SEI Investments Co. 10-K Summary (Fiscal Year Ended Dec 31, 1995)
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended December 31, 1995, for SEI Corporation, a Pennsylvania-based provider of investment technology, services, and asset management solutions. The Company reorganized its operations in 1995 into two primary segments: Investment Technology and Services (70% of revenue) and Asset Management (30% of revenue). Key activities include trust accounting systems (3000 product line), proprietary fund administration, and liquidity/mutual fund services. The Company serves approximately 2,200 clients, primarily bank trust departments and institutional investors.
Key Financial Metrics
| Metric | 1995 | 1994 |
|---|---|---|
| Total Revenues | $225,964,000 | $205,051,000 |
| Net Income | $19,184,000 | $19,250,000 |
| Income from Continuing Ops | $21,126,000 | $18,253,000 |
| Earnings Per Share (Diluted) | $0.99 | $0.96 |
| Operating Cash Flow | $24,352,000 | $36,681,000 |
| Total Assets | $101,347,000 | $91,148,000 |
| Shareholders' Equity | $56,002,000 | $51,309,000 |
| Assets Under Management | $61.2 Billion | $46.3 Billion |
| Debt Outstanding | $0 (Line of Credit Unused) | $0 |
Note: All figures in thousands except per share data and Assets Under Management.
Material Changes vs. Prior Period
- Revenue Growth: Consolidated revenues increased 10.2% to $225.96 million, driven primarily by the Investment Technology and Services segment which grew 16%.
- Segment Performance:
- Investment Technology & Services: Revenues rose to $157.96 million. Proprietary fund services revenue surged 46% due to a 60% increase in average proprietary fund balances ($34.3B in 1995 vs $21.5B in 1994). Operating profit for this segment increased 24% to $45.18 million.
- Asset Management: Revenues declined slightly (1%) to $68.00 million. This was due to a 7% drop in mutual fund services and an 11% drop in asset management services, offset by a 19% increase in brokerage and consulting services.
- Discontinued Operations: The Company recorded a loss of $1.94 million from discontinued operations (Capital Resources Division and Defined Contribution Retirement Services), compared to a gain of $0.997 million in 1994. These units are being sold or transferred.
- Effective Tax Rate: Increased to 40.5% in 1995 from 38.0% in 1994, attributed to losses from foreign subsidiaries for which no tax benefit was received.
Guidance, Outlook, and Risks
- Outlook: Management expects the Investment Technology segment to continue expanding revenues and operating profits in 1996, despite technology investments. The Asset Management segment is expected to show improved results in 1996 due to growth in core asset management and liquidity services.
- Capital Allocation: The Company is constructing a new corporate campus in Wayne, PA, expected to be completed in late 1996 at an estimated total cost of $31.8 million. The Board has authorized a stock repurchase program (up to $175.7 million); $18.4 million was spent in 1995.
- Liquidity: The Company maintains a $20 million line of credit (unused at year-end) and held $10.26 million in cash and cash equivalents. Cash flow from operations declined in 1995 due to increased receivables and investments in loans receivable available for sale via a new Swiss subsidiary.
- Risks:
- Regulatory: Changes in banking laws or SEC regulations regarding directed brokerage payments could impact revenue.
- Market Consolidation: Bank mergers may reduce the number of proprietary fund complexes, potentially offsetting revenue growth.
- Foreign Operations: New international ventures (Swiss subsidiary) involve country, interest rate, and credit risks.
Investor Verification Checklist
- Discontinued Operations: Verify the timeline and expected proceeds from the sale of the Capital Resources Division and the transfer of Defined Contribution Retirement Services to KPMG.
- Proprietary Fund Growth: Confirm the sustainability of the 60% increase in proprietary fund balances and the impact of bank mergers on future client retention.
- Asset Management Decline: Investigate the specific causes of the decline in the International Equity Fund and Family of Funds balances.
- Foreign Subsidiary: Review the performance and risk profile of the new Swiss subsidiary (SEI Capital AG) and its $5.2 million in loans receivable.
- Capital Expenditures: Monitor the completion and cost overruns of the new corporate campus construction.