 | ||||||
| (1) | – Includes the operations of LSV and LSV Employee Group for the first-quarter 2006. Revenues include $66,034 from LSV, Sales and marketing includes $6,645 from LSV, Interest income includes $339 from LSV and LSV Employee Group, and Interest expense includes $850 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 first-quarter 2005 was reflected in Equity in the earnings of unconsolidated affiliate. |
5
SEI INVESTMENTS COMPANY
CONDENSED BALANCE SHEETS
(In thousands)
| March 31, 2006 |
December 31, 2005 | |||||
| Assets | ||||||
| Cash and short-term investments (1) |
$ | 172,959 | $ | 130,128 | ||
| Restricted Cash |
10,250 | 10,250 | ||||
| Receivables (1) |
198,858 | 128,545 | ||||
| Other current assets |
38,389 | 37,053 | ||||
| Total current assets |
420,456 | 305,976 | ||||
| Property and Equipment, net |
116,545 | 114,505 | ||||
| Investments available for sale |
53,583 | 54,632 | ||||
| Capitalized Software, net |
134,136 | 116,670 | ||||
| Goodwill (2) (3) |
95,062 | — | ||||
| Investment in unconsolidated affiliate (1) |
— | 51,941 | ||||
| Other assets |
19,794 | 13,423 | ||||
| Total assets |
$ | 839,576 | $ | 657,147 | ||
| Liabilities | ||||||
| Current liabilities (1) (2) (3) |
$ | 151,519 | $ | 167,470 | ||
| Long-term debt (2) (3) |
77,800 | 9,000 | ||||
| Deferred income taxes |
65,012 | 58,989 | ||||
| Minority Interest |
86,409 | — | ||||
| Shareholders’ Equity | 458,836 | 421,688 | ||||
| Total liabilities and shareholders’ equity |
$ | 839,576 | $ | 657,147 | ||
| (1) | – Includes the accounts of LSV as of March 31, 2006. Cash includes $59,017, Receivables includes $66,712, and Current Liabilities includes $2,583 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 $82,800 of the purchase price, of which $10,000 is classified as a current liability and the remaining $72,800 is reflected as Long-term debt. |
| (3) | - The Company provided an unsecured loan guarantee to LSV Employee Group which resulted in consolidating the accounts of LSV Employee Group. |
6
SEI INVESTMENTS COMPANY
ASSET BALANCES
(In millions)
| Mar. 31, 2005 |
Jun. 30, 2005 |
Sep. 30, 2005 |
Dec. 31, 2005 |
Mar. 31, 2006 | |||||||||||
| Private Banking and Trust: |
|||||||||||||||
| Equity/Fixed Income prgms. |
$ | 2,427 | $ | 2,495 | $ | 2,504 | $ | 2,363 | $ | 2,404 | |||||
| Collective Trust Fund prgm. |
1,574 | 1,700 | 1,704 | 1,657 | 1,581 | ||||||||||
| Liquidity funds |
7,406 | 7,442 | 7,668 | 7,485 | 7,139 | ||||||||||
| Total assets under mgmt. |
$ | 11,407 | $ | 11,637 | $ | 11,876 | $ | 11,505 | $ | 11,124 | |||||
| Client assets under admin. |
16,600 | 16,704 | 10,612 | 10,275 | 15,279 | ||||||||||
| Total assets under admin. |
$ | 28,007 | $ | 28,341 | $ | 22,488 | $ | 21,780 | $ | 26,403 | |||||
| Investment Advisors: |
|||||||||||||||
| Equity/Fixed Income prgms. |
$ | 27,164 | $ | 27,674 | $ | 28,993 | $ | 29,553 | $ | 31,569 | |||||
| Collective Trust Fund prgm. |
2,513 | 2,610 | 2,623 | 2,479 | 2,482 | ||||||||||
| Liquidity funds |
1,075 | 991 | 1,011 | 1,103 | 1,017 | ||||||||||
| Total assets under mgmt. |
$ | 30,752 | $ | 31,275 | $ | 32,627 | $ | 33,135 | $ | 35,068 | |||||
| Enterprises: |
|||||||||||||||
| Equity/Fixed Income prgms. |
$ | 24,718 | $ | 25,642 | $ | 27,626 | $ | 30,203 | $ | 32,083 | |||||
| Collective Trust Fund prgm. |
994 | 1,001 | 1,013 | 1,172 | 1,157 | ||||||||||
| Liquidity funds |
2,976 | 2,836 | 2,389 | 3,153 | 4,076 | ||||||||||
| Total assets under mgmt. |
$ | 28,688 | $ | 29,479 | $ | 31,028 | $ | 34,528 | $ | 37,316 | |||||
| Money Managers: |
|||||||||||||||
| Equity/Fixed Income prgms. |
$ | 12 | $ | 12 | $ | 13 | $ | 11 | $ | 33 | |||||
| Collective Trust Fund prgm. |
7,634 | 8,108 | 8,524 | 8,770 | 9,096 | ||||||||||
| Liquidity funds |
182 | 167 | 185 | 412 | 505 | ||||||||||
| Total assets under mgmt. |
$ | 7,828 | $ | 8,287 | $ | 8,722 | $ | 9,193 | $ | 9,634 | |||||
| Client assets under admin. |
144,741 | 158,332 | 168,399 | 147,357 | 151,688 | ||||||||||
| Total assets under admin. |
$ | 152,569 | $ | 166,619 | $ | 177,121 | $ | 156,550 | $ | 161,322 | |||||
| Investments in New Businesses: |
|||||||||||||||
| Equity/Fixed Income prgms. |
$ | 11,455 | $ | 12,259 | $ | 11,093 | $ | 12,396 | $ | 12,848 | |||||
| Total assets under mgmt. |
$ | 11,455 | $ | 12,259 | $ | 11,093 | $ | 12,396 | $ | 12,848 | |||||
| Client assets under admin. |
6,253 | 7,296 | 6,841 | 5,894 | 4,496 | ||||||||||
| Total assets under admin. |
$ | 17,708 | $ | 19,555 | $ | 17,934 | $ | 18,290 | $ | 17,344 | |||||
| LSV Asset Management |
|||||||||||||||
| Equity/Fixed Income prgms. |
$ | 33,781 | $ | 37,740 | $ | 43,192 | $ | 47,781 | $ | 54,128 | |||||
| Consolidated: |
|||||||||||||||
| Equity/Fixed Income prgms (A,B) |
$ | 99,557 | $ | 105,822 | $ | 113,421 | $ | 122,307 | $ | 133,065 | |||||
| Collective Trust Fund prgm. |
12,715 | 13,419 | 13,864 | 14,078 | 14,316 | ||||||||||
| Liquidity funds (B) |
11,639 | 11,436 | 11,253 | 12,153 | 12,737 | ||||||||||
| Total assets under mgmt. |
$ | 123,911 | $ | 130,677 | $ | 138,538 | $ | 148,538 | $ | 160,118 | |||||
| Client assets under admin. |
167,594 | 182,332 | 185,852 | 163,526 | 171,463 | ||||||||||
| Total assets |
$ | 291,505 | $ | 313,009 | $ | 324,390 | $ | 312,064 | $ | 331,581 | |||||
| (A) | Equity/Fixed Income programs include $2,899 of assets invested in SEI’s Asset Allocation Funds at 3/31/06 |
| (B) | In addition to the numbers presented, SEI also administers an additional $10,300 in Funds of Funds assets (as of March 31, 2006) on which SEI does not earn an administration fee. |
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